President's Message
- --------------------------------------------------------------------------------
(photograph of John Danello)
John J. Danello
President
November 18, 1998
Dear Shareholder:
The world's stock and bond markets experienced unusual volatility during the
third quarter of 1998. Here in the U.S., the economy continued the eighth year
of economic expansion (our longest peacetime expansion). The global outlook
reflected deflationary pressures resulting from the sputtering economies in
Asia, most notably Japan, as well as the "meltdown" of the Russian economy. In
sum, the world economy faces a challenging year ahead. U.S. growth is slowing
and the Federal Reserve Board is expected to reduce interest rates over the next
year since inflationary pressures are minimal.
The dramatic volatility of the stock and bond markets over the past six months
have frustrated even the most savvy mutual fund manager. One of the most common
mistakes many investors make is to believe that a single mutual fund portfolio
manager can outperform the market regardless of overall economic and market
conditions. We refer to this misguided assumption as the "myth of the all
weather manager." Good money managers that stick to their investment style
regardless of market conditions will not have chart-topping performance every
year.
Our own research, based on data from Morningstar, Inc., shows that of the top 10
funds -- ranked according to total return -- in any given year from 1990 through
1997, 50% were in the bottom half of the fund universe within 12-24 months. A
similar study by Wyatt Asset in 1990 showed that over a ten-year period, 75% of
managers who excelled during a five-year period (appeared in top 20% of
performance) fell to the bottom 40% in the subsequent five-year period.
Despite evidence that the "all weather manager" does not exist, the financial
press rewards "star" mutual fund managers for their recent performance. We're
saturated with lists such as "10 Top Performing Mutual Funds" and "Ten Funds to
Buy Now." But it is true that "past performance is not indicative of future
results." Investors who "chase the stars" may suffer inconsistent long-term
results and suffer from a lack of diversification in their personal portfolios.
As you review the Annual Report, you will note that each of our FundManager
Portfolios contains a portfolio diversified not only by different portfolio
managers, but also allocates assets among funds according to investment style
(e.g. growth versus value), market capitalization (e.g. small cap versus large
cap) or asset class (e.g. stocks, bonds, cash).
<PAGE>
The recent volatility in the financial markets is a reminder to investors to
diversify their portfolios in order to pursue long-term consistent performance.
No one manager can be at the top of the charts all the time and neither can one
investment style. You want portfolio managers who "stick to their knitting" and
weather markets when their investment style is out of favor and flourish when it
is in favor.
Best regards,
/s/ John J. Danello
John J. Danello
President
2
<PAGE>
Management Discussion & Analysis
- --------------------------------------------------------------------------------
(photograph of Michael D. Hirsch)
Michael D. Hirsch
Chief Investment
Officer
November 18, 1998
Dear Shareholder:
I am pleased to present you with our annual report for the fiscal year ended
September 30, 1998. This investment review addresses the various strategies
implemented for each FundManager Portfolio within the past year and provides our
outlook for the months ahead.
INTERNATIONAL PORTFOLIO
The newest member of our investment family, the International Portfolio was
launched in June 1998. As the name implies, the Portfolio provides investors
with exposure to the international equity marketplace by using the same
multi-manager, multi-style structure employed by other FundManager
Portfolios(o). Soon after unveiling the Portfolio, we invested in both
growth-style and value-style managers, with a tilt towards the latter. Due to
our concerns over the global economy, we did not add a small cap international
fund(oo) to the Portfolio until July. At that time, we purchased shares in the
Nicholas-Applegate International Small Cap Growth fund. Since we believe the
long-term effects of the uncertain global economy will continue to weigh heavily
on emerging markets, we elected not to invest in funds that invest mainly in
these areas. Additionally, we maintained investments in funds with an
underweighting in Japan due to the country's lingering economic and banking
crisis. Throughout the reporting period, we were invested in funds that were
overweighted in Europe; by the end of our fiscal year, the funds in which the
Portfolio invests had roughly 76% of total assets invested there.
Looking ahead, we believe the underlying problems of the global economy will
continue to cause market volatility for the rest of this year and into 1999. We
are encouraged by the fact that governments around the globe are taking steps to
rectify their respective country's inherent problems, most notably the Japanese
government's plan to restructure its banking system. Governments, however, will
need to do more before the global economy stabilizes. Given this backdrop, we
expect financial markets to remain volatile. We believe that the current mix of
managers in the FundManager International Portfolio may provide investors with
reasonable returns over the longer term.
AGGRESSIVE GROWTH PORTFOLIO
Our decision to underweight the Portfolio in small-cap funds proved beneficial
to shareholders, as large- and mid-cap stocks handily outperformed their
small-cap counterparts during the reporting period. As the fiscal year wore on,
we reduced our weighting in small cap funds significantly and emphasized the
Portfolio's investment in mid cap funds which proved to be much less volatile.
At the end of the fiscal year, the Portfolio consisted of funds that invest
primarily in mid-cap stocks, with the exception of Harbor Capital Appreciation
Fund, a large-cap fund.
The decline in small-cap stocks in 1998 was much steeper and lasted much longer
than the downturn in large-cap stocks. The large-cap market indices, such as the
Standard & Poor's 500 Composite Index(ooo) and the
(o) Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
(oo) Small cap stocks have historically experienced greater volatility than the
average large- or mid-cap stocks.
(ooo) Standard & Poor's 500 is an unmanaged capitalization-weighted index of 500
stocks designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. Investments cannot be made in an index.
3
<PAGE>
Dow Jones Industrial Average, did not begin trending lower until mid-July.
However, small-cap stocks, as measured by the Russell 2000 index,(o) started
showing weakness as early as April. As of the end of this fiscal year, average
losses among small-cap stocks, since their March peak, totalled between 40%-50%,
double that experienced more recently by large-cap issues.
Given the sharp pullback in small-cap stocks, many of these securities are now
selling at historically attractive valuations compared to their large-cap
brethren. However, since small-cap stocks have underperformed large-caps since
1994 (a long time by historical measures), we remain hesitant to jump back into
the small-cap arena. Our opinion is likely to change once a clearer picture of
sustainable upside potential emerges for these stocks. Until then, we intend to
continue to research candidates in the small-cap fund universe to prepare for
the most opportune moment to re-enter this investment category.
GROWTH PORTFOLIO
As you may recall, last year we adopted a core/non-core portfolio structure.
Forty percent of the Growth Portfolio's assets was invested in two indexed
vehicles--Vanguard Index Growth and Vanguard Index Value. The proportion
invested in each reflects our assessment of the relative attractiveness of those
two management styles. The remaining 50 percent of Portfolio assets were
invested in value-added managers in the same proportion.
After establishing this structure, we initially set the proportion at 70% in
growth funds and 30% in value funds. However, in anticipation of a slowdown in
the longest economic expansion in the post-war era and a concurrent end to this
grandest of bull markets, early in 1998 we began reducing our allocation to
growth funds. By the end of the fiscal year, the ratio stood at 55%-45% in favor
of growth. While we prefer to be early with our more defensive position, this
call was somewhat premature.
Near-term, we expect to continue to shift more assets to the value index and
value-style managers because the economic and market landscape we anticipated
has begun to surface. In fact, after the close of the fiscal year, we brought
the ratio into parity.
GROWTH WITH INCOME PORTFOLIO
This Portfolio was the most stable over the past year. Most underlying funds
performed as anticipated, and relatively well when compared to their peers.
Equity-income managers, heavily invested in interest-sensitive stocks,
benefitted from the sharp decline in rates. (For example, the only S&P industry
group with positive returns during the August stock market debacle was electric
utilities.) Growth and income managers enjoyed a favorable environment for both
their growth stocks and fixed income instruments.
The status quo continues at present, although we are researching additional
balanced type managers, such as UAM FPA Crescent Fund, a current holding. Such
funds afford us the ability to offset the growth-style utilized by most growth
and income managers with a value-style (much more prevalent among balanced
managers).
BOND PORTFOLIO
Throughout the year, we periodically communicated our positive outlook for bonds
based on a broad variety of rationales -- low inflation, a flight to safety (or
more specifically, U.S. government bonds) due to the global economic
uncertainty, and the declining supply of U.S. Treasuries. The decline in supply
was due to a
(o) The Russell 2000 Index is an unmanaged index consisting of approximately
2000 small capitalization common stocks. Investments cannot be made in an
index.
4
<PAGE>
decrease in bond issuance as a result of the federal budget surplus.
In May, we backed up our favorable opinion of bonds by lengthening the average
duration of the core portion of the Bond Portfolio (50% of assets) to 20%
greater than that of the market index (Lehman Brothers Government/Corporate Bond
Index).(o) The payback was not long in coming. Uncertainty surrounding the
global economy coupled with the plunge in U.S. equity prices encouraged
investors to flee to the safety of U.S. government bonds, sending long-term
yields to unprecedented lows.
When the yield on the 30-year Treasury bond fell below 5.25% toward the end of
the fiscal year, we shortened the Portfolio's duration to 1.1 times the index.
When Treasury rates dropped below 5%, we returned to a neutral stance.
Our decision to maintain an underweighted exposure to the high-yield(oo) area
also proved beneficial to shareholders during the third quarter of 1998. While
some of our underlying funds have small percentages in high-yield securities,
the FundManager Bond Portfolio holds no funds that invest predominantly in these
investments at this time.
There is an old Chinese saying that one should live in interesting times. In
over 30 years in the investment business, I have never witnessed such
interesting times in the bond market. Once a sleepy backwater of the investment
world (clipping coupons every six months, measuring daily price movements in
sixty-fourths of a point or 14 cents on a $1000 face value bond), the bond
market has evolved into a "commodities-like" action center.
As we look ahead, we remain ever diligent to this mass of fixed income cross
currents and will steer the composition of the Bond Portfolio along the most
prudent course to help enhance income and protect shareholder wealth.
