PRESIDENT'S MESSAGE
November 21, 1997
Dear Fellow Shareholder:
One of the many advantages to investors in FundManager Portfolios is that
Michael Hirsch has built strong relationships over his twenty-three year career
with the mutual fund managers of the funds in which we invest. These
relationships enable us to periodically bring together leading fund managers to
address investment strategies and provide an insight into their outlook on the
markets.
Handling "information overload" was the topic of a June roundtable discussion
held in Boston. Information overload is created as investors confront the ever
increasing number of sources offering investment advice on topics ranging from
what to buy, how to develop investment strategies and the best avenues of
investment. Often, these myriad sources of information are conflicting and
confusing. The roundtable offered insights into how professional fund managers
help investors deal with the vast amount of information with which they are
confronted while creating diversified portfolios that will pursue their
investment goals.
[Graphic]
From left to right: Harry Burn III, Donald Yacktman, Gail Bardin, Michael
Price, and Chris Davis.
Panel participants included well-known mutual fund managers Gail Bardin of
Hotchkis & Wiley, Harry Burn III from Sound Shore Management, Chris Davis of
Davis Selected Advisers, Michael Price of Franklin Mutual Advisors and Donald
Yacktman of Yacktman Asset Management.
DIVERSIFY WISELY
Most investors have heard the message about the benefits of diversification and
how diversification will help protect assets in declining markets. Mr. Burn,
portfolio manager of Sound Shore Fund (a holding in FundManager Growth
Portfolio) and chairman of Sound Shore Management, pointed out that actively
managed funds offer much of the upside of indexed funds and in the long-term
more than compensate investors for the management fee. An actively managed
portfolio, Mr. Burn maintained, can achieve proper diversification while
maintaining strong returns. Active managers select the most appropriate
securities for a fund, considering issues such as asset allocation, sector
volatility and market capitalization.
[Graphic]
Charles B. Lipson
President
Mr. Davis, president of Shelby Cullom Davis Financial Consultants and co-manager
of the Davis NY Venture Fund (FundManager Growth Portfolio) concurred, saying
investors must sort through an incredible amount of information to find the
mutual funds which are right for them. Mr. Davis stated that a professional fund
manager will help investors deal with investment advice and information by
constructing a well balanced mutual fund product. He went on to say that
investors are better buyers than sellers, but being a good seller is as
important as being a good buyer. This goal is made more complex by the
overabundance of information available to investors. By sorting through
investment information and finding the best quality investments, fund managers
provide investors with strong performance, Mr. Davis concluded.
At FundManager we strive to provide a level of diversification by choosing
high-quality funds with relatively consistent long-term performance records. We
continually monitor the funds in each FundManager Portfolio, and refine and
adjust the fund mix when appropriate.
You can enjoy the benefits of a managed portfolio of mutual funds and don't have
to worry about when to buy or sell a particular fund.
Just as diversification helps protect assets, remaining fully invested helps
reduce the impact of market corrections. Gail Bardin, manager of the Hotchkis &
Wiley Equity Income Fund (FundManager Growth with Income holding), is an
advocate of remaining fully invested.
Commenting on finding value opportunities, Ms. Bardin pointed out that
professional fund managers often turn to international research capabilities
when the domestic markets become overvalued. Through this international
research, professional managers can help investors remain invested in funds with
correct value characteristics. Ms. Bardin went on to say that investing in the
current market requires some defensive planning, but she stressed the importance
of remaining in the market.
As more information is made available to investors through print and broadcast
media, the internet and investment clubs, selecting the correct mutual funds
will require a deeper understanding of investment philosophies, investment
vehicles and portfolio construction, contended Donald Yacktman, founder and
president of Yacktman Asset Management and manager of the Yacktman Fund
(FundManager Growth Portfolio). People will pick and choose the funds that they
want and will no longer be satisfied buying a manager's entire package of funds,
explained Mr. Yacktman. Investors, he continued, demand access to consistent
performers and want to have access to the best of the best funds. Mr. Yacktman
noted that through FundManager Portfolios, investors continue to have access to
mutual funds which are closed to new shareholders.
At FundManager we are unique as we continually monitor the performance, the
investment process and portfolio managers of the mutual funds we hold. Our
investment team chooses the very best mutual fund managers available providing
consistent long-term performance. In fact, less than 1% of the funds available
in today's mutual fund market meet the investment standards we set.
SPECTER OF A CORRECTION
Our autumn roundtable discussion, "Echoes of 1987," was held on October 7 in
New York City and featured Robert Rodriguez of First Pacific Advisers, Inc.,
Mr. Davis, Mr. Price and Mr. Yacktman.
Commenting on investor expectations, Mr. Rodriguez, Principal and Chief
Investment Officer of First Pacific Advisers (FPA Capital is a holding in our
Aggressive Growth Portfolio and FPA New Income is a holding in our FundManager
Bond Portfolio), pointed out that the 1987 and current markets offered quick
growth, creating dangerous investor psychology, and are leading to totally
unrealistic expectations about long-term investment returns. As a result, he
explained, the current market is absolutely set-up, in terms of individual
investors, for some fairly significant disappointments. Mr. Rodriguez concluded
that he is cautious during periods of rapid growth because he is not certain
retail investors will stay in the market during periods of decline.
While volatility in the markets this year has caused some concern, Mr. Davis
reminded those in attendance that although costly in absolute terms, 1987's
Black Monday did not create a bear market. Mr. Davis stated a bear market is not
a quick market decline and recovery, but a market which declines significantly
over an extended period. Accordingly, 1987 was not a bear market, as the market
recovered from Black Monday and returned two to three percent for the year. His
indicator of bear market cycles considers the losses sustained by the favorite
institutional money managers. Looking at the current market, Mr. Davis cautioned
investors not to lose sight of economics when considering market valuations and
always apply common sense to investing.
Institutional changes have occurred between 1987's Black Monday and today which
make today's markets operationally safer, stated Mr. Price (portfolio manager of
Franklin Mutual Discovery, a holding in FundManager Aggressive Growth Fund and
Franklin Mutual Beacon, a holding in FundManager Growth Fund). He went on to
cite trading circuit breakers and higher levels of liquidity of fund companies
as just two of the changes that offer investors greater protection than seen a
decade ago. Mr. Price acknowledged that many investors could not reach their
brokers during 1987's market decline, but reminded attendees that today's
investor trades through more channels than they did ten years ago, relying less
frequently on brokers. He concluded by stating he believed today's investors
enjoy a mutual fund industry which is fundamentally safe.
* * *
As markets achieve unprecedented valuations, investor attitude and behavior is
coming under closer scrutiny by market analysts. When the New York stock markets
underwent a correction on October 27, it was the institutional rather than
retail investors who fueled the market decline. Institutional changes, such as
trading circuit breakers, are also being examined more closely, as commentators
debate whether the market would have regained some of the losses realized
October 27 when circuit breakers prematurely terminated the trading day on the
New York Stock Exchange.
All of the participants in both the June and October roundtables are managers of
mutual funds held in FundManager Portfolios. "We're proud to be able to offer
the advice of some of the nation's top mutual fund managers to our investors,"
said Michael Hirsch. "Many of the managers' funds we invest with are able to
turn the volatility in the market into a buying opportunity by selecting stocks
that have dropped to fair or undervalued status. These are the kinds of managers
that FundManager Portfolios invests in and that were on these roundtable
panels," he explained.
We look forward to serving your financial needs and appreciate your continued
investment in the FundManager Portfolios.
Sincerely,
[Graphic]
MANAGEMENT DISCUSSION & ANALYSIS
October 15, 1997
Dear Fellow Shareholders:
It is our pleasure to submit the following report to you for the FundManager
Portfolios' fiscal year ended September 30, 1997. We will follow our traditional
format of reviewing performance, discussing portfolio modifications, and taking
on an in-depth look at two underlying mutual funds.
All five portfolios experienced significant gains in net asset value since we
last reported to you in the Semi-Annual Report. In fact, for the second half of
the fiscal year, the Financial Adviser Class of all three equity portfolios
(Aggressive Growth, Growth, Growth with Income) achieved gains in excess of
twenty percent. This brought the total returns for the 12 months ended September
30, 1997, to 24.2% (Aggressive Growth), 36.9%(Growth), 34.3%(Growth with
Income), 17.4%(Managed Total Return), and 8.5% (Bond), respectively.* We are
equally encouraged by the fact that, in this, the most difficult of market
environments for a multifund portfolio to provide reasonable relative
performance (a sharply rising market), two of the five series (Growth, Growth
with Income) outperformed their peer groups -- with the Value Line Growth peer
average being reported at 31.6%, while the Growth/Income peer average was 34.1%.
After the wealth of activity which we reported to you in the Semi-Annual Report,
portfolio composition in the second half of the fiscal year remained fairly
stable.
AGGRESSIVE GROWTH PORTFOLIO
After carefully assessing the risk-reward characteristics of small cap stocks**
relative to other capitalization classes, we decided to reduce this portfolio's
exposure to small cap by switching from T. Rowe Price New Horizons (small cap)
into T. Rowe Price Mid-Cap Growth Fund. As a result, our exposure to small cap
stocks in the portfolio is approximately 8.7% with Michael Price's small cap
value stocks in his Franklin Mutual Discovery Fund. This portfolio also owns two
large cap stock funds (Brandywine and Harbor Capital Appreciation) and three
mid-cap funds (Baron Asset, T. Rowe Price Mid-Cap Growth and FPA Capital, which
remains closed to new investors, but remains available through FundManager
Portfolios).
