1933 Act File No. 33-89754
1940 Act File No. 811-8992
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. .........................
Post-Effective Amendment No. 5 ...................... X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 6 ........................................ X
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FUNDMANAGER PORTFOLIOS
(formerly, FUNDMANAGER TRUST)
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
(check appropriate box)
__ immediately upon filing pursuant to paragraph (b)
on ____________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i)
X 75 days after filing pursuant to paragraph (a)(ii) on
_________________ pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X _ filed the Notice required by that Rule on November 26, 1996; or
intends to file the Notice required by that Rule on or about
____________; or during the most recent fiscal year did not sell
any securities pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and, pursuant to Rule
24f-2(b)(2), need not file the Notice.
Copies to:
John J. Danello Edward T. O'Dell, P.C
Freedom Capital Management Corporation Goodwin, Procter & Hoar
One Beacon Street One Exchange Place
Boston, Massachusetts 02108 Boston, Massachusetts 02109
<PAGE>
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FUNDMANAGER
PORTFOLIOS (formerly, FundManager Trust)),which is comprised of six
Portfolios: (1) Aggressive Growth Portfolio, consisting of two classes
of shares (a) Financial Adviser Class and (b) No-Load Class; (2)
Growth Portfolio, consisting of two classes of shares (a) Financial
Adviser Class and (b) No-Load Class; (3) Growth with Income Portfolio,
consisting of two classes of shares (a) Financial Adviser Class and
(b) No-Load Class; (4) Bond Portfolio, consisting of two classes of
shares (a) Financial Adviser Class and (b) No-Load Class; (5) Managed
Total Return Portfolio, consisting of one class of shares (a)
Financial Adviser Class, and International Portfolio, consisting of
two classes of shares (a) Financial Adviser Class and (b) No-Load
Class relates only to International Portfolio and is comprised of the
following (The remaining references to other portfolios have been kept
for easier cross reference.):
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
PROSPECTUS HEADINg
(Rule 404(c) Cross Reference)
Item 1. Cover Page......................(1-6) Cover Page.
Item 2. Synopsis (1-6) Summary of Fund Expenses.
Item 3. Condensed Financial
Information (1-5) Financial Highlights; (1-6)
Performance Information.
Item 4. General Description of
Registrant. (1-6) FundManager Portfolios;
(1-5) Investment Objectives;
(6) Investment Objective; (1-6)
Investments of and Investment
Techniques Employed By Mutual Funds
in which the Portfolio May Invest;
(1-6) Investment Policies and
Restrictions; (1-5) Risks and Other
Considerations; (6) Additional
Risks and Other Considerations; (1-6)
Capitalization.
Item 5. Management of the Fund (1-6) Management of FundManager
Portfolios; (1-6) The Adviser; (1-6)
The Administrator; (1-6) The
Distributors;(1-5) Custodian and
Transfer Agent; (6) Custodian;
(6) Transfer Agent, Dividend
Disbursing Agent, and Shareholder
Servicing Agent; (1a-5a,6) Service
Organizations; (1-6) Other Expenses;
(1-6) Portfolio Transactions.
Item 6. Capital Stock and Other
Securities (1-6) Dividends, Distributions and
Taxes; (1-6) Voting;
(1-6) Shareholder Inquiries.
Item 7. Purchase of Securities Being
Offered (1-6) The Distributors;(1-6)
Determination of Net Asset
Value;(1-6) Purchase of
Shares; (1a-5a, 6) Retirement
Plans; (1a-5a,6) Individual
Retirement Accounts;(1a-5a,6)
Defined Contribution Plan;
(1a-5a,6) Exchange Privilege;
(1b-4b,6) FundManager Advisory
Program.
Item 8. Redemption or Repurchase (1-6) Redemption of Shares; (1a-5a,6)
Redemption of Shares Purchased
Through a Distributor or Authorized
Securities Dealer; (1b-5b) Redemption
of Shares Purchased Through a
Distributor; (1-5) Direct Redemption;
(6) Financial Adviser Class;(1a-5a,6)
Redemption By Wire or Telephone;
(1a-5a,6) Systematic Withdrawal Plan;
(6) Limits on Redemptions.
Item 9. Legal Proceedings None.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page.......................(1-6) Cover Page.
Item 11. Table of Contents................(1-6) Table of Contents.
Item 12. General Information and
History (1-6) Other Information.
Item 13. Investment Objectives and
Policies........................(1-6) Investment Policies;
(1-6) Investment Restrictions.
Item 14. Management of the Fund (1-6) Management;
(1-6) Trustees Compensation.
Item 15. Control Persons and Principal
Holders of Securities...........(1-6) Management;
(1-6) Other Information.
Item 16. Investment Advisory and Other
Services........................(1-6) Management;
(1-6) Investment Adviser
Item 17. Brokerage Allocation.............(1-6) Portfolio Transactions.
Item 18. Capital Stock and Other
Securities (1-6) Other Information.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered.........................(1-6) See Part A Prospectus -
Purchase of Shares;
(1-6) See Part A Prospectus -
Redemption of Shares;
(1-6) See Part A Prospectus -
Determination of Net Asset
Value.
Item 20. Tax Status.......................(1-5) See Part A Prospectus -
Dividends,
Distributions and Taxes;
(6) The Portfolio's Tax Status.
Item 21. Underwriters (1-6) Management; (1-6)Administrator;
(1-6) Distributors; (6) Service
Organizations.
Item 22. Calculation of Performance
Data............................(1-6) Other Information;
(1-6) Performance Information.
Item 23. Financial Statements.............Not applicable.
INTERNATIONAL PORTFOLIO
(A PORTFOLIO OF FUNDMANAGER PORTFOLIOS)
FINANCIAL ADVISER CLASS
NO-LOAD CLASS
ONE BEACON STREET, BOSTON, MASSACHUSETTS 02108
GENERAL INFORMATION: (800) 344-9033 (TOLL FREE)
FundManager Portfolios (the "Trust") is an open-end management
investment company consisting of six separate diversified series with
different investment objectives. Each Portfolio (except for Managed
Total Return Portfolio) offers two classes of shares. This prospectus
offers investors interests in the International Portfolio (the
"Portfolio"), a diversified portfolio of FundManager Portfolios. The
shares offered by this Prospectus are the Financial Adviser Class and
the No-Load Class of shares ("Shares"). Interests in the other
portfolios are offered in separate combined prospectuses.
The investment objective of the Portfolio is to provide long-term
capital appreciation. Current income is of secondary importance. The
Portfolio seeks to achieve its objective by investing in shares of
open-end and closed-end management investment companies (commonly
called mutual funds), that invest internationally. This policy
involves certain expenses in addition to those applicable to direct
investment in mutual funds. See "Risks and Other Considerations --
Expenses." The M.D. Hirsch Division of Freedom Capital Management
Corporation ("Freedom Capital Management" or the "Adviser")
continuously manages the Portfolio's investment portfolio.
Financial Adviser Class Shares of the Portfolio are offered for
sale at net asset value by Edgewood Services, Inc. ("Edgewood"),
Freedom Distributors Corporation ("Freedom Distributors"), Tucker
Anthony, Incorporated ("Tucker Anthony") and Sutro & Co., Inc.
("Sutro") (collectively, the "Distributors") as an investment vehicle
for individuals, institutions, corporations and fiduciaries. The
Portfolio pays expenses related to the distribution of its Financial
Adviser Class Shares. See "Management of the Trust -- The
Distributors."
No-Load Class Shares of the Portfolio are only offered for sale at net
asset value by Tucker Anthony and Sutro to participants in the
FundManager Advisory Program (the "Program"). The Program is an
investment advisory service that directly provides to investors asset
allocation recommendations with respect to the portfolios of the Trust
based on an evaluation of an investor's investment objectives and risk
tolerances. See "Purchase of Shares."
INVESTMENTS IN THE PORTFOLIO ARE NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. SHARES OF THE PORTFOLIO ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND THE SHARES
ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY. AN INVESTMENT IN THE PORTFOLIO IS SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
This prospectus sets forth concisely the information a prospective
investor should know before investing in the Portfolio. A Statement of
Additional Information (the "SAI") dated _______, 1997, and as
supplemented from time to time containing additional and more detailed
information about the Portfolio has been filed with the Securities and
Exchange Commission ("SEC") and is hereby incorporated by reference
into this prospectus. You may request a copy of the SAI, or a paper
copy of this prospectus, if you have received your prospectus
electronically, free of charge by writing or calling the Trust at the
address and information number printed above. The SAI, material
incorporated by reference into this document, and other information
regarding the Portfolio is maintained electronically with the SEC at
internet web site (http://www.sec.gov).
This Prospectus should be read and retained for information about the
Portfolio.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS _____________, 1997.
<PAGE>
TABLE OF CONTENTS
SUMMARY OF PORTFOLIO EXPENSES 1
HIGHLIGHTS 2
FUNDMANAGER PORTFOLIOS 4
INVESTMENT OBJECTIVE 4
INVESTMENTS OF AND INVESTMENT TECHNIQUES
EMPLOYED BY MUTUAL FUNDS IN WHICH THE
PORTFOLIO MAY INVEST 5
Derivatives 11
Investment Policies and Restrictions 14
ADDITIONAL RISKS AND OTHER CONSIDERATIONS 15
Expenses 16
MANAGEMENT OF FUNDMANAGER
PORTFOLIOS 17
Adviser 17
Administrator 18
Distributors 18
Custodian 19
Transfer Agent, Dividend Disbursing
Agent, and Shareholder Servicing Agent 19
Service Organizations 19
Other Expenses 19
Portfolio Transactions 20
Determination of Net Asset Value 20
PURCHASE OF SHARES 21
Purchases by Clients of the Distributors
or Authorized Securities Dealers 22
FundManager Advisory Program -
No Load Class 22
Financial Adviser Class 23
Automatic Investment Plan 23
Retirement Plans 24
Individual Retirme Accounts 24
Defined Contribution Plan 24
EXCHANGE PRIVILEGE 24
REDEMPTION OF SHARES 25
Redemption of Shares Purchase Through a
Distributor or Authorized Securities
Dealer 25
Direct Redemption 25
Financial Adviser Class 25
Redemption by Wire or Telephone 26
Systematic Withdrawal Plan 26
Limits on Redemptions 26
DIVIDENDS, DISTRIBUTIONS AND TAXES 27
Other Information 29
Shareholder Inquires 30
Description of Bond Ratings 30
<PAGE>
1
INTERNATIONAL PORTFOLIO
SUMMARY OF PORTFOLIO EXPENSES
The following table illustrates the expenses and fees that a
shareholder of each class of the Portfolio will incur.
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets) Financial Adviser No-Load
Class Class
Distribution and Shareholder Service Expenses (1)
Other Expenses
Total Portfolio Operating Expenses
(1) The maximum distribution and shareholder service fee is % and is
assessed only on the Financial Adviser Class. Under rules of the
National Assocation of Security Dealers, Inc., (the "NASD"), a 12b-1
fee may be treated as a sales charge for certain purposes under those
rules. Because the 12b-1 fee is an annual fee charged against the
assets of the Financial Adviser Class, long-term shareholders may
indirectly pay more total sales charges than the economic equivalent
of the maximum front-end sales charge permitted by rules of the NASD.
See "Management - Distributors" in the Prospectus.
Total Portfolio Operating Expenses in the table above are based on
expenses expected during the fiscal year ending September 30, 1998.
The Total Portfolio Operating Expenses are estimated to be % for the
Financial Adviser Class and % for the No-Load Class absent the
voluntary waiver of a portion of the administrative fee.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder will bear, either
directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Management." Wire-transferred redemptions may
be subject to an additional fee.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period.
The portfolio charges no redemption fees.
Financial Adviser No-Load
Class Class
----------------------------------------
1 year.............................
3 years. ..........................
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FISCAL YEAR
ENDING SEPTEMBER 30, 1998.
<PAGE>
HIGHLIGHTS
FUNDMANAGER PORTFOLIOS PAGE
The Trust is a Delaware business trust which consists of six separate
series: Aggressive Growth Portfolio, Growth Portfolio, Growth with
Income Portfolio, Bond Portfolio, Managed Total Return Portfolio and
International Portfolio. Each Portfolio seeks to achieve its
investment objective by investing in mutual funds registered with the
SEC.
INVESTMENT OBJECTIVE
PAGE
International Portfolio seeks long-term capital appreciation with
current income as a secondary consideration. The mutual funds in which
the Portfolio invests may invest in securities which entail certain
risks. These risks are described in "Investments of and Investment
Techniques employed by Mutual Funds in Which the Portfolio May
Invest."
RISKS AND OTHER CONSIDERATIONS PAGE
Investing through the Portfolio in an underlying portfolio of open-end
and closed-end mutual funds ("underlying funds") involves certain
additional expenses and certain tax results which would not be present
in a direct investment in mutual funds. See "Expenses" and "Dividends,
Distributions and Taxes." In addition, Federal law imposes certain
limits on the purchases of mutual fund shares by the Portfolio.
MANAGEMENT OF FUNDMANAGER PORTFOLIOS PAGE
The Trust has retained Freedom Capital Management to act as its
investment adviser. For its services, the Adviser receives from the
Portfolio a fee at the annual rate of 0.50% of the Portfolio's average
daily net assets up to $500 million and 0.40% of its average daily net
assets in excess of $500 million. See "The Adviser."
The Trust has retained Federated Administrative Services ("FAS") to
provide certain management and administrative services to the
Portfolio. For these services, the Portfolio pays FAS a fee at the
annual rate of 0.150% of the first $250 million of the Portfolio's
average daily net assets, 0.125% of the next $250 million of such
assets, 0.100% of the next $250 million of such assets, and 0.075% of
such assets in excess of $750 million. See "The Administrator."
With respect to the Financial Adviser Class, the Trust has adopted a
Distribution Plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940 (the "1940 Act"), under which the Portfolio will reimburse
the Distributors (in amounts up to 0.50% of the Portfolio 's average
daily net assets attributable to the Financial Adviser Class) for
marketing costs and payments to other organizations for services
rendered in distributing the Financial Adviser Class Shares. In
addition, Freedom Distributors and Edgewood may receive additional
compensation in connection with the Portfolio's purchases of mutual
funds. See "Portfolio Transactions."
The Trust also contracts with various organizations to provide
administrative services for the Financial Adviser Class, such as
maintaining shareholder accounts and records. The Portfolio pays fees
to these organizations in amounts up to an annual rate of 0.25% of the
daily net asset value of the Financial Adviser Class Shares owned by
shareholders with whom the organization has a servicing relationship.
PURCHASE OF SHARES
PAGE
Financial Adviser Class Shares of the Portfolio are offered at net
asset value by the Distributors as an investment vehicle for
individuals, institutions, corporations and fiduciaries. Purchases of
No-Load Class Shares by participants in the Program must be through a
brokerage account maintained with the Distributors.
The minimum initial investment for investors purchasing No-Load Class
Shares through the Program is $50,000. The minimum initial investment
for other qualified investors in No-Load Class Shares and investors in
Financial Adviser Class Shares is $1,000, except that the minimum
initial investment for an Individual Retirement Account ("IRA") is
$250. The minimum subsequent investment is $100. The Trust may issue
shares of the Portfolio in exchange for mutual fund shares meeting the
Portfolio's investment objective, as determined by the Adviser.
REDEMPTION OF SHARES PAGE Shares may be redeemed at their next
determined net asset value. See "Determination of Net Asset Value."
Redemptions may be made by letter or wire. The Trust reserves the
right to redeem, upon not less than 30 days' notice, all Shares of the
Portfolio in an account (other than an IRA) which has a value below
$500.
DIVIDENDS, DISTRIBUTIONS AND TAXES PAGE International Fund Portfolio
will distribute net investment income annually. The Portfolio will
distribute any net realized capital gains at least annually unless
otherwise instructed. All dividends and distributions generally will
be reinvested automatically at net asset value in additional Shares.
<PAGE>
FUNDMANAGER PORTFOLIOS
The Trust was organized as a Delaware business trust on February 7,
1995, and is an open-end management investment company registered
under the 1940 Act consisting of six separate diversified series
Aggressive Growth Portfolio, Growth Portfolio, Growth with Income
Portfolio, Bond Portfolio, Managed Total Return Portfolio and
International Portfolio. Investment in shares of one or more of the
Portfolios involves risks and there can be no assurance that the
Portfolios' investment objectives will be achieved.
INVESTMENT OBJECTIVE
The Portfolio's investment objective and certain of its related
policies and activities are fundamental and may not be changed by the
Board of Trustees (the "Trustees") of the Trust without approval of
the shareholders of the Portfolio. The investment objective of the
Portfolio is long-term capital appreciation; current income is a
secondary, non-fundamental consideration.
The Portfolio seeks to achieve its investment objective by investing
primarily in shares of international mutual funds. Under normal market
conditions, and as a non-fundamental investment policy, the Portfolio
will invest at least 65% of its total assets in international equity
funds (those funds that invest primarily in foreign common stocks, or
foreign securities convertible into or exchangeable for common stock).
The remaining assets of the Portfolio may consist of international
bond funds (those funds that invest primarily in foreign government
and corporate bonds) or global bond or stock funds. International
funds invest primarily in the securities of companies or issuers
located in at least three countries other than the United States.
Global funds invest primarily in securities of companies or issuers
located in at least three countries, including the United States. The
Portfolio may also invest in closed-end investment companies and unit
investment trusts with similar investment emphasis. (Unlike open-end
funds that offer and sell their shares at net asset value plus any
applicable sales charge, the shares of closed-end funds and unit
investment trusts may trade at a market value that represents a
premium, discount, or spread to net asset value.)
The underlying funds will typically have an investment objective of
long-term capital growth or appreciation with current income typically
of secondary importance. Investment in foreign securities entails
unique risks in addition to the risks involved in investing in
domestic securities. In addition, foreign securities investments may
include investments in developing or emerging market countries, which
tend to have economic, political and social structures that are less
stable than developed market countries. The risks of investing in
foreign securities as well as developing or emerging markets are
described further under "Investments Of And Investment Techniques
Employed By Mutual Funds In Which The Portfolio May Invest." All of
the underlying funds in which the Portfolio invests must be registered
under the 1940 Act.
The Portfolio may invest in underlying funds which limit their
corporate bond investments to investment grade category, which are
rated within one of the four highest quality grades assigned by a
nationally recognized statistical rating organization ("NRSRO") such
as Standard and Poor's ("S&P) or Moody's Investors Service, Inc.
(`Moody's") or underlying funds which invest in corporate bond
investments which are unrated but are deemed by an underlying fund's
investment adviser to be of comparable quality. The Portfolio may also
invest in underlying funds which invest in corporate bonds which are
not considered investment grade bonds (commonly referred to as "junk
bonds") by an NRSRO or which are unrated, and thus may carry a greater
degree of risk than bonds considered investment grade. These ratings
may indicate that the bonds are predominantly speculative with respect
to the issuer's ability to pay interest and repay principal and may
indicate that the issuer soon may be or currently is in default. The
risks associated with these investments are described below under
"High Yield Securities."