MANAGED TOTAL RETURN PORTFOLIO
Throughout the year, we underweighted equities for the same reasons enumerated
in the Growth Portfolio section. This strategy detracted from performance during
the first three quarters of the fiscal year, but served to sharply reduce losses
during the fourth quarter ended September 30, 1998. This was not the first time
the Portfolio managed to help protect shareholder capital during a volatile
market period. The Portfolio did the same for investors during market pullbacks
in 1990 and 1994 and in October, 1997.
During the reporting period, we were also overweighted in bonds, for the same
reasons outlined in our Bond Portfolio discussion. This strategy also proved
beneficial to shareholders as long-term interest rates, as measured by the
benchmark 30-year Treasury bond, fell to record lows throughout the year,
sending bond prices substantially higher. One strategy, in particular, that
helped performance significantly was our decision to shift 5% of assets out of
equity funds and into bond funds after the Dow Jones Industrial Average eclipsed
the 9000 plateau in April.
(o) Lehman Brothers Government/Corporate Bond Index is comprised of
approximately 5,000 issues which include non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed
by the U.S. government and quasi-federal corporations; and publicly issued,
fixed-rate, non-convertible domestic bonds of companies in industry, public
utilities and finance. The index is unmanaged, and investments cannot be
made in an index.
(oo) Lower rated bonds involve a higher degree of risk than investment grade
bonds in return for higher yield and capital appreciation potential.
5
<PAGE>
OUTLOOK
Near-term, we are less enthusiastic about the prospects for domestic equities.
While the foundation of the U.S. economy remains relatively good, the impact of
the crisis beyond our borders may continue to have an adverse impact on U.S.
corporate earnings, particularly large multinational companies.
On a positive note, the stock market correction has brought valuations on many
U.S. stocks to more rational levels, particularly among some of the small-cap
and medium-cap stocks. More important, it has created excellent investment
opportunities for long-term investors.
Internationally, we remain positive on European stocks for several reasons. The
foundation of most economies on the continent remains sound given the decline in
interest rates, the relatively low inflation rates within most countries and the
wave of corporate restructuring that has already taken place.
Before becoming more enthusiastic about Japan's growth prospects, we would still
like to see the government take more meaningful steps to reform its banking
system. Similarly, Southeast Asian and Latin American economies must still
overcome their economic difficulties before their equity markets can show
sustained progress.
I hope you have enjoyed this expanded overview of strategy implementation within
the FundManager Portfolios family of funds. As always we welcome your comments,
questions and suggestions. We look forward to continue serving your investment
needs.
Sincerely,
Michael D. Hirsch
/s/ Michael D. Hirsch
6
<PAGE>
A Closer Look at Two of Our Leading Fund Managers
- --------------------------------------------------------------------------------
(photograph of Martin S. Orgel)
Martin S. Orgel
Assistant Portfolio
Manager
November 18, 1998
Over the past 12 months, "growth" stocks have continued the longer than 3-year
trend of outperformance over "value" stocks. Conclusive evidence is illustrated
in the fact that the S&P BARRA Large Cap Growth Index(o) returned +18.17% over
the past 12 months, in comparison to the negative 0.18% return for the
corresponding S&P BARRA Large Cap Value Index(oo). In spite of this divergence
in returns between the styles, value-oriented Washington Mutual Investors Fund's
(WMIF) 9.93%(ooo) return beat the S&P 500's+ 9.05% over the trailing twelve
month period ended September 30, 1998. Consequently, we believe it to be an
opportune time to highlight the specific nature of this long-time holding within
the FundManager Growth with Income Portfolio.
Created in 1952, the Washington Mutual Investors Fund has amassed an impressive
record to become the third largest (with $46.7 billion in assets) mutual fund in
the United States. Among all domestic stock funds in the Morningstar universe
with a track record going back to 1983, WMIF's 16.32% average annualized rate of
return over the past 15 years ranks it among the top 5%.++ Additionally, the
fund has produced positive returns in each of the past 20 calendar years, with
the single exception of a -3.82% return in 1990. We continue to be particularly
pleased with this fund not only because of its great return performance, but
also because of the fact that this return was consistently generated with less
risk (as measured by standard deviation) than the average large capitalization
value-oriented mutual fund.
As with all of the funds belonging to the American Funds Group that are managed
by the prestigious Capital Research and Management Company in Los Angeles,
California, WMIF is run by a team of managers. In comparison to many other team
managed funds that are run by committees to seek consensus, WMIF's assets are
sliced into portions for each of the seven managers to invest as they see fit.
Additionally, an eighth slice is managed by a team of Capital Research analysts,
whose compensation is based partly on the long-term performance of their picks,
usually over a rolling four-year period. This unique management approach aims to
provide consistency of management, and lower volatility relative to
single-manager funds.
(o) S&P Barra Large Cap Growth Index is a market capitalization weighted index
of all the stocks in the Standard & Poor's 500 Index that have the highest
price-to-book ratios. The index consists of approximately half of the
Standard & Poor's 500 Index on a market capitalization basis. This index
is unmanaged and investments cannot be made in an index.
(oo) S&P Barra Large Cap Value Index is a market capitalization-weighted index
of the stocks in the Standard & Poor's 500 Index having the lowest price
to book ratios. The index consists of approximately half of the Standard &
Poor's 500 Index on a market capitalization basis. This index is unmanaged
and investments cannot be made in an index.
(ooo) Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their annual cost.
+ S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks
designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries. Investments cannot be made in an index.
++ As of September 30, 1998, Washington Mutual Investors Fund ranked 14th out
of 282 funds. (Source: Morningstar)
7
<PAGE>
WMIF's portfolio is comprised almost entirely of large capitalization stocks.
Its universe is constrained by criteria set forth in the "Prudent Investor
Rule", which was developed in the wake of the 1929 crash to guide persons with
fiduciary responsibility. As Capital Research & Management interprets the rule,
the fund can invest only in established companies that have paid dividends in
nine of the past ten years, and do not derive their primary revenue from alcohol
or tobacco. These requirements limit the fund to classic "growth and income"
type stocks of large, high-quality, dividend-paying firms which exhibit
relatively stable share prices. Once WMIF buys a stock, the fund's management
team will keep it until the underlying fundamentals change or the price rises to
reflect the firm's real value. As a result, WMIF's very low average annual
turnover rate of 19% over the past ten years has helped the fund to keep the
expense ratio to around 65 basis points (compared to the industry average of 153
bp for all equity mutual funds in the Morningstar database), as well as allowed
the fund to compound unrealized capital gains longer, which reduce shareholder's
tax bills.
With a total of 159 stocks, WMIF is well diversified across all of the major
industry sectors. Each stock is purchased based upon bottoms-up fundamental
financial research and in depth meetings with each firm's management. Relative
to the S&P 500 Index, WMIF is over-weighted in the utility, financial service,
and energy sectors. As WMIF has consistently proved itself as a solid core
holding within the FundManager Growth with Income Portfolio for many years, we
continue to believe it could remain a profitable risk-averse vehicle in the
future.
* * * *
Given the fact that the current bull market in equities we have all been
enjoying for the past several years is the longest in recorded financial
history, now might be an opportune time to revisit the reasons why we believe
the addition of a bond component to your overall investment portfolio is
prudent. Let's take a closer look at PIMCO Total Return, a long-time holding
within both the FundManager Bond Portfolio and FundManager Managed Total Return
Portfolio.
PIMCO Total Return is the largest publicly traded bond fund in existence, with
assets in excess of $20 billion. The fund is broadly-diversified, with holdings
in U.S. government securities, corporate bonds, mortgage-related securities,
asset-backed bonds, as well as other investment vehicles denominated in foreign
currencies. Legendary portfolio manager Bill Gross has guided this fund to
impressive returns (for examples, 19.56% in '91 and 19.79% in '95) since its
inception 11 years ago. PIMCO Total Return's ten year average annualized return
of 10.39% as of September 30, 1998 is a full 109 basis points above the
benchmark Lehman Brothers Aggregate Bond Index.(o)
Pacific Investment Management Company is one of the most respected names in
fixed income management, due in large part to its total return approach and
impressive long-
(o) Lehman Brothers Aggregate Bond Index is an unmanaged index composed of
securities from the Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index and the Asset-Backed Securities Index.
Total return comprises price appreciation/depreciation and income as a
percentage of the original investment. Indices are rebalanced monthly by
market capitalizaton. Investments cannot be made in an index.
8
<PAGE>
term performance record. The firm counts among its prestigious clients 61 of the
largest 200 U.S. companies (as measured by Fortune magazine 4/97). A major
benefit of the FundManager fund-of-funds structure is the economies of scale
that emerge from the pooling of assets from among the thousands of individual
and institutional shareholders in our funds. Because of our size, we are able to
purchase the institutional class (minimum investment $5 million) of the PIMCO
Total Return fund with the very low expense ratio of 0.43%.
Some bond managers focus solely on providing income, but Bill Gross believes
this approach can mean sacrificing valuable capital appreciation. As a result,
the fund is managed to produce maximum total return (income plus capital
appreciation). The process of implementing PIMCO Total Return's investment
strategy is exhaustive to say the least. Management meets annually with leading
outside experts to develop a 3 to 5-year outlook for the economy and interest
rates. On a quarterly basis, the investment professionals hold economic forums
to determine how the outlook applies to upcoming months and to forecast specific
influencing factors, including interest rate volatility, yield curve movements,
and credit trends. While making the specific buy and sell decisions, Gross pays
particular attention to the overall duration, sector weightings, yield-curve
positioning, and credit quality of the overall portfolio. With the extensive
resources and information flow that come from managing over $148 billion in
fixed income assets, PIMCO's research of the credit worthiness and estimate of
fair value in the pricing of individual bond issues is arguably second to none.