GROWTH PORTFOLIO
The core position in the two Vanguard Index Funds remains in a 70%-30%
proportion Vanguard Growth Index Fund vs. Vanguard Value Index Fund. There were
no changes to the lineup of value-added managers in this series during the
latest six months ended September 30.
GROWTH WITH INCOME PORTFOLIO
The proportion between growth & income funds and equity-income funds remains at
60%-40%, in favor of the former. However, in the last month of the fiscal year a
new fund was added to the Portfolio -- UAM FPA Crescent -- which we classify as
a balanced fund.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
** Small cap stocks have historically experienced greater volatility than the
average large or mid cap stocks.
[Graphic]
Michael D. Hirsch
Portfolio Manager
As of September 30, the Growth with Income Portfolio breaks down by style as
follows: growth & income funds 55.4%, equity-income funds 34.7%, and balanced
funds, 9.2%.
Crescent is a member of the FPA family of funds, in which FundManager also has
positions in Capital (Aggressive Growth) and New Income (Bond). UAM FPA Crescent
is a value-oriented balanced fund that seeks to find value in all parts of a
firm's capital structure. The fund will be invested at different times in a
combination of common stocks, preferred stocks, convertible bonds, corporate
bonds and "distressed" credits (high-yield bonds).* Typically, the fund will
keep 50% to 70% in stocks, with the rest in fixed-income securities as well as
cash. Portfolio manager Steven Romick's goal is to deliver equity-like returns,
but lower volatility and less risk than the stock market, with this flexible mix
of stocks and income-producing securities.
BOND PORTFOLIO
While this portfolio enjoyed a very fine 6.7%** return for the latest six months
ended September 30, 1997, we decided to retain the neutral duration stance of
the core holdings relative to the Lehman Government/Corporate Bond Index.***
This was due to continued uncertainties over future Federal Reserve Board rate
policies and the significant returns already achieved. Between July and
September, there were no changes in the lineup of value-added managers.
MANAGED TOTAL RETURN PORTFOLIO
Asset allocation in this portfolio as of the end of the fiscal year continues as
follows: 10% in aggressive growth funds, 15% growth funds, 15% in growth with
income funds, 55% in bond funds, and 5% in money market funds. The allocation to
the three equity classes are all at minimum levels (due to the gross
overvaluation of the stock market on a traditional fundamental basis), while the
bond allocation is at the maximum (due to the relative risk-reward parameters of
bonds vs. stocks).
In this Report, we will take a closer look at the Bond Fund of America and the
Clipper Fund, which we own in the FundManager Bond and FundManager Growth
Portfolios, respectively.
As one of the five specialty managers in our FundManager Bond Portfolio, the
Bond Fund of America has produced an impressive 11.6%** return over the past 12
months ended 9/30/97 relative to 9.6% for the Lehman Brothers Government
Corporate Index. The $7.6 billion Bond Fund of America is team managed by a
group of portfolio counselors from the well-respected Capital Research and
Management Company, the investment adviser to The American Funds Group, one of
the nation's oldest and largest mutual fund families.
* Lower rated bonds involve a higher degree of risk than investment grade bonds
in return for higher yield and capital appreciation potential.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
*** Lehman Brothers Government/Corporate Bond Index is comprised of
approximately 5,000 issues which include non-convertible bonds publicly issued
by the U.S. government or its agencies; corporate bonds guaranteed by the U.S.
government and quasi-federal corporations; and publicly issued, fixed-rate,
non-convertible domestic bonds of companies in industry, public utilities and
finance. The index is unmanaged, and investments cannot be made in an index.
Separating this fund from many others is the fact that the four portfolio
counselors (with more than 109 years of combined investment experience) are each
allocated a specific portion of the portfolio to manage within which each is
able to specialize on a more narrow segment of the fixed-income markets. For
example, Richard Schotte focuses his energies on uncovering bargains in the
high-yield corporate bond sector, while John Smet analyzes mortgage-backed
securities. This broadly-diversified fund invests in bonds issued by companies
in various industries, by the U.S. Treasury, by governments abroad,
mortgage-backed issues, as well as asset-backed securities (such as those made
up of credit card, boat or auto loans).
It has been our pleasure to hold the Clipper Fund within the FundManager Growth
Portfolio for over a decade. Since the fund's inception in February of 1984,
James Gipson has skillfully managed the Clipper Fund with an S&P 500-topping
10-year average annualized return of 16.1% through September 30, 1997, versus
14.7% for the broad market index.* Joining the portfolio management team in
1994, Michael Sandler and Gipson attempt to estimate how much a company would
fetch in a buyout based on the intrinsic value of the firms they seek to hold in
the portfolio. Stocks are generally purchased at a 30% to 45% discount to this
estimated private market value based on their use of discounted cash flow
analysis. This labor-intensive, strict value methodology normally guides the
fund toward the identification of large-capitalization undervalued firms often
in out-of-favor sectors of the market. As of the end of the quarter, the fund
was 61.5%
invested in equities, within a concentrated portfolio of only 18 stocks. The
characteristics that unite these select firms include strong positive cash
flows, high returns on equity, good franchises (often global in reach), as well
as strong management.
In the booming months leading up to 1987's October crash, this fund presciently
held 45% of its assets in stocks. Heading into the turmoil that has begun in the
fourth quarter of 1997, the Clipper Fund was holding 38.5% in fixed-income
securities and cash as these managers continue to stick with their value
orientation, unable to find cheap stocks on an absolute basis in this roaring
market.
POSTSCRIPT
After the close of your fund's fiscal year, and after I completed the above
letter, the explosive events of late October ensued. The currency collapse in
Southeast Asia, the crisis in the Hang Seng Index, the attack on the Hong Kong
dollar, and the effect those events had on stock markets around the globe
precipitated the most dramatic test of investor confidence in the past decade.
We are pleased to tell you that once again the ability of multifund portfolios
to provide safe havens in periods of turbulence proved itself in these trying
times. All three equity Portfolios in FundManager -- Aggressive Growth, Growth,
and Growth with Income -- were down substantially less than the general market
on Monday, October 27, when the Dow Jones Industrial Average declined 7.2% for
the day.
* S&P 500 is an unmanaged capitalization-weighted index of 500 stocks designed
to measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries.
Investments cannot be made in an index.
In terms of portfolio modifications which were triggered by those events, in the
Growth Portfolio, the ratio between growth and value was reduced to 65%-35% and
may be reduced further in coming weeks. In the Managed Total Return Portfolio,
taking advantage of the rally in bonds which accompanied the decline in stocks,
we shifted 15% out of bonds. The current allocations are: 15% aggressive growth,
20% growth, 20% growth with income, 40% bonds, and 5% money market. Any further
weakness in the stock market will be utilized as an additional buying
opportunity.
As always, we appreciate your continued support and welcome your comments and
questions.
Respectfully submitted,
Michael D. Hirsch
[Graphic]
PERFORMANCE SUMMARY
AGGRESSIVE GROWTH PORTFOLIO -- FINANCIAL ADVISER CLASS
Growth of $10,000 Invested in Aggressive Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Financial
Adviser Class of the Aggressive Growth Portfolio (AGP) from October 1, 1987 to
September 30, 1997, compared to the Russell 2000 Index (R2000)+ and Lipper
Capital Appreciation Average (LCAA).++
Graphic representation omitted; see Appendix A.
Average Annual Total Returns for the Period Ended September 30, 1997
1 Year 24.2%
5 Year 16.5%
10 Year 11.1%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The R2000 and LCAA have been adjusted to reflect reinvestment of
dividends on securities in the index and average. Effective May 8, 1995, the
Portfolio no longer imposes a one-time sales charge.
+ The R2000 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
The index is unmanaged.
++ The LCAA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into this
category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
AGGRESSIVE GROWTH PORTFOLIO --
NO-LOAD CLASS
Growth of $10,000 Invested in Aggressive Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in No-Load
Class of the Aggressive Growth Portfolio (AGP) from October 1, 1995 (start of
performance) to September 30, 1997, compared to the Russell 2000 Index (R2000)+
and Lipper Capital Appreciation Average (LCAA).++
Graphic representation omitted; see Appendix B.
Average Annual Total Returns for the Period Ended September 30, 1997
1 Year 24.8%
Start of Performance (October 1, 1995) 18.6%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The R2000 and the LCAA have been adjusted to reflect reinvestment
of dividends on securities in the index and average.
+ The R2000 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
The index is unmanaged.
++ The LCAA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into this
category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
PERFORMANCE SUMMARY
GROWTH PORTFOLIO -- FINANCIAL ADVISER CLASS
Growth of $10,000 Invested in Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Financial
Adviser Class of the Growth Portfolio (GP) from October 1, 1987 to September 30,
1997, compared to the Standard & Poor's 500 Index (S&P 500)+ and Lipper Growth
Average (LGA).++
Graphic representation omitted; see Appendix C.
Average Annual Total Returns for the Period Ended September 30, 1997
1 Year 36.9%
5 Year 18.2%
10 Year 12.2%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and LGA have been adjusted to reflect reinvestment of
dividends on securities in the index and average. Effective May 8, 1995, the
Portfolio no longer imposes a one-time sales charge.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
The index is unmanaged.