At times, for temporary defensive purposes when warranted by general
economic and financial conditions, the Portfolio may invest up to 100%
of its total assets in money market mutual funds or invest directly in
(or enter into repurchase agreements maturing in seven days or less
with banks and broker-dealers with respect to) short-term debt
securities, including U.S. Treasury bills and other short-term U.S.
government securities, commercial paper, certificates of deposit and
bankers' acceptances. The underlying funds may also have a similar
temporary defensive investment policy. However, except when the
Portfolio is in a temporary defensive investment position or as may be
considered necessary to accumulate cash in order to satisfy minimum
purchase requirements of the underlying funds or to meet anticipated
redemptions, the Portfolio normally will maintain its assets invested
in underlying funds.
The underlying funds in which the Portfolio invests may invest up to
100% of their assets in securities of foreign issuers and engage in
foreign currency transactions with respect to these investments;
invest up to 15% or more of their assets in illiquid securities
(excluding Rule 144A securities which are deemed illiquid by the
Trustees) ("Illiquid Securities"); invest their assets in warrants;
lend their portfolio securities; sell securities short; borrow money
in amounts up to one-third of their assets for investment purposes
(i.e., leverage their portfolios); write (sell) or purchase call or
put options on securities or stock indexes; concentrate more than 25%
of their assets in one industry; invest up to 100% of their assets in
master demand notes; and enter into futures contracts and options on
futures contracts. The risk associated with these investments are
described in the "Investments Of And Investment Techniques Employed By
Mutual Funds In Which The Portfolio May Invest."
INVESTMENTS OF AND INVESTMENT TECHNIQUES EMPLOYED BY MUTUAL FUNDS IN WHICH THE
PORTFOLIO MAY INVEST
FOREIGN SECURITIES. An underlying fund may invest up to 100% of its
assets in securities of foreign issuers. There may be less publicly
available information about these issuers than is available about
companies in the U.S. and foreign auditing requirements may not be
comparable to those in the U.S. In addition, the value of the fund's
foreign securities may be adversely affected by fluctuations in the
exchange rates between foreign currencies and the U.S. dollar, as well
as other political and economic developments, including the
possibility of expropriation, confiscatory taxation, exchange controls
or other foreign governmental restrictions. In addition, income
received by an underlying fund from sources within foreign countries,
such as dividends and interest payable on foreign securities, may be
subject to foreign taxes, including taxes withheld from payments on
those securities. Moreover, the underlying funds will generally
calculate their net asset values and complete orders to purchase,
exchange or redeem shares only on a Monday-Friday basis (excluding
holidays on which the New York Stock Exchange ("NYSE") is closed).
Foreign securities in which the underlying funds may invest may be
listed primarily on foreign stock exchanges which may trade on other
days (such as Saturday or NYSE holidays). As a result, the net asset
value of an underlying fund's portfolio may be significantly affected
by such trading on days when the Adviser does not have access to the
underlying funds and shareholders do not have access to the Portfolio.
Under the 1940 Act, an underlying fund may maintain its foreign
securities in custody of non-U.S. banks and securities depositories.
Other differences between foreign and U.S. companies include: less
readily available market quotations on foreign companies; differences
in government regulation and supervision of foreign stock exchanges,
brokers, listed companies, and banks; differences in legal systems
which may affect the ability to enforce contractual obligations or
obtain court judgments; the limited size of many foreign securities
markets and limited trading volume in issuers compared to the volume
of trading in U.S. securities, which could cause prices to be erratic
for reasons apart from factors that affect the quality of securities;
the likelihood that foreign securities may be less liquid or more
volatile; unreliable mail service between countries; political or
financial changes which adversely affect investments in some
countries; certain markets may require payment for securities before
delivery; and religious and ethnic instability.
To the extent that the Portfolio invests in underlying funds that
invest primarily in the securities of issuers located in a single
country, any political, economic or regulatory developments within
that country will have a greater impact on the total value of the
portfolio underlying funds than would be the case if the portfolio
were diversified among the securities of more countries.
The economies of foreign countries may differ from the U.S. economy in
such respects as growth of gross domestic product, rate of inflation,
currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments position. Further, the
economies of developing countries generally are heavily dependent on
international trade and, accordingly, have been, and may continue to
be, adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values, and other protectionist
measures imposed or negotiated by the countries with which they trade.
These economies also have been, and may continue to be, adversely
affected by economic conditions in the countries with which they
trade.
Prior governmental approval for foreign investments may be required
under certain circumstances in some countries, or in issuers or
industries deemed sensitive to national interests, and the extent of
foreign investment in certain debt securities and domestic companies
may be subject to limitation. Foreign ownership limitations also may
be imposed by the charters of individual companies to prevent, among
other concerns, violation of foreign investment limitations.
Repatriation of investment income, capital, and the proceeds of sales
by foreign investors may require governmental registration and/or
approval in some countries. An underlying fund could be adversely
affected by delays in, or a refusal to grant, any required
governmental registration or approval for such repatriation. Any
investment subject to such repatriation controls would be considered
illiquid if it appears reasonably likely that this process will take
more than seven days.
With respect to any foreign country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political
changes, governmental regulation, social instability or diplomatic
developments (including war) which could affect adversely the
economies of such countries or the value of the investments in those
countries.
Brokerage commissions, custodial services, and other costs relating to
foreign investment may be more expensive than in the United States.
Foreign markets may have different clearance and settlement procedures
and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions,
making it difficult to conduct such transactions. The inability of an
underlying fund to make intended security purchases due to settlement
problems could cause the underlying fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security due to
settlement problems could result either in losses due to subsequent
declines in value of the portfolio security or, if the underlying fund
has entered into a contract to sell the security, could result in
possible liability to the purchaser.
In the past, U.S. government policies have discouraged or restricted
certain investments abroad by investors. Investors are advised that
when such policies are instituted, the Portfolio will abide by them,
and the Portfolio anticipates compliance by the underlying funds.
DEPOSITARY RECEIPTS. An underlying fund may also invest in
equity or debt securities of foreign issuers traded on the
New York or American Stock Exchanges, other exchanges, or in
the over-the-counter market in the form of sponsored or
unsponsored American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), and European Depositary
Receipts ("EDRs") (collectively, "Depositary Receipts"). ADRs
are receipts typically issued by an American bank or trust
company that evidences ownership of underlying securities
issued by a foreign issuer. ADRs may not necessarily be
denominated in the same currency as the securities into which
they may be converted. Generally, ADRs, in registered form,
are designed for use in U.S. securities markets. EDRs and
GDRs are typically issued by foreign banks or trust
companies, although they also may be issued by U.S. banks or
trust companies, and evidence ownership of underlying
securities issued by either a foreign or a U.S. corporation.
Generally, Depositary Receipts in registered form are
designed for use in the U.S. securities market and Depositary
Receipts in bearer form are designed for use in securities
markets outside the U.S. Depositary Receipts may not
necessarily be denominated in the same currency as the
underlying securities into which they may be converted.
Depositary Receipts may be available for investment through
"sponsored" or "unsponsored" facilities. A sponsored facility
is established jointly by the issuer of the security
underlying the receipt and a depositary, whereas an
unsponsored facility may be established by a depositary
without participation by the issuer of the receipt's
underlying security. Holders of an unsponsored Depositary
Receipt generally bear all the costs of the unsponsored
facility. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited
security or to pass through to the holders of the receipts
voting rights with respect to the deposited securities.
Ownership of unsponsored Depositary Receipts may not entitle
the underlying funds to financial or other reports from the
issuer of the underlying security, to which they would be
entitled as the owner of sponsored Depositary Receipts.
EMERGING MARKETS. Generally included in emerging markets are
all countries in the world except Australia, Canada, Japan,
New Zealand, the United States, and most western European
countries. The risks of investing in developing or emerging
markets are similar to, but greater than, the risks of
investing in the securities of developed international
markets since emerging or developing markets tend to have
economic structures that are less diverse and mature, and
political systems that are less stable, than developed
countries.
In certain emerging market countries, there is less
government supervision and regulation of business and
industry practices, stock exchanges, brokers, and listed
companies than in the United States. The economies of
emerging market countries may be predominantly based on a few
industries and may be highly vulnerable to change in local or
global trade conditions. The securities markets of many of
these countries also may be smaller, less liquid, and subject
to greater price volatility than those in the United States.
Some emerging market countries also may have fixed or managed
currencies which are not free-floating against the U.S.
dollar. Further, certain emerging market country currencies
may not be internationally traded. Certain of these
currencies have experienced a steady devaluation relative to
the U.S. dollar. Any devaluations in the currencies in which
portfolio securities are denominated may have an adverse
impact on the underlying fund, including the Portfolio.
Finally, many emerging market countries have experienced
substantial, and in some periods, extremely high, rates of
inflation for many years. Inflation and rapid fluctuations in
inflation rates have had, and may continue to have, negative
effects on the economies for individual emerging market
countries. Moreover, the economies of individual emerging
market countries may differ favorably or unfavorably from the
U.S. economy in such respects as the rate of growth of
domestic product, inflation, capital reinvestment, resource
self-sufficiency and balance of payments position.
CURRENCY RISKS. Because an underlying fund may purchase
securities denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates could
affect: the underlying fund's net asset value; the value of
interest earned; gains and losses realized on the sale of
securities; and net investment income and capital gain, if
any, to be distributed to shareholders by the underlying
fund, including the Portfolio. If the value of a foreign
currency rises against the U.S. dollar, the value of the
underlying fund assets denominated in that currency will
increase; correspondingly, if the value of a foreign currency
declines against the U.S. dollar, the value of underlying
fund assets denominated in that currency will decrease.
The exchange rates between the U.S. dollar and foreign
currencies are a function of such factors as supply and
demand in the currency exchange markets, international
balances of payments, governmental interpretation,
speculation and other economic and political conditions.
Although underlying funds value their assets daily in U.S.
dollars, they generally do not convert their holdings of
foreign currencies to U.S. dollars daily. When an underlying
fund converts its holdings to another currency, it may incur
conversion costs. Foreign exchange dealers may realize a
profit on the difference between the price at which they buy
and sell currencies.
ILLIQUID SECURITIES. Except as noted below, an underlying fund may
invest not more than 15% of its net assets in securities for which
there is no readily available market ("Illiquid Securities") which
would include certain restricted securities the disposition of which
would be subject to legal restrictions and repurchase agreements
having more than seven days to maturity. A considerable period of time
may elapse between an underlying fund's decision to dispose of such
securities and the time when the fund is able to dispose of them,
during which time the value of the securities (and therefore the value
of the underlying fund's shares held by the Portfolio) could decline.
A closed-end investment company may have greater than 15% of its net
assets in illiquid securities since closed-end funds are not required
to redeem their shares under the 1940 Act.
INDUSTRY CONCENTRATION. An underlying fund may concentrate its
investments within one industry. Because the scope of investment
alternatives within an industry is limited, the value of the shares of
such an underlying fund may be subject to greater market fluctuation
than an investment in a fund which invests in a broader range of
securities.
MASTER DEMAND NOTES. Although the Portfolio itself will not do so,
underlying funds (particularly money market mutual funds) may invest
up to 100% of their assets in master demand notes. Master demand notes
are unsecured obligations of U.S. corporations redeemable upon notice
that permit investment by a fund of fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the fund and
the issuing corporation. Because they are direct arrangements between
the fund and the issuing corporation, there is no secondary market for
the notes. However, they are redeemable at face value, plus accrued
interest, at any time.
REPURCHASE AGREEMENTS. Underlying funds, particularly money market
funds, may enter into repurchase agreements with banks and
broker-dealers under which they acquire securities subject to an
agreement with the seller to repurchase the securities at an agreed
upon time and price. The Portfolio also may enter into repurchase
agreements. These agreements are considered under the 1940 Act to be
loans by the purchaser collateralized by the underlying securities. If
the seller should default on its obligation to repurchase the
securities, the underlying fund may experience delay or difficulties
in exercising its rights to dispose of the securities held as
collateral and might incur a loss if the value of the securities
should decline. For a more complete discussion of repurchase
agreements, see "Investment Policies" in the SAI.
LOANS OF PORTFOLIO SECURITIES. An underlying fund may lend its
portfolio securities provided it complies with the following general
requirements: (i) the loan is secured continuously by collateral
consisting of liquid securities or cash or cash equivalents maintained
on a daily mark-to-market basis in an amount at least equal to the
current market value of the securities loaned; (ii) the fund may at
any time call the loan and obtain the return of the securities loaned;
(iii) the fund will receive any interest or dividends paid on the
loaned securities; and (iv) the aggregate market value of securities
loaned will not at any time exceed one-third of the total assets of
the fund. Loans of securities involve a risk that the borrower may
fail to return the securities or may fail to provide additional
collateral. Closed-end funds may have a greater percentage of their
assets on loan.
SHORT SALES. An underlying fund may sell securities short. In a short
sale, the fund sells stock which it does not own, making delivery with
securities "borrowed" from a broker. The fund is then obligated to
replace the security borrowed by purchasing it at the market price at
the time of replacement. This price may or may not be less than the
price at which the security was sold by the fund. Until the security
is replaced, the fund is required to pay to the lender any dividends
or interest which accrue during the period of the loan. In order to
borrow the security, the fund may also have to pay a premium which
would increase the cost of the security sold. The proceeds of the
short sale will be retained by the broker, to the extent necessary to
meet margin requirements, until the short position is closed out.
The underlying fund also must deposit in a segregated account (or
earmark) an amount of cash or liquid securities equal to the
difference between (a) the market value of the securities sold short
at the time they were sold short and (b) the value of the collateral
deposited with the broker in connection with the short sale (not
including the proceeds from the short sale). While the short position
is open, the underlying fund must maintain daily the segregated
account at such a level that (i) the amount deposited in it plus the
amount deposited with the broker as collateral equals the current
market value of the securities sold short and (ii) the amount
deposited in it plus the amount deposited with the broker as
collateral is not less than the market value of the securities at the
time they were sold short. Depending upon market conditions, up to 80%
of the value of an underlying fund's net assets may be deposited as
collateral for the obligation to replace securities borrowed to effect
short sales and allocated to a segregated account in connection with
short sales.
The underlying fund will incur a loss as a result of the short sale if
the price of the security increases between the date of the short sale
and the date on which the underlying fund replaces the borrowed
security. The underlying fund will realize a gain if the security
declines in price between those dates. The amount of any gain will be
decreased and the amount of any loss increased by the amount of any
premium, dividends or interest the underlying fund may be required to
pay in connection with a short sale.
A short sale is "against the box" if at all times when the short
position is open the underlying fund owns an equal amount of the
securities or securities convertible into, or exchangeable without
further consideration for, securities of the same issue as the
securities sold short. Such a transaction serves to defer a gain or
loss for federal income tax purposes.
FOREIGN CURRENCY TRANSACTIONS. In connection with its portfolio
transactions in securities traded in a foreign currency, an underlying
fund may enter into forward contracts to purchase or sell an agreed
upon amount of a specific currency at a future date which may be any
fixed number of days from the date of the contract agreed upon by the
parties at a price set at the time of the contract. Under such an
arrangement, concurrently with the entry into a contract to acquire a
foreign security for a specified amount of currency, the fund would
purchase with U.S. dollars the required amount of foreign currency for
delivery at the settlement date of the purchase; the fund would enter
into similar forward currency transactions in connection with the sale
of foreign securities. The effect of such transactions would be to fix
a U.S. dollar price for the security to protect against a possible
loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between
the date the security is purchased or sold and the date on which
payment is made or received, the normal range of which is three to 14
days. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and
their customers. A forward contract generally has no deposit
requirement and no commissions are charged at any stage for trades.
Although such contracts tend to minimize the risk of loss due to a
decline in the value of the subject currency, they tend to limit
commensurately any potential gain which might result should the value
of such currency increase during the contract period.
LEVERAGE THROUGH BORROWING. An underlying fund may borrow up to
one-third of the value of its net assets on an unsecured basis from
banks to increase its holdings of portfolio securities. Under the 1940
Act, the fund is required to maintain continuous asset coverage of
300% with respect to such borrowings and to sell (within three days)
sufficient portfolio holdings to restore such coverage if it should
decline to less than 300% due to market fluctuations or otherwise,
even if disadvantageous from an investment standpoint. Leveraging will
exaggerate the effect of any increase or decrease in the value of
portfolio securities on the fund's net asset value, and money borrowed
will be subject to interest costs (which may include commitment fees
and/or the cost of maintaining minimum average balances) which may or
may not exceed the interest and option premiums received from the
securities purchased with borrowed funds.
Closed-end funds may borrow a greater percentage of their assets.
WARRANTS. An underlying fund may invest in warrants, which are options
to purchase equity securities at specific prices valid for a specific
period of time. The prices do not necessarily move parallel to the
prices of the underlying securities. Warrants have no voting rights,
receive no dividends and have no rights with respect to the assets of
the issuer. If a warrant is not exercised within the specified time
period, it will become worthless and the fund will lose the purchase
price and the right to purchase the underlying security.
HIGH YIELD SECURITIES. An underlying fund may invest in high yield,
high risk securities. Investing in high yield, high risk securities
(also called "junk bonds") involves special risks in addition to the
risks associated with investments in higher rated debt securities.
High yield, high risk securities may be regarded as predominantly
speculative with respect to the issuer's continuing ability to meet
principal and interest payments.
High yield, high risk securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions than
higher grade securities. The prices of high yield, high risk
securities have been found to be less sensitive to interest rate
changes than more highly rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest
rates, for example, could cause a decline in high yield, high risk
security prices because the advent of a recession could lessen the
ability of a highly leveraged company to make principal and interest
payments on its debt securities. If the issuer of high yield, high
risk securities defaults, a fund may incur additional expenses to seek
recovery. In the case of high yield securities structured as zero
coupon or payment-in-kind securities, the market prices of such
securities are affected to a greater extent by interest rate changes,
and therefore tend to be more volatile than securities which pay
interest periodically and in cash.
The secondary markets on which high yield, high risk securities are
traded may be less liquid than the market for higher grade securities.
Less liquidity in the secondary trading markets could adversely affect
and cause large fluctuations in the daily net asset value of a fund's
shares. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity
of high yield, high risk securities, especially in a thinly traded
market.
There may be special tax considerations associated with investing in
high yield, high risk securities structured as zero coupon or
payment-in-kind securities. A fund records the interest on these
securities as income even though it receives no cash interest until
the security's maturity or payment date. A fund will be required to
distribute all or substantially all such amounts annually and may have
to obtain the cash to do so by selling securities which otherwise
would continue to be held. Shareholders will be taxed on these
distributions.