Ongoing monitoring of the economy and the individual fixed-income securities is
critical to making whatever adjustments are deemed necessary to maximize return
potential and reduce volatility of the portfolio. Vitally important to PIMCO's
success has been its use of innovative computer technology -- particularly
proprietary programs used to identify investment opportunities, as well as to
measure and stress-test securities.
Respectfully Submitted,
/s/ Martin S. Orgel
Martin S. Orgel
9
<PAGE>
Shareholder Meeting Results
- --------------------------------------------------------------------------------
A Special Meeting of the shareholders of FundManager Portfolios was held on May
20, 1998. On March 30, 1998, the record date for shareholders voting at the
meeting, there were 13,502,906.948 total outstanding shares. The following items
were considered and approved by shareholders and the results of their voting
were as follows:
<TABLE>
<CAPTION>
ABSTENTIONS
AND WITHHELD
BROKER AUTHORITY TO
Agenda Item FOR AGAINST NON-VOTES VOTE
- -------------------------- ------------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
1. Approve Master
Investment Advisory
Contract between
FundManager Portfolios
and each Portfolio and
Freedom Capital
Management
Corporation 7,898,352.375 17,063.825 67,434.942
2. Ratify Ernst & Young
as Independent
Auditors 7,933,765.776 4,488.164 44,597.202
</TABLE>
10
<PAGE>
Performance Summary
- --------------------------------------------------------------------------------
Aggressive Growth Portfolio --
Financial Adviser Class
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Aggressive Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Financial
Adviser Class of the Aggressive Growth Portfolio (AGP) from October 1, 1987 to
September 30, 1998, compared to the Russell 2000 Index (R2000)+ and Lipper
Capital Appreciation Funds Average (LCAA).++
[line chart]
<TABLE>
<CAPTION>
Date R2000 AGP* LCAA
- ------------------------------------------------
<S> <C> <C> <C>
10/87 10,000 10,000 10,000
9/88 8,731 8,919 8,201
9/89 11,030 10,836 11,151
9/90 9,350 7,894 10,250
9/91 12,609 11,452 13,025
9/92 13,406 12,476 13,909
9/93 16,071 16,613 17,255
9/94 16,598 17,057 17,514
9/95 20,630 21,041 22,187
9/96 23,120 23,804 25,635
9/97 28,706 31,705 32,077
9/98 24,966 25,674 30,762
</TABLE>
[end chart]
Average Annual Total Returns** for the Period
Ended September 30, 1998
1 Year ................................................................ (17.0)%
5 Year ................................................................... 8.2%
10 Year ................................................................. 10.6%
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The R2000 and LCAA have been adjusted to reflect reinvestment
of dividends on securities in the index and average. Effective January 31,
1998, the fund imposed a maximum sales charge of 4.50%.
**Total returns quoted reflect all applicable sales charges.
+ The R2000 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance. The
index is unmanaged.
++The LCAA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
this category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected
in a fund's performance.
Growth Portfolio -- Financial Adviser Class
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Financial
Adviser Class of the Growth Portfolio (GP) from October 1, 1987 to September 30,
1998, compared to the Standard & Poor's 500 Index (S&P 500)+ and Lipper Growth
Funds Average (LGA).++
[line chart]
<TABLE>
<CAPTION>
Date GP* S&P 500 LGA
- ------------------------------------------------
<S> <C> <C> <C>
10/87 10,000
9/88 9,258 8,759 8,926
9/89 11,417 11,641 11,656
9/90 9,779 10,564 10,035
9/91 12,569 13,848 13,697
9/92 13,754 15,370 14,747
9/93 15,951 17,368 17,569
9/94 16,664 18,011 17,883
9/95 20,423 23,367 22,897
9/96 23,172 28,120 26,046
9/97 31,727 39,495 35,060
9/98 31,026 43,077 36,137
</TABLE>
[end chart]
Average Annual Total Returns** for the Four
Month Period Ended September 30, 1998
1 Year ................................................................ (6.6)%
5 Year ................................................................. 13.2%
10 Year ................................................................ 12.3%
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
*The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and LGA have been adjusted to reflect reinvestment
of dividends on securities in the index and average. Effective January 31,
1998, the fund imposed a maximum sales charge of 4.50%.
**Total returns quoted reflect all applicable sales charges.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
The index is unmanaged.
++The LGA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
this category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected
in a fund's performance.
11
<PAGE>
Performance Summary
- --------------------------------------------------------------------------------
Growth with Income Portfolio --
Financial Adviser Class
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth with
Income Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Financial
Adviser Class of the Growth with Income Portfolio (GIP) from October 1, 1987 to
September 30, 1998, compared to the Standard & Poor's 500 Index (S&P 500)+ and
Lipper Growth & Income Funds Average (LG&IA).++
[line chart]
<TABLE>
<CAPTION>
Date GIP* S&P 500 LG&IA
- ------------------------------------------------
<S> <C> <C> <C>
10/87 10,000 10,000 10,000
9/88 9,657 8,759 9,282
9/89 11,847 11,641 11,776
9/90 10,090 10,564 10,269
9/91 12,737 13,848 13,304
9/92 13,987 15,370 14,651
9/93 16,151 17,368 17,315
9/94 16,688 18,011 17,941
9/95 20,576 23,367 22,119
9/96 23,401 28,120 25,899
9/97 31,421 39,495 35,075
9/98 30,915 43,077 34,602
</TABLE>
[end chart]
Average Annual Total Returns** for the Period Ended September 30, 1998
1 Year ................................................................ (6.0)%
5 Year ................................................................. 12.8%
10 Year ................................................................ 11.8%
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
*The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and LG&IA have been adjusted to reflect
reinvestment of dividends on securities in the index and average. Effective
January 31, 1998, the fund imposed a maximum sales charge of 4.50%.
**Total returns quoted reflect all applicable sales charges.
+The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance.
The index is unmanaged.
++The LG&IA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
this category and are not adjusted to reflect any sales charges. Each Fund is
reported net of expenses or other fees that the SEC requires to be reflected
in a fund's performance.
Bond Portfolio -- Financial Adviser Class
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Bond Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Financial
Adviser Class of the Bond Portfolio (BP) from October 1, 1987 to September 30,
1998, compared to the Lehman Government/ Corporate Total Index (LG/CI)+ and
Lipper General Bond Funds Average (LGBA).++
[line chart]
<TABLE>
<CAPTION>
Date BP* LGBA LG/CI
- ------------------------------------------------
<S> <C> <C> <C>
10/87 10,000 10,000
9/88 10,800 11,278
9/89 11,543 12,554
9/90 11,829 13,401
9/91 13,564 15,528 13,936
9/92 15,205 17,582 16,027
9/93 16,786 19,597 18,071
9/94 16,190 18,786 17,334
9/95 17,868 21,482 19,339
9/96 18,544 22,451 21,012
9/97 20,111 24,604 23,332
9/98 21,858 27,763 24,972
</TABLE>
[end chart]
Average Annual Total Returns for the Period Ended September 30, 1998
1 Year .................................................................. 8.7%
5 Year .................................................................. 5.4%
10 Year ................................................................. 7.3%
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
*The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The LG/CI and LGBA have been adjusted to reflect reinvestment
of dividends on securities in the index and average.
+ The LG/CI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance. The
index is unmanaged.
++The LGBA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
this category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected
in a fund's performance. For this illustration, the LGBA began performance
December 31, 1990. The index was assigned a beginning value of $12,362, the
value of the Portfolio on December 31, 1990.
12
<PAGE>
Performance Summary
- --------------------------------------------------------------------------------
Managed Total Return Portfolio--
Financial Adviser Class
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Managed Total Return Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Financial
Adviser Class of the Managed Total Return Portfolio (MTRP) from August 4, 1988
(start of performance) to September 30, 1998, compared to the Lipper Balanced
Funds Average (LBA)+ and Lehman Government/Corporate Total Index (LG/CI).++
[line chart]
<TABLE>
<CAPTION>
Date MTRP* LBA LG/CI
- ----------------------------------------------
<S> <C> <C> <C>
9/87 10,000 10,000 0
9/88 10,140 10,134 0
9/89 11,672 12,186 0
9/90 11,161 11,531 0
9/91 12,711 14,467 0
9/92 13,785 15,968 0
9/93 15,277 18,233 0
9/94 15,298 18,233 0
9/95 17,490 21,752 0
9/96 18,815 24,498 0
9/97 22,092 30,451
9/98 22,461 31,918
</TABLE>
[end chart]
Average Annual Total Returns** for the Period Ended September 30, 1998
1 Year ................................................................ (2.9)%
5 Year .................................................................. 7.0%
10 Year ................................................................. 8.3%
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
*The Portfolio's performance assumes the reinvestment of all dividends and
distributions. The LBA and LG/CI have been adjusted to reflect reinvestment of
dividends on securities in the index and average. Effective January 31, 1998,
the fund imposed a maximum sales charge of 4.50%.
**Total returns quoted reflect all applicable sales charges.
+ The LBA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
this category and are not adjusted to reflect any sales charges. Each fund is
reported net of expenses or other fees that the SEC requires to be reflected
in a fund's performance.
++The LG/CI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Portfolio's performance. The
index is unmanaged.
International Portfolio --
Financial Adviser Class
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in
International Portfolio
The graph below illustrates the hypothetical investment of $10,000* in Financial
Adviser Class of the International Portfolio (IP) from June 6, 1998 (start of
performance) to September 30, 1998, compared to the Morgan Stanley Capital
International Europe Australia Far East Index.(MSCI)+
[line chart]
<TABLE>
<CAPTION>
Date IP* MSCI
- --------------------------------
<S> <C> <C>
6/98 9,550 10,000
9/98 7,898 8,495
</TABLE>
[end chart]
Average Annual Total Returns** for the Four-Month
Period Ended September 30,1998
Start of Performance (6/6/98)(cumulative) ............................. (21.0)%
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
*Represents a hypothetical investment of $10,000 in the Portfolio after
deducting the maximum sales charge of 4.50% ($10,000 investment minus $450
sales charge = $9,550). The Portfolio's performance assumes the reinvestment
of all dividends and distributions. The MSCI EAFE Index has been adjusted to
reflect reinvestment of dividends on securities in the index.