++ The LGA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into this
category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
GROWTH PORTFOLIO -- NO-LOAD CLASS
Growth of $10,000 Invested in Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in No-Load
Class of the Growth Portfolio (GP) from October 1, 1995 (start of performance)
to September 30, 1997, compared to the Standard & Poor's 500 Index (S&P 500)+
and Lipper Growth Average (LGA).++
Graphic representation omitted; see Appendix D.
Average Annual Total Returns for the Period Ended September 30, 1997
1 Year 37.6%
Start of Performance (October 1, 1995) 25.3%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and LGA have been adjusted to reflect reinvestment of
dividends on securities in the index and average.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
The index is unmanaged.
++ The LGA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into this
category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
PERFORMANCE SUMMARY
GROWTH WITH INCOME PORTFOLIO -- FINANCIAL ADVISER CLASS
Growth of $10,000 Invested in Growth with Income Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Financial
Adviser Class of the Growth with Income Portfolio (GIP) from October 1, 1987 to
September 30, 1997, compared to the Standard & Poor's 500 Index (S&P 500),+
Lehman Government Corporate Total Index (LG/CI),+ and Lipper Growth & Income
Average (LG&IA).++
Graphic representation omitted; see Appendix E.
Average Annual Total Returns for the Period Ended September 30, 1997
1 Year 34.3%
5 Year 17.6%
10 Year 12.1%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The S&P 500, LG/CI, and LG&IA have been adjusted to reflect
reinvestment of dividends on securities in the indices and average. Effective
May 8, 1995, the Portfolio no longer imposes a one-time sales charge.
+ The S&P 500 and LG/CI are not adjusted to reflect sales charges, expenses, or
other fees that the SEC requires to be reflected in the Portfolio's performance.
The indices are unmanaged.
++ The LG&IA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into this
category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
GROWTH WITH INCOME PORTFOLIO --
NO-LOAD CLASS
Growth of $10,000 Invested in Growth with Income Portfolio
The graph below illustrates the hypothetical investment of $10,000 in the
No-Load Class of the Growth with Income Portfolio (GIP) from October 1, 1995
(start of performance) to September 30, 1997, compared to the Standard & Poor's
500 Index (S&P 500),+ Lehman Government Corporate Total Index (LG/CI),+ and
Lipper Growth & Income Average (LG&IA).++
Graphic representation omitted; see Appendix F.
Average Annual Total Returns for the Period Ended September 30, 1997
1 Year 34.9%
Start of Performance (October 1, 1995) 24.0%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The S&P 500, LG/CI, and LG&IA have been adjusted to reflect
reinvestment of dividends on securities in the indices and average.
+ The S&P 500 and LG/CI are not adjusted to reflect sales charges, expenses, or
other fees that the SEC requires to be reflected in the Portfolio's performance.
The indices are unmanaged.
++ The LG&IA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into this
category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
PERFORMANCE SUMMARY
BOND PORTFOLIO -- FINANCIAL ADVISER CLASS
Growth of $10,000 Invested in Bond Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Financial
Adviser Class of the Bond Portfolio (BP) from October 1, 1987 to September 30,
1997, compared to the Lehman Government/Corporate Total Index (LG/CI)+ and
Lipper General Bond Average (LGBA).++
Graphic representation omitted; see Appendix G.
Average Annual Total Returns for the Period Ended September 30, 1997
1 Year 8.5%
5 Year 5.8%
10 Year 7.2%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The LG/CI and LGBA have been adjusted to reflect reinvestment of
dividends on securities in the index and average. Effective May 8, 1995, the
Portfolio no longer imposes a one-time sales charge.
+ The LG/CI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
The index is unmanaged.
++ The LGBA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into this
category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
For this illustration, the LGBA began performance December 31, 1990. The index
was assigned a beginning value of $12,362, the value of the Portfolio on
December 31, 1990.
BOND PORTFOLIO -- NO-LOAD CLASS
Growth of $10,000 Invested in Bond Portfolio
The graph below illustrates the hypothetical investment of $10,000 in No-Load
Class of the Bond Portfolio (BP) from October 1, 1995 (start of performance) to
September 30, 1997, compared to the Lehman Government/Corporate Total Index
(LG/CI)+ and Lipper General Bond Average
(LGBA).++
Graphic representation omitted; see Appendix H.
Average Annual Total Returns for the Period Ended September 30, 1997
1 Year 8.9%
Start of Performance (October 1, 1995) 6.4%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The LG/CI and LGBA have been adjusted to reflect reinvestment of
dividends on securities in the index and average.
+ The LG/CI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
The index is unmanaged.
++ The LGBA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into this
category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
PERFORMANCE SUMMARY
MANAGED TOTAL RETURN PORTFOLIO --
FINANCIAL ADVISER CLASS
Growth of $10,000 Invested in Managed Total Return Portfolio
The graph below illustrates the hypothetical investment of $10,000 in the
Managed Total Return (MTR) Portfolio from August 4, 1988 (start of performance)
to September 30, 1997, compared to the Lehman Government/Corporate Total Index
(LG/CI)+ and Lipper General Bond Average
(LGBA).++
Graphic representation omitted; see Appendix I.
Average Annual Total Returns for the Period Ended September 30, 1997
1 Year 17.4%
5 Year 9.9%
Start of Performance (August 4, 1988) 9.7%
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The LG/CI and LGBA have been adjusted to reflect reinvestment of
dividends on securities in the index and average. Effective May 8, 1995, the
Portfolio no longer imposes a one-time sales charge.
+ The LG/CI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
The index is unmanaged.
++ The LGBA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into this
category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
For this illustration, the LGBA began performance December 31, 1990. The index
was assigned a beginning value of $11,768, the value of the Portfolio on
December 31, 1990.
FUNDMANAGER PORTFOLIOS
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
AGGRESSIVE GROWTH PORTFOLIO
High capital appreciation. Seeks capital appreciation without regard to current
income.
MARKET
SHARES VALUE
MID CAP FUNDS -- (49.0%)
118 Aim Aggressive Growth Fund
(Class A) $ 6,289
132,750 Barron Asset Fund 6,296,333
169,500 FPA Capital Fund 6,266,422
24 John Hancock Regional Bank
Fund (Class A) 1,159
211,597 T. Rowe Price Mid-Cap Growth 6,119,371
TOTAL MID CAP FUNDS 18,689,574
LARGE CAP FUNDS -- (32.6%)
179,105 Harbor Capital Appreciation
Fund 6,383,294
137,089 Brandywine Fund 6,019,597
TOTAL LARGE CAP FUNDS 12,402,891
GLOBAL FUNDS -- (17.4%)
318,038 Franklin Mutual Discovery Fund
(Class Z) 6,634,281
TOTAL INVESTMENTS AT MARKET VALUE
(COST $28,838,243)(A) 37,726,746
OTHER ASSETS NET OF LIABILITIES 394,042
NET ASSETS (100.0%) $ 38,120,788
[Graphic]
GROWTH PORTFOLIO
Modest capital appreciation. Primarily seeks long-term capital appreciation.
Current income is a secondary consideration.
MARKET
SHARES VALUE
GROWTH FUNDS -- (68.9%)
211,305 Davis New York Venture Fund $ 4,923,403
99,656 Guardian Park Avenue Fund, Inc. 4,879,172
398,891 Vanguard Index Trust Growth Fund 8,815,489
304,848 Yacktman Fund 4,886,719
TOTAL GROWTH FUNDS 23,504,783
VALUE FUNDS -- (30.1%)
6 FPA Paramount Fund, Inc. 98
15,235 Clipper Fund 1,267,864
12,596 Dodge & Cox Stock Fund 1,288,163
62,663 MAS Value Portfolio 1,276,439
83,383 Franklin Mutual Beacon Fund
(Class Z) 1,309,110
43,868 Sound Shore Fund, Inc. 1,309,450
181,054 Vanguard Index Trust Value Fund 3,802,136
TOTAL VALUE FUNDS 10,253,260
TOTAL INVESTMENTS AT MARKET VALUE
(COST $26,702,247)(B) 33,758,043
OTHER ASSETS NET OF LIABILITIES 341,764
NET ASSETS (100.0%) $ 34,099,807
[Graphic]
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
GROWTH WITH INCOME PORTFOLIO
Income and modest capital appreciation. Seeks a combination of capital
appreciation and current income.
MARKET
SHARES VALUE
GROWTH AND INCOME FUNDS -- (55.4%)
501,701 AIM Charter Fund $ 7,038,872
228,507 Fundamental Investors 7,022,009
453,225 Lord Abbett Affiliated Fund 7,043,120
TOTAL GROWTH AND
INCOME FUNDS 21,104,001
BALANCED FUNDS -- (9.2%)
221,940 UAM FPA Crescent Portfolio 3,500,000
EQUITY INCOME FUNDS -- (34.7%)
150,607 Hotchkis & Wiley Equity
Income Fund 3,530,226
179,882 T. Rowe Price Equity
Income Fund 4,844,220
156,937 Washington Mutual
Investors Fund 4,816,394
TOTAL EQUITY INCOME FUNDS 13,190,840
TOTAL INVESTMENTS AT MARKET VALUE
(COST $29,085,141)(C) 37,794,841
OTHER ASSETS NET OF LIABILITIES 279,695
NET ASSETS (100.0%) $ 38,074,536
[Graphic]
BOND PORTFOLIO
Monthly income. Seeks a high level of current income.