The use of credit ratings as the sole method of evaluating high yield,
high risk securities can involve certain risks. For example, credit
ratings evaluate the safety of principal and interest payments, not
the market value risk of high yield, high risk securities. Also,
credit rating agencies may fail to change credit ratings in a timely
fashion to reflect events since the security was last rated.
DERIVATIVES
An underlying fund may invest in the following instruments that are
commonly known as derivatives. Generally, a derivative is a financial
arrangement, the value of which is based on, or "derived" from, a
traditional security, asset, or market index.
OPTIONS ACTIVITIES. An underlying fund may write (i.e., sell) listed
call options ("calls") if the calls are "covered" throughout the life
of the option. A call is "covered" if the fund owns the optioned
securities. When a fund writes a call, it receives a premium and gives
the purchaser the right to buy the underlying security at any time
during the call period (usually not more than nine months in the case
of common stock) at a fixed exercise price regardless of market price
changes during the call period. If the call is exercised, the fund
will forgo any gain from an increase in the market price of the
underlying security over the exercise price.
A fund may purchase a call on securities only to effect a "closing
purchase transaction" which is the purchase of a call covering the
same underlying security and having the same exercise price and
expiration date as a call previously written by the fund on which it
wishes to terminate its obligation. If the fund is unable to effect a
closing purchase transaction, it will not be able to sell the
underlying security until the call previously written by the fund
expires (or until the call is exercised and the fund delivers the
underlying security).
An underlying fund also may write and purchase put options ("puts").
When a fund writes a put, it receives a premium and gives the
purchaser of the put the right to sell the underlying security to the
fund at the exercise price at any time during the option period. When
a fund purchases a put, it pays a premium in return for the right to
sell the underlying security at the exercise price at any time during
the option period. An underlying fund also may purchase stock index
puts which differ from puts on individual securities in that they are
settled in cash based on the values of the securities in the
underlying index rather than by delivery of the underlying securities.
Purchase of a stock index put is designed to protect against a decline
in the value of the portfolio generally rather than an individual
security in the portfolio. If any put is not exercised or sold, it
will become worthless on its expiration date.
An underlying fund may purchase and write put and call options on
foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency-denominated portfolio
securities and against increases in the U.S. dollar cost of such
securities to be acquired. As in the case of other kinds of options,
however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and
the fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase
of an option on a foreign currency may constitute an effective hedge
against fluctuations in exchange rates although, in the event of rate
movements adverse to the fund's position, it may forfeit the entire
amount of the premium plus related transaction costs. Options on
foreign currencies to be written or purchased by an underlying fund
are traded on U.S. and foreign exchanges or over-the-counter.
A fund's option positions may be closed out only on an exchange which
provides a secondary market for options of the same series, but there
can be no assurance that a liquid secondary market will exist at a
given time for any particular option. In this regard, trading in
options on certain securities (such as U.S. government securities) is
relatively new so that it is impossible to predict to what extent
liquid markets will develop or continue.
The underlying fund's custodian, or a securities depository acting for
it, generally acts as escrow agent as to the securities on which the
fund has written puts or calls, or as to other securities acceptable
for such escrow so that no margin deposit is required of the fund.
Until the underlying securities are released from escrow, they cannot
be sold by the fund.
In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation ("OCC") has
the authority to permit other, generally comparable securities to be
delivered in fulfillment of option exercise obligations. If the OCC
exercises its discretionary authority to allow such other securities
to be delivered, it may also adjust the exercise prices of the
affected options by setting different prices at which otherwise
ineligible securities may be delivered. As an alternative to
permitting such substitute deliveries, the OCC may impose special
exercise settlement procedures.
FUTURES CONTRACTS. An underlying fund may enter into futures contracts
for the purchase or sale of debt securities, foreign currencies, and
stock indexes. A futures contract is an agreement between two parties
to buy and sell a security, foreign currencies, or an index for a set
price on a future date. Futures contracts are traded on designated
"contract markets" which, through their clearing corporations,
guarantee performance of the contracts.
Generally, if market interest rates increase, the value of outstanding
debt securities declines (and vice versa). Entering into a futures
contract for the sale of securities has an effect similar to the
actual sale of securities, although sale of the futures contract might
be accomplished more easily and quickly. For example, if a fund holds
long-term U.S. government securities and it anticipates a rise in
long-term interest rates, it could, in lieu of disposing of its
portfolio securities, enter into futures contracts for the sale of
similar long-term securities. If rates increased and the value of the
fund's portfolio securities declined, the value of the fund's futures
contracts would increase, thereby protecting the fund by preventing
the net asset value from declining as much as it otherwise would have.
Similarly, entering into futures contracts for the purchase of
securities has an effect similar to the actual purchase of the
underlying securities, but permits the continued holding of securities
other than the underlying securities. For example, if the fund expects
long-term interest rates to decline, it might enter into futures
contracts for the purchase of long-term securities so that it could
gain rapid market exposure that may offset anticipated increases in
the cost of securities it intends to purchase while continuing to hold
higher-yield short-term securities or waiting for the long-term market
to stabilize. Futures contracts for foreign currencies are similarly
structured to provide a hedge against fluctuations in foreign
currency.
A stock index futures contract may be used to hedge an underlying
fund's portfolio with regard to market risk as distinguished from risk
relating to a specific security. A stock index futures contract does
not require the physical delivery of securities, but merely provides
for profits and losses resulting from changes in the market value of
the contract to be credited or debited at the close of each trading
day to the respective accounts of the parties to the contract. On the
contract's expiration date, a final cash settlement occurs. Changes in
the market value of a particular stock index futures contract reflect
changes in the specified index of equity securities on which the
future is based.
There are several risks in connection with the use of futures
contracts. In the event of an imperfect correlation between the
futures contract and the portfolio position which is intended to be
protected, the desired protection may not be obtained and the fund may
be exposed to risk of loss. Further, unanticipated changes in interest
rates, foreign currency exchange rates, or stock price movements may
result in a poorer overall performance for the fund than if it had not
entered into futures contracts on debt securities, foreign currencies,
or stock indexes.
In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close
futures contracts through offsetting transactions which could distort
the normal relationship between the securities and futures markets.
Second, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause
temporary price distortions.
Finally, positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such
futures. There is no assurance that a liquid secondary market on an
exchange or board of trade will exist for any particular contract or
at any particular time.
OPTIONS ON FUTURES CONTRACTS. A fund also may purchase and sell listed
put and call options on futures contracts. An option on a futures
contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put), at
a specified exercise price at any time during the option period. When
an option on a futures contract is exercised, delivery of the futures
position is accompanied by cash representing the difference between
the current market price of the futures contract and the exercise
price of the option. The fund may purchase put options on futures
contracts in lieu of, and for the same purpose as, a sale of a futures
contract. It also may purchase such put options in order to hedge a
long position in the underlying futures contract in the same manner as
it purchases "protective puts" on securities.
As with options on securities, the holder of an option may terminate
his position by selling an option of the same series. There is no
guarantee that such closing transactions can be effected. The fund is
required to deposit initial margin and maintenance margin with respect
to put and call options on futures contracts written by it pursuant to
brokers' requirements similar to those applicable to futures contracts
described above and, in addition, net option premiums received will be
included as initial margin deposits. In addition to the risks which
apply to all options transactions, there are several special risks
relating to options on futures contracts. The ability to establish and
close out positions on such options will be subject to the development
and maintenance of a liquid secondary market. It is not certain that
this market will develop. Compared to the use of futures contracts,
the purchase of options on futures contracts involves less potential
risk to the fund because the maximum amount at risk is the premium
paid for the options (plus transaction costs). However, there may be
circumstances when the use of an option on a futures contract would
result in a loss to the fund when the use of futures contract would
not, such as when there is no movement in the prices of the underlying
securities. Writing an option on a futures contract involves risks
similar to those arising in the sale of futures contracts, as
described above.
HEDGING. An underlying fund may employ many of the investment
techniques described in this section not only for investment purposes
which may be considered speculative, but also for hedging purposes.
For example, an underlying fund may purchase or sell put and call
options on common stocks to hedge against movements in individual
common stock prices, or purchase and sell stock index futures and
related options to hedge against marketwide movements in common stock
prices. Although such hedging techniques generally tend to minimize
the risk of loss that is hedged against, they also may limit
commensurately the potential gain that might have resulted had the
hedging transaction not occurred. Also, the desired protection
generally resulting from hedging transactions may not always be
achieved.
INVESTMENT POLICIES AND RESTRICTIONS
The Portfolio has adopted certain fundamental investment policies
(i.e., policies which may not be changed without the vote of a
majority of the Portfolio's outstanding shares, as defined under
"Other Information -- Voting") as well as certain investment policies
which are not fundamental and therefore may be changed by the Trustees
without shareholder approval. These policies reflect self-imposed
standards or the requirements of federal law.
The Trust may, in the future, seek to achieve the Portfolio's
investment objective by investing all of the Portfolio's assets in a
no-load, diversified, open-end management investment company having
substantially the same investment objective as the Portfolio. The
Portfolio's investment policies permit such an investment.
Shareholders will receive prior written notice with respect to any
such investment.
Under the Portfolio's fundamental investment policies, the Portfolio
may not invest more than 25% of its total assets in the securities of
underlying funds which themselves concentrate (i.e., invest more than
25% of their assets) in any one industry. Nevertheless, through its
investment in underlying funds, the Portfolio indirectly may invest
more than 25% of its assets in one industry. The Portfolio also may
not borrow money, except that a Portfolio may, as a temporary measure
for extraordinary or emergency purposes, borrow from a bank in an
amount not in excess of 5% of the Portfolio's total assets, or pledge
or hypothecate its assets, except that the Portfolio may pledge not
more than 5% of its total assets to secure such borrowings. The
Portfolio will not make additional investments at any time during
which it has outstanding borrowings.
Under the Portfolio's policies which are not fundamental, the
Portfolio may (i) not invest more than 25% of its assets in the shares
of any one open-end investment company; (ii) not purchase or otherwise
acquire the securities of any open-end or closed end investment
company (except in connection with a merger, consolidation,
acquisition of substantially all of the assets or reorganization of
another investment company) if, as a result, the Portfolio and all of
its affiliates including the other Portfolios, would own more than 3%
of the total outstanding stock of that company, or (iii) not purchase
a security which is not readily marketable if, as a result, more than
15% of the Portfolio's net assets would consist of such securities.
For this purpose, securities which are not readily marketable include
repurchase agreements having more than seven days to maturity (see
"Investments of and Investment Techniques Employed by Mutual Funds in
Which the Portfolio May Invest") and shares of an open-end investment
company owned by the Portfolio in an amount exceeding 1% of the
issuer's total outstanding securities. See "Additional Risks and Other
Considerations."
The Portfolio may invest up to 5% of its net assets in repurchase
agreements with banks and broker-dealers. This and other investment
policies and restrictions are discussed in the SAI under the heading
"Investment Policies."
The underlying funds in which the Portfolio invests may, but need not,
have the same investment policies as the Portfolio. For example,
although International Portfolio will not borrow money for investment
purposes, it may invest its assets in an underlying fund which borrows
money for investment purposes (i.e., engages in leveraging). The
investments which may be made by underlying funds in which the
Portfolio invests and the risks associated with those investments are
described under "Investment Objective," "Investment Policies and
Restrictions" and "Investments of and Investment Techniques Employed
by Mutual Funds in Which the Portfolio May Invest."
ADDITIONAL RISKS AND OTHER CONSIDERATIONS
Any investment in a mutual fund involves risk and, although the
Portfolio invests in a number of underlying funds, this practice does
not eliminate investment risk. Moreover, investing through the
Portfolio in an underlying portfolio of mutual funds involves certain
additional expenses and certain tax results which would not be present
in a direct investment in the underlying funds. See "Expenses" and
"Dividends, Distributions and Taxes."
The Portfolio, together with the other Portfolios and any "affiliated
persons" (as defined in the 1940 Act), may purchase only up to 3% of
the total outstanding securities of any underlying fund. For this
purpose, shares of underlying funds held by private discretionary
investment advisory accounts managed by the Adviser will be aggregated
with those held by the other Portfolios. Accordingly, when affiliated
persons and other accounts managed by the Adviser hold shares of any
of the underlying funds, each Portfolio's ability to invest fully in
shares of those funds is restricted, and the Adviser must then, in
some instances, select alternative investments that would not have
been its first preference.
The 1940 Act also provides that an underlying fund whose shares are
purchased by the Portfolio will be obligated to redeem shares held by
the Portfolio only in an amount up to 1% of the underlying open-end
fund's outstanding securities during any period of less than 30 days.
Shares held by the Portfolio in excess of 1% of an underlying open-end
fund's outstanding securities, therefore, will be considered not
readily marketable securities which together with other such
securities may not exceed 15% of the Portfolio's net assets. See
"Investment Policies and Restrictions." These limitations are not
fundamental investment policies and may be changed by the Trustees
without shareholder approval.
Under certain circumstances, an underlying fund may determine to make
payment of a redemption by the Portfolio wholly or partly by a
distribution in kind of securities from its portfolio, in lieu of
cash, in conformity with the rules of the SEC. In such cases, the
Portfolio may hold securities distributed by an underlying fund until
the Adviser determines that it is appropriate to dispose of such
securities.
Investment decisions by the investment advisers of the underlying
funds are made independently of the Trust and its Adviser. Therefore,
the investment adviser of one underlying fund may be purchasing shares
of the same issuer whose shares are being sold by the investment
adviser of another such fund. The result of this would be an indirect
expense to the Portfolio without accomplishing any investment purpose.
The Portfolio may purchase shares of both load and no-load underlying
funds. To the extent an underlying fund offers multiple classes of
shares, the Portfolio will purchase the share class available to it
with the lowest sales charges. However, the Portfolio will not invest
in shares of underlying funds which are sold with a contingent
deferred sales charge.
Under the 1940 Act, a mutual fund must sell its shares at the price
(including sales load, if any) described in its prospectus, and
current rules under the 1940 Act do not permit negotiation of sales
charges. Therefore, the Portfolio currently is not able to negotiate
the level of the sales charges at which it will purchase shares of
load funds, which may be as great as 8.5% of the public offering price
(or 9.29% of the net amount invested). Nevertheless, when appropriate,
the Portfolio will purchase such shares pursuant to (i) letters of
intent, permitting it to obtain reduced sales charges by aggregating
its intended purchases over time (generally 13 months from the initial
purchase under the letter); (ii) rights of accumulation, permitting it
to obtain reduced sales charges as it purchases additional shares of
an underlying fund; and (iii) the right to obtain reduced sales
charges by aggregating its purchases of several funds within a family
of mutual funds. Based upon these privileges, it is expected that, in
the majority of cases, the sales charges paid by the Portfolio on a
load fund purchase will not exceed 1% of the public offering price
(1.01% of the net amount invested). See "Portfolio Transactions."
Under certain circumstances, a sales charge incurred by the Portfolio
in acquiring shares of an underlying fund may not be taken into
account in determining the gain or loss for federal income tax
purposes on the disposition of the shares acquired. If shares are
disposed of within 90 days from the date they were purchased and if
shares of a new underlying fund are subsequently acquired without
imposition of a sales charge or imposition of a reduced sales charge
pursuant to a right granted to the Portfolio to acquire shares without
payment of a sales charge or with the payment of a reduced charge,
then the sales charge paid upon the purchase of the initial shares
will be treated as paid in connection with the acquisition of the new
underlying fund's shares rather than the initial shares.
EXPENSES
As an investor in the Portfolio, you should recognize that you may
invest directly in mutual funds and that, by investing in mutual funds
indirectly through the Portfolio, you will bear not only your
proportionate share of the expenses of the Portfolio (including
operating costs and investment advisory and administrative fees) but
also, indirectly, similar expenses of the underlying funds. If you are
an investor in the Portfolio through a managed account program and pay
an advisory fee for asset allocation, you should recognize that the
combined expenses of the program and of the Portfolio (including their
indirect expenses) may involve greater fees and expenses than present
in other types of investments without the benefit of professional
asset allocation recommendations. In addition, if you are a
shareholder of the Financial Adviser Class, you will bear your
proportionate share of expenses related to the distribution of the
Portfolio's Financial Adviser Class Shares, see "Management of the
Trust -- The Distributors." As a Portfolio shareholder, you also may
indirectly bear expenses paid by an underlying fund related to the
distribution of its shares. As a Portfolio shareholder, you also will
bear your proportionate share of any sales charges incurred by the
Portfolio related to the purchase of shares of the underlying funds.
Finally, as an investor, you should recognize that, as a result of the
Portfolio's policies of investing in other mutual funds, you may
receive taxable capital gains distributions to a greater extent than
would be the case if you invested directly in the underlying funds.
See "Dividends, Distributions and Taxes."
MANAGEMENT OF FUNDMANAGER PORTFOLIOS
The business and affairs of the Trust are managed under the direction
of the Trustees. Additional information about the Trustees, as well as
the Trust's executive officers, may be found in the SAI under the
heading "Management Trustees and Officers."
THE ADVISER
Freedom Capital Management has its principal office at One Beacon
Street, Boston, Massachusetts. The Adviser advises the Trust through
the M.D. Hirsch Division of Freedom Capital Management. Michael D.
Hirsch, Chairman of the M.D. Hirsch Division of Freedom Capital
Management, has provided discretionary investment advisory services
relating to investments in mutual funds to individual accounts since
1975.
Freedom Capital Management is an indirect, wholly-owned subsidiary of
JHFSC Acquisition Corp. whose stock is held by the following companies
in the approximate percentages: Thomas H. Lee Equity Fund III, L.P.
(49%), a Massachusetts limited partnership; SCP Private Equity
Partners, L.P. (13%), a Delaware limited partnership; John Hancock
Subsidiaries, Inc. (4.9%), a wholly-owned subsidiary of John Hancock
Mutual Life Insurance Company; and certain members of management and
employees of John Hancock Freedom Securities Corporation (the direct
parent of the Adviser and a subsidiary of JHFSC Acquisition Corp.) and
its subsidiaries, including the Adviser (32%). Prior to November 29,
1996, Freedom Capital Management was an indirect, wholly-owned
subsidiary of John Hancock Mutual Life Insurance Company ("John
Hancock"). John Hancock is a major mutual life insurance company based
in Boston, Massachusetts.
Pursuant to an Investment Advisory Contract, the Adviser is
responsible for the investment management of the Portfolio's assets,
including the responsibility for making investment decisions and
placing orders for the purchase and sale of the Portfolio's
investments directly with the issuers or with brokers or dealers,
selected by it in its discretion, including Freedom Distributors and
Edgewood. See "Portfolio Transactions." The Adviser also furnishes to
the Trustees, which have overall responsibility for the business and
affairs of the Trust, periodic reports on the investment performance
of the Trust. For these services, the Adviser receives from the
Portfolio a fee, payable monthly, at the annual rate of 0.50% of the
Portfolio's average daily net assets up to $500 million and 0.40% of
its average daily net assets in excess of $500 million.