**Total returns quoted reflect all applicable sales charges.
+ The MSCI EAFE Index is not adjusted to reflect sales charges, expenses, or
other fees that the SEC requires to be reflected in the Portfolio's
performance. The index is unmanaged.
13
<PAGE>
FundManager Portfolios
Schedule of Investments
September 30, 1998
- --------------------------------------------------------------------------------
Aggressive Growth Portfolio
- --------------------------------------------------------------------------------
High capital appreciation. Seeks capital appreciation without regard to current
income.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- ---------- --------------------------------------- -----------
<S> <C> <C>
Small Cap Funds -- (14.6%)
122 AIM Aggressive Growth ................. $ 4,740
87,179 Barron Asset .......................... 3,483,682
24 John Hancock Regional Bank
(Class A) ............................. 1,140
-----------
Total Small Cap Funds ................. 3,489,562
-----------
Mid Cap Funds -- (48.1%)
149,896 FPA Capital ........................... 4,045,685
188,679 RBB Boston Partners Mid Cap
Value ................................. 1,864,151
204,106 T. Rowe Price Mid Cap Growth .......... 5,616,986
-----------
Total Mid Cap Funds ................... 11,526,822
-----------
Large Cap Funds -- (24.8%)
190,957 Harbor Capital Appreciation ........... 5,921,576
-----------
Global Funds -- (0.0%)
51 Mutual Discovery ...................... 847
-----------
Total Investments at Market Value
(Cost $20,028,546) (a) ................ 20,938,807
Other assets net of liabilities (12.5%) 3,004,828
-----------
Net Assets (100.0%) ................... $23,943,635
===========
</TABLE>
[pie chart]
Mid Cap 62.7%
Large Cap 24.8%
Other Assets Net of Liabilities 12.5%
[end chart]
Growth Portfolio
- --------------------------------------------------------------------------------
Modest capital appreciation. Primarily seeks long-term capital appreciation.
Current income is a secondary consideration.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- ---------- --------------------------------------- -----------
<S> <C> <C>
Growth Funds -- (44.4%)
56,025 Guardian Park Avenue .................. $ 2,507,664
280,337 Vanguard Index Trust Growth ........... 7,168,209
280,848 Yacktman Fund ......................... 3,389,836
-----------
Total Growth Funds .................... 13,065,709
-----------
Value Funds -- (40.1%)
14,399 Clipper Fund .......................... 1,004,916
168,567 Davis New York Venture ................ 3,558,452
7,884 Dodge & Cox Stock ..................... 675,271
7 FPA Paramount ......................... 74
46,405 MAS Value ............................. 703,029
51 Mutual Beacon ......................... 638
39,846 Sound Shore ........................... 1,019,657
244,033 Vanguard Index Trust Value ............ 4,836,727
-----------
Total Value Funds ..................... 11,798,764
-----------
Total Investments at Market Value
(Cost $22,494,809) (b) ................ 24,864,473
Other assets net of liabilities (15.5%) 4,566,847
-----------
Net Assets (100.0%) ................... $29,431,320
===========
</TABLE>
[pie chart]
Growth 44.4%
Value 40.1%
Other Assets Net of Liabilities 15.5%
[end chart]
(See Notes which are an integral part of the Financial Statements)
14
<PAGE>
FundManager Portfolios
Schedule of Investments -- (continued)
September 30, 1998
- --------------------------------------------------------------------------------
Growth with Income Portfolio
- --------------------------------------------------------------------------------
Income and modest capital appreciation. Seeks a combination of capital
appreciation and current income.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- --------- ----------------------------------------- -----------
<S> <C> <C>
Growth and Income Funds -- (54.3%)
546,076 AIM Charter ............................. $ 6,711,278
241,315 Fundamental Investors ................... 6,590,324
513,731 Lord Abbett Affiliated .................. 6,940,500
-----------
Total Growth and Income Funds ........... 20,242,102
-----------
Balanced Funds -- (10.1%)
268,519 UAM FPA Crescent ........................ 3,775,372
-----------
Equity Income Funds -- (34.7%)
160,558 Hotchkis & Wiley Equity Income .......... 3,135,695
199,731 T. Rowe Price Equity Income ............. 5,009,262
152,585 Washington Mutual Investors ............. 4,786,599
-----------
Total Equity Income Funds ............... 12,931,556
-----------
Total Investments at Market Value
(Cost $33,845,983) (c) 36,949,030
Other assets net of liabilities (0.9%) 306,891
-----------
Net Assets (100.0%) ..................... $37,255,921
===========
</TABLE>
[pie chart]
Growth and Income 54.3%
Equity Income 34.7%
Balanced 10.1%
Other Assets Net of Liabilities 0.9%
[end chart]
Bond Portfolio
- --------------------------------------------------------------------------------
Monthly income. Seeks a high level of current income.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- --------- ---------------------------------------- -----------
<S> <C> <C>
Short Maturity Funds -- (33.3%)
623,368 FPA New Income ......................... $ 6,938,084
557,594 MAS Fixed Income ....................... 6,808,219
607,650 Vanguard Admiral Funds, Inc. -
Short-Term U.S. Treasury ............... 6,289,165
-----------
Total Short Maturity Funds ............. 20,035,468
-----------
Intermediate Maturity Funds -- (54.2%)
502,852 Bond Fund of America ................... 6,868,959
499,021 MFS Bond Fund (Class A) ................ 6,771,710
624,747 PIMCO Total Return ..................... 6,928,446
642,774 Vanguard Admiral Funds, Inc. -
Intermediate Term U.S. Treasury ........ 7,179,764
324,836 Vanguard Fixed Income Securities
Fund - Intermediate Term
Corporate .............................. 3,342,560
127,741 Vanguard Fixed Income Securities
Fund - Intermediate Term U.S.
Treasury ............................... 1,453,685
-----------
Total Intermediate Maturity Funds ...... 32,545,124
-----------
Long Maturity Funds -- (12.2%)
320,315 Vanguard Admiral Funds, Inc. -
Long-Term U.S. Treasury Portfolio ...... 3,840,587
364,647 Vanguard Fixed Income Securities
Fund - Long-Term Corporate
Portfolio .............................. 3,482,376
-----------
Total Long Maturity Funds .............. 7,322,963
-----------
Total Investments at Market Value
(Cost $57,348,946) (d) ................. 59,903,555
Other assets net of liabilities (0.3%) 176,454
-----------
Net Assets (100.0%) .................... $60,080,009
===========
</TABLE>
[pie chart]
Intermediate Maturity 54.2%
Short Maturity 33.3%
Long Maturity 12.2%
Other Assets Net of Liabilities 0.3%
[end chart]
(See Notes which are an integral part of the Financial Statements)
15
<PAGE>
FundManager Portfolios
Schedule of Investments -- (continued)
September 30, 1998
- --------------------------------------------------------------------------------
Managed Total Return Portfolio
- --------------------------------------------------------------------------------
Asset allocation. Seeks high total return through disciplined asset allocation.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- ---------- ------------------------------------------- ----------
<S> <C> <C>
International Equity Funds -- (9.4%)
23,815 BT Investment International Equity $ 492,502
27,089 Tweedy, Browne Global Value ............... 423,937
----------
Total International Equity Funds .......... 916,439
----------
Aggressive Growth Funds -- (5.0%)
9,898 FPA Capital ............................... 267,137
7,217 Harbor Capital Appreciation ............... 223,814
----------
Total Aggressive Growth Funds ............. 490,951
----------
Growth Funds -- (15.4%)
11,174 Clipper Fund .............................. 779,866
34,498 Davis New York Venture (Class A) .......... 728,248
----------
Total Growth Funds ........................ 1,508,114
----------
Growth and Income Funds -- (20.5%)
34,903 Fundamental Investors ..................... 953,213
31,375 T. Rowe Price Equity Income ............... 786,885
18,577 UAM FPA Cresent ........................... 261,187
----------
Total Growth and Income Funds ............. 2,001,285
----------
Fixed Income Funds -- (45.1%)
80,604 Bond Fund of America ...................... 1,101,044
156,376 MFS Bond .................................. 2,122,027
106,232 PIMCO Total Return ........................ 1,178,119
----------
Total Fixed Income Funds .................. 4,401,190
----------
Total Investments at Market Value
(Cost $9,649,161) (e) ..................... 9,317,979
Other assets net of liabilities (4.6%) 443,696
----------
Net Assets (100.0%) ....................... $9,761,675
==========
</TABLE>
[pie chart]
Fixed Income 45.1%
Growth and Income 20.5%
Growth 15.4%
International Equity 9.4%
Aggressive Growth 5.0%
Other Assets Net of Liabilities 4.6%
[end chart]
International Portfolio
- --------------------------------------------------------------------------------
High capital appreciation. Seeks long-term capital appreciation without regard
to current income.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- --------- ------------------------------------------- -----------
<S> <C> <C>
International Equity Funds -- (91.7%)
111,465 American AAdvantage International
Equity .................................... $ 1,731,051
81,713 BT Investment International Equity 1,689,820
123,655 Janus Overseas ............................ 2,118,218
29,950 Nicholas-Applegate International
Small Cap Growth .......................... 497,478
100,765 Putnam International Growth ............... 1,631,386
107,769 Tweedy, Browne Global Value ............... 1,686,586
-----------
Total International Equity Funds .......... 9,354,539
-----------
Total Investments at Market Value
(Cost $11,377,899) (f) .................... 9,354,539
Other assets net of liabilities (8.3%) 841,271
-----------
Net Assets (100.0%) ....................... $10,195,810
===========
</TABLE>
[pie chart]
International Equity 91.7%
Other Assets Net of Liabilities 8.3%
[end chart]
(See Notes which are an integral part of the Financial Statements)
16
<PAGE>
FundManager Portfolios
Schedule of Investments -- (continued)
September 30, 1998
- --------------------------------------------------------------------------------
(a) Aggregate cost for federal income tax purposes is $19,626,463. The gross
unrealized appreciation is $2,344,447: the gross unrealized depreciation is
$1,032,103, resulting in net unrealized appreciation of $1,312,344 for
federal income tax purposes.