MARKET
SHARES VALUE
SHORT MATURITY FUNDS -- (9.3%)
553,676 Vanguard Admiral Funds, Inc. -
Short-Term U.S. Treasury
Portfolio $ 5,575,514
55,588 Vanguard Fixed Income Securities
Fund - Short-Term U.S. Treasury
Portfolio 566,439
TOTAL SHORT MATURITY FUNDS 6,141,953
INTERMEDIATE MATURITY FUNDS -- (77.2%)
473,746 Bond Fund of America, Inc. 6,651,397
590,445 FPA New Income Fund 6,636,604
541,599 MAS Fixed Income Portfolio 6,618,337
492,753 MFS Bond Fund (Class A) 6,676,798
617,363 PIMCO Total Return Fund 6,624,308
659,594 Vanguard Admiral Funds, Inc. -
Intermediate Term U.S.
Treasury Portfolio 6,800,416
510,321 Vanguard Fixed Income
Securities Fund - Intermediate
Term Corporate Bond Portfolio 5,036,866
547,279 Vanguard Fixed Income
Securities Fund - Intermediate
Term U.S. Treasury Portfolio 5,751,903
TOTAL INTERMEDIATE MATURITY FUNDS
50,796,629
LONG MATURITY FUNDS -- (12.5%)
183,613 Vanguard Admiral Funds, Inc. -
Long-Term U.S. Treasury Portfolio 1,927,938
398,136 Vanguard Fixed Income
Securities Fund - Long-Term
Corporate Bond Portfolio 3,607,109
266,910 Vanguard Fixed Income
Securities Fund - Long-Term
U.S. Treasury Portfolio 2,719,808
TOTAL LONG MATURITY FUNDS 8,254,855
TOTAL INVESTMENTS AT MARKET VALUE
(COST $63,546,924)(D) 65,193,437
OTHER ASSETS NET OF LIABILITIES 584,723
NET ASSETS (100.0%) $ 65,778,160
[Graphic]
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
MANAGED TOTAL RETURN PORTFOLIO
Asset allocation. Seeks high total return through disciplined asset allocation.
MARKET
SHARES VALUE
AGGRESSIVE GROWTH FUNDS -- (10.2%)
9,613 Brandywine Fund $ 422,108
11,355 FPA Capital Fund 419,808
16,614 Franklin Mutual-Discovery Fund
(Class Z) 346,573
TOTAL AGGRESSIVE GROWTH FUNDS 1,188,489
GROWTH FUNDS -- (15.0%)
6,251 Clipper Fund 520,175
25,346 Davis New York Venture Fund
(Class A) 590,555
12,830 Guardian Park Avenue Fund, Inc. 628,159
TOTAL GROWTH FUNDS 1,738,889
GROWTH & INCOME FUNDS -- (15.0%)
28,936 Fundamental Investors, Inc. 889,218
31,606 T. Rowe Price Equity Income Fund 851,149
TOTAL GROWTH AND INCOME FUNDS 1,740,367
FIXED INCOME FUNDS -- (54.8%)
113,720 Bond Fund of America, Inc. 1,596,630
148,308 PIMCO Total Return Fund 1,591,344
36,401 Vanguard Admiral Funds, Inc. -
Long-Term U.S. Treasury
Portfolio 382,210
282,491 Vanguard Fixed Income
Securities Fund - Intermediate
Term Corporate Bond Portfolio 2,788,184
TOTAL FIXED INCOME FUNDS 6,358,368
TOTAL INVESTMENTS AT MARKET VALUE
(COST $9,743,274)(E) $ 11,026,113
OTHER ASSETS NET OF LIABILITIES 580,194
NET ASSETS (100.0%) $ 11,606,307
[Graphic]
(a) Aggregate cost for federal income tax purposes is $28,838,248. The gross
unrealized appreciation is $8,888,498: the gross unrealized depreciation is $0,
resulting in net unrealized appreciation of $8,888,498 for federal income tax
purposes.
(b) Aggregate cost for federal income tax purposes is $26,707,524. The gross
unrealized appreciation is $7,050,519: the gross unrealized depreciation is $0,
resulting in net unrealized appreciation of $7,050,519 for federal income tax
purposes.
(c) Aggregate cost for federal income tax purposes is $29,096,427. The gross
unrealized appreciation is $8,698,414: the gross unrealized depreciation is $0,
resulting in net unrealized appreciation of $8,698,414 for federal income tax
purposes.
(d) Aggregate cost for federal income tax purposes is $63,710,110. The gross
unrealized appreciation is $1,483,327: the gross unrealized depreciation is $0,
resulting in net unrealized appreciation of $1,483,327 for federal income tax
purposes.
(e) Aggregate cost for federal income tax purposes is $9,768,695. The gross
unrealized appreciation is $1,257,418: the gross unrealized depreciation is $0,
resulting in net unrealized appreciation of $1,257,418 for federal income tax
purposes.
Note: The Growth Portfolio designates $3,032,406 of the dividends paid during
the year ended September 30, 1997, as capital gain dividends for federal income
tax purposes. The Aggressive Growth Portfolio designates $3,923,319 of the
dividends paid during the year ended September 30, 1997, as capital gain
dividends for federal income tax purposes.
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH WITH MANAGED
GROWTH GROWTH INCOME BOND TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Assets:
Investments, at value* $37,726,746 $33,758,043 $37,794,841 $65,193,437 $11,026,113
Cash 500,128 318,623 331,658 335,281 592,753
Receivable for fund shares sold 36,880 57,623 16,272 100,638 267
Dividend receivable -- 21,574 20,155 231,097 25,334
Total assets 38,263,754 34,155,863 38,162,926 65,860,453 11,644,467
Liabilities:
Payable for investments -- -- 20,939 -- --
purchased
Payable for fund shares redeemed 134,353 8,023 -- -- --
Administrative fee payable 4,041 3,582 3,869 6,977 1,225
Distribution expense payable -- 26,477 29,030 46,506 18,862
Custodian fee payable -- 2,169 11,300 1,757 8,588
Accrued Expenses 4,572 15,805 23,252 27,023 9,485
Total liabilities 142,966 56,056 88,390 82,293 38,160
Net Assets $ 38,120,788 $34,099,807 $38,074,536 $65,778,160 $11,606,307
Financial Adviser Class:
Shares Outstanding 1,963,321 1,843,969 1,965,232 6,184,570 962,428
Net Assets $ 36,199,660 $32,835,425 $37,274,165 $63,556,884 $11,606,307
Net Asset Value $ 18.44 $ 17.81 $ 18.97 $ 10.28 $ 12.06
No-Load Class:
Shares Outstanding 103,510 70,876 42,633 214,805 --
Net Assets $ 1,921,128 $ 1,264,382 $ 800,371 $ 2,221,276 --
Net Asset Value $ 18.56 $ 17.84 $ 18.77 $ 10.34 --
Net Assets consist of:
Paid in capital $25,719,089 $21,269,489 $23,829,081 $67,225,091 $ 9,369,676
Undistributed net
investment income 9,012 -- -- 470,672 59,883
Accumulated realized gain (loss) 3,504,184 5,774,522 5,535,755 (3,564,116) 893,909
Net unrealized appreciation
(depreciation) 8,888,503 7,055,796 8,709,700 1,646,513 1,282,839
Net Assets $ 38,120,788 $34,099,807 $38,074,536 $65,778,160 $11,606,307
*Investments, at cost $ 28,838,243 $26,702,247 $29,085,141 $63,546,924 $ 9,743,274
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH WITH MANAGED
GROWTH GROWTH INCOME BOND TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Income:
Dividend income $ 357,486 $ 581,326 $ 1,038,342 $ 4,389,782 $ 506,148
Expenses:
Advisory fee 200,484 154,313 167,415 340,908 58,530
Transfer agent 67,990 57,375 60,891 45,787 40,989
Distribution and shareholder
service expenses 191,310 148,154 163,165 328,198 58,410
Administrative fee 61,748 47,373 51,488 105,099 18,035
Audit 16,354 15,198 15,502 20,565 11,422
Printing & Postage 13,217 9,456 10,168 9,659 6,042
Custodian fees and fund accounting fees 49,872 45,292 53,927 55,958 44,088
Legal 11,611 9,189 9,180 16,003 2,367
Registration fees 23,038 25,360 17,822 25,798 9,979
Trustee fees 3,882 3,187 2,873 5,173 2,326
Insurance expense 2,341 1,684 2,085 4,649 836
Miscellaneous 738 -- 169 668 2,722
Total expenses 642,585 516,581 554,685 958,465 255,746
Waiver of administrative fee (11,217) (8,360) (9,251) (19,270) (3,307)
Custodian earnings credits (Note 5) (1,491) (7,176) (8,247) (8,729) (9,933)
Net expenses 629,877 501,045 537,187 930,466 242,506
Net investment income (272,391) 80,281 501,155 3,459,316 263,642
Realized and Unrealized Gain (Loss):
Net realized gain (loss) on investment 1,823,387 4,250,172 4,246,151 (118,621) 788,564
Net realized gains received from
underlying funds 1,840,897 1,661,398 1,438,254 160,489 262,714
Net change in unrealized
appreciation (depreciation) 5,133,734 3,662,887 3,631,243 1,923,463 540,852
Net realized and unrealized gain (loss) 8,798,018 9,574,457 9,315,648 1,965,331 1,592,130
Net increase (decrease) in net assets
resulting from operations $ 8,525,627 $9,654,738 $ 9,816,803 $ 5,424,647 $ 1,855,772
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FISCAL AGGRESSIVE GROWTH GROWTH PORTFOLIO GROWTH WITH INCOME
YEAR ENDED PORTFOLIO PORTFOLIO
SEPTEMBER 30,
INCREASE 1997 1996 1997 1996 1997 1996
(DECREASE) IN
NET ASSETS
FROM:
<S> <C> <C> <C> <C> <C> <C>