Michael D. Hirsch is the Portfolio Manager of the Portfolio and
is responsible for the day to day management of the Portfolio.
Currently, Mr. Hirsch is Chairman of the M.D. Hirsch Division of
Freedom Capital Management. Prior to February 21, 1995, Mr. Hirsch was
the Vice Chairman and Managing Director of the M.D. Hirsch Division of
Republic Asset Management. Mr. Hirsch served as President of M.D.
Hirsch Investment Management, Inc. from February 1991 until June 1993
and Chief Investment Officer of Republic from 1981 until February
1991. Mr. Hirsch pioneered the concept of investing his clients'
assets in a portfolio of mutual funds in 1975. Mr. Hirsch is now a
noted authority on mutual funds and has authored two books, "Multifund
Investing" in 1987 and "The Mutual Fund Wealth Builder" in 1991.
THE ADMINISTRATOR
FAS, a wholly-owned subsidiary of Federated Investors with its
principal business offices at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779, provides administrative personnel and
services (including certain legal and financial reporting services)
necessary to operate the Portfolio. FAS provides these at an annual
rate which relates to the average aggregate daily net assets of the
Portfolio as specified below:
MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE
FEE DAILY NET ASSETS
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at
least $75,000 per Portfolio and $35,000 per each additional class of
shares. FAS may choose voluntarily to waive a portion of its fee or
minimums from time to time in its sole discretion.
THE DISTRIBUTORS
The Trustees of the Trust have approved a Distribution Contract (the
"Distribution Contract") between the Trust and each of Edgewood,
Freedom Distributors , Tucker Anthony, and Sutro pursuant to which
each will serve as a Distributor of the Trust and of the Shares of the
Portfolio.
Edgewood, a registered broker/dealer, is a wholly-owned subsidiary of
Federated Investors with principal business offices at Clearing
Operations, P.O. Box 897, Pittsburgh, Pennsylvania 15230-0897. Freedom
Distributors is a registered broker/dealer with principal business
offices at One Beacon Street, Boston, Massachusetts 02108. Tucker
Anthony is a brokerage firm which is a member of the New York Stock
Exchange continuing an investment banking and brokerage business
established in 1892. The principal business address of Tucker Anthony
is One Beacon Street, Boston, Massachusetts 02108. Sutro is brokerage
firm and a member of the New York Stock Exchange. The principal
business address of Sutro is 201 California Street, San Francisco,
California 94111. Freedom Distributors, Tucker Anthony, and Sutro are
subsidiaries of John Hancock Freedom Securities Corporation. See
description of "The Adviser" above. Pursuant to a Distribution Plan
adopted by the Portfolio with respect to the Financial Adviser Class
(the "Plan"), the Portfolio will reimburse the Distributors monthly
(subject to a limit of 0.50% per annum of the Portfolio's average
daily net assets attributable to the Financial Adviser Class) for
costs and expenses incurred by the Distributors in connection with the
distribution of Financial Adviser Class Shares and for the provision
of certain shareholder services with respect to Financial Adviser
Class Shares. Payments to the Distributors will be for various types
of activities, including: (i) payments to broker-dealers who advise
shareholders regarding the purchase, sale, or retention of Portfolio
Shares and who provide shareholders with personal services and account
maintenance services ("service fee"), (ii) payments to employees of
the Distributors, and (iii) printing and advertising expenses. Such
payments by the Distributors to broker-dealers may be in amounts up to
0.50% per annum of the Portfolio's average daily net assets
attributable to the Financial Adviser Class, provided, however, that
the service fee will be limited to 0.25% of the Portfolio's average
daily net assets attributable to the Financial Adviser Class. The fees
and reimbursements paid by the Portfolio to the Distributors may equal
up to 0.50% of the Portfolio's average daily net assets attributable
to the Financial Adviser Class, of which up to 0.25% of the
Portfolio's average daily net assets may be paid for shareholder
servicing expenses. Salary expense of salesmen who are responsible for
marketing Financial Adviser Class Shares of the Portfolio and related
travel expenses may be allocated to the Portfolio on the basis of
average net assets attributable to the Financial Adviser Class.
Any payment by a Distributor or reimbursement of a Distributor by the
Portfolio made pursuant to the Plan is contingent upon the Trustees'
approval. The Portfolio will not be liable for distribution and
shareholder servicing expenditures in any given year in excess of the
maximum amount (0.50% per annum of the Portfolio's average daily net
assets attributable to the Financial Adviser Class) payable under the
Plan in that year. The Plan also permits the Distributors to receive
and retain brokerage commissions with respect to portfolio
transactions for underlying funds, including funds which have a policy
of considering sales of their shares in selecting broker-dealers for
the execution of their portfolio transactions.
The Distributors may provide promotional incentives to investment
executives who support the sale of Shares of the Portfolio. In some
instances, these incentives may be offered only to certain investment
executives which provide services in connection with the sale or
expected sale of significant amounts of Shares.
CUSTODIAN
State Street Bank and Trust Company ("State Street Bank") provides
custodial and portfolio accounting services to the Trust and the
Portfolio. The principal business address of State Street Bank is P.O.
Box 8600, Boston, Massachusetts 02266-8600.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND SHAREHOLDER SERVICING AGENT
Federated Shareholder Services Company ("FSSC") maintains all
necessary shareholder records. All written correspondence, including
purchase and redemption requests, changes of address and other
shareholder account changes, should be sent to: FundManager
Portfolios, c/o Federated Shareholder Services Company, P.O. Box 8609,
Boston, Massachusetts, 02266-8609.
SERVICE ORGANIZATIONS
The Trust also contracts with various banks, trust companies,
broker-dealers (other than the Distributors) or other financial
organizations (collectively, "Service Organizations") to provide
administrative services for the Financial Adviser Class such as
maintaining shareholder accounts and records. The Portfolio pays fees
to Service Organizations (which vary depending upon the services
provided) in amounts up to an annual rate of 0.25% of the daily net
asset value of the Portfolio's Financial Adviser Class Shares owned by
shareholders with whom the Service Organization has a servicing
relationship.
Some Service Organizations may impose additional or different
conditions on their clients such as requiring their clients to invest
more than the minimum initial or subsequent investments specified by
the Trust or charging a direct fee for servicing. If imposed, these
fees would be in addition to any amounts which might be paid to the
Service Organization by the Trust. Each Service Organization has
agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult them
regarding any such fees or conditions.
OTHER EXPENSES
The Trust bears all costs of its operations other than expenses
specifically assumed by the Administrator, Distributors or the
Adviser. See "Management" in the SAI. Expenses directly attributable
to a Portfolio or class are charged to that Portfolio or class; other
expenses are allocated proportionately among the Portfolios or class,
as the case may be, in relation to the net assets of each Portfolio or
class.
PORTFOLIO TRANSACTIONS
Pursuant to the Investment Advisory Contract, the Adviser places
orders for the purchase and sale of portfolio investments for the
Portfolio's accounts with brokers or dealers, selected by it in its
discretion, including Freedom Distributors and Edgewood. With respect
to purchases of certain money market instruments, purchase orders are
placed directly with the issuer or its agent. With respect to
purchases of shares of underlying funds, the Portfolio may pay a sales
charge. Sales charges of the underlying funds generally consist of two
parts, the "dealer reallowance" (which typically comprises at least
80% of the amount of the charge and is paid to the broker
participating in the sale of the underlying fund shares) and the
underwriter's retention. To the extent permissible by law, Freedom
Distributors and Edgewood will be designated as the participating
brokers entitled to receive the dealer reallowance portion of the
sales charge on purchases of load fund shares by the Portfolio.
However, Freedom Distributors will not retain any dealer reallowance
in excess of 1% of the public offering price on any transaction nor
will it be designated as the broker entitled to receive the dealer
reallowance portion of the sales charge where such reallowance would
exceed 1% of the public offering price. With respect to purchases of
underlying fund shares, the Adviser directs substantially all of the
Portfolio's orders to either Freedom Distributors or Edgewood, which
may, in its discretion, direct the order to other broker-dealers in
consideration of sales of the Portfolio's shares, except where the
direction to another broker-dealer would increase the dealer
reallowance paid by a fund to Freedom Distributors above 1% of the
public offering price.
Freedom Distributors and Edgewood may also assist in the execution of
the Portfolio's purchase of underlying fund shares and they may
receive additional compensation (such as distribution payments,
shareholder servicing fees, and/or trailer fees) from the underlying
funds or their underwriters. In providing execution assistance,
Freedom Distributors and Edgewood receive orders from the Adviser;
place them with the underlying fund's distributor, transfer agent or
other person, as appropriate; confirm the trade, price and number of
shares purchased; and assure prompt payment by the Portfolio and
proper completion of the order. Payment of sales charges or other
forms of compensation to Freedom Distributors or Edgewood is not a
factor that the Adviser considers when selecting an underlying fund
for purchase.
The Portfolio is actively managed and has no restrictions upon
portfolio turnover, although its annual turnover rate is not expected
to exceed 100%. A 100% annual portfolio turnover rate would be
achieved if each security in the Portfolio's portfolio (other than
securities with less than one year remaining to maturity) were
replaced once during the year. To the extent the Portfolio is
purchasing shares of load funds, a higher turnover rate would result
in correspondingly higher sales loads paid by the Portfolio. Trading
also may result in realization of net short-term capital gains which
would not otherwise be realized, and shareholders are taxed on such
gains when distributed from the Portfolio at ordinary income tax
rates. See "Dividends, Distributions and Taxes." There is no limit on
the portfolio turnover rates of the underlying funds in which the
Portfolio may invest.
DETERMINATION OF NET ASSET VALUE
The net asset value per Share of the Portfolio is determined as of the
close of trading (normally 4:00 p.m., Eastern time) on the NYSE,
Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Portfolio's portfolio
securities that its net asset value might be materially affected; (ii)
days during which no Shares are tendered for redemption and no orders
to purchase shares are received; and (iii) the following holidays: New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. Net asset value per Share is calculated by dividing the
aggregate value of the Portfolio's assets allocable to the each class
less all liabilities by the number of each class' outstanding shares.
The assets of the Portfolio consist primarily of the underlying funds,
which are valued at their respective net asset values under the 1940
Act. The underlying funds value securities in their portfolios for
which market quotations are readily available at their current market
value (generally the last reported sale price) and all other
securities and assets at fair value pursuant to methods established in
good faith by the boards of directors or trustees of the underlying
funds. Money market mutual funds may use the amortized cost or
penny-rounding methods to value their securities. Securities having 60
days or less remaining to maturity generally are valued at their
amortized cost which approximates market value. Other assets of the
Portfolio are valued at their current market value if market
quotations are readily available and, if market quotations are not
available, they are valued at fair value pursuant to methods
established in good faith by the Trustees. Debt instruments having 60
days or less remaining to maturity are valued at their amortized cost.
PURCHASE OF SHARES
Financial Adviser Class Shares of the Portfolio are offered by the
Distributors as an investment vehicle for individuals, institutions,
corporations and fiduciaries. Financial Adviser Class Shares of the
Portfolio may also be offered to participants in certain managed
account programs who receive, for a fee at a maximum annual rate based
upon a percentage of assets invested, certain services, including
asset allocation recommendations with respect to investments in the
Trust's portfolios based on an evaluation of the investment objective
and risk tolerance of the investor. The Portfolio pays expenses
related to the distribution of Financial Adviser Class Shares. See
"Management of the Trust -- The Distributors."
The minimum initial investment in Financial Adviser Class Shares is
$1,000, except that the minimum initial investment for an IRA is $250.
The minimum subsequent investment is $100. There are no minimum
investment requirements for FundManager prototype defined contribution
plans.
No-Load Class Shares of the Portfolio are offered by the Distributors
as an investment vehicle for individuals, institutions, corporations
and fiduciaries in the Program offered by the Distributors. The
participants in the Program receive, for a fee at a maximum annual
rate based upon a percentage of assets invested, certain services,
including asset allocation recommendations with respect to investments
in the Trust's portfolios based on an evaluation of the investment
objective and risk tolerance of the investor. No-Load Class Shares of
the Portfolios are offered for sale at net asset value by the
Distributors to participants in the Program. No-Load Class Shares of
the Portfolio may also be offered to employees through tax-deferred
retirement plans of the Distributors and the Adviser.
Purchases of No-Load Class Shares of the Trust by participants in the
Program must be through a brokerage account maintained with the
Distributors. The minimum investment by participants in the Program is
$50,000. The minimum initial investment for other qualified investors
is $1,000, except that the minimum initial investment for an IRA is
$250. The minimum subsequent investment is $100.
Prospectuses, sales material and applications relating to the
Portfolio can be obtained from the Distributors.
The minimum initial investment is waived for purchases by Trustees,
officers and employees of the Trust, the Adviser or a Distributor,
including their immediate families and certain accounts. The Portfolio
also reserves the right to vary the initial and subsequent investment
minimums in Shares. All purchase payments are invested in full and
fractional shares. The Trust and each Distributor are authorized to
reject any purchase order.
For each shareholder of record, the Trust, as the shareholder's
agent, establishes an open account to which all Shares purchased are
credited together with any dividends and capital gains distributions
which are paid in additional Shares. See "Dividends, Distributions and
Taxes."
PURCHASES BY CLIENTS OF THE DISTRIBUTORS OR AUTHORIZED SECURITIES DEALERS
If you have a brokerage account or Program account with a Distributor
or an authorized securities dealer, you may purchase Shares through
your investment executive. Your investment executive has the
responsibility of submitting your purchase order to FSSC on such day
in order to obtain that day's applicable purchase price. Purchase
orders received by FSSC after the time of determining that day's
purchase price (generally 4:00 p.m., New York time), are priced
according to the net asset value per share next determined on the
following business day. Payment for purchase orders must be made to
such Distributor or dealer within three business days of the purchase
order.
The Distributor or your dealer will receive statements and dividends
directly from the Portfolio and will in turn provide you with account
statements reflecting the Portfolio's purchases, redemptions and
dividend payments. If you wish additional information concerning your
investment, please call your investment executive.
FUNDMANAGER ADVISORY PROGRAM - NO-LOAD CLASS
The Adviser, through the Program, provides discretionary advisory
services in connection with investments among the Trust's portfolios.
Under the Program, investment executives of the Distributors provide
services to an investor by assisting the investor in identifying his
or her financial objectives, preferences and risk tolerances through
evaluation of a confidential questionnaire-Client Information Guide.
Based on its evaluation of the investor's financial goals and
circumstances, the Adviser allocates the investor's assets among
Automated Cash Management Trust, California Municipal Cash Trust, New
York Municipal Cash Trust money market funds and some or all of the
Trust's portfolios. The Adviser will adjust each investor's Program
portfolio among the money market funds and the portfolios from time to
time based on its assessment of the economy, interest rates, the
financial markets and macro-economic events worldwide. The Program is
a continuing investment advisory program. Once a Program is active,
the investor receives, at least quarterly, a report containing an
analysis and evaluation of the investor's portfolio. Investment
executives of the Distributors may review the quarterly report with
the investor, monitor identified changes in the investor's financial
characteristics and communicate any changes to the Adviser.
The Distributors are paid a quarterly fee for the services comprising
the Program at the maximum annual rate of 1.35% of assets held in a
Program account. Where the investor is a qualified retirement plan, a
different fee schedule may apply. Investment executives of the
Distributors will receive, and the Adviser may receive, a portion of
any fee paid by Program clients. The Adviser also receives advisory
fees from the Trust's portfolios. The Program fees may be subject to
negotiation based on a number of factors including, but not limited
to, the size of the Program account. The operating expenses of the
money market fund and the Trust's portfolios, when combined with the
Program fee, may involve greater fees and expenses than other mutual
funds whose shares are purchased without the benefit of asset
allocation recommendations rendered by investment advisers such as the
Adviser.
For participants in the Program, No-Load Class Shares of the Portfolio
may be purchased directly through the Distributors only after the
completion and processing of the investor's Client Information Guide
and applicable documents. The offering price is the net asset value
per share next determined following receipt of an order by the
Distributors.
FINANCIAL ADVISER CLASS
CERTAIN SERVICE ORGANIZATIONS AND OTHER INVESTORS -- PURCHASE BY CHECK OR WIRE
PURCHASE BY MAIL. If you do not have a brokerage account with a
Distributor, you may purchase Financial Adviser Class Shares of the
Portfolio directly by completing the Purchase Application included in
this Prospectus and mailing it, together with a check written on a
U.S. bank in a minimum amount of $1,000 payable to "International
Portfolio", to Federated Shareholder Services Company, P.O. Box 8600,
Boston, MA 02266-8600. Investors wishing to purchase Financial Adviser
Class Shares through their account at a Service Organization should
contact the organization directly for appropriate instructions.
Subsequent purchases of $100 or more may also be made through FSSC by
forwarding payment, together with the detachable stub from your
account statement or a letter containing your account number.
PURCHASE BY WIRE. Service Organizations (on behalf of customers) may transmit
purchase payments by wire directly to the Portfolio's Custodian at the
following address:
State Street Bank and Trust Company, Boston, Massachusetts Attn: Transfer
Agent ABA#011000028, Deposit Account. #2303-298-0. For further credit to
FundManager Portfolios -- Financial Adviser Class
(International Portfolio, account name, account #).
The wire order must specify the name of the Portfolio, the account
name, number, confirmation number, address, social security or tax
identification number (where applicable), amount to be wired, name of
the wiring bank and name and telephone number of the person to be
contacted in connection with the order. Where the initial purchase is
by wire, an account number will be assigned and a Purchase Application
must be completed and mailed to the Trust.
Investors making purchases through a Service Organization should be
aware that it is the responsibility of the Service Organization to
transmit orders for purchases of shares by its customers to the
Transfer Agent and to deliver required funds on a timely basis, in
accordance with the procedures stated above.
AUTOMATIC INVESTMENT PLAN
The Trust offers a plan for regularly investing specified dollar
amounts ($25 minimum in monthly, quarterly, semiannual or annual
intervals) in Financial Adviser Class Shares of the Portfolio. If an
Automatic Investment Plan is selected, subsequent investments will be
automatic and will continue until such time as the Portfolio and the
investor's bank are notified to discontinue further investments. Due
to the varying procedures to prepare, process and forward the bank
withdrawal information to the Portfolio, there may be a delay between
the time of the bank withdrawal and the time the money reaches the
Portfolio. The investment in the Portfolio will be made at the public
offering price per share determined on the day that both the check and
bank withdrawal data are received in required form by the Distributor.
Further information about the plan may be obtained from FSSC at the
telephone number listed on the back cover of the Prospectus.
RETIREMENT PLANS
The Trust offers Financial Adviser Class Shares of the Portfolio in
connection with tax-deferred retirement plans. Application forms and
further information about these plans, including applicable fees, are
available from the Trust or a Distributor upon request. Before
investing in shares of the Portfolio through one or more such plans,
an investor should consult a tax adviser regarding the Federal income
tax treatment of contributions to retirement plans, such as those
listed below.