(b) Aggregate cost for federal income tax purposes is $22,489,461. The gross
unrealized appreciation is $2,974,335: the gross unrealized depreciation is
$602,557, resulting in net unrealized appreciation of $2,371,778 for
federal income tax purposes.
(c) Aggregate cost for federal income tax purposes is $33,845,983. The gross
unrealized appreciation is $3,558,763: the gross unrealized depreciation is
$455,716, resulting in net unrealized appreciation of $3,103,047 for
federal income tax purposes.
(d) Aggregate cost for federal income tax purposes is $57,348,946. The gross
unrealized appreciation is $2,582,298: the gross unrealized depreciation is
$27,689, resulting in net unrealized appreciation of $2,554,609 for federal
income tax purposes.
(e) Aggregate cost for federal income tax purposes is $9,648,391. The gross
unrealized appreciation is $130,219: the gross unrealized depreciation is
$460,631, resulting in net unrealized depreciation of $330,412 for federal
income tax purposes.
(f) Aggregate cost for federal income tax purposes is $11,377,898. The gross
unrealized appreciation is $0: the gross unrealized depreciation is
$2,023,360, resulting in net unrealized depreciation of $2,023,360 for
federal income tax purposes.
Note: The Growth Portfolio designates $6,605,131 of the dividends paid during
the year ended September 30, 1998, as capital gain dividends for federal income
tax purposes. The Aggressive Growth Portfolio designates $5,389,371 of the
dividends paid during the year ended September 30,1998, as capital gain
dividends for federal income tax purposes. The Growth with Income Portfolio
designates $5,800,818 of the dividends paid during the year ended September 30,
1998 as capital gains dividends for federal income tax purposes. The Managed
Total Return Portfolio designates $1,001,878 of the dividends paid during the
year ended September 30, 1998 as capital gain dividends for federal income tax
purposes.
(See Notes which are an integral part of the Financial Statements)
17
<PAGE>
FundManager Portfolios
Statement of Assets and Liabilities
September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive
Growth Growth
Portfolio Portfolio
---------------- ----------------
<S> <C> <C>
Assets:
Investments, at value* .............. $ 20,938,807 $ 24,864,473
Cash ................................ 187,006 557,348
Receivable for investments sold 2,815,341 4,031,541
Receivable for fund shares sold...... 46,968 26,562
Dividend receivable ................. -- --
Prepaid expenses .................... -- --
Miscellaneous receivable ............ -- 452
------------ ------------
Total assets ....................... 23,988,122 29,480,376
------------ ------------
Liabilities:
Payable for fund shares
redeemed ............................ 28,133 17,450
Distribution expense payable ........ 6,289 16,021
Accrued Expenses .................... 10,065 15,585
------------ ------------
Total liabilities .................. 44,487 49,056
------------ ------------
Net Assets ........................... $ 23,943,635 $ 29,431,320
============ ============
Financial Adviser Class:
Shares Outstanding .................. 1,701,201 1,986,992
Net Assets .......................... $ 23,943,635 $ 29,431,320
Net Asset Value ..................... $ 14.07 $ 14.81
============ ============
Net Assets consist of:
Paid in capital ..................... $ 19,196,564 $ 22,127,428
Undistributed (distribution in
excess of) net investment
income ............................. (381,832) (144,206)
Accumulated realized gain (loss) 4,218,642 5,078,434
Net unrealized appreciation
(depreciation) ...................... 910,261 2,369,664
------------ ------------
Net Assets ........................... $ 23,943,635 $ 29,431,320
============ ============
*Investments, at cost ............... $ 20,028,546 $ 22,494,809
============ ============
Offering Price Per Share
(100/95.50 of Net Asset Value) ....... $ 14.73 $ 15.51
<CAPTION>
Growth with Managed
Income Bond Total Return International
Portfolio Portfolio Portfolio Portfolio
---------------- ------------------ -------------- ----------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value* .............. $ 36,949,030 $ 59,903,555 $ 9,317,979 $ 9,354,539
Cash ................................ 363,562 216,453 455,219 827,962
Receivable for investments sold -- -- -- --
Receivable for fund shares sold...... 16,807 58 499 19,100
Dividend receivable ................. -- 41,425 12,553 --
Prepaid expenses .................... -- -- -- 17,871
Miscellaneous receivable ............ -- 20,196 9,664 --
------------ ------------ ----------- -------------
Total assets ....................... 37,329,399 60,181,687 9,795,914 10,219,472
------------ ------------ ----------- -------------
Liabilities:
Payable for fund shares
redeemed ............................ 18,700 61,981 -- 10,964
Distribution expense payable ........ 39,092 33,584 21,367 --
Accrued Expenses .................... 15,686 6,113 12,872 12,698
------------ ------------ ----------- -------------
Total liabilities .................. 73,478 101,678 34,239 23,662
------------ ------------ ----------- -------------
Net Assets ........................... $ 37,255,921 $ 60,080,009 $ 9,761,675 $ 10,195,810
============ ============ =========== =============
Financial Adviser Class:
Shares Outstanding .................. 2,323,640 5,704,681 903,317 1,232,125
Net Assets .......................... $ 37,255,921 $ 60,080,009 $ 9,761,675 $ 10,195,810
Net Asset Value ..................... $ 16.03 $ 10.53 $ 10.81 $ 8.27
============ ============ =========== =============
Net Assets consist of:
Paid in capital ..................... $ 29,114,102 $ 60,052,616 $ 8,601,762 $ 12,294,359
Undistributed (distribution in
excess of) net investment
income ............................. 56,653 (9,964) 36,186 (84,700)
Accumulated realized gain (loss) 4,982,119 (2,517,252) 1,454,909 9,511
Net unrealized appreciation
(depreciation) ...................... 3,103,047 2,554,609 (331,182) (2,023,360)
------------ ------------ ----------- -------------
Net Assets ........................... $ 37,255,921 $ 60,080,009 $ 9,761,675 $ 10,195,810
============ ============ =========== =============
*Investments, at cost ............... $ 33,845,983 $ 57,348,946 $ 9,649,161 $ 11,377,899
============ ============ =========== =============
Offering Price Per Share
(100/95.50 of Net Asset Value) ....... $16.79 $10.53*** $11.32 $8.66
</TABLE>
*** Offering price for Bond Portfolio equals net asset value as no sales charge
is imposed on purchases of this Portfolio.
(See Notes which are an integral part of the Financial Statements)
18
<PAGE>
FundManager Portfolios
Statement of Operations
Fiscal Year Ended September 30, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive
Growth Growth
Portfolio Portfolio
--------------- ---------------
<S> <C> <C>
Income:
Dividend income ...................... $ 347,795 $ 505,060
Expenses:
Advisory fees ........................ 179,155 189,945
Transfer agent fees .................. 59,199 57,665
Distribution and shareholder
service expenses ..................... 170,157 183,409
Administrative fees .................. 95,063 94,943
Audit fees ........................... 41,237 39,415
Printing & Postage ................... 11,607 13,353
Custodian and fund
accounting fees ...................... 33,042 33,039
Legal fees ........................... 8,846 12,916
Registration fees .................... 20,337 8,281
Trustee fees ......................... 4,921 4,692
Insurance expense .................... 646 722
Miscellaneous ........................ 2,657 2,165
------------ -------------
Total expenses ...................... 626,867 640,545
Waiver of administrative fee ......... (879) (809)
Custodian earnings credits ........... (21,798) (19,300)
------------ -------------
Net expenses ........................ 604,190 620,436
------------ -------------
Net investment income ................. (256,395) (115,376)
------------ -------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gains on
investments .......................... 2,281,006 3,024,872
Net realized gains received from
underlying funds ..................... 3,214,210 2,402,780
Net change in unrealized
appreciation (depreciation) .......... (7,978,242) (4,686,132)
------------ -------------
Net realized and unrealized gain
(loss) on investments ................. (2,483,026) 741,520
------------ -------------
Net increase (decrease) in net
assets resulting from operations $ (2,739,421) $ 626,144
============ =============
<CAPTION>
Growth with Managed
Income Bond Total Return International
Portfolio Portfolio Portfolio Portfolio*
--------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C>
Income:
Dividend income ...................... $ 721,578 $3,469,778 $ 415,766 $ 372
Expenses:
Advisory fees ........................ 209,030 283,059 54,131 17,802
Transfer agent fees .................. 49,173 47,553 25,908 5,981
Distribution and shareholder
service expenses ..................... 204,497 275,559 54,124 17,798
Administrative fees .................. 95,799 103,110 67,963 24,041
Audit fees ........................... 39,130 38,856 37,557 --
Printing & Postage ................... 9,868 11,312 7,037 2,495
Custodian and fund
accounting fees ...................... 34,045 38,472 22,500 7,130
Legal fees ........................... 9,868 10,329 2,490 1,996
Registration fees .................... 8,507 8,853 9,743 13,462
Trustee fees ......................... 4,423 6,394 2,490 998
Insurance expense .................... 681 985 217 --
Miscellaneous ........................ 2,043 2,951 2,490 499
------------- ---------- ------------- ------------
Total expenses ...................... 667,064 827,433 286,650 92,202
Waiver of administrative fee ......... (883) (1,381) (260) --
Custodian earnings credits ........... (16,150) (19,324) (21,723) (7,130)
------------- ---------- ------------- ------------
Net expenses ........................ 650,031 806,728 264,667 85,072
------------- ---------- ------------- ------------
Net investment income ................. 71,547 2,663,050 151,099 (84,700)
------------- ---------- ------------- ------------
Realized and Unrealized Gain (Loss) on
Investments:
Net realized gains on
investments .......................... 1,885,633 890,567 1,002,327 9,511
Net realized gains received from
underlying funds ..................... 3,494,631 309,005 669,980 --
Net change in unrealized
appreciation (depreciation) .......... (5,606,653) 908,096 (1,614,021) (2,023,360)
------------- ---------- ------------- ------------
Net realized and unrealized gain
(loss) on investments ................. (226,389) 2,107,668 58,286 (2,013,849)
------------- ---------- ------------- ------------
Net increase (decrease) in net
assets resulting from operations $ (154,842) $4,770,718 $ 209,385 $ (2,098,549)
============= ========== ============= ============
</TABLE>
* Portfolio commenced operations on June 6, 1998.