Operations
Net investment $ (272,391) $ 266,908 $ 80,281 $ 10,760 $ 501,155 $ 1,188,854
income (loss)
Net realized 3,664,284 5,623,017 5,911,570 3,731,601 5,684,405 4,021,879
gain (loss) on
investments and
underlying
funds
Change in 5,133,734 (1,522,338) 3,662,887 (308,815) 3,631,243 (745,572)
unrealized
appreciation
(depreciation)
Net increase 8,525,627 4,367,587 9,654,738 3,433,546 9,816,803 4,465,161
(decrease) in
net assets
resulting from
operations
Financial Adviser
Class
Dividends and
distributions from:
Net investment (147,770) (824,279) (510,906) (411,153) (693,670) (1,768,401)
income
Net realized (4,353,531) (5,432,040) (3,077,506) (4,398,651) (4,130,314) (5,595,638)
gains
Total (4,501,301) (6,256,319) (3,588,412) (4,809,804) (4,823,984) (7,364,039)
distributions
Capital share
transactions:
Proceeds from 8,781,300 11,562,398 5,445,210 7,261,283 5,226,373 4,712,857
sales of shares
Reinvestment of 4,412,280 4,687,699 3,236,436 3,125,091 4,215,023 4,533,318
dividends
Payments for (19,564,579) (9,013,894) (8,184,865) (8,351,421) (8,502,204) (10,388,950)
shares redeemed
Total from (6,370,999) 7,236,203 496,781 2,034,953 939,192 (1,142,775)
share
transactions
No-Load Class
Dividends and
distributions from:
Net investment (14,095) (2,446) (26,438) (11,296) (25,855) (15,005)
income
Net realized (176,417) (15,496) (116,120) (12,543) (97,318) (22,147)
gains
Total (190,512) (17,942) (142,558) (23,839) (123,173) (37,152)
distributions
Capital share
transactions:
Proceeds from 696,951 1,440,407 465,686 900,243 294,004 691,373
sales of shares
Reinvestment of 1,639 17,942 6,380 12,806 16,388 29,943
dividends
Payments for (417,057) (79,100) (309,640) (53,014) (237,458) (93,171)
shares redeemed
Total from 281,533 1,379,249 162,426 860,035 72,934 628,145
share
transactions
Total Increase (2,255,652) 6,708,778 6,582,975 1,494,891 5,881,772 (3,450,660)
(Decrease) in
Net Assets
Net Assets:
Beginning of 40,376,440 33,667,662 27,516,832 26,021,941 32,192,764 35,643,424
year
End of year $38,120,788 $40,376,440 $34,099,807 $27,516,832 $38,074,536 $32,192,764
Undistributed $ 9,012 $ 100,956 $ -- $ 136,071 $ -- $ 54,611
Net Investment
Income
Shares Outstanding:
Financial Adviser
Class
Beginning of 2,318,177 1,838,433 1,776,631 1,612,567 1,891,259 1,949,419
year
Shares sold 535,301 717,174 356,666 504,686 298,724 287,591
Reinvestment of 292,718 310,280 230,169 227,151 273,767 280,600
dividends
Shares redeemed (1,182,875) (547,710) (519,497) (567,773) (498,518) (626,351)
End of year 1,963,321 2,318,177 1,843,969 1,776,631 1,965,232 1,891,259
No-Load Class
Beginning of 84,732 -- 58,324 -- 37,188
year
Shares sold 43,615 88,427 30,883 61,018 18,095 41,141
Reinvestment of 106 1,186 397 933 1,049 1,855
dividends
Shares redeemed (24,943) (4,881) (18,728) (3,627) (13,699) (5,808)
End of year 103,510 84,732 70,876 58,324 42,633 37,188
</TABLE>
FUNDMANAGER PORTFOLIOS
STATEMENT OF OPERATIONS
FISCAL YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
FOR THE FISCAL BOND PORTFOLIO MANAGED TOTAL
YEAR ENDED RETURN PORTFOLIO
SEPTEMBER 30,
INCREASE 1997 1996 1997 1996
(DECREASE) IN
NET ASSETS
FROM:
<S> <C> <C> <C> <C>
Operations
Net investment $ 3,459,316 $ 3,811,768 $ 263,642 $ 494,711
income (loss)
Net realized 41,868 (282,297) 1,051,278 948,274
gain (loss) on
investments and
underlying
funds
Change in 1,923,463 (544,860) 540,852 (468,365)
unrealized
appreciation
(depreciation)
Net increase 5,424,647 2,984,611 1,855,772 974,620
(decrease) in
net assets
resulting from
operations
Financial Adviser Class
Dividends and
distributions from:
Net investment (3,534,481) (4,260,538) (385,086) (614,026)
income
Net realized -- -- (889,268) (636,120)
gains
Total (3,534,481) (4,260,538) (1,274,354) (1,250,146)
distributions
Capital share
transactions:
Proceeds from 27,364,356 6,954,937 1,198,275 1,069,066
sales of shares
Reinvestment of 1,647,269 2,428,436 1,320,233 1,225,106
dividends
Payments for (37,319,454) (15,321,843) (3,616,172) (4,645,420)
shares redeemed
Total from (8,307,829) (5,938,470) (1,097,664) (2,351,248)
share
transactions
No-Load Class
Dividends and
distributions from:
Net investment (125,228) (42,793) -- --
income
Net realized -- -- -- --
gains
Total (125,228) (42,793) -- --
distributions
Capital share
transactions:
Proceeds from 655,314 2,095,355 -- --
sales of shares
Reinvestment of 67,264 11,328 -- --
dividends
Payments for (555,748) (113,888) -- --
shares redeemed
Total from 166,830 1,992,795 -- --
share
transactions
Total Increase (6,376,061) (5,264,395) (516,246) (2,626,774)
(Decrease) in
Net Assets
Net Assets:
Beginning of 72,154,221 77,418,616 12,122,553 14,749,327
year
End of year $65,778,160 $72,154,221 $11,606,307 $12,122,553
Undistributed $ 470,672 $ 608,814 $ 59,883 $ 99,297
Net Investment
Income
Shares Outstanding:
Financial Adviser Class
Beginning of 7,015,708 7,583,952 1,058,564 1,266,151
year
Shares sold 2,689,498 689,245 105,534 94,665
Reinvestment of 163,682 239,118 122,005 108,144
dividends
Shares redeemed (3,684,318) (1,496,607) (323,675) (410,396)
End of year 6,184,570 7,015,708 962,428 1,058,564
No-Load Class
Beginning of 198,015 -- -- --
year
Shares sold 64,621 208,277 -- --
Reinvestment of 6,665 1,103 -- --
dividends
Shares redeemed (54,496) (11,365) -- --
End of year 214,805 198,015 -- --
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AGGRESSIVE GROWTH PORTFOLIO: FINANCIAL ADVISER CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.80 $18.31 $15.57 $16.70 $14.71
INCOME FROM INVESTMENT OPERATIONS
Net investment income (operating loss) (0.12)(b) 0.12(b) (0.13) (0.08) (0.04)
Net realized and unrealized gain (loss) on investments 3.75 1.64 3.70 0.62 2.87
Total from investment operations 3.63 1.76 3.57 0.54 2.83
LESS DISTRIBUTIONS
Distributions from net investment income (0.07) (0.38) -- -- --
Distributions from net realized gain
on investments+ (1.92) (2.89) (0.83) (1.67) (0.84)
Total distributions (1.99) (3.27) (0.83) (1.67) (0.84)
NET ASSET VALUE, END OF PERIOD $18.44 $16.80 $18.31 $15.57 $16.70
TOTAL RETURN(C) 24.16% 12.10% 24.30% 3.30% 19.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $36,200 $38,944 $33,668 $37,766 $31,201
Ratio of expenses to average net assets 1.62% 1.67% 1.65% 1.70% 1.52%
Ratio of net investment income to average net assets (0.70%) 0.74% (0.68%) (0.57%) (0.24%)
Ratio of expense waivers to average net assets(d) 0.03% 0.06% -- -- --
Portfolio turnover 51% 158% 50% 43% 35%
+Paid from realized net short-term gain $0.28 $0.27 $0.04 $0.25 --
</TABLE>
(a) On February 21, 1995, Freedom Capital Management Corporation became the
Investment Adviser.
(b) Per share information is based on average shares outstanding.
(c) Based on net asset value, which does not reflect the sales charge payable on
purchases of shares. Effective May 8, 1995, the Portfolio no longer imposed a
one-time sales charge.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
AGGRESSIVE GROWTH PORTFOLIO: NO-LOAD CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997 1996
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.91 $18.31
INCOME FROM INVESTMENT OPERATIONS
Net investment income (operating loss) (0.04)(a) 0.04(a)
Net realized and unrealized gain on investments 3.76 1.83
Total from investment operations 3.72 1.87
LESS DISTRIBUTIONS
Distributions from net investment income (0.15) (0.38)
Distributions from net realized gain on investments+ (1.92) (2.89)
Total distributions (2.07) (3.27)
NET ASSET VALUE, END OF PERIOD $18.56 $16.91
TOTAL RETURN(B) 24.76% 12.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,921 $1,432
Ratio of expenses to average net assets 1.12% 1.15%
Ratio of net investment income to average net assets (0.25)% 0.24%
Ratio of expense waivers to average net assets(c) 0.03% 0.06%
Portfolio turnover 51% 158%
+Paid from realized net short-term gain $0.28 $0.27
</TABLE>
(a) Per share information is based on average shares outstanding.