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS")
Shares of the Portfolio may be used as a funding medium for an IRA. An
Internal Revenue Service-approved IRA plan is available from each
Distributor naming State Street Bank as custodian. The minimum initial
investment for an IRA is $250; the minimum subsequent investment is
$100. IRAs are available to individuals who receive compensation or
earned income and their spouses whether or not they are active
participants in a tax-qualified or government-approved retirement
plan. An IRA contribution by an individual who participates, or whose
spouse participates, in a tax-qualified or government-approved
retirement plan may not be deductible depending upon the individual's
income. Individuals also may establish an IRA to receive a "rollover"
contribution of distributions from another IRA or a qualified plan.
Tax advice should be obtained before planning a rollover.
DEFINED CONTRIBUTION PLAN
Investors who are self-employed may purchase Financial Adviser Class
Shares of the Portfolio for retirement plans for self-employed persons
which are known as Defined Contribution Plans (formerly Keogh or H.R.
10 Plans). The Financial Adviser Class offers a prototype Defined
Contribution Plan for Money Purchase or Profit Sharing Plans, 401(k)
Plans, Simplified Employee Pension Plans (SEPs) and SAR (SEPs).
Section 401(k) Plan
Financial Adviser Class Shares of the Portfolio may be used as a
vehicle for a cash or deferred arrangement designed to qualify under
Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code").
Section 403(b) Plan
Financial Adviser Class Shares of the Portfolio may be used as vehicle
for certain deferred compensation plans designed to qualify under
Section 403(b) of the Code for use by employees of certain
educational, non-profit hospital and charitable organizations.
Section 457 Plan
Financial Adviser Class Shares of the Portfolio may be used as a
vehicle for certain deferred compensation plans provided for by
Section 457 of the Code with respect to service for state governments,
local governments, rural electric cooperatives and political
subdivisions, agencies, instrumentalities and certain affiliates of
such entities which enjoy special treatment.
EXCHANGE PRIVILEGE
By contacting their brokerage account executive, service organization
or transfer agent, Financial Adviser Class shareholders may exchange
some or all of their Portfolio Shares for Financial Adviser Class
Shares of one or more of the Trust's other portfolios or shares of
Automated Cash Management Trust -- Institutional Service Shares, New
York Municipal Cash Trust or California Municipal Cash Trust (the
"Fund" or "Funds," as the context requires) at net asset value. The
Funds offer checkwriting at no charge. An exchange may result in a
change in the number of shares held, but not in the value of such
shares, immediately after the exchange. Each exchange involves the
redemption of the portfolio or Fund shares to be exchanged and the
purchase of the Financial Adviser Class Shares of the other portfolio
or Fund. As a result, any gain or loss on the redemption of the shares
exchanged is reportable on the shareholder's Federal income tax
return. The exchange privilege (or any aspect of it) may be changed or
discontinued upon 60 days' written notice to shareholders and is
available only to shareholders in states where such exchanges may be
legally made. A shareholder considering an exchange should obtain and
read the prospectus of the portfolios or Fund and consider the
differences in investment objectives and policies before making any
exchange.
For further information as to how to purchase or exchange Financial
Adviser Class Shares, an investor should contact their Service
Organization or Transfer Agent.
REDEMPTION OF SHARES
Upon receipt by the Trust of a redemption request in proper form,
Shares of the Portfolio will be redeemed at the next determined net
asset value. See "Determination of Net Asset Value." For the
shareholder's convenience, the Trust has established several different
direct redemption procedures.
REDEMPTION OF SHARES PURCHASED THROUGH A DISTRIBUTOR OR AUTHORIZED SECURITIES
DEALER
In order to redeem your Shares purchased through a Distributor in the
Program or through a brokerage account, you should advise your
investment executive, by telephone or mail, to execute the redemption.
Redemption requests received by the close of the NYSE (generally 4:00
p.m., New York time) are effective that day. Your investment executive
has the responsibility of submitting your redemption request to FSSC
on such day in order to obtain that day's applicable redemption price.
There is no redemption charge. Redemption proceeds will be held in
your brokerage account unless you give instructions to your investment
executive to remit the proceeds to you.
DIRECT REDEMPTION
Direct redemptions are not available for Shares purchased through a
Distributor's brokerage account. Any such redemption requests received
will be forwarded to your investment executive who will process them
as described above.
FINANCIAL ADVISER CLASS
Redemptions of Financial Adviser Class Shares may be made by letter to
the Trust specifying the dollar amount or number of shares to be
redeemed, and account number. The letter must be signed in exactly the
same way the account is registered (if there is more than one owner of
the shares, all must sign) and all signatures must be guaranteed by an
Eligible Guarantor Institution, which includes a domestic bank,
broker, dealer, credit union, national securities exchange, registered
securities association, clearing agency or savings association. The
Portfolio's transfer agent, however, may reject redemption
instructions if the guarantor is neither a member of nor a participant
in a signature guarantee program (currently known as "STAMP," "SEMP,"
or "NYSE MSP"). Corporations, partnerships, trusts or other legal
entities may be required to submit additional documentation. An
investor may redeem shares in any amount by written request mailed to
the Trust at the following address: FundManager Portfolios c/o
Federated Shareholder Services Company P.O. Box 8609 Boston,
Massachusetts 02266-8609
Checks for redemption proceeds normally will be mailed within three
days, but will not be mailed until all checks in payment for the
purchase of the shares to be redeemed have been cleared, which may
take up to 15 days. Unless other instructions are given in proper
form, a check for the proceeds of a redemption will be sent to the
shareholder's address of record.
REDEMPTION BY WIRE OR TELEPHONE
An investor may redeem Financial Adviser Class Shares by wire or by
telephone if the investor has checked the appropriate box on the
Purchase Application or has filed a Telephone Authorization Form with
the Portfolio. These redemptions may be paid by the Portfolio by wire
or by check. The Trust reserves the right to refuse telephone wire
redemptions and may limit the amount involved or the number of
telephone redemptions. The telephone redemption procedure may be
modified or ended at any time by the Trust. Instructions for wire
redemptions are set forth in the Purchase Application. The Trust
employs reasonable procedures to confirm that instructions
communicated by telephone are genuine. For instance, the following
information must be verified by the shareholder or broker at the time
a request for a telephone redemption is effected: (i) shareholder's
account number; (ii) shareholder's social security number; and (iii)
name and account number of shareholder's designated securities dealer
or bank. If the Trust fails to follow these or other established
procedures, it may be liable for any losses due to unauthorized or
fraudulent instructions.
A Service Organization may request a wire redemption, provided a Wire
Authorization Form is on file with the Trust. There is no charge to
the Service Organization for wire redemptions. The proceeds of a wire
redemption will be sent to an account with a Service Organization
designated on the appropriate form. The Trust reserves the right to
restrict or terminate wire redemption privileges. Proceeds of wire
redemptions generally will be transferred within three days after
receipt of the request.
SYSTEMATIC WITHDRAWAL PLAN
Any shareholder who owns Financial Adviser Class Shares of the
Portfolio with an aggregate value of $10,000 or more may establish a
Systematic Withdrawal Plan under which the shareholder redeems at net
asset value the number of full and fractional shares which will
produce the monthly, quarterly, semi-annual or annual payments
specified (minimum $50 per payment). Depending on the amounts
withdrawn, systematic withdrawals may deplete the investor's
principal. Investors contemplating participation in this Plan should
consult their tax advisers. No additional charge to the shareholder is
made for this service.
LIMITS ON REDEMPTIONS
The Trust may suspend the right of redemption during any period when
(i) trading on the NYSE is restricted or the NYSE is closed, other
than customary weekend and holiday closings, (ii) the SEC has by order
permitted such suspension or (iii) an emergency, as defined by rules
of the SEC, exists making disposal of portfolio investments or
determination of the value of the net assets of the Portfolio not
reasonably practicable.
If the Trustees should determine that it would be detrimental to the
best interests of the remaining shareholders of the Portfolio to make
payment wholly or partly in cash, the Portfolio may pay the redemption
price in whole or in part by a distribution in kind of readily
marketable securities (mutual fund shares or money market instruments)
from the portfolio of the Portfolio, in lieu of cash, in conformity
with applicable rules of the SEC. The Trust will, however, redeem
shares solely in cash up to the lesser of $250,000 or 1% of its net
assets during any 90-day period for any one shareholder.
The proceeds of redemption may be more or less than the amount
invested and, therefore, a redemption may result in a gain or loss for
Federal income tax purposes.
Because the Portfolio incurs fixed costs in maintaining shareholder
accounts, the Portfolio reserves the right to redeem your account if
its total value falls below $500 at the end of any month, unless the
decrease is solely the result of a reduction in net asset value per
share. If the Portfolio elects to redeem your account, it will notify
you of its intention to do so and will provide you with an opportunity
to increase your account by investing a sufficient amount to bring the
account up to $500 or more within 30 days of the notice.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Portfolio intends to continue to qualify as a regulated investment
company under Subchapter M of the Code. In any year in which the
Portfolio qualifies as a regulated investment company and distributes
substantially all of its investment company taxable income (which
includes, among other items, the excess of net short-term capital
gains over net long-term capital losses) and its net capital gains
(the excess of net long-term capital gains over net short-term capital
losses), the Portfolio will not be subject to Federal income tax to
the extent it distributes to shareholders such income and capital
gains in the manner required under the Code. Amounts not distributed
on a timely basis in accordance with a calendar year distribution
requirement are subject to a nondeductible 4% excise tax. To prevent
imposition of the excise tax, the Portfolio must distribute for each
calendar year an amount equal to the sum of (i) at least 98% of its
net ordinary income (excluding any capital gains or losses) for the
calendar year, (ii) at least 98% of the excess of its capital gains
over capital losses (adjusted for certain ordinary losses) realized
during the one-year period ending October 31 of such year, and (iii)
all ordinary income and capital gains for previous years that were not
distributed during such years. If a distribution is declared by the
Portfolio in December to shareholders of record as of a specified date
in December and paid by the Portfolio during January of the following
calendar year, the distribution will be treated as a dividend paid
during the calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are
received. The Portfolio intends to distribute its income in accordance
with this requirement to prevent application of the excise tax.
Each year the Trust will notify shareholders of the tax status of
dividends and distributions.
Income received by the Portfolio from a mutual fund in the Portfolio's
portfolio (including dividends and distributions of short-term capital
gains), as well as interest received on money market instruments and
net short-term capital gains received by the Portfolio on the sale of
mutual fund shares, will be distributed by the Portfolio (after
deductions for expenses) and will be taxable to shareholders as
ordinary income. Because the Portfolio is actively managed and can
realize taxable net short-term capital gains by selling shares of an
underlying fund with unrealized portfolio appreciation, investing in
the Portfolio rather than directly in the underlying funds may result
in increased tax liability to the shareholder, since the Portfolio
must distribute its gain in accordance with the rules in the Code. The
Portfolio's ability to dispose of shares of mutual funds held less
than three months may be limited by requirements relating to the
Portfolio's qualification as a regulated investment company for
federal income tax purposes.
Distributions of net capital gains (the excess of net long-term
capital gains over net short-term capital losses) received by the
Portfolio from mutual funds, as well as net long-term capital gains
realized by the Portfolio from the purchase and sale (or redemption)
of mutual fund shares or other securities held (generally) by the
Portfolio for more than one year, will be distributed by the Portfolio
and will be taxable to shareholders as long-term capital gains (even
if the shareholder has held the shares for less than one year).
However, if you receive a capital gains distribution and suffer a loss
on the sale of your shares not more than six months after purchase,
the loss will be treated as a long-term capital loss to the extent of
the capital gains distribution received. The long-term capital gains,
including distributions of net capital gains, are currently subject to
a maximum federal tax rate of 28% which is less than the maximum rate
imposed on other types of taxable income. Furthermore, capital gains
may be advantageous because, unlike ordinary income, they may be
offset by capital losses.
For purposes of determining the character of income received by the
Portfolio when an underlying fund distributes net capital gains to the
Portfolio, the Portfolio will treat the distribution as a long-term
capital gain, even if it has held shares of the mutual fund for less
than one year. However, any loss incurred by the Portfolio on the sale
of that underlying fund's shares held for six months or less will be
treated as a long-term capital loss to the extent of the gain
distribution.
The tax treatment of distributions from the Portfolio is the same
whether the distributions are received in additional Shares or in
cash. Shareholders receiving distributions in the form of additional
Shares will have a cost basis for Federal income tax purposes in each
Share received equal to the net asset value of a Share of the
Portfolio on the reinvestment date. The Portfolio may invest in
underlying funds with capital loss carry-forwards. If such an
underlying fund realizes capital gains, it will be able to offset the
gains to the extent of its loss carry-forwards in determining the
amount of capital gains which must be distributed to its shareholders.
To the extent that gains are offset in this manner, the Portfolio will
not realize gains on the related fund until such time as the
underlying fund is sold.
Depending on the residence of the shareholder for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes. Shareholders should consult their own tax advisers
as to the tax consequences of ownership of shares of the Portfolio in
their particular circumstances.
The Portfolio generally will be required to withhold Federal income
tax at a rate of 31% ("backup withholding") from dividends paid to
shareholders if: (a) the payee fails to furnish the Trust with and to
certify the payee's correct taxpayer identification number or social
security number, (b) the Internal Revenue Service (the "IRS") notifies
the Trust that the payee has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to
that effect, or (c) the payee fails to certify that he or she is not
subject to backup withholding.
International Portfolio will distribute investment company taxable
income annually. The Portfolio will distribute any net realized
capital gains at least annually. All dividends and distributions will
be reinvested automatically at net asset value in additional shares of
the Portfolio, unless you have notified the Portfolio in writing of
your election to receive distributions in cash.
Income received by the underlying funds from sources within various
foreign countries may be subject to foreign income taxes withheld at
the source. Since less than 50% of the value of the Portfolio's total
assets at the close of its taxable year is expected to consist of
stock or securities of foreign corporations, the Portfolio is not
permitted to elect to "pass through" to the Portfolio's shareholders
the amount of foreign income taxes paid by the underlying funds. Each
shareholder's respective pro rata share of foreign taxes paid by the
underlying funds will, therefore, be netted against their share of the
underlying fund's gross income.
The underlying funds' transactions in foreign currencies and hedging
activities may give rise to ordinary income or loss to the extent such
income or loss results from fluctuations in value of the foreign
currency concerned. In addition, such activities will likely produce a
difference between book income and taxable income. This difference may
cause a portion of the underlying funds' income distributions to
constitute a return of capital for tax purposes or require the
underlying fund to make distributions exceeding book income to qualify
as a regulated investment company for tax purposes.
OTHER INFORMATION
CAPITALIZATION
The Trust (initially named FundManager Trust, and since renamed
FundManager Portfolios) was organized as a Delaware business trust on
February 7, 1995 as a successor, with respect to the Trust's other
portfolios, to Republic Funds (formerly FundTrust) a Massachusetts
business trust (organized on April 22, 1987). Republic Funds succeeded
two previously existing Massachusetts business trusts, FundTrust
Tax-Free Trust (organized on July 30, 1986) and FundVest (organized on
July 17, 1984 and since renamed Fund Source). The Trust currently
consists of six separately-managed portfolios each offering two
classes of shares of beneficial interest, the Financial Adviser Class
and the No-Load Class (except for Managed Total Return, which only
offers Financial Adviser Class). The Trustees may establish additional
portfolios and divide shares in each portfolio into additional classes
in the future. The capitalization of the Trust consists solely of an
unlimited number of shares of beneficial interest with a par value of
$0.001 each. When issued, shares of the portfolios are fully paid,
non-assessable and freely transferable.
VOTING
Shareholders have the right to vote in the election of Trustees and on
any and all matters on which by law or the provisions of the Master
Trust Agreement they may be entitled to vote. When matters are
submitted for shareholder vote, shareholders will have one vote for
each full share held and proportionate, fractional votes for
fractional shares held. A separate vote of a Trust portfolio or class
is required on any matter affecting that Portfolio or class on which
shareholders are entitled to vote. Shareholders of a Trust portfolio
or class are not entitled to vote on Trust matters that do not affect
the portfolio or class and do not require a separate vote of the
Portfolio or class. The Trust is not required to hold regular annual
meetings of its shareholders and does not intend to do so. See "Other
Information -- Voting Rights" in the SAI.
The Master Trust Agreement provides that the holders of not less than
three-fourths of the outstanding shares of the Trust may remove a
person serving as Trustee either by declaration in writing or at a
meeting called for such purpose. The Trustees are required to call a
meeting for the purpose of considering the removal of a person serving
as Trustee if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust.
Shares entitle their holders to one vote per share (with proportionate
voting for fractional shares). As used in this Prospectus, the phrase
"vote of a majority of the outstanding shares" of the Trust, a
portfolio or class means the vote of the lesser of: (i) 67% of the
shares of the Trust, Portfolio or class present at a meeting if the
holders of more than 50% of the outstanding shares of the Trust,
portfolio or class are present in person or by proxy or (ii) more than
50% of the outstanding shares of the Trust, portfolio or class.
In compliance with applicable provisions of the 1940 Act, shares of
the underlying funds owned by the Portfolio will be voted in the same
proportion as the vote of all other holders of those shares.
PERFORMANCE INFORMATION
The Trust may, from time to time, include quotations of the
Portfolio's yield and total return in advertisements or reports to
shareholders or prospective investors. Quotations of yield will be
based on the investment income per share earned during a particular
30-day period (including dividends and interest), less expenses
accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public
offering price per share on the last day of the period. Quotations of
total return will be expressed in terms of the average annual
compounded rate of return of a hypothetical investment in the
Portfolio over periods of 1, 5 and 10 years (up to the life of the
Portfolio). All total return figures will reflect a proportional share
of Portfolio expenses on an annual basis, and will assume that all
dividends and distributions are reinvested when paid. Quotations of
yield or total return reflect only the performance of a hypothetical
investment in the Portfolio during the particular time period on which
the calculations are based. Yield and total return for a Portfolio
will vary based on changes in market conditions and the level of the
Portfolio's expenses, and no reported performance figure should be
considered an indication of performance which may be expected in the
future.
In connection with communicating the Portfolio's yield and total
return to current or prospective shareholders, the Trust also may
compare these figures to the performance of other mutual funds tracked
by mutual fund rating services or to other unmanaged indexes which may
assume reinvestment of dividends but generally do not reflect
deductions for administrative and management costs and expenses.
For a more detailed description of the methods used to calculate the
Portfolio's yield and total return, see the SAI.
SHAREHOLDER INQUIRES
All shareholder inquires should be directed to your investment
executive or financial adviser, or call (800) 344-9033 (Toll Free).
