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
----
Pre-Effective Amendment No. ........................
Post-Effective Amendment No. 7 ........................... X
---- ----
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
----
Amendment No. 8 .......................................... X
------ ----
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)
Victor R. Siclari, 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)
X 60 days after filing pursuant to paragraph (a) (i) on ____________ pursuant
to paragraph (a) (i) 75 days after filing pursuant to paragraph (a)(ii) on
_________________ pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
[X] 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 (6) 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.
<TABLE>
<CAPTION>
<S> <C> <C>
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
<S> <C> <C>
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.
</TABLE>
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
- ------------------------------------------------------------------------------I
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.
<TABLE>
<CAPTION>
<S> <C> <C>
Annual Operating Expenses
(As a percentage of projected average net assets) Financial Adviser No-Load
Class Class
--------------------------------------------------
Management Fees 0.50% 0.50%
----- -----
Distribution and Shareholder Service Expenses (1) 0.50% None
----- ----
Other Expenses 0.96% 0.96%
----- -----
Total Portfolio Operating Expenses 1.96% 1.46%
----- -----
</TABLE>
(1) The maximum distribution and shareholder service fee is 0.50% 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 2.39% for the Financial Adviser Class and
1.89% 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............................. $20 $15
--- ---
3 years. .......................... $62 $46
--- ---
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 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 (ii) 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
8
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. 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>
<S> <C> <C>
Name, Aggregate Compensation Total Compensation Paid
Position With Trust From Trust*# From Trust And Freedom Complex+**
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: To be filed by amendment.
(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)
(i) Domestic Custody and Accounting Fee Schedule;+
(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 Applicable
(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 September 17, 1997
Aggressive Growth Portfolio
Financial Adviser Class 1,509
No-Load Class 142
Growth Portfolio
Financial Adviser Class 726
No-Load Class 128
Growth with Income Portfolio
Financial Adviser Class 828
No-Load Class 131
Bond Portfolio
Financial Adviser Class 210
No-Load Class 110
Managed Total Return Portfolio
Financial Adviser Class 591
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 President and Chief Executive Officer of
Freedom Securities Corporation; Chairman and Chief
Executive Officer of Tucker Anthony Incorporated;
Managing Director of Freedom Capital
Dexter A. Dodge Chairman and Director of Freedom Capital;
Vice President of Freedom Distributors Corporation
Lawrence G. Kirshbaum Chief Financial Officer of Freedom
Securities Corporation; Director of Tucker Anthony
Holding Corp., Sutro Group 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 Chief Operating Officer, Managing Director, Clerk and
General Counsel of Freedom Capital; President and
Director of Freedom Distributors Corporation
Richard V. Howe Managing Director of Freedom Capital
Arthur E. McCarthy Managing Director of Tucker Anthony Incorporated
Michael M. Spencer Senior Vice President and Director of Fixed-Income
Investments of Freedom Capital;
Portfolio Manager at Shawmut Investment Advisers
Terrence J. Gerlich Managing Director of Freedom Capital
Charles B. Lipson President of the M.D. Hirsch Division of the
Adviser since February 1995; President and Chief
Operating Officer of the M.D. Hirsch Division of
Republic Asset Management Corporation from February
1991 to December 1994
Michael D. Hirsch Chairman, M.D. Hirsch Division of the Adviser since
February 1995; Vice President and Executive Vice
Chairman and Managing Director, Portfolio Manager
of M.D. Hirsch Division of Republic Asset Management
Corporation from June 1993 to February 1994
<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)
<TABLE>
<CAPTION>
<S> <C> <C>
(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.
</TABLE>
<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.
<TABLE>
<CAPTION>
<S> <C> <C>
(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
</TABLE>
(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 Shareholder Services Company P.O. Box 8600
("Transfer Agent and Dividend Boston, Massachusetts 02266-8600
Disbursing Agent and Shareholder
Servicing Agent")
State Street Bank and Trust Company P.O. Box 8600
("Custodian and Portfolio Boston, Massachusetts 02266-8600
Accountant")
<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 th day of October 21, 1997.
FUNDMANAGER PORTFOLIOS
(formerly, FUNDMANAGER TRUST)
By: /s/ Victor R. Siclari
Victor R. Siclari, Secretary
October 21, 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 October 21, 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
EXHIBIT 8 (I) UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG.S-K
STATE STREET BANK AND TRUST COMPANY
DOMESTIC CUSTODY AND ACCOUNTING FEE SCHEDULE
FREEDOM CAPITAL MANAGEMENT CORPORATION
I. CUSTODY, PORTFOLIO AND FUND ACCOUNTING
Custody, Portfolio and Fund Accounting Service: Maintain custody of
fund assets. Settle portfolio purchases and sales. Report buy and sell
fails. Determine and collect portfolio income. Make cash disbursements
and report cash transactions. Maintain investment ledgers, provide
selected portfolio transactions, position and income reports. Maintain
general ledger and capital stock accounts. Prepare daily trial balance.
Calculate net asset value daily. Provide selected general ledger
reports. Securities yield or market value quotations will be provided
to State Street by the fund.
ANNUAL FEES PER PORTFOLIO
Custody, Portfolio
Fund Net Assets and Fund Accounting
First $20 Million 7 basis points
Next $80 Million 3 basis points
Excess 1 basis point
Minimum Charges Per Month $1,500
Multiclass Accounting Per Class $750
II. PORTFOLIO TRADES - FOR EACH LINE ITEM PROCESSED
State Street Bank Repos $7.00
Maturity Collections $8.00
PTC Purchase, Sale, Deposit or Withdrawal $16.00
All Other Trades $16.00
III. AUTOMATED PRICING
Base charge per month $375.00
Monthly quote charge Equities $5.00
IV. HOLDINGS CHARGE
For each issue maintained -- monthly charge $5.00
V. DIVIDEND CHARGES
(For items held at the Request of Traders over record date in
street form) $50.00
VI. SPECIAL SERVICES
Fees for activities of a non-recurring nature such as fund
consolidations or reorganizations, extraordinary security shipments and
the preparation of special reports will be subject to negotiation. Fees
for automated pricing, yield calculation and other special items will
be negotiated separately.
VII. OUT-OF-POCKET EXPENSES
A billing for the recovery of applicable out-of-pocket expenses will be made as
of the end of each month. Out-of-pocket expenses include, but are not limited to
the following:
- Telephone
- Wire Charges ($5.25 per wire in and $5 out) - Postage and Insurance
- Courier Service - Duplicating - Legal Fees - Supplies Related to
Fund Records - Rush Transfer -- $8.00 each - Transfer Fees -
Sub-custodian Charges - Price Waterhouse Audit Letter
- Federal Reserve Fee for Return Check items over $2,500 - $4.25 -
GNMA Transfer - $15 each - PTC Deposit/Withdrawal for same day
turnarounds - $50.00
FREEDOM CAPITAL MANAGEMENT CORP. STATE STREET BANK & TRUST COMPANY
By /s/ Charles B. Lipson By/s/ Ronald E. Logue
Title President Title Executive Vice President
Date 4/8/97 Date 3/31/97