(b) Based on net asset value.
(c) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GROWTH PORTFOLIO: FINANCIAL ADVISER CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.99 $16.14 $14.09 $14.62 $14.40
INCOME FROM INVESTMENT OPERATIONS
Net investment income (operating loss) 0.04(b) 0.01(b) (0.02) (0.05) 0.02
Net realized and unrealized gain
on investments 4.91 1.85 2.99 0.69 2.10
Total from investment operations 4.95 1.86 2.97 0.64 2.12
LESS DISTRIBUTIONS
Distributions from net investment income (0.30) (0.24) -- -- --
Distributions from net realized gain
on investments+ (1.83) (2.77) (0.92) (1.17) (1.90)
Total distributions (2.13) (3.01) (0.92) (1.17) (1.90)
NET ASSET VALUE, END OF PERIOD $17.81 $14.99 $16.14 $14.09 $14.62
TOTAL RETURN(C) 36.92% 13.46% 22.60% 4.50% 16.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $32,835 $26,639 $26,022 $34,205 $21,919
Ratio of expenses to average
net assets 1.70% 1.81% 1.71% 1.71% 1.70%
Ratio of net investment income
to average net assets 0.23% 0.05% (0.11%) (0.52%) 0.15%
Ratio of expense waivers to
average net assets(d) 0.05% 0.06% -- -- --
Portfolio turnover 95% 98% 68% 44% 40%
+Paid from realized net short-term gain $0.12 $0.48 $0.10 $0.22 $0.16
</TABLE>
(a) On February 21, 1995, Freedom Capital Management Corporation became the
Investment Adviser.
(b) Per share information is based on average shares outstanding.
(c) Based on net asset value,which does not reflect the sale charge payable on
purchases of shares. Effective May 8, 1995, the Portfolio no longer imposed a
one-time sales charge.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GROWTH PORTFOLIO: NO-LOAD CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997 1996
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.04 $16.14
INCOME FROM INVESTMENT OPERATIONS
Net investment income (operating loss) 0.11(a) (0.06)(a)
Net realized and unrealized gain (loss) on investments 4.93 2.02
Total from investment operations 5.04 1.96
LESS DISTRIBUTIONS
Distributions from net investment income (0.41) (0.29)
Distributions from net realized gain on investments+ (1.83) (2.77)
Total distributions (2.24) (3.06)
NET ASSET VALUE, END OF PERIOD $17.84 $15.04
TOTAL RETURN(B) 37.59% 14.21%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,264 $877
Ratio of expenses to average net assets 1.20% 1.30%
Ratio of net investment income to average net assets 0.69% (0.39%)
Ratio of expense waivers to average net assets(c) 0.05% 0.06%
Portfolio turnover 95% 98%
+Paid from realized net short-term gain $0.12 --
</TABLE>
(a) Per share information is based on average shares outstanding.
(b) Based on net asset value.
(c) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GROWTH WITH INCOME PORTFOLIO: FINANCIAL ADVISER CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.69 $18.28 $15.99 $16.50 $15.11
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.26(b) 0.60(b) 0.27 0.35 0.28
Net realized and unrealized gain (loss)
on investments 4.78 1.60 3.19 0.18 1.97
Total from investment operations 5.04 2.20 3.46 0.53 2.25
LESS DISTRIBUTIONS
Distributions from net investment income (0.43) (0.86) (0.33) (0.30) (0.33)
Distributions from net realized gain
on investments+ (2.33) (2.93) (0.84) (0.74) (0.53)
Total distributions (2.76) (3.79) (1.17) (1.04) (0.86)
NET ASSET VALUE, END OF PERIOD $18.97 $16.69 $18.28 $15.99 $16.50
TOTAL RETURN(C) 34.27% 13.73% 23.30% 3.30% 15.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $37,274 $31,571 $35,643 $52,595 $40,269
Ratio of expenses to average net assets 1.67% 1.77% 1.59% 1.55% 1.49%
Ratio of net investment income to
average net assets 1.49% 3.57% 1.72% 1.88% 1.77%
Ratio of expense waivers to average
net assets(d) 0.05% 0.06% -- -- --
Portfolio turnover 61% 85% 12% 35% 24%
+Paid from realized net short-term gain -- $0.06 -- $0.14 $0.09
</TABLE>
(a) On February 21, 1995, Freedom Capital Management became the Investment
Adviser.
(b) Per share information is based on average shares outstanding.
(c) Based on net asset value, which does not reflect the sales charge payable on
purchases of shares. Effective May 8, 1995, the Portfolio no longer imposed a
one-time sales charge.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GROWTH WITH INCOME PORTFOLIO: NO-LOAD CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1997 1996
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.71 $18.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.32(a) 0.39(a)
Net realized and unrealized gain on investments 4.75 1.86
Total from investment operations 5.07 2.25
LESS DISTRIBUTIONS
Distributions from net investment income (0.68) (0.89)
Distributions from net realized gain on investments+ (2.33) (2.93)
Total distributions (3.01) (3.82)
NET ASSET VALUE, END OF PERIOD $18.77 $16.71
TOTAL RETURN(B) 34.89% 14.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $800 $621
Ratio of expenses to average net assets 1.17% 1.28%
Ratio of net investment income to average net assets 1.84% 2.42%
Ratio of expense waivers to average net assets(c) 0.05% 0.06%
Portfolio turnover 61% 85%
+Paid from realized net short-term gain -- $0.06
</TABLE>
(a) Per share information is based on average shares outstanding.
(b) Based on net asset value.
(c) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
BOND PORTFOLIO : FINANCIAL ADVISER CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.21 $ 9.66 $10.67 $10.28
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.51(b) 0.52(b) 0.52 0.48 0.60
Net realized and unrealized gain (loss)
on investments 0.31 (0.14) 0.49 (0.84) 0.43
Total from investment operations 0.82 0.38 1.01 (0.36) 1.03
LESS DISTRIBUTIONS
Distributions from net investment
income (0.54) (0.59) (0.46) (0.53) (0.54)
Distributions from net realized gain
on investments -- -- -- (0.12) (0.10)
Total distributions (0.54) (0.59) (0.46) (0.65) (0.64)
NET ASSET VALUE, END OF PERIOD $10.28 $10.00 $10.21 $ 9.66 $10.67
TOTAL RETURN(C) 8.45% 3.78% 10.80% (3.60%) 10.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $63,557 $70,166 $77,419 $76,769 $54,057
Ratio of expenses to average net assets 1.43% 1.47% 1.45% 1.43% 1.29%
Ratio of net investment income to
average net assets 5.07% 5.19% 5.38% 4.67% 5.70%
Ratio of expense waivers to
average net assets(d) 0.04% 0.05% -- -- --
Portfolio turnover 142% 93% 53% 41% 53%
</TABLE>
(a) On February 21, 1995, Freedom Capital Management Corporation became the
Investment Adviser.
(b) Per share information is based on average shares outstanding.
(c) Based on net asset value which does not reflect the sale charge payable on
purchases of shares. Effective May 8, 1995, the Portfolio no longer imposed a
one-time sales charge.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
BOND PORTFOLIO: NO-LOAD CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
<S> <C> <C>
1997 1996
NET ASSET VALUE, BEGINNING OF PERIOD $10.04 $10.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.57(a) 0.55(a)
Net realized and unrealized (loss) on investments 0.30 (0.16)
Total from investment operations 0.87 0.39
LESS DISTRIBUTIONS
Distributions from net investment income (0.57) (0.56)
Distributions from net realized gain on investments -- --
Total distributions (0.57) (0.56)
NET ASSET VALUE, END OF PERIOD $10.34 $10.04
TOTAL RETURN(B) 8.92% 3.88%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $2,221 $1,988
Ratio of expenses to average net assets 0.93% 0.99%
Ratio of net investment income to average net assets 5.57% 5.57%
Ratio of expense waivers to average net assets(c) 0.04% 0.05%
Portfolio turnover 142% 93%
</TABLE>
(a) Per share information is based on average shares outstanding.
(b) Based on net asset value.
(c) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
MANAGED TOTAL RETURN PORTFOLIO: FINANCIAL ADVISER CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.45 $11.65 $11.24 $12.03 $11.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28(b) 0.42(b) 0.28 0.18 0.29
Net realized and unrealized gain (loss)
on investments 1.55 0.40 1.18 (0.16) 0.90
Total from investment operations 1.83 0.82 1.46 0.02 1.19
LESS DIVIDENDS
Distributions from net
investment income (0.32) (0.50) (0.30) (0.31) (0.26)
Distributions from net realized gain
on investments+ (0.90) (0.52) (0.75) (0.50) (0.38)
Total distributions (1.22) (1.02) (1.05) (0.81) (0.64)
NET ASSET VALUE, END OF PERIOD $12.06 $11.45 $11.65 $11.24 $12.03
TOTAL RETURN(C) 17.42% 7.58% 14.30% 0.10% 10.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $11,606 $12,123 $ 14,749 $17,515 $ 25,519
Ratio of expenses to average net assets 2.19% 2.21% 2.09% 1.94% 1.80%
Ratio of net investment income to
average net assets 2.26% 3.68% 2.29% 1.60% 2.54%
Ratio of expense waivers to
average net assets(d) 0.11% 0.06% -- -- --
Portfolio turnover 73% 159% 50% 50% 40%
+Paid from realized net short-term gain -- $0.01 -- $0.13 $0.08
</TABLE>
(a) On February 21, 1995, Freedom Capital Management Corporation became
Investment Adviser.