DESCRIPTION OF BOND RATINGS
Excerpts from Moody's description of its bond ratings: Aaa -- judged
to be the best quality. They carry the smallest degree of investment
risk; Aa -- judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high
grade bonds; A -- possess many favorable investment attributes and are
to be considered as "upper medium grade obligations"; Baa --
considered as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length
of time; Ba -- judged to have speculative elements, their future
cannot be considered as well assured; B -- generally lack
characteristics of the desirable investment; Caa -- are of poor
standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest; Ca --
speculative in a high degree; often in default; C -- lowest rated
class of bonds; regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating
categories. The modifier 1 indicates that the security is in the
higher end of its rating category; the modifier 2 indicates a
mid-range ranking; and 3 indicates a ranking toward the lower end of
the category.
Excerpts from S&P's description of its bond ratings: AAA -- highest
grade obligations. Capacity to pay interest and repay principal is
extremely strong; AA -- also qualify as high grade obligations. A very
strong capacity to pay interest and repay principal and differs from
AAA issues only in a small degree; A -- regarded as upper medium
grade. They have a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories; BBB -- regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category than in
higher rated categories. This group is the lowest which qualifies for
commercial bank investment. BB, B, CCC, CC -- predominantly
speculative with respect to capacity to pay interest and repay
principal in accordance with terms of the obligations; BB indicates
the lowest degree of speculation and CC the highest.
S&P applies indicators "+", no character, and "-" to its rating
categories. The indicators show relative standing within the major
rating categories.
<PAGE>
FUNDMANAGER PORTFOLIOS
THE FIRST FAMILY IN MULTIFUND INVESTING
INVESTMENT ADVISER
Freedom Capital Management Corporation
M.D. Hirsch Division
One Beacon Street
Boston, MA 02106
DISTRIBUTORS
Freedom Distributors Corporation
One Beacon Street
Boston, MA 02108
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
FUNDMANAGER PORTFOLIOS
THE FIRST FAMILY IN MULTIFUND INVESTING
PROSPECTUS
______________, 1997
G0(/)
INTERNATIONAL PORTFOLIO
A PORTFOLIO OF FUNDMANAGER PORTFOLIOS
(FORMERLY, FUNDMANAGER TRUST)
ONE BEACON STREET
BOSTON, MASSACHUSETTS 02108
INFORMATION: (800) 344-9033
STATEMENT OF ADDITIONAL INFORMATION
Financial Adviser Class Shares
No-Load Class Shares
FundManager Portfolios (the "Trust") is an open-end management
investment company consisting of six separate series (the
"Portfolios"). The Portfolios seek to achieve their objectives by
investing in shares of other open-end investment companies -- commonly
called mutual funds. Prior to May 8, 1995, the Aggressive Growth
Portfolio, Growth Portfolio, Growth with Income Portfolio, Bond
Portfolio, and Managed Total Return Portfolio were a diversified
series of the Republic Funds (the "Predecessor Funds"), also an
open-end management investment company. This Statement of Additional
Information relates only to International Portfolio (the "Portfolio").
International Portfolio seeks long-term capital appreciation; current
income is a secondary, non-fundamental consideration. Two classes of
shares, the Financial Adviser Class and the No-Load Class (each a
"Class" and collectively the "Classes"), of the International
Portfolio are offered for sale. The Financial Adviser Class is offered
for sale at net asset value by Tucker Anthony, Incorporated ("Tucker
Anthony") and Sutro & Co., Incorporated ("Sutro") Tucker Anthony,
Sutro, Edgewood Services, Inc. ("Edgewood") and Freedom Distributors
Corporation ("Freedom Distributors") (collectively, the
"Distributors") as an investment vehicle for individuals,
institutions, corporations and fiduciaries. The Financial Adviser
Class pays a distribution fee in connection with the distribution of
its shares pursuant to a Distribution Plan. The No-Load Class is
offered for sale at net asset value by Tucker Anthony and Sutro to
participants in the FundManager Advisory Program. This Statement of
Additional Information is not a prospectus and is only authorized for
distribution when preceded or accompanied by the International
Portfolio prospectus for the Financial Adviser Class and No-Load Class
dated________ 1997. This Statement of Additional Information contains
additional and more detailed information than that set forth in the
prospectus and should be read in conjunction with the prospectus. You
may request additional copies of the prospectus or a paper copy of
this Statement of Additional Information, if you have received it
electronically, without charge by writing or calling the Trust at the
address and information number printed above. This Statement of
Additional Information is dated__________, 1997.
<PAGE>
TABLE OF CONTENTS
INVESTMENT POLICIES 1
Foreign Securities 1
Foreign Currency Hedging Transactions 1
U.S. Government Securities 2
Bank Obligations 2
Commercial Paper 2
Repurchase Agreements 3
INVESTMENT LIMITATIONS 3
MANAGEMENT 4
Trustees and Officers 4
Trustee's Compensation 5
Investment Adviser 6
Administrator 6
Distributors 7
Service Organizations 7
FundManager Advisory Program 8
PORTFOLIO TRANSACTIONS 8
OTHER INFORMATION 8
Capitalization 8
The Portfolio's Tax Status 8
Voting Rights 8
Performance Information 9
Independent Auditors 10
Counsel 11
<PAGE>
INVESTMENT POLICIES
Although the Portfolio invests primarily in the shares of other mutual
funds, it also is authorized to invest for temporary defensive
purposes or as may be considered necessary to accumulate cash for
investments or to meet anticipated redemptions in a variety of
short-term debt securities, including U.S. Treasury bills and other
U.S. government securities, commercial paper, certificates of deposit,
bankers' acceptances and repurchase agreements with respect to such
securities. The following information supplements the discussion of
the investment objective and policies of the International Portfolio
found under "Investment Objectives" in the prospectus. FOREIGN
SECURITIES
If an underlying fund maintains its assets abroad, the board members
of the underlying fund or their delegate must determine whether
maintaining the fund's assets with eligible foreign custodians will be
subject to reasonable care, based on the standards applicable to the
particular market. In addition, the board members or their delegates
must monitor the continual appropriateness of these foreign custody
arrangements. However, any losses resulting from the holding of the
underlying fund's portfolio securities in foreign countries and/or
with foreign custodians or securities depositories may be at the risk
of shareholders, unless the losses are insured. No assurance can be
given that the determination of the board members' or their delegates
will always be correct or that exchange control restrictions or
political acts of foreign governments might not occur.
Securities that are acquired by an underlying fund outside the United
States and that are publicly traded in the United States on a foreign
securities exchange or in a foreign securities market are not
considered by the underlying fund to be illiquid assets provided that:
(i) the underlying fund acquires and holds the securities with the
intention of reselling the securities in the foreign trading market,
(ii) the underlying fund reasonably believes it can readily dispose of
the securities in the foreign trading market or for cash in the United
States, or (iii) foreign market and current market quotations are
readily available. Investments may be in securities of foreign
issuers, whether located in developed or undeveloped countries.
Investments in foreign securities where delivery takes place outside
the United States will have to be made in compliance with any
applicable U.S. and foreign currency restrictions and tax laws
(including laws imposing withholding taxes on any dividend or interest
income) and laws limiting the amount and types of foreign investments.
Changes of government administrations or economic or monetary policies
in the United States or abroad, or changed circumstances regarding
convertibility or exchange rates, could result in investment losses
for the Portfolio. FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against foreign currency exchange rate risks, the
underlying funds may enter into forward foreign currency exchange
contracts and foreign currency futures contracts, as well as purchase
put or call options on foreign currencies, as described below. The
underlying funds may also conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market. The underlying funds may
enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the underlying funds
from adverse changes in the relationship between the U.S. dollar and
foreign currencies. A forward contract is an obligation to purchase or
sell a specific currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders and
their customers. The underlying funds may enter into a forward
contract, for example, when it enters into a contract for the purchase
or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security. In addition, for
example, when the underlying funds believe that a foreign currency may
suffer a substantial decline against the U.S. dollar, it may enter
into a forward contract to sell an amount of that foreign currency
approximating the value of some or all of the underlying fund's
portfolio securities denominated in such foreign currency, or when an
underlying fund believes that the U.S. dollar may suffer a substantial
decline against a foreign currency, it may enter into a forward
contract to buy that foreign currency for a fixed dollar amount. This
second investment practice is generally referred to as
"cross-hedging." Because in connection with the underlying fund's
forward foreign currency transactions an amount of the underlying
fund's assets equal to the amount of the purchase will be held aside
or segregated to be used to pay for the commitment, the underlying
funds will always have cash, cash equivalents or high quality debt
securities available sufficient to cover any commitments under these
contracts or to limit any potential risk. The segregated account will
be marked to market on a daily basis. While these contracts are not
presently regulated by the Commodities Futures Trading Commission
("CFTC"), the CFTC may in the future assert authority to regulate
forward contracts. In such event, the underlying funds' ability to
utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive
change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in
poorer overall performance for the Underlying funds than if it had not
engaged in such contracts. The underlying funds may purchase and write
put and call options on foreign currencies for the purpose of
protecting against declines in the dollar value of foreign portfolio
securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options,
however, the writing of an option on foreign currency will constitute
only a partial hedge, up to the amount of the premium received, and
the underlying funds could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on foreign currency may constitute
an effective hedge against fluctuation in exchange rates, although, in
the event of rate movements adverse to the underlying funds' position,
the underlying funds may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies to be written
or purchased by the underlying funds will be traded on U.S. and
foreign exchanges or over-the-counter. The underlying funds may enter
into exchange-traded contracts for the purchase or sale for future
delivery of foreign currencies ("foreign currency futures"). This
investment technique will be used only to hedge against anticipated
future changes in exchange rates which otherwise might adversely
affect the value of the underlying fund's portfolio securities or
adversely affect the prices of securities that an underlying fund
intends to purchase at a later date. The successful use of foreign
currency futures will usually depend on the ability of the adviser to
forecast currency exchange rate movements correctly. Should exchange
rates move in an unexpected manner, an underlying fund may not achieve
the anticipated benefits of foreign currency futures or may realize
losses. U.S. GOVERNMENT SECURITIES The Portfolio may invest in
obligations issued or guaranteed by the United States government or
its agencies or instrumentalities which have remaining maturities not
exceeding one year. The U.S. government securities in which the
Portfolio invests are either issued or guaranteed by the U.S.
government, its agencies or instrumentalities. The U.S. government
securities in which the Portfolio invests include, but are not limited
to:
o direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes and bonds;
notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of
the United States;
notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the
instrumentalities.
BANK OBLIGATIONS
The Portfolio and underlying funds may invest in obligations of U.S.
banks (including certificates of deposit and bankers' acceptances)
having total assets at the time of purchase in excess of $1 billion.
Such banks shall be members of the Federal Deposit Insurance
Corporation. A certificate of deposit is an interest-bearing
negotiable certificate issued by a bank against funds deposited in the
bank. A bankers' acceptance is a short-term draft drawn on a
commercial bank by a borrower, usually in connection with an
international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay
the draft at its face value on the maturity date. COMMERCIAL PAPER
Commercial paper represents short-term unsecured promissory notes
issued in bearer form by bank holding companies, corporations and
finance companies. The commercial paper purchased by the Portfolio
consists of direct obligations of domestic issuers which, at the time
of investment, are: (i) rated in the highest commercial paper rating
category by a nationally recognized statistical rating organization
("NRSRO"), such as "P-1" by Moody's Investors Service, Inc.
("Moody's") or "A-1" or better by Standard & Poor's ("Standard &
Poor's"); (ii) issued or guaranteed as to principal and interest by
issuers or guarantors having an existing debt security rating of "Aa"
or better by Moody's or "AA" or better by Standard & Poor's or a
similar high grade rating by another NRSRO; or (iii) securities which,
if not rated, are, in the opinion of Freedom Capital Management
Corporation, the Portfolio's investment adviser ("Freedom Capital
Management" or the "Adviser"), of an investment quality comparable to
rated commercial paper in which the Funds may invest. The rating "P-1"
is the highest commercial paper rating assigned by Moody's and the
ratings "A-1" and "A-1+" are the highest commercial paper ratings
assigned by Standard & Poor's. Debts rated "Aa" or better by Moody's
or "AA" or better by Standard & Poor's are generally regarded as
high-grade obligations and such ratings indicate that the ability to
pay principal and interest is very strong.
<PAGE>
REPURCHASE AGREEMENTS
The Portfolio and underlying funds may invest in securities subject to
repurchase agreements with banks or broker-dealers. A repurchase
agreement is a transaction in which the seller of a security commits
itself at the time of the sale to repurchase that security from the
buyer at a mutually agreed upon time and price. The repurchase price
exceeds the sale price, reflecting an agreed upon interest rate
effective for the period the buyer owns the security subject to
repurchase. The agreed upon rate is unrelated to the interest rate on
that security. The investment adviser will monitor the value of the
underlying security at the time the transaction is entered into and at
all times during the term of the repurchase agreement to insure that
the value of the security always equals or exceeds the repurchase
price. In the event of default by the seller under the repurchase
agreement, the Portfolio or underlying fund may have problems in
exercising its rights to the underlying securities and may incur costs
and experience time delays in connection with the disposition of such
securities. Repurchase agreements are considered to be loans under the
Investment Company Act of 1940 (the "1940 Act") collateralized by the
underlying securities.
INVESTMENT RESTRICTIONS
The following investment restrictions are in addition to those
described under "Investment Objective" and "Investment Policies and
Restrictions" in the prospectus. The following restrictions may not be
changed with respect to the Portfolio without the approval of the
holders of a majority of the Portfolio's outstanding securities.
Except that the Portfolio may invest all of its investable assets in
an open-end investment company with substantially the same investment
policies and restrictions as the Portfolio, the Portfolio will not: 1.
With respect to securities comprising 75% of the value of its total
assets, the Portfolio will not invest more than 5% in securities of
any one issuer (other than cash, cash items, securities of investment
companies or securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and repurchase
agreements collateralized by such securities) if, as a result, more
than 5% of the value of its total assets would be invested in the
securities of that issuer, and will not acquire more than 10% of the
outstanding voting securities of any one issuer.
2. The Portfolio will not issue senior securities, except that the
Portfolio may borrow money directly or through reverse repurchase
agreements in amounts up to one-third of the value of its total
assets, including the amount borrowed, and except to the extent that
the Portfolio may enter into futures contracts. The Portfolio will not
borrow money or engage in reverse repurchase agreements for investment
leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the
Portfolio to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous.
The Portfolio will not purchase any securities while any borrowings in
excess of 5% of its total assets are outstanding.
3. The Portfolio will not invest 25% or more of the value of its total
assets in any one industry other than investment companies, except
that the Portfolio may invest in securities issued by the U.S.
government, its agencies or instrumentalities.
4. Purchase or otherwise acquire interests in real estate, real estate
mortgage loans, except that the Portfolio may purchase securities
issued by companies, including real estate investment trusts, which
invest in real estate or interests therein. 5. Make loans, except that
the Portfolio may purchase and hold publicly distributed debt
securities and it may enter into repurchase agreements. 6. Sell
securities short or invest in puts, calls, straddles, spreads or
combinations thereof.
7. Purchase securities on margin, except such short-term credits as
are necessary for the clearance of transactions, but may obtain such
short-term credits as are necessary for the clearance of purchases and
sales of portfolio securities. The deposit or payment by the Portfolio
of initial or variation margin in connection with financial futures
contracts or related options transactions is not considered the
purchase of a security on margin.
8. Purchase or acquire commodities or commodity contracts (other than
engaging in foreign currency exchanges contracts and futures
contracts).
9. Act as an underwriter of securities.
In addition, as non-fundamental policies, the Portfolio will not: (i)
invest in securities for the purpose of exercising control over or
management of the issuer, although the Portfolio may own 25% or more
of the assets of another investment company; (ii) participate in a
joint or a joint-and-several basis in any trading account in
securities; (iii) purchase securities of any closed-end investment
company or any investment company which is not registered in the
United States; or (iv) invest more than 15% of the Portfolio's net
assets in illiquid securities.These additional policies may be changed
as to the Portfolio by the Board of Trustees (the "Trustees") without
shareholder approval.
The underlying funds in which the Portfolio invests may, but need not,
have the same investment policies as the Portfolio. Although the
Portfolio may, from time to time, invest in shares of the same
underlying fund owned by the Trust's other Portfolios, the percentage
of the Portfolio's assets so invested may vary, and the Adviser will
determine that such investments are consistent with the investment
objective and policies of each Portfolio.
MANAGEMENT
TRUSTEES AND OFFICERS
The principal occupations of the Trustees and executive officers of
the Trust for the past five years and their ages are listed
below. The address of each, unless otherwise indicated, is One Beacon Street,
Boston, Massachusetts 02108.
DEXTER A. DODGE* (62), TRUSTEE, CHAIRMAN AND CHIEF EXECUTIVE OFFICER.
Chairman of the Adviser since October 1994. President and
Managing Director of the Adviser since 1992. Vice President of Freedom
Distributors Corporation since 1989. Chairman of the
Boards and Chief Executive Officer of Freedom Mutual Fund and Freedom
Group of Tax Exempt Funds since July 1992.
ERNEST T. KENDALL (64), TRUSTEE. 230 Beacon Street, Boston, Massachusetts
02116. President, Commonwealth Research Group, Inc.,
Boston, Massachusetts, a consulting firm specializing in
microeconomics, regulatory economics and labor economics, since 1978.
Trustee of Freedom Mutual Fund and Freedom Group of Tax Exempt Funds
since September 1993.
JOHN R. HAACK (54), TRUSTEE since December 16, 1996. 311 Commonwealth Avenue,
#81, Boston, Massachusetts 02115. Vice President
of Operations, Reliable Transaction Processing, 1995 to present. Major General,
Assistant to the Commander in Chief, U.S. Space
Command, 1993 to 1995. General Manager, Unilect Industries, which is
an electrical component manufacturer, 1993 to 1994.
Brigadier General, Commander of 102nd Fighter Interceptor Wing, U.S. Air Force
and Air National Guard, 1986 to 1993.
RICHARD B. OSTERBERG (52), TRUSTEE. 84 State Street, Boston, Massachusetts
02109. Member of the law firm of Weston, Patrick, Willard & Redding, Boston,
Massachusetts, since 1978. Trustee of Freedom Mutual Fund and Freedom Group of
Tax Exempt Funds since September 1993.
CHARLES B. LIPSON (50), PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER. President
and founding partner of the M.D. Hirsch Division of Freedom Capital since
January 1995. President and Chief Operating Officer of the M.D. Hirsch Division
of Republic Asset Management Corporation from February 1991 to December 1994.
Senior Vice President and Chief Operating Officer of Home Capital
Services, Inc. prior to February 1991.