(See Notes which are an integral part of the Financial Statements)
19
<PAGE>
FundManager Portfolios
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive Growth Portfolio
---------------------------------
Year Ended
September 30,
1998 1997
---------------- ----------------
<S> <C> <C>
Increase (decrease) in Net Assets from:
Operations
Net investment income (loss) ......................................... $ (256,395) $ (272,391)
Net realized gain (loss) on investments and underlying funds ......... 5,495,216 3,664,284
Change in unrealized appreciation (depreciation) ..................... (7,978,242) 5,133,734
-------------- --------------
Net increase (decrease) in net assets resulting from
operations .......................................................... (2,739,421) 8,525,627
-------------- --------------
Financial Adviser Class
Dividends and distributions from:
Net investment income ................................................ (806,597) (147,770)
Net realized gains ................................................... (3,851,235) (4,353,531)
-------------- --------------
Total distributions ................................................. (4,657,832) (4,501,301)
-------------- --------------
Capital share transactions:
Proceeds from sales of shares ........................................ 12,072,686 8,781,300
Reinvestment of dividends ............................................ 4,313,633 4,412,280
Payments for shares redeemed ......................................... (21,325,338) (19,564,579)
-------------- --------------
Total from share transactions ....................................... (4,939,019) (6,370,999)
-------------- --------------
No-Load Class
Dividends and distributions from:
Net investment income ................................................ (52,885) (14,095)
Net realized gains ................................................... (204,489) (176,417)
-------------- --------------
Total distributions ................................................. (257,374) (190,512)
-------------- --------------
Capital share transactions:
Proceeds from sales of shares ........................................ 454,507 696,951
Reinvestment of dividends ............................................ 247,873 1,639
Payments for shares redeemed ......................................... (2,285,887) (417,057)
-------------- --------------
Total from share transactions ....................................... (1,583,507) 281,533
-------------- --------------
Total Increase (Decrease) in Net Assets ............................... (14,177,153) (2,255,652)
Net Assets:
Beginning of year .................................................... 38,120,788 40,376,440
-------------- --------------
End of year .......................................................... $ 23,943,635 $ 38,120,788
============== ==============
Undistributed Net Investment Income ................................. $ -- $ 9,012
============== ==============
Shares Outstanding:
Financial Adviser Class
Beginning of year .................................................... 1,963,321 2,318,177
Shares sold .......................................................... 715,177 535,301
Reinvestment of dividends ............................................ 275,632 292,718
Shares redeemed ...................................................... (1,252,928) (1,182,875)
-------------- --------------
End of year .......................................................... 1,701,201 1,963,321
============== ==============
No-Load Class
Beginning of year .................................................... 103,510 84,732
Shares sold .......................................................... 25,734 43,615
Reinvestment of dividends ............................................ 15,798 106
Shares redeemed ...................................................... (145,042) (24,943)
-------------- --------------
End of year .......................................................... -- 103,510
============== ==============
<CAPTION>
Growth Portfolio
--------------------------------
Year Ended
September 30,
1998 1997
---------------- ---------------
<S> <C> <C>
Increase (decrease) in Net Assets from:
Operations
Net investment income (loss) ......................................... $ (115,376) $ 80,281
Net realized gain (loss) on investments and underlying funds ......... 5,427,652 5,911,570
Change in unrealized appreciation (depreciation) ..................... (4,686,132) 3,662,887
-------------- ------------
Net increase (decrease) in net assets resulting from
operations .......................................................... 626,144 9,654,738
-------------- ------------
Financial Adviser Class
Dividends and distributions from:
Net investment income ................................................ (561,585) (510,906)
Net realized gains ................................................... (5,379,099) (3,077,506)
-------------- ------------
Total distributions ................................................. (5,940,684) (3,588,412)
-------------- ------------
Capital share transactions:
Proceeds from sales of shares ........................................ 11,237,552 5,445,210
Reinvestment of dividends ............................................ 5,552,487 3,236,436
Payments for shares redeemed ......................................... (14,818,143) (8,184,865)
-------------- ------------
Total from share transactions ....................................... 1,971,896 496,781
-------------- ------------
No-Load Class
Dividends and distributions from:
Net investment income ................................................ (21,512) (26,438)
Net realized gains ................................................... (190,374) (116,120)
-------------- ------------
Total distributions ................................................. (211,886) (142,558)
-------------- ------------
Capital share transactions:
Proceeds from sales of shares ........................................ 334,657 465,686
Reinvestment of dividends ............................................ 203,743 6,380
Payments for shares redeemed ......................................... (1,652,357) (309,640)
-------------- ------------
Total from share transactions ....................................... (1,113,957) 162,426
-------------- ------------
Total Increase (Decrease) in Net Assets ............................... (4,668,487) 6,582,975
Net Assets:
Beginning of year .................................................... 34,099,807 27,516,832
-------------- ------------
End of year .......................................................... $ 29,431,320 $ 34,099,807
============== ============
Undistributed Net Investment Income ................................. $ -- $ --
============== ============
Shares Outstanding:
Financial Adviser Class
Beginning of year .................................................... 1,843,969 1,776,631
Shares sold .......................................................... 666,690 356,666
Reinvestment of dividends ............................................ 362,197 230,169
Shares redeemed ...................................................... (885,864) (519,497)
-------------- ------------
End of year .......................................................... 1,986,992 1,843,969
============== ============
No-Load Class
Beginning of year .................................................... 70,876 58,324
Shares sold .......................................................... 19,526 30,883
Reinvestment of dividends ............................................ 13,256 397
Shares redeemed ...................................................... (103,657) (18,728)
-------------- ------------
End of year .......................................................... -- 70,876
============== ============
</TABLE>
(See Notes which are an integral part of the Financial Statements)
20
<PAGE>
FundManager Portfolios
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International
Growth with Income Portfolio Bond Portfolio Managed Total Return Portfolio Portfolio
- --------------------------------- --------------------------------- --------------------------------- --------------
Year Ended Year Ended Year Ended Period Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997 1998 1997 1998*
- --------------- --------------- --------------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 71,547 $ 501,155 $ 2,663,050 $ 3,459,316 $ 151,099 $ 263,642 $ (84,700)
5,380,264 5,684,405 1,199,572 41,868 1,672,307 1,051,278 9,511)
(5,606,653) 3,631,243 908,096 1,923,463 (1,614,021) 540,852 (2,023,360)
------------ ------------ ------------- ------------- ------------ ------------ ------------
(154,842) 9,816,803 4,770,718 5,424,647 209,385 1,855,772 (2,098,549)
------------ ------------ ------------- ------------- ------------ ------------ ------------
(745,365) (693,670) (3,199,284) (3,534,481) (284,225) (385,086) --
(5,060,401) (4,130,314) -- -- (1,001,878) (889,268) --
------------ ------------ ------------- ------------- ------------ ------------ ------------
(5,805,766) (4,823,984) (3,199,284) (3,534,481) (1,286,103) (1,274,354) --
------------ ------------ ------------- ------------- ------------ ------------ ------------
8,739,488 5,226,373 15,451,056 27,364,356 804,996 1,198,275 12,727,934
5,338,014 4,215,023 1,629,827 1,647,269 1,241,594 1,320,233
(8,098,887) (8,502,204) (22,008,626) (37,319,454) (2,814,504) (3,616,172) (433,575)
------------ ------------ ------------- ------------- ------------ ------------ ------------
5,978,615 939,192 (4,927,743) (8,307,829) (767,914) (1,097,664) 12,294,359
------------ ------------ ------------- ------------- ------------ ------------ ------------
(20,452) (25,855) (97,109) (125,228) -- -- --
(123,575) (97,318) -- -- -- -- --
------------ ------------ ------------- ------------- ------------ ------------ ------------
(144,027) (123,173) (97,109) (125,228) -- -- --
------------ ------------ ------------- ------------- ------------ ------------ ------------
295,796 294,004 380,169 655,314 -- -- --
138,956 16,388 95,245 67,264 -- -- --
(1,127,347) (237,458) (2,720,148) (555,748) -- -- --
------------ ------------ ------------- ------------- ------------ ------------ ------------
(692,595) 72,934 (2,244,733) 166,830 -- -- --
------------ ------------ ------------- ------------- ------------ ------------ ------------
(818,615) 5,881,772 (5,698,151) (6,376,061) (1,844,632) (516,246) 10,195,810
38,074,536 32,192,764 65,778,160 72,154,221 11,606,307 12,122,553 --
------------ ------------ ------------- ------------- ------------ ------------ ------------
$ 37,255,921 $ 38,074,536 $ 60,080,009 $ 65,778,160 $ 9,761,675 $ 11,606,307 $ 10,195,810
============ ============ ============= ============= ============ ============ ============
$ -- $ -- $ -- $ 470,672 $ 36,186 $ 59,883 $ --
============ ============ ============= ============= ============ ============ ============
1,965,232 1,891,259 6,184,570 7,015,708 962,429 1,058,564 --
487,108 298,724 1,501,298 2,689,498 70,171 105,534 1,278,370
325,003 273,767 158,828 163,682 113,991 122,005 --
(453,704) (498,518) (2,140,015) (3,684,318) (243,273) (323,675) (46,245)
------------ ------------ ------------- ------------- ------------ ------------ ------------
2,323,640 1,965,232 5,704,681 6,184,570 903,317 962,428 1,232,125
============ ============ ============= ============= ============ ============ ============
42,633 37,188 214,806 198,015 -- -- --
16,346 18,095 36,698 64,621 -- -- --
8,556 1,049 9,212 6,665 -- -- --
(67,534) (13,699) (260,716) (54,496) -- -- --
------------ ------------ ------------- ------------- ------------ ------------ ------------
-- 42,633 -- 214,805 -- -- --
============ ============ ============= ============= ============ ============ ============
</TABLE>
* Portfolio commenced investment operations on June 6, 1998.