(b) Per share information is based on average shares outstanding.
(c) Based on net asset value, which does not reflect the sales charge payable on
purchases of shares. Effective May 8, 1995, the Portfolio no longer imposed a
one-time sales charge.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. DESCRIPTION AND SHARES OF THE PORTFOLIOS. FundManager Portfolios, (the
"Trust") consists of a series of five separately managed portfolios
(collectively, the "Portfolios"), each with distinct investment objectives.
Following is the investment objective of each of the five Portfolios presented
herein: Aggressive Growth Portfolio (capital appreciation without regard to
current income), Growth Portfolio (long-term capital appreciation with current
income a secondary consideration), Growth with Income Portfolio (combination of
capital appreciation and current income), Bond Portfolio, (high level of current
income), and Managed Total Return Portfolio (high total return, through capital
appreciation and current income). The Trust is registered under the Investment
Company Act of 1940, as amended, (the "Act") as an open-end, diversified
management investment company established as a "Delaware business trust."
The Trust, with the exception of the Managed Total Return Portfolio, offers both
a Financial Adviser Class and a No-Load Class (commenced operations on October
1, 1995) of shares. Managed Total Return Portfolio only offers a Financial
Adviser Class. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that the
Financial Adviser Class pays certain distribution expenses and has exclusive
voting rights with respect to its distribution plan. Income and expenses of each
Portfolio are borne pro rata by each class of shares except that the Financial
Adviser Class bears distribution and shareholder service expenses unique to that
class of shares.
The Trust retained M.D. Hirsch Division of Freedom Capital Management
Corporation ("Freedom") as Investment Adviser ("Adviser"), Signature
Broker-Dealer Services, Inc. ("Signature") as Administrator and a Distributor
(through November 11, 1996--see Note 3), Federated Administrative Services as
Administrator (beginning November 12, 1996), and Tucker Anthony Incorporated and
Sutro & Co. Incorporated as Distributors.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the Trust's
significant accounting policies:
(A) Security Valuation. Shares of other open-end investment companies are valued
at their net asset value as reported by such companies. In the absence of
readily available market quotations, investments are valued at fair value as
determined by the Board of Trustees (the "Trustees").
(B) Security Transactions and Related Investment Income. Investment transactions
are accounted for on the trade date. Dividend income is recorded on the
ex-dividend date. Interest income is accrued as earned. Identified cost of
investments sold is used to calculate gains and losses for both financial
statement and federal income tax purposes.
(C) Expense Allocation. The Portfolios bear all costs of their operations other
than expenses specifically assumed by the investment adviser or the
distributors. Expenses directly attributable to a Portfolio are charged to that
Portfolio. Expenses incurred by the Trust with respect to any two or more
Portfolios are allocated in proportion to the net asset levels of each
Portfolio; except where allocations of direct expenses to each Portfolio can
otherwise be made fairly.
(D) Federal Income Taxes. Each Portfolio is treated as a separate taxable entity
for federal tax purposes. Each Portfolio has qualified and intends to continue
to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code, as amended, and to distribute substantially all of its
taxable income, including any net realized gains, to its shareholders.
Accordingly, no provision for federal income or excise tax is required. At
September 30, 1997, Bond Portfolio has net capital loss carryforwards on the
basis of identified cost, for federal income tax purposes of approximately
$3,008,814. These capital loss carryforwards will be used to offset any future
realized gains to the extent permitted by the Internal Revenue Code and thus
will reduce the amount of distributions to shareholders which would otherwise be
necessary to relieve the Bond Portfolio of any liability for federal income tax.
The capital losses of $478,848, $1,762,165, and $767,801 will expire September
30, 2005, September 30, 2003, and September 30, 1998, respectively.
(E) Distributions to Shareholders. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to losses deferred on wash sales, post
October 31 losses, and short-term capital gain distributions received by the
Portfolios from other open-end investment companies.
(F) Use of Estimates. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
(G) Reclassification of Net Asset Accounts. During the year ended September 30,
1997, the Portfolios reclassified the effects of certain differences between the
financial statement amounts and distributions determined in accordance with
income tax regulations. These differences were reclassified
[increase/(decrease)] between undistributed net investment income and
accumulated net realized gain/(loss) on investments:
UNDISTRIBUTED ACCUMULATED
NET NET REALIZED
INVESTMENT GAIN/(LOSS) ON
INCOME INVESTMENTS
Aggressive Growth
Portfolio $ 342,312 $ (342,312)
Growth Portfolio 320,992 (320,992)
Growth and Income
Portfolio 163,759 (163,759)
Bond Portfolio 62,251 (62,251)
Managed Total Return
Portfolio 82,030 (82,030)
3. ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
(A) Advisory Fees. The Trust retains Freedom Capital Management Corporation
("Freedom") to act as Investment Adviser ("Adviser"). Freedom is responsible for
the investment management of each Portfolio's assets, including the
responsibility for making the investment decisions and placing orders for the
purchase and sale of the Portfolios' investments directly with the issuers or
with brokers or dealers selected by it in its discretion, including the
distributors. Freedom also furnished to the Trustees, who have overall
responsibility for the business affairs of the Trust, periodic reports on the
investment performance of the Portfolios. For its services as Adviser, Freedom
receives from each Portfolio a fee, payable monthly, at the annual rate of 0.50%
of each Portfolio's average daily net assets up to $500 million and 0.40% of
average daily net assets in excess of $500 million.
(B) Administration. Federated Administrative Services ("FAS"), a wholly-owned
subsidiary of Federated Investors, provides administrative personnel and
services (including certain legal and financial reporting services) necessary to
operate the Portfolios. FAS provides these at an annual rate which relates to
the average aggregate daily net assets of the Portfolios 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
For the period from November 11, 1996, through September 30, 1997, FAS
voluntarily chose to waive a portion of its fee. FAS can modify or terminate
this voluntary waiver at any time at its sole discretion. Prior to November 11,
1996, the Trust retained Signature to serve as Administrator and a Distributor.
For these services, Signature received from each Portfolio a fee, payable
monthly, at the annual rate of 0.25% of each Portfolio's average daily net
assets up to $50 million, 0.20% of its average daily net assets over $50 million
up to $100 million and 0.15% of its average daily net assets in excess of $100
million. For the period ended November 11, 1996, the fee was voluntarily reduced
to 0.13% of each Portfolio's average daily net assets.
(C) Distribution Fee and Shareholder Servicing Expenses. Edgewood Services,
Inc., Freedom Distributors Corporation, Sutro & Co., Inc., and Tucker Anthony
Incorporated (the "Distributors") are co-distributors of the Trust. The Trust
has adopted a non-compensatory Distribution Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 of the Act for the Financial Adviser Class of shares. The
Plan provides for a monthly payment by the Portfolios to the Distributors in
amounts representing actual expenses incurred by the Distributors for marketing
costs and services rendered in distributing the Portfolios' Financial Adviser
Class of shares at an annual rate not to exceed 0.50% of the average daily net
assets of each Portfolios' Financial Adviser Class of Shares. Up to a maximum of
0.25% of such payments may be made as Shareholder Servicing Expenses pursuant to
contracts that the Trust has with various banks, trust companies, broker-dealers
(other than the Distributors) or other financial organizations (collectively
"Service Organizations") to provide administrative services to the Trust, such
as maintaining shareholder accounts and records, for shares owned by Financial
Adviser Class shareholders with whom the Service Organization has a
relationship.
(D) Transfer and Dividend Disbursing Agent Fees and Expenses. Federated
Shareholder Services Company ("FSSC"), a subsidiary of Federated Investors,
serves as transfer agent, dividend disbursing agent and shareholder servicing
agent for the Portfolios. The fee paid to FSSC is based on actual shareholder
activity.
(E) Trustees' Fees. Trustees who are not affiliated with Signature or Freedom
receive compensation and out-of-pocket expenses from each Portfolio.
4. INVESTMENT TRANSACTIONS. Purchase and sale transactions for the year ended
September 30, 1997, were as follows:
PORTFOLIOS PURCHASES SALES
Aggressive Growth Portfolio $20,252,125 $ 29,796,155
Growth Portfolio $29,038,737 $ 30,709,044
Growth with Income Portfolio $20,527,214 $ 22,862,938
Bond Portfolio $96,821,320 $105,514,820
Managed Total Return Portfolio $ 8,348,662 $ 10,956,724
5. EXPENSE OFFSET ARRANGEMENTS. Each Fund's Statement of Operations reflects
custodial earnings credits. These amounts are used to offset the custody fees
payable by the Funds to the custodian bank. The credits are earned when the Fund
maintains a balance of uninvested cash at the custodian bank.