JOHN J. DANELLO (41), EXECUTIVE VICE PRESIDENT. President, Chief Operating
Officer and Secretary of the Adviser since October
1994. Vice President-Managing Director, Clerk and General Counsel of the
Adviser from November 1986 to October 1994. President
and Director since February 1989 and Clerk since February 1987 of Freedom
Distributors Corporation. President and Secretary of
Freedom Mutual Fund and Freedom Group of Tax Exempt Funds since July
1992.
MICHAEL D. HIRSCH (51), EXECUTIVE VICE PRESIDENT AND PORTFOLIO MANAGER. .
Chairman, M.D. Hirsch Division of the Adviser since
February 1995. Vice Chairman and Managing Director, M.D. Hirsch Division of
Republic Asset Management Corporation from June
1993 to February 1994. President M.D. Hirsch Investment Management, Inc. from
February 1991 to June 1993. Chief Investment
Officer, Republic National Bank of New York prior to February 1991.
VICTOR R. SICLARI (35), SECRETARY. Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. Vice President and Corporate
Counsel, Federated Administrative Services since 1992; Associate of
Morrison & Foerster, a law firm, from 1990 to 1992.
JUDITH J. MACKIN (36), TREASURER. Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. Assistant Vice President and
Director of the Client Management and Services Group of Federated
Administrative Services.
DAVID J. KEALEY (27), ASSISTANT TREASURER. Assistant Treasurer,
Assistant Vice President and Director of Mutual Funds of the Adviser,
Assistant Vice President of Freedom Distributors Corporation since
1996. Senior Fund Administrator, Signature Financial Group, 1994 to
1996. Fund Administrator, Colonial Management Associates, 1992 to
1994.
EDWARD C. GONZALES (66), EXECUTIVE VICE PRESIDENT. Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. Vice Chairman,
Treasurer, and Trustee, Federated Investors; Vice President, Federated
Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Chairman, Treasurer,
and Trustee, Federated Administrative Services.
RONALD M. PETNUCH (36), EXECUTIVE VICE PRESIDENT. Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779. Vice President
and Director of the Client Management and Services Group of Federated
Administrative Services.
- --------------------------------------------------------------------------
* Trustee may be deemed to be an "interested person" of the Trust
as defined by the 1940 Act.
Mr. Danello is also an officer of certain other investment
companies for which the Adviser or an affiliate is the investment
adviser. Messrs. Gonzales, Petnuch, Siclari and Ms. Mackin are also
directors, trustees and/or officers of certain other investment
companies for which Federated Investors or its subsidiaries serve as
investment adviser, administrator and/or principal underwriter.
TRUSTEES' COMPENSATION
<TABLE>
<CAPTION>
NAME, AGGREGATE COMPENSATION TOTAL COMPENSATION PAID
POSITION WITH TRUST FROM TRUST*# FROM TRUST AND FREEDOM COMPLEX+**
<S> <C> <C>
Dexter A. Dodge $0 for the Trust and
Trustee $ 0 4 other investment companies in
the Freedom Complex
Ernest T. Kendall $6,600 $20,400 for the Trust and
Trustee 4 other investment companies in
the Freedom Complex
John R. Haack++ $0 for the Trust and
Trustee $ 0 4 other investment companies in
the Freedom Complex
Richard B. Osterberg $6,600 $20,400 for the Trust and
Trustee 4 other investment companies in
the Freedom Complex
</TABLE>
* Information is furnished for the fiscal year ended September 30, 1996.
* Freedom Complex refers to both Freedom Mutual Fund and Freedom Group of
Tax Exempt Funds.
# The aggregate compensation is provided for the Trust which was comprised
of 5 Portfolios during the fiscal year ended September 30, 1996.
+ The information is provided for the last fiscal year.
++ Mr. Haack became a Trustee on December 16, 1996.
Trustees who are not interested persons of the Trust receive an annual
retainer of $3,600 and a fee of $600 for each meeting of the Trustees
or committee thereof attended. The chairperson of each of the Audit
and Contracts Committee receives an additional fee per annum of $600.
Mr. Kendall serves as chairperson of the Audit Committee and Mr.
Osterberg serves as chairperson of the Contracts Committee. Interested
persons of the Trust who serve as Trustee receive no fees from the
Trust. All Trustees of the Trust are reimbursed for expenses for
attendance at meetings. The Trust has no bonus, profit sharing,
pension or retirement plans. For the fiscal year ended September 30,
1996, the Trust paid $12,893 in Trustee fees and expenses. The
Trustees of the Trust have two committees, an Audit Committee and a
Contracts Committee. The Audit Committee assists the Board in
fulfilling its duties relating to accounting and financial reporting
practices and serves as a direct line of communication between the
Board and the independent auditors. The Audit Committee is responsible
for recommending the engagement or retention of the independent
accountants, reviewing with the independent accountants the plan and
the results of the auditing engagement, approving professional
services provided by the independent accountants prior to the
performance of such services, considering the range of audit and
non-audit fees, reviewing the independence of the independent
auditors, reviewing the scope and results of procedures for internal
auditing, and reviewing the system of internal accounting control. The
function of the Contracts Committee is to assist the Board in
fulfilling its duties with respect to the review and approval of
contracts between the Trust, on behalf of the Portfolios, and other
entities, including entering into new contracts and the renewal of
existing contracts. The Contracts Committee considers investment
advisory, distribution, transfer agency, administrative service and
custodial contracts and such other contracts as the Board deems
necessary or appropriate for the continuation of operations of the
Portfolios or the Trust. The Contracts Committee will also be
responsible for the selection and nomination of Trustees who are not
"interested persons" within the meaning of the 1940 Act of the Trust.
All of the Trustees who are not "interested persons" within the
meaning of the 1940 Act of the Trust currently serve on the Audit and
Contracts Committees. The Trust's Master Trust Agreement provides that
it will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with litigation in which they may be
involved because of their offices with the Trust, unless, as to
liability to the Trust or its shareholders, it is finally adjudicated
that they engaged in willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that
they did not act in good faith in the reasonable belief that their
actions were in the best interests of the Trust. In the case of
settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or
other disposition, or by a reasonable determination, based upon a
review of readily available facts, by vote of a majority of
disinterested Trustees or in a written opinion of independent counsel,
that such officers or Trustees have not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
INVESTMENT ADVISER Pursuant to an Investment Advisory
Contract, Freedom Capital Management is responsible for the investment
management of the Portfolio's assets, including the responsibility for
making investment decisions and placing orders for the purchase and
sale of the Portfolio's investments directly with the issuers or with
brokers or dealers selected by it in its discretion, including Freedom
Distributors and Edgewood. See "Portfolio Transactions." The Adviser
also furnishes to the Trustees, which have overall responsibility for
the business and affairs of the Trust, periodic reports on the
investment performance of the Portfolio. The Adviser is a registered
investment advisory firm which maintains a large securities research
department, the efforts of which will be made available to the
Portfolios. Thomas H. Lee Equity Fund III, L.P. is a Massachusetts
limited partnership. The general partner of Thomas H. Lee Equity Fund
III, L.P. is THL Equity Advisors III Limited Partnership, a
Massachusetts limited partnership. The general partner of THL Equity
Advisors III Limited Partnership is THL Equity Trust III, a
Massachusetts business trust. The sole beneficial owner of THL Equity
Trust III is Thomas H. Lee. The address of Thomas H. Lee Equity Fund
III, L.P., THL Equity Advisors III Limited Partnership and THL Equity
Trust III is 75 State Street, Boston, Massachusetts 02109. SCP Private
Equity Partners, L.P. is a Delaware limited partnership. The general
partner of SCP Private Equity Partners, L.P. is SCP Private Equity
Management, L.P., a Delaware limited partnership. The interests of SCP
Private Equity Management, L.P. are divided equally among its three
general partners: Safeguard Capital Management, Inc. (which is a
wholly owned subsidiary of Safeguard Scientifics, Inc., a publicly
held company), Winston J. Churchill and Samuel A. Plum. The address of
SCP Private Equity Partners, L.P., SCP Private Equity Management,
L.P., Safeguard Capital Management, Inc., Winston J. Churchill and
Samuel A. Plum is 435 Devon Park Drive, Wayne, Pennsylvania 19087. For
a more complete description of the Adviser see "Management of
FundManager Portfolios--The Adviser" in your prospectus. The
investment advisory services of the Adviser to the Portfolios are not
exclusive under the terms of the Investment Advisory Contract. The
Adviser is free to render investment advisory services to others. For
its services as investment adviser, the Adviser receives from the
Portfolio a fee, payable monthly, at the annual rate of 0.50% of the
Portfolio's average daily net assets up to $500 million and 0.40% of
its average daily net assets in excess of $500 million. The Investment
Advisory Contract will continue in effect from year to year provided
such continuance is approved annually (i) by the holders of a majority
of the outstanding voting securities of a Portfolio or by the Trustees
and (ii) by a majority of the Trustees who are not parties to such
Contract or "interested persons" (as defined in the 1940 Act) of any
such party. The Contract may be terminated with respect to the
Portfolio on 60 days' written notice by either party to the Contract
and will terminate automatically if assigned. Mr. Osterberg, a Trustee
of the Trust, is a member of the law firm of Weston, Patrick, Willard
& Redding, which has retained the Adviser from time to time to provide
investment advisory consulting services for clients of such firm.
ADMINISTRATOR The Trustees of the Trust have approved an
Administrative Services Contract between the Trust and Federated
Administrative Services ("FAS") as Administrator of the Trust and each
Class of shares of each of the Portfolios. In this capacity, FAS will
provide certain administrative and personnel services to the Portfolio
for a fee as described in the prospectus. The administrative and
personnel services necessary for the operation of the Trust provided
by the Administrator include among other things: (i) preparation of
shareholder reports and communications; (ii) regulatory compliance,
such as reports to and filings with the Securities and Exchange
Commission ("SEC") and state securities commissions; and (iii) general
supervision of the operation of the Trust, including coordination of
the services performed by the Trust's investment adviser, transfer
agent, custodian, independent auditors, legal counsel and others. In
addition, the Administrator furnishes office space and facilities
required for conducting the business of the Trust and pays the
compensation of the Trust's officers, employees and Trustees (if any)
affiliated with the Administrator.
DISTRIBUTORS The Trustees of the
Trust have approved a Distribution Contract between the Trust and the
Distributors, pursuant to which such Distributors provide shareholder
servicing services and/or distribute the Financial Adviser Class of
shares of the Portfolio. The Trustees of the Trust have also approved
a Distribution Contract between the Trust and each of Tucker Anthony
and Sutro pursuant to which such distributors provide shareholder
servicing services and distribute the No-Load Class of shares of the
Portfolio. The Distributors are not obligated to sell any specific
amount of shares. Under a Distribution Plan (the "Plan") adopted by
the Financial Adviser Class of the Portfolio, the Portfolio may
reimburse the distributors monthly (subject to a limit of 0.50% per
annum of the Portfolio's average daily net assets attributable to the
Financial Adviser Class) for the sum of (a) direct costs and expenses
incurred by the Distributors in connection with advertising and
marketing of the Financial Adviser Class of shares and (b) payment of
fees to one or more broker-dealers or other organizations (other than
banks) for services rendered in the distribution of the Financial
Adviser Class of shares and for the provision of personal services and
account maintenance services with respect to Portfolio shareholders,
including payments in amounts based on the average daily value of
Portfolio shares owned by shareholders in respect of which the
broker-dealer or organization has a relationship. The fees and
reimbursements paid by the Portfolio to the Distributors may equal up
to 0.50% of the Portfolio's average daily net assets attributable to
the Financial Adviser Class of shares, of which up to 0.25% of the
Portfolio's average daily net assets attributable to the Financial
Adviser Class may be paid for shareholder servicing expenses. Any
payment by a Distributor or reimbursement of a Distributor by the
Portfolio made pursuant to the Plan is contingent upon Trustees'
approval. A report of the amounts expended pursuant to the Plan, and
the purposes for which such expenditures were incurred, must be made
to the Trustees for their review at least quarterly. The Plan permits,
among other things, payment by the Portfolio of the costs of
preparing, printing and distributing prospectuses and of implementing
and operating the Plan. The Plan also permits the Distributors to
receive and retain brokerage commissions with respect to portfolio
transactions for mutual funds in the Portfolio's portfolios, including
funds which have a policy of considering sales of their shares in
selecting broker-dealers for the execution of their portfolio
transactions. In addition, Freedom Distributors and Edgewood may
receive dealer reallowances (up to a maximum of 1% of the public
offering price with respect to Freedom Distributors) and/or
distribution payments, shareholder servicing fees or "trailer fees"
from the underlying mutual funds purchased by the Portfolio. The Plan
provides that it may not be amended to increase materially the costs
which the Portfolio may bear pursuant to the Plan without shareholder
approval and that other material amendments of the Plan must be
approved by the Trustees, and by the Trustees who are neither
"interested persons" (as defined in the 1940 Act) of the Trust nor
have any direct or indirect financial interest in the operation of the
Plan or in any related agreement, by vote cast in person at a meeting
called for the purpose of considering such amendments. While the Plan
is in effect, the selection and nomination of the Trustees of the
Trust has been committed to the discretion of the Trustees who are not
"interested persons" of the Trust. The Plan has been approved, and is
subject to annual approval, by the Board of Trustees and by the
Trustees who are neither "interested persons" nor have any direct or
indirect financial interest in the operation of the Plan, by vote cast
in person at a meeting called for the purpose of voting on the Plan.
The Trustees considered alternative methods to distribute the
Financial Adviser Class of shares of the Portfolio and to reduce the
Financial Adviser Class' per share expense ratios and concluded that
there was a reasonable likelihood that the Plan will benefit such
Class and its shareholders. The Plan is terminable with respect to the
Financial Adviser Class or the Portfolio at any time by a vote of a
majority of the Trustees who are not "interested persons" of the Trust
and who have no direct or indirect financial interest in the operation
of the Plan or by vote of the holders of a majority of the shares of
the Portfolio or the Financial Adviser Class. The Portfolio will not
invest in any fund which may be affiliated with the Distributors or
any of their affiliates unless otherwise permitted under the 1940 Act.
SERVICE ORGANIZATIONS Pursuant to the Plan, the Trust also contracts
with banks, trust companies, broker-dealers (other than the
Distributors) or other financial organizations ("Service
Organizations") to provide certain administrative services for the
Portfolio's Financial Adviser Class of shares. Services provided by
service organizations may include, among other things, providing
necessary personnel and facilities to establish and maintain certain
shareholder accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds;
transmitting and receiving funds in connection with client orders to
purchase or redeem shares; verifying and guaranteeing client
signatures in connection with redemption orders, transfers among and
changes in client-designated accounts; providing periodic statements
showing a client's account balances and, to the extent practicable,
integrating such information with other client transactions;
furnishing periodic and annual statements and confirmations of all
purchases and redemptions of shares in a client's account;
transmitting proxy statements, annual reports, and updating
prospectuses and other communications from the trust to clients; and
such other services as the trust or a client reasonably may request,
to the extent permitted by applicable statute, rule or regulation. The
Distributors and the Adviser will not be service organizations or
receive fees for servicing.
FUNDMANAGER ADVISORY PROGRAM Shares of the
No-Load Class of shares will be offered to participants in the
FundManager Advisory Program who receive, for an advisory fee at a
maximum annual rate based upon a percentage of assets invested,
certain services, including asset allocation recommendations with
respect to mutual funds based on an evaluation of their investment
objectives and risk tolerances.
PORTFOLIO TRANSACTIONS
As part of its obligations under the investment advisory contract, the
Adviser places all orders for the purchase and sale of portfolio
investments for the Portfolios' accounts with brokers or dealers
selected by it in its discretion, including Freedom Distributors or
Edgewood. In selecting a broker, the Adviser considers a number of
factors including the research and other investment information
provided by the broker.
OTHER INFORMATION
CAPITALIZATION
FundManager Portfolios (formerly named FundManager Trust) is a
Delaware business trust established under a Master Trust Agreement
dated February 7, 1995. Prior to May 8, 1995, the FundManager
Portfolios were series of the Republic Funds (formerly FundTrust), a
Massachusetts business trust (organized April 22, 1987). Republic
Funds was a successor to two previously-existing Massachusetts
business trusts, FundTrust Tax-Free Trust (organized on July 30, 1986)
and FundVest (organized on July 17, 1984, and since renamed Fund
Source). The Trust currently consists of six separately managed
portfolios each offering two classes of shares of beneficial interest
(except Managed Total Return Portfolio, which only offers a Financial
Adviser Class). The capitalization of the Trust consists solely of an
unlimited number of shares of beneficial interest with a par value of
$0.001 each. The Trustees may establish additional series (with
different investment objectives and fundamental policies) and
additional classes of shares at any time in the future. Establishment
and offering of additional series and classes will not alter the
rights of the Trust's shareholders. When issued, shares are fully
paid, nonassessable, redeemable and freely transferable. Shares do not
have preemptive rights or subscription rights. In liquidation of a
Portfolio, each shareholder is entitled to receive his pro rata share
of the net assets of that Portfolio.
THE PORTFOLIO'S TAX STATUS The
Portfolio may invest in any non-U.S. corporations which could be
treated as passive foreign investment companies ("PFICs"). This could
result in adverse tax consequences upon the disposition of, or the
receipt of "excess distributions" with respect to, such equity
investments. To the extent the Portfolio does invest in PFICs, it may
adopt certain tax strategies to reduce or eliminate the adverse
effects of certain federal tax provisions governing PFIC investments.
Many non-U.S. banks and insurance companies may not be treated as
PFICs if they satisfy certain technical requirements under the Code.
To the extent that the Portfolio does invest in foreign securities
which are determined to be PFIC securities and is required to pay a
tax on such investments, a credit for this tax would not be allowed to
be passed through to its shareholders. Therefore, the payment of this
tax would reduce the Portfolio's economic return from its PFIC shares,
and excess distributions received with respect to such shares are
treated as ordinary income rather than capital gains. An underlying
fund may inadvertently invest in non-U.S. corporations which would be
treated as Passive Foreign Investment Companies ("PFICs") or become a
PFIC under the Code. This could result in adverse tax consequences
upon the disposition of, or the receipt of "excess distributions" with
respect to, such equity investments. To the extent an underlying fund
does invest in PFICs, it may elect to treat the PFIC as a "qualified
electing fund" or mark-to-market its investments in PFICs annually. In
either case, the underlying fund may be required to distribute amounts
in excess of its realized income and gains. To the extent that the
underlying fund itself is required to pay a tax on income or gain from
investment in PFICs, the payment of this tax would reduce the
Portfolio's economic return.
VOTING RIGHTS Under the Master Trust
Agreement, the Trust is not required to hold annual meetings to elect
Trustees or for other purposes. It is not anticipated that the Trust
will hold shareholders' meetings unless required by law. However, the
Master Trust Agreement provides that the holders of not less than two
thirds of the outstanding shares of the Trust may remove persons
serving as Trustee either by declaration in writing or at a meeting
called for such purpose. The Trustees are required to call a meeting
for the purpose of considering the removal of persons serving as
Trustee if requested in writing to do so by the holders of not less
than 10% of the outstanding shares of the Trust.