(See Notes which are an integral part of the Financial Statements)
21
<PAGE>
Aggressive Growth Portfolio: Financial Adviser Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------
1998 1997
------------- ------------------
<S> <C> <C>
Net Asset Value, beginning of period ................... $ 18.44 $ 16.80
--------- ----------
Income from investment operations
Net investment income (loss) .......................... 0.16 (0.12)(b)
Net realized and unrealized gain on
investments ........................................... (2.34) 3.75
--------- ----------
Total from investment operations ..................... (2.18) 3.63
--------- ----------
Less distributions
Distributions from net investment income .............. (0.38) (0.07)
Distributions from net realized gain on
investments ........................................... (1.81) (1.92)
--------- ----------
Total distributions .................................. (2.19) (1.99)
--------- ----------
Net Asset Value, end of period ......................... $ 14.07 $ 18.44
========= ==========
Total return(c) ........................................ (13.03)% 24.16%
Ratios/Supplemental data
Net assets, end of period (in 000's) .................. $ 23,944 $ 36,200
Ratio of expenses to average net assets ............... 1.78% 1.59%
Ratio of net investment income to average net
assets ................................................ (0.74)% (0.70)%
Ratio of expense waivers to average net assets(d) ..... -- 0.03%
Portfolio turnover .................................... 38% 56%
Paid from realized net short-term gain ................ $ -- $ 0.28
<CAPTION>
Year Ended September 30,
--------------------------------------------
1996 1995(a) 1994
---------------- ------------- -------------
<S> <C> <C> <C>
Net Asset Value, beginning of period ................... $ 18.31 $ 15.57 $ 16.70
--------- --------- ---------
Income from investment operations
Net investment income (loss) .......................... 0.12(b) (0.13) (0.08)
Net realized and unrealized gain on
investments ........................................... 1.64 3.70 0.62
--------- --------- ---------
Total from investment operations ..................... 1.76 3.57 0.54
--------- --------- ---------
Less distributions
Distributions from net investment income .............. (0.38) -- --
Distributions from net realized gain on
investments ........................................... (2.89) (0.83) (1.67)
--------- --------- ---------
Total distributions .................................. (3.27) (0.83) (1.67)
--------- --------- ---------
Net Asset Value, end of period ......................... $ 16.80 $ 18.31 $ 15.57
========= ========= =========
Total return(c) ........................................ 12.10% 24.30% 3.30%
Ratios/Supplemental data
Net assets, end of period (in 000's) .................. $ 38,944 $ 33,668 $ 37,766
Ratio of expenses to average net assets ............... 1.67% 1.65% 1.70%
Ratio of net investment income to average net
assets ................................................ 0.74% (0.68)% (0.57)%
Ratio of expense waivers to average net assets(d) ..... 0.06% -- --
Portfolio turnover .................................... 158% 50% 43%
Paid from realized net short-term gain ................ $ 0.27 $ 0.04 $ 0.25
</TABLE>
- --------------------------------------------------------------------------------
(a) On February 21, 1995, Freedom Capital Management Corporation became the
Investment Adviser.
(b) Per share information is based on average shares outstanding. (c) Based on
net asset value, which does not reflect the sales charge payable
on purchases of shares. Effective January 31, 1998, the Portfolio imposed
a maximum sales charge of 4.50%.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
22
<PAGE>
Aggressive Growth Portfolio: No-Load Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------
1998(a) 1997 1996
------------------ ----------- ----------------
<S> <C> <C> <C>
Net Asset Value, beginning of period ........................ $ 18.56 $ 16.91 $ 18.31
---------- ------- --------
Income from investment operations
Net investment income (loss) ............................... 0.29 (b) (0.04) 0.04(b)
Net realized and unrealized gain (loss) on investments ..... (1.63) 3.76 1.83
---------- ------- --------
Total from investment operations .......................... (1.34) 3.72 1.87
---------- ------- --------
Less distributions
Distributions from net investment income ................... (0.47) (0.15) (0.38)
Distributions from net realized gain on investments ........ (1.82) (1.92) (2.89)
---------- ------- --------
Total distributions ....................................... (2.29) (2.07) (3.27)
---------- ------- --------
Net Asset Value, end of period .............................. $ 14.93 $ 18.56 $ 16.91
========== ======= ========
Total return(c) ............................................. (7.88)%(e) 24.76% 12.77%
Ratios/Supplemental data
Net assets, end of period (in 000's) ....................... $ -- $ 1,921 $ 1,432
Ratio of expenses to average net assets .................... 1.21%(f) 1.12% 1.15%
Ratio of net investment income to average net assets ....... (0.22)%(f) (0.25)% 0.24%
Ratio of expense waivers to average net assets(d) .......... --(f) 0.03% 0.06%
Portfolio turnover ......................................... 38% 51% 158%
Paid from realized net short-term gain ..................... $ -- $ 0.28 $ 0.27
</TABLE>
- --------------------------------------------------------------------------------
(a) As of September 23, 1998, the No-Load Class was no longer offered and ceased
to exist.
(b) Per share information is based on average shares outstanding. (c) Based on
net asset value. (d) This voluntary expense decrease is reflected in both the
expense and net
investment income ratios shown above.
(e) Not annualized.
(f) Annualized.
(See Notes which are an integral part of the Financial Statements)
23
<PAGE>
Growth Portfolio: Financial Adviser Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------------------------
1998 1997 1996 1995(a) 1994
------------ ---------------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ................... $ 17.81 $ 14.99 $ 16.14 $ 14.09 $ 14.62
------- -------- -------- ------- -------
Income from investment operations
Net investment income (loss) .......................... 0.18 0.04(b) 0.01(b) (0.02) (0.05)
Net realized and unrealized gain (loss) on
investments ........................................... (0.48) 4.91 1.85 2.99 0.69
------- -------- -------- ------- -------
Total from investment operations ..................... (0.30) 4.95 1.86 2.97 0.64
------- -------- -------- ------- -------
Less distributions
Distributions from net investment income .............. (0.26) (0.30) (0.24) -- --
Distributions from net realized gain on
investments ........................................... (2.44) (1.83) (2.77) (0.92) (1.17)
------- -------- -------- ------- -------
Total distributions .................................. (2.70) (2.13) (3.01) (0.92) (1.17)
------- -------- -------- ------- -------
Net asset value, end of period ......................... $ 14.81 $ 17.81 $ 14.99 $ 16.14 $ 14.09
======= ======== ======== ======= =======
Total return(c) ........................................ (2.21)% 36.92% 13.46% 22.60% 4.50%
Ratios/Supplemental data
Net assets, end of period (in 000's) .................. $29,431 $ 32,835 $ 26,639 $26,022 $34,205
Ratio of expenses to average net assets ............... 1.70% 1.65% 1.61% 1.71% 1.71%
Ratio of net investment income (loss) to
average net assets .................................... (0.32)% 0.23% 0.05% (0.11)% (0.52)%
Ratio of expense waivers to average net assets(d) ..... -- 0.05% 0.06% -- --
Portfolio turnover .................................... 33% 95% 93% 68% 44%
Paid from realized net short-term gain ................ $ 0.28 $ 0.12 $ 0.48 $ 0.10 $ 0.22
</TABLE>
- --------------------------------------------------------------------------------
(a) On February 21, 1995, Freedom Capital Management Corporation became the
Investment Adviser.
(b) Per share information is based on average shares outstanding. (c) Based on
net asset value, which does not reflect the sales charge payable
on purchases of shares. Effective January 31, 1998, the Portfolio imposed
a maximum sales charge of 4.50%.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
24
<PAGE>
Growth Portfolio: No-Load Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------
1998(a) 1997 1996
------------------ ---------------- ----------------
<S> <C> <C> <C>
Net Asset Value, beginning of period ........................ $ 17.84 $ 15.04 $ 16.14
---------- -------- --------
Income from investment operations
Net investment income (loss) ............................... 0.26(b) 0.11(b) (0.06)(b)
Net realized and unrealized gain (loss) on investments ..... 0.15 4.93 2.02
---------- -------- --------
Total from investment operations .......................... 0.41 5.04 1.96
---------- -------- --------
Less distributions
Distributions from net investment income ................... (0.28) (0.41) (0.29)
Distributions from net realized gain on investments ........ (2.44) (1.83) (2.77)
---------- -------- --------
Total distributions ....................................... (2.72) (2.24) (3.06)
---------- -------- --------
Net asset value, end of period .............................. $ 15.53 $ 17.84 $ 15.04
========== ======== ========
Total return(c) ............................................. 2.45%(e) 37.59% 14.21%
Ratios/Supplemental data
Net assets, end of period (in 000's) ....................... $ -- $ 1,264 $ 877
Ratio of expenses to average net assets .................... 1.15%(f) 1.15% 1.30%
Ratio of net investment income to average net assets ....... 0.08%(f) 0.69% (0.39)%
Ratio of expense waivers to average net assets(d) .......... --(f) 0.03% 0.06%
Portfolio turnover ......................................... 33% 95% 98%
Paid from realized net short-term gain ..................... $ 0.28 $ 0.12 $ --
</TABLE>
- --------------------------------------------------------------------------------
(a) As of September 23, 1998, the No-Load Class was no longer offered and ceased
to exist.