FUNDMANAGER PORTFOLIOS
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Trustees of FundManager Portfolios:
We have audited the accompanying statement of assets and liabilities, including
the schedules of investments of FundManager Portfolios (comprising,
respectively, Aggressive Growth Portfolio, Growth Portfolio, Growth with Income
Portfolio, Bond Portfolio and Managed Total Return Portfolio) (the "Trust"), as
of September 30, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1997, by correspondence with the custodian and a broker. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting FundManager Portfolios at September
30, 1997, the results of their operations for the year then ended, the changes
in their net assets for each of the two years in the period then ended, and
their financial highlights for each of the five years in the period then ended,
in conformity with generally accepted accounting principles.
[Graphic]
Boston, Massachusetts
November 25, 1997
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[This Page Intentionally Left Blank]
[Graphic]
INVESTMENT ADVISER
Freedom Capital Management Corporation
One Beacon Street
Boston, MA 02108
FOR SHAREHOLDER INFORMATION: (800) 344-9033
DISTRIBUTORS
Freedom Distributors Corporation
One Beacon Street
Boston, MA 02108
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
This report is for the information of the shareholders of the FundManager
Portfolios. Its use in connection with any offering of the Portfolios' shares is
authorized only in case of a concurrent or prior delivery of the Portfolios'
current prospectus.
G01933-01
[Graphic]
FundManager Portfolios
The First Family in Multifund Investing
[Graphic]
Annual Report
SEPTEMBER 30, 1997
* AGGRESSIVE GROWTH PORTFOLIO
* GROWTH PORTFOLIO
* GROWTH WITH INCOME PORTFOLIO
* BOND PORTFOLIO
* MANAGED TOTAL RETURN PORTFOLIO
Appendix A. The graphic presentation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath. The
Financial Adviser Class Shares of Aggressive Growth Portfolio are represented by
a solid line. The Lipper Capital Appreciation Average (the "LCAA") is
represented by a broken line and the Russell 2000 Index (the "R2000") is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the
Financial Adviser Class Shares of the fund, the LCAA and the R2000. The "x" axis
reflects computation periods from 10/1/87 to 9/30/97. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the fund's Financial Adviser Class Shares, as
compared to the LCAA and the R2000. The ending values were $28,706, $32,077, and
$31,705, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Financial Adviser Class Shares Average Annual
Total Returns for the one-year, five-year and 10-year periods ended 9/30/97. The
total returns were 24.2%, 16.5%, and 11.1%, respectively.
Appendix B. The graphic presentation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath. The
No-Load Class Shares of Aggressive Growth Portfolio are represented by a solid
line. The Lipper Capital Appreciation Average (the "LCAA") is represented by a
broken line and the Russell 2000 Index (the "R2000") is represented by a dotted
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the No-Load Class Shares of the
fund, the LCAA and the R2000. The "x" axis reflects computation periods from
10/1/95 to 9/30/97. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the fund's
No-Load Class Shares, as compared to the LCAA and the R2000. The ending values
were $14,060, $14,458, and $15,068, respectively. The legend in the bottom
quadrant of the graphic presentation indicates the fund's No-Load Class Shares
Average Annual Total Returns for the one-year period ended 9/30/97 and from the
fund's start of performance (10/1/95) to 9/30/97. The total returns were 24.8%
and 18.6%, respectively.
Appendix C. The graphic presentation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath. The
Financial Adviser Class Shares of Growth Portfolio are represented by a solid
line. The Lipper Growth Average (the "LGA") is represented by a broken line and
the Standard & Poor's 500 Index (the "S&P 500) is represented by a dotted line.
The line graph is a visual representation of a comparison of change in value of
a $10,000 hypothetical investment in the Financial Adviser Class Shares of the
fund, the LGA and the S&P 500. The "x" axis reflects computation periods from
10/1/87 to 9/30/97. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the fund's
Financial Adviser Class Shares, as compared to the LGA and the S&P 500. The
ending values were $31,727, $35,060, and $39,495, respectively. The legend in
the bottom quadrant of the graphic presentation indicates the fund's Financial
Adviser Class Shares Average Annual Total Returns for the one-year, five-year
and 10-year periods ended 9/30/97. The total returns were 36.9%, 18.2%, and
12.2%, respectively.
Appendix D. The graphic presentation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath. The
No-Load Class Shares of Growth Portfolio are represented by a solid line. The
Lipper Growth Average (the "LGA") is represented by a broken line and the
Standard & Poor's 500 Index (the "S&P 500") is represented by a dotted line. The
line graph is a visual representation of a comparison of change in value of a
$10,000 hypothetical investment in the No-Load Class Shares of the fund, the LGA
and the S&P 500. The "x" axis reflects computation periods from 10/1/95 to
9/30/97. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the fund's No-Load
Class Shares, as compared to the LGA and the S&P 500. The ending values were
$15,713, $15,312, and $16,902, respectively. The legend in the bottom quadrant
of the graphic presentation indicates the fund's No-Load Class Shares Average
Annual Total Returns for the one-year period ended 9/30/97 and from the fund's
start of performance (10/1/95) to 9/30/97. The total returns were 37.6% and
25.3%, respectively.
Appendix E. The graphic presentation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath. The
Financial Adviser Class Shares of Growth with Income Portfolio are represented
by a solid line. The Lehman Government Corporate Total Index (the "LG/CI") is
represented by a broken line, the Standard & Poor's 500 Index (the "S&P 500") is
represented by a dotted line, and the Lipper Growth & Income Average (the
"LG&IA") is represented by a broken/dotted line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Financial Adviser Class Shares of the fund, the LG/CI, the S&P
500 and the LG&IA. The "x" axis reflects computation periods from 10/1/87 to
9/30/97. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the fund's Financial
Adviser Class Shares, as compared to the LG/CI, the S&P 500 and the LG&IA. The
ending values were $31,421, $24,603, $39,495 and $35,075, respectively. The
legend in the bottom quadrant of the graphic presentation indicates the fund's
Financial Adviser Class Shares Average Annual Total Returns for the one-year,
five-year and 10-year periods ended 9/30/97. The total returns were 34.3%,
17.6%, and 12.1%, respectively.
Appendix F. The graphic presentation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath. The
No-Load Class Shares of Growth with Income Portfolio are represented by a solid
line. The Lehman Government Corporate Total Index (the "LG/CI") is represented
by a broken line, the Standard & Poor's 500 Index (the "S&P 500") is represented
by a dotted line, and the Lipper Growth & Income Average (the "LG&IA") is
represented by a broken/dotted line. The line graph is a visual representation
of a comparison of change in value of a $10,000 hypothetical investment in the
No-Load Class Shares of the fund, the LG/CI, the S&P 500, and the LG&IA. The "x"
axis reflects computation periods from 10/1/95 to 9/30/97. The "y" axis reflects
the cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the fund's No-Load Class Shares, as compared to the
LG/CI, the S&P 500, and the LG&IA. The ending values were $15,445, $11,453,
$16,902, and $15,857, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the fund's No-Load Class Shares Average Annual
Total Returns for the one-year period ended 9/30/97 and from the fund's start of
performance (10/1/95) to 9/30/97. The total returns were 34.9% and 24.0%,
respectively.
Appendix G. The graphic presentation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath. The
Financial Adviser Class Shares of Bond Portfolio are represented by a solid
line. The Lipper General Bond Average (the "LGBA") is represented by a broken
line and the Lehman Government/Corporate Total Index (the "LG/CI") is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the
Financial Adviser Class Shares of the fund, the LGBA and the LG/CI. The "x" axis
reflects computation periods from 10/1/87 to 9/30/97. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the fund's Financial Adviser Class Shares, as
compared to the LGBA and the LG/CI. The ending values were $20,111, $23,332, and
$24,604, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Financial Adviser Class Shares Average Annual
Total Returns for the one-year, five-year and 10-year periods ended 9/30/97. The
total returns were 8.5%, 5.8%, and 7.2%, respectively.
Appendix H. The graphic presentation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath. The
No-Load Class Shares of Bond Portfolio are represented by a solid line. The
Lipper General Bond Average (the "LGBA") is represented by a broken line and the
Lipper Government/Corporate Total Index (the "LG/CI") is represented by a dotted
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the No-Load Class Shares of the
fund, the LGBA and the LG/CI. The "x" axis reflects computation periods from
10/1/95 to 9/30/97. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the fund's
No-Load Class Shares, as compared to the LGBA and the LG/CI. The ending values
were $11,317, $12,064, and $11,453, respectively. The legend in the bottom
quadrant of the graphic presentation indicates the fund's No-Load Class Shares
Average Annual Total Returns for the one-year period ended 9/30/97 and from the
fund's start of performance (10/1/95) to 9/30/97. The total returns were 8.9%
and 6.4%, respectively.
Appendix I. The graphic presentation here displayed consists of a line graph.
The corresponding components of the line graph are listed underneath. The
Financial Adviser Class Shares of Managed Total Return Portfolio are represented
by a solid line. The Lipper General Bond Average (the "LGBA") is represented by
a broken line and the Lehman Government/Corporate Total Index (the "LG/CI") is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the
Financial Adviser Class Shares of the fund, the LGBA and the LG/CI. The "x" axis
reflects computation periods from 8/4/88 to 9/30/97. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the fund's Financial Adviser Class Shares, as
compared to the LGBA and the LG/CI. The ending values were $23,294, $22,211, and
$22,352, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Financial Adviser Class Shares Average Annual
Total Returns for the one-year and five-year periods ended 9/30/97 and from the
fund's start of performance (8/4/88) to 9/30/97. The total returns were 17.4%,
9.9%, and 9.7%, respectively.