PERFORMANCE INFORMATION The Trust may, from time to time, include quotations of
the Portfolio's yield and average annual total return in
advertisements or reports to shareholders or prospective investors.
Quotations of yield will be based on the Portfolio's investment income
per share earned during a particular 30-day period, less expenses
accrued during the period ("net investment income") and will be
computed by dividing net investment income by the maximum offering
price per share on the last day of the period, according to the
following formula:
YIELD = 2[(A cdB + 1)6-1]
(where a = dividends and interest earned during the period, b =
expenses accrued for the period (net of any reimbursements), c = the
average daily number of shares outstanding during the period that were
entitled to receive dividends and d = the maximum offering price per
share on the last day of the period). Quotations of the Portfolio's
average annual total return will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in such
Portfolio over periods of 1, 5 and 10 years (up to the life of the
Portfolio), calculated pursuant to the following formula:
P (1 + T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average
annual total return, n = the number of years and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the
beginning of the period). All total return figures will reflect the
deduction of Portfolio expenses on an annual basis and will assume
that all dividends and distributions are reinvested when paid.
Quotations of yield and total return will reflect only the performance
of a hypothetical investment in the Portfolio during the particular
time period shown. Yield and total return for the Portfolio will vary
based on changes in market conditions and the level of the Portfolio's
expenses, and no reported performance figure should be considered an
indication of performance which may be expected in the future.
Investors who purchase and redeem Financial Adviser Class Shares of
the Portfolio through a customer account maintained at a service
organization may be charged one or more of the following types of fees
as agreed upon by the Service Organization and the investor, with
respect to the customer services provided by the service organization:
account fees (a fixed amount per month or per year); transaction fees
(a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in
order to obtain the services offered); or account maintenance fees (a
periodic charge based upon a percentage of the assets in the account
or of the dividends paid on those assets). Such fees will have the
effect of reducing the yield and effective yield of the Portfolio for
those investors. Investors who maintain accounts with the Trust as
transfer agent will not pay these fees. In connection with
communicating its performance to current or prospective shareholders,
the Portfolio also may compare these figures to the performance of
other mutual funds tracked by mutual fund rating services or to
unmanaged indices which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management
costs. Evaluations of the Portfolio's performance made by independent
sources may also be used in advertisements concerning the Portfolio.
Sources for the Portfolio's performance information could include the
following: BARRON'S, a Dow Jones and Company, Inc. business and
financial weekly that periodically reviews mutual fund performance
data. BOTTOM LINE, a bi-weekly newsletter which periodically reviews
mutual funds and interviews their portfolio managers.
BUSINESS WEEK, a national business weekly that periodically reports
the performance rankings and ratings of a variety of mutual funds
investing abroad.
CHANGING TIMES, THE KIPLINGER MAGAZINE, a monthly investment advisory
publication that periodically features the performance of a variety of
securities.
CNBC, a cable financial news television station which periodically
reviews mutual funds and interviews portfolio managers.
CONSUMER DIGEST, a monthly business/financial magazine that includes a
"money watch" section featuring financial news.
FORBES, a national business publication that from time to time reports
the performance of specific investment companies in the mutual fund
industry.
FORTUNE, a national business publication that periodically rates the
performance of a variety of mutual funds.
LIPPER ANALYTICAL SERVICES, INC.'S Mutual Fund Performance Analysis, a
weekly publication of industry-wide mutual fund averages by type of
fund.
MONEY, a monthly magazine that from time to time features both
specific funds and the mutual fund industry as a whole.
MORNINGSTAR, INC., a publisher of financial information and mutual
fund research. Mutual Funds Magazine, a magazine for the mutual fund
investor which frequently reviews and ranks mutual funds and
interviews their portfolio managers.
NEW YORK TIMES, a nationally distributed newspaper which regularly
covers financial news.
PERSONAL INVESTING NEWS, a monthly news publication that often reports
on investment opportunities and market conditions.
PERSONAL INVESTOR, a monthly investment advisory publication that
includes a "mutual funds outlook" section reporting on mutual fund
performance measures, yields, indices and portfolio holdings.
SUCCESS, a monthly magazine targeted to the world of entrepreneurs and
growing business, often featuring mutual fund performance data.
U.S. NEWS AND WORLD REPORT, a national business weekly that periodically
reports mutual fund performance data.
VALUE LINE, a bi-weekly publication that reports on the largest 15,000
mutual funds.
WALL STREET JOURNAL, a Dow Jones and Company, Inc. newspaper which regularly
covers financial news.
WEISENBERGER INVESTMENT COMPANIES SERVICES, an annual compendium of
information about mutual funds and other investment companies,
including comparative data on funds' backgrounds, management policies,
salient features, management results, income and dividend records, and
price ranges.
WORTH MAGAZINE, a monthly magazine for the individual investor which
frequently reviews and ranks mutual funds and interviews their
portfolio managers.
In addition, the Trust may also provide in its communications to
current or prospective shareholders a listing of those investment
companies and mutual fund complexes or the respective funds included
in the Portfolio's portfolio holdings. These
may include, but are not limited to, the following:
FUND COMPLEXES -- The AIM Family of Funds; The American Funds Group;
Dodge & Cox Investment Managers; Fidelity Investment; First Pacific
Advisors, Inc.; Franklin Custodian Funds, Inc.; Franklin Templeton
Group; Friess Associates, Inc.; The Gabelli Funds; Guardian Investor
Services Corporation; Harbor Capital Advisors, Inc.; Harris
Associates, L.P.; Hotchkis & Wiley Funds; IDS Management; Lord Abbett
Family of Funds; Massachusetts Financial Services Company; Miller
Anderson & Sherrerd, LLP; MJ Whitman, Inc.; Mutual Series Fund, Inc.;
Neuberger & Berman Management Inc.; Pacific Financial Research;
Pacific Investment Management Company; Pioneer Funds Distributor;
Putnam Funds; The Royce Funds; Sanford C. Bernstein & Co., Inc.;
Socie'te Ge'ne'rale Asset Management Corp.; T. Rowe Price Associates,
Inc.; The Vanguard Family of Funds; Venture Advisors, L.P.; Waddell &
Reed Asset Management Company; Yacktman Asset Management.
INDEPENDENT AUDITORS
Ernst & Young LLP serves as the independent auditors for the Trust.
Ernst & Young LLP audits the Portfolio's financial statements,
prepares the Portfolio's tax return and assists in filings with the
SEC. Ernst & Young LLP's address is 200 Clarendon Street, Boston, MA
02116.
<PAGE>
COUNSEL
Goodwin, Procter & Hoar, Exchange Place, Boston, Massachusetts 02109,
passes upon certain legal matters in connection with the shares
offered by the Trust and also acts as counsel to the Trust.
REGISTRATION STATEMENT
The prospectus and Statement of Additional Information do not contain
all the information included in the Trust's registration statement
filed with the SEC under the 1933 Act with respect to the securities
offered hereby, certain portions of which have been omitted pursuant
to the rules and regulations of the SEC. The registration statement,
including the exhibits filed therewith, may be examined at the office
of the SEC in Washington, D.C.
Statements contained in the prospectus and Statement of Additional
Information as to the contents of any contract or other documents
referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or other documents
filed as an exhibit to the registration statement, each such statement
being qualified in all respects by such reference.
G0 (/97)
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS: NOT APPLICABLE.
(b) EXHIBITS:
(l) (i) Conformed copy of the Master Trust Agreement of the Registrant; (4)
(ii) Conformed copy of the Amendment No. 1 to Master Trust Agreement; (4)
(iii) Conformed copy of the Amendment No. 2 to Master Trust Agreement; (11)
(iv) Conformed copy of the Amendment No. 3 to Master Trust Agreement; (11)
(2) Copy of By-Laws of the Registrant; (4)
(3) Not Applicable
(4) Not Applicable
(5) Conformed copy of the new Master Investment Advisory Contract and
Investment Advisory Contract Supplement for Aggressive Growth Portfolio,
Growth Portfolio, Growth with Income Portfolio, Bond Portfolio, Managed
Total Return Portfolio; (11)
(6) (i) Conformed copy of the Distributors Contract between Edgewood Services
Company and FundManager Portfolios; (11)
(ii) Conformed copy of the Master Distributors Contract between Tucker
Anthony Incorporated and FundManager Portfolios; (11)
(iii) Conformed copy of the Master Distributors Contract between Sutro & Co.
Incorporated and FundManager Portfolios; (11)
(iv) Conformed copy of the Master Distributors Contract between Freedom
Distributors Corporation and FundManager Portfolios; (11)
(7) Not Applicable
(8) Conformed copy of Custodian Agreement between FundManager
Portfolios and Investors Bank & Trust Company; (11)
(9) (i) Conformed copy of the Administrative Services
Agreement between FundManager Portfolios and
Federated Administrative Services; (11)
(ii) Conformed copy of the Transfer Agency and Service
Agreement between FundManager Portfolios and
Investors Bank & Trust Company; (11)
(10) Opinion and Consent of counsel; (2)
- -----------------------------------
+ All exhibits have been filed electronically.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement as filed with the Commission on
May 3, 1995. (File Nos. 33-89754 and 811-8992)
(4) Incorporated by reference to Post-Effective Amendment No.2 to the
Registrant's Registration Statement as filed with the Commission on
January 30, 1996. (File Nos. 33-89754 and 811-8992)
(11) Incorporated by reference to Post-Effective Amendment No.4 to the
Registrant's Registration Statement as filed with the Commission on
January 23, 1997. (File Nos. 33-89754 and 811-8992)
<PAGE>
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15) Amended and Restated Master Distribution Plan and Supplements
for the Financial Adviser Class of shares; (3)
(16) Copy of Performance Data Calculations: Aggressive Growth
Portfolio, Growth Portfolio, Growth with Income Portfolio,
Bond Portfolio, Managed Total Return Portfolio; (2)
(17) Not Applicabble
(18) Multiple Class Expense Allocation Plan; (3)
(19) Conformed copy of Powers of Attorney of Trustees and
Officers of Registrant; (11)
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:
Not Applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
TITLE OF CLASS Number of Record Holders
AS OF JULY 11, 1997
Aggressive Growth Portfolio
Financial Adviser Class 1,529
No-Load Class 142
Growth Portfolio
Financial Adviser Class 754
No-Load Class 129
Growth with Income Portfolio
Financial Adviser Class 833
No-Load Class 133
Bond Portfolio
Financial Adviser Class 208
No-Load Class 113
Managed Total Return Portfolio
Financial Adviser Class 686
International Portfolio
Financial Adviser Class 0
No-Load Class 0
ITEM 27. INDEMNIFICATION; (4)
- -----------------------------------
+ All exhibits have been filed electronically.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 to
the Registrant's Registration Statement as filed with the
Commission on May 3, 1995. (File Nos. 33-89754 and 811-8992)
(3) Incorporated by reference to Post-Effective Amendment No.1 to the
Registrant's Registration Statement as filed with the Commission
on July 28, 1995. (File Nos. 33-89754 and 811-8992)
(4) Incorporated by reference to Post-Effective Amendment No.2 to the
Registrant's Registration Statement as filed with the Commission
on January 30, 1996. (File Nos. 33-89754 and 811-8992)
(11) Incorporated by reference to Post-Effective Amendment No.4 to the
Registrant's Registration Statement as filed with the Commission
on January 23, 1997. (File Nos. 33-89754 and 811-8992)
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
For a description of the other business of the investment
adviser, see the section entitled "Management of FundManager
Portfolios-The Adviser" in Part A.
The names and principal occupations of each director and executive
officer of Freedom Capital Management Corporation are set forth below:
NAME BUSINESS AND OTHER CONNECTIONS
John H. Goldsmith Chairman and Chief Executive Officer, John Hancock
Freedom Securities, Inc.; Chairman and Chief
Executive Officer of Tucker Anthony Incorporated;
Chairman of the Board of Freedom Capital
Dexter A. Dodge Chairman, President and Managing Director of Freedom
Capital; Vice President of Freedom Distributors
Corporation
Lawrence G. Kirshbaum Chief Financial Officer of John Hancock Freedom
Securities, Inc.; Director of Tucker Anthony
Incorporated, Sutro & Co. Incorporated and John
Hancock Clearing Corporation; Managing Director of
Freedom Capital; Registered Principal of
Tucker Anthony Incorporated; Former Chief
Executive Officer of Kirshbaum & Co. and of
Prescott, Ball & Turben
John J. Danello President, Chief Operating Officer and Secretary
of Freedom Capital; President and Director of
Freedom Distributors Corporation
Thomas H. Urmston, Jr. Managing Director and Vice President of Freedom
Capital
David L. Richardson, Jr. Managing Director of Freedom Capital
Edward W. Weld Managing Director of Freedom Capital; Registered
Representative of Tucker Anthony Incorporated
Richard V. Howe Managing Director of Freedom Capital
Michael G. Ferry Vice President and Chief Financial Officer of
Freedom Capital
Arthur E. McCarthy Managing Director of Tucker Anthony Incorporated
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Edgewood Services, Inc. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant: BT
Advisor Funds, BT Pyramid Mutual Funds, BT Investment Funds, BT
Institutional Funds, Excelsior Institutional Trust (formerly, UST
Master Funds, Inc.), Excelsior Tax-Exempt Funds, Inc. (formerly,
UST Master Tax-Exempt Funds, Inc.), Excelsior Institutional
Trust, FTI Funds, FundManager Portfolios, Marketvest Funds,
Marketvest Funds, Inc. and Old Westbury Funds, Inc.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Lawrence Caracciolo Director, President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
J. Christopher Donahue Director, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Sholes Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas P. Schmitt Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant Secretary
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Thomas J. Ward Assistant Secretary, --
Federated Investors Tower Edgewood Services, Inc.
Pittsburgh, PA 15222-3779
Kenneth W. Pegher, Jr. Treasurer, --
Federated Investors Tower Edgewood Services, Inc.
<PAGE>
(ai) Freedom Distributors Corp., a Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies: Freedom Mutual Fund and Freedom Group
of Tax Exempt Funds.
(bi)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
John J. Danello President and Director Executive Vice
One Beacon Street of Freedom Distributors President of the
Boston, MA 02108 Corp. Registrant.
Michael G. Ferry Treasurer of Freedom --
One Beacon Street Distributors Corp.
Boston, MA 02108
Dexter A. Dodge Director of Freedom Trustee, Chairman
One Beacon Street Distributors Corp. and Chief
Boston, MA 02108 Executive Officer of
the Registrant.
Maureen M. Renzi Vice President and Clerk Assistant
One Beacon Street of Freedom Distributors Secretary of the
Boston, MA 02108 Corp. Registrant.
(aii) Tucker Anthony Incorporated, a Distributor for shares of
the Registrant, also acts as principal underwriter for the following
open-end investment companies: Freedom Mutual Fund and Freedom Group
of Tax Exempt Funds.
(bii)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
John H. Goldsmith Chairman, Chief Executive --
One World Financial Center Officer and Director of
New York, NY 10281 Tucker Anthony Incorporated.
Robert H. Yevich President and Director of --
One World Financial Center Tucker Anthony Incorporated.
New York, NY 10281
Thomas A. Pasquale Executive Vice President --
One World Financial Center and Director of Tucker
New York, NY 10281 Anthony Incorporated.
Marc Menchel Executive Vice President, --
One World Financial Center Secretary and Clerk of
New York, NY 10281 Tucker Anthony Incorporated.
Thomas E Gilligan Treasurer and Chief Executive, --
One World Financial Center Officer of Tucker Anthony
New York, NY 10281 Incorporated.
<PAGE>
(aiii) Sutro & Co. Incorporated, a Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies: Freedom Mutual Fund and Freedom Group
of Tax Exempt Funds.
(biii)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
John F. Luikart President and Chief Executive --
201 California Street Officer of Sutro & Co.
San Francisco, CA 94111 Incorporated.
Mary Jane Delaney Executive Vice President --
201 California Street and General Counsel of
San Francisco, CA 94111 Sutro & Co. Incorporated.
John H. Goldsmith Director of Sutro & Co. --
One World Financial Center Incorporated.
New York, NY 10281
Fergus J. Henehan Executive Vice President of --
201 California Street Sutro & Co. Incorporated.
San Francisco, CA 94111
John W. Eisle Executive Vice President of --
201 California Street Sutro & Co. Incorporated.
San Francisco, CA 94111
Thomas R. Weinberger Executive Vice President of --
201 California Street Sutro & Co. Incorporated.
San Francisco, CA 94111
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS:
All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules 31a-1 through 31a-3
promulgated thereunder will be maintained at one of the following
locations:
Registrant Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Freedom Capital Management Corporation One Beacon Street
("Adviser") Boston Massachusetts 02108.
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, Pennsylvania 15222-3779
Federated Services Company P.O. Box 8600
("Transfer Agent and Dividend Boston, Massachusetts 02266-8600
Disbursing Agent")
State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, Massachusetts 02266-8600
<PAGE>
ITEM 31. MANAGEMENT SERVICES:
Not applicable.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to comply with Section 16(c) of
the 1940 Act as though such provisions of the Act were applicable to
the Registrant except that the request referred to in the third full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the Registrant,
regardless of the net asset value or values of shares held by such
requesting shareholders.
Registrant hereby undertakes to furnish to each person to
whom a prospectus is delivered a copy of the Registrant's
latest annual report to shareholders upon request and without
charge.
Registrant hereby undertakes to file a post-effective
amendment using financial statements, which need not be certified,
within four to six months from the effective date of Registrant's
Post- Effective Amendment No. 5.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, the Registrant,
FUNDMANAGER PORTFOLIOS (formerly, FundManager Trust), certifies that
it meets all of the requirements for effectiveness of this Amendment
to its Registration Statement pursuant to Rule 485(b) under the
Securities act of 1933, and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and the
Commonwealth of Pennsylvania on the 8th day of August, 1997.
FUNDMANAGER PORTFOLIOS
(formerly, FUNDMANAGER PORTFOLIOS)
By: /s/ Victor R. Siclari
Victor R. Siclari, Secretary
August 8, 1997
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to its Registration Statement has been signed below by
the following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Victor R. Siclari Attorney in Fact August 8, 1997
Victor R. Siclari For the Persons
SECRETARY Listed Below
/s/Dexter A. Dodge* Chairman and Trustee
Dexter A. Dodge (Chief Executive Officer)
/S/Charles B. Lipson* President
Charles B. Lipson (Principal Executive Officer)
/S/Judith J. Mackin* Treasurer
Judith J. Mackin (Principal Financial and
Accounting Officer)
/S/Ernst T. Kendall* Trustee
Ernst T. Kendall
/S/Richard B. Osterberg* Trustee
Richard B. Osterberg
/S/John R. Haack* Trustee
John R. Haack
* By Power of Attorney