(b) Per share information is based on average shares outstanding. (c) Based on
net asset value. (d) This voluntary expense decrease is reflected in both the
expense and net
investment income ratios shown above.
(e) Not annualized.
(f) Annualized.
(See Notes which are an integral part of the Financial Statements)
25
<PAGE>
Growth with Income Portfolio: Financial Adviser Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------------------
1998 1997 1996 1995(a) 1994
------------ ----------------- ----------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period .............. $ 18.97 $ 16.69 $ 18.28 $ 15.99 $ 16.50
-------- --------- --------- -------- --------
Income from investment operations
Net investment income ............................ 0.37 0.26(b) 0.60(b) 0.27 0.35
Net realized and unrealized gain (loss) on
investments ...................................... (0.62) 4.78 1.60 3.19 0.18
-------- --------- --------- -------- --------
Total from investment operations ................ (0.25) 5.04 2.20 3.46 0.53
-------- --------- --------- -------- --------
Less distributions
Distributions from net investment income ......... (0.34) (0.43) (0.86) (0.33) (0.30)
Distributions from net realized gain on
investments ...................................... (2.35) (2.33) (2.93) (0.84) (0.74)
-------- --------- --------- --------- ---------
Total distributions ............................. (2.69) (2.76) (3.79) (1.17) (1.04)
-------- --------- --------- --------- ---------
Net Asset Value, end of period .................... $ 16.03 $ 18.97 $ 16.69 $ 18.28 $ 15.99
======== ========= ========= ========= =========
Total return(c) ................................... (1.61)% 34.27% 13.73% 23.30% 3.30%
Ratios/Supplemental data
Net assets, end of period (in 000's) ............. $ 37,256 $ 37,274 $ 31,571 $ 35,643 $ 52,595
Ratio of expenses to average net assets .......... 1.61% 1.62% 1.77% 1.59% 1.55%
Ratio of net investment income to average net
assets ........................................... 0.16% 1.49% 3.57% 1.72% 1.88%
Ratio of waiver to average net assets(d) ......... -- 0.05% 0.06% -- --
Portfolio turnover ............................... 14% 61% 85% 12% 35%
Paid from realized net short-term gain ........... $ 0.31 $ -- $ 0.06 $ -- $ 0.14
</TABLE>
- --------------------------------------------------------------------------------
(a) On February 21, 1995, Freedom Capital Management Corporation became the
Investment Adviser.
(b) Per share information is based on average shares outstanding. (c) Based on
net asset value, which does not reflect the sales charge payable
on purchases of shares. Effective January 31, 1998, the Portfolio imposed
a maximum sales charge of 4.50%.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
26
<PAGE>
Growth with Income Fund Portfolio: No-Load Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------------
1998(a) 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Asset Value, beginning of period ................... $ 18.77 $ 16.71 $ 18.28
---------- --------- ---------
Income from investment operations
Net investment income ................................. 0.43(b) 0.32(b) 0.39(b)
Net realized and unrealized gain (loss) on investments 0.05 4.75 1.86
---------- --------- ---------
Total from investment operations ..................... 0.48 5.07 2.25
---------- --------- ---------
Less distributions
Distributions from net investment income .............. (0.39) (0.68) (0.89)
Distributions from net realized gain on investments+ .. (2.35) (2.33) (2.93)
---------- --------- ---------
Total distributions .................................. (2.74) (3.01) (3.82)
---------- --------- ---------
Net Asset Value, end of period ......................... $ 16.51 $ 18.77 $ 16.71
========== ========= =========
Total return(c) ........................................ 2.83%(e) 34.89% 14.06%
Ratios/Supplemental data
Net assets, end of period (in 000's) .................. $ -- $ 800 $ 621
Ratio of expenses to average net assets ............... 1.07%(f) 1.17% 1.28%
Ratio of net investment income to average net assets .. 0.58%(f) 1.84% 2.42%
Ratio of waiver to average net assets(d) .............. --(f) 0.05% 0.06%
Portfolio turnover .................................... 14% 61% 85%
+Paid from realized net short-term gain ............... $ 0.31 $ -- $ 0.06
</TABLE>
- --------------------------------------------------------------------------------
(a) As of September 23, 1998, the No-Load Class was no longer offered and ceased
to exist.
(b) Per share information is based on average shares outstanding. (c) Based on
net asset value. (d) This voluntary expense decrease is reflected in both the
expense and net
investment income ratios shown above.
(e) Not annualized.
(f) Annualized.
(See Notes which are an integral part of the Financial Statements)
27
<PAGE>
Bond Portfolio: Financial Adviser Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------------------
1998 1997 1996 1995(a) 1994
----------- ----------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ................... $ 10.28 $ 10.00 $ 10.21 $ 9.66 $ 10.67
-------- --------- --------- -------- --------
Income from investment operations
Net investment income ................................. 0.54 0.51 (b) 0.52(b) 0.52 0.48
Net realized and unrealized gain (loss) on
investments ........................................... 0.32 0.31 (0.14) 0.49 (0.84)
-------- --------- --------- -------- --------
Total from investment operations ..................... 0.86 0.82 0.38 1.01 (0.36)
-------- --------- --------- -------- --------
Less distributions
Distributions from net investment income .............. (0.61) (0.54) (0.59) (0.46) (0.53)
Distributions from net realized gain on
investments ........................................... -- -- -- -- (0.12)
-------- --------- --------- -------- --------
Total distributions .................................. (0.61) (0.54) (0.59) (0.46) (0.65)
-------- --------- --------- -------- --------
Net asset value, end of period ......................... $ 10.53 $ 10.28 $ 10.00 $ 10.21 $ 9.66
======== ========= ========= ======== ========
Total return(c) ........................................ 8.69% 8.45% 3.78% 10.80% (3.60)%
Ratios/Supplemental data
Net assets, end of period (in 000's) .................. $ 60,080 $ 63,557 $ 70,166 $ 77,419 $ 76,769
Ratio of expenses to average net assets ............... 1.47% 1.43% 1.47% 1.45% 1.43%
Ratio of net investment income to average net
assets ................................................ 4.69% 5.07% 5.19% 5.38% 4.67%
Ratio of expense waivers to average net assets(d) ..... -- 0.04% 0.05% -- --
Portfolio turnover .................................... 33% 142% 93% 53% 41%
</TABLE>
- --------------------------------------------------------------------------------
(a) On February 21, 1995, Freedom Capital Management Corporation became the
Investment Adviser.
(b) Per share information is based on average shares outstanding. (c) Based on
net asset value which does not reflect the sales charge payable on
purchases of shares. Effective May 8, 1995, the Portfolio no longer
imposed a one time sales charge.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
28
<PAGE>
Bond Portfolio: No-Load Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------------
1998(a) 1997 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Asset Value, beginning of period ........................ $ 10.34 $ 10.04 $ 10.21
--------- --------- ---------
Income from investment operations
Net investment income ...................................... 0.57 (b) 0.57(b) 0.55(b)
Net realized and unrealized gain (loss) on investments ..... 0.28 0.30 (0.16)
--------- --------- ---------
Total from investment operations .......................... 0.85 0.87 0.39
--------- --------- ---------
Less distributions
Distributions from net investment income ................... (0.67) (0.57) (0.56)
Distributions from net realized gain on investments ........ -- -- --
--------- --------- ---------
Total distributions ....................................... (0.67) (0.57) (0.56)
--------- --------- ---------
Net asset value, end of period .............................. $ 10.52 $ 10.34 $ 10.04
========= ========= =========
Total return(c) ............................................. 8.51%(e) 8.92% 3.88%
Ratios/Supplemental data
Net assets, end of period (in 000's) ....................... $ -- $ 2,221 $ 1,988
Ratio of expenses to average net assets .................... 0.94%(f) 0.93% 0.99%
Ratio of net investment income to average net assets ....... 5.29%(f) 5.57% 5.57%
Ratio of expense waivers to average net assets(d) .......... --(f) 0.04% 0.05%
Portfolio turnover ......................................... 33% 142% 93%
</TABLE>
- --------------------------------------------------------------------------------
(a) As of September 23, 1998, the No-Load Class was no longer offered and ceased
to exist.
(b) Per share information is based on average shares outstanding. (c) Based on
net asset value. (d) This voluntary expense decrease is reflected in both the
expense and net
investment income ratios shown above.
(e) Not annualized.
(f) Annualized.
(See Notes which are an integral part of the Financial Statements)
29
<PAGE>
Managed Total Return Portfolio: Financial Adviser Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Year Ended September 30,
---------------------------------------------------------------------
1998 1997 1996 1995(a) 1994
----------- ---------------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ................... $ 12.06 $ 11.45 $ 11.65 $ 11.24 $ 12.03
-------- -------- -------- -------- --------
Income from investment operations
Net investment income ................................. 0.29 0.28(b) 0.42(b) 0.28 0.18
Net realized and unrealized gain (loss) on
investments ........................................... (0.08) 1.55 0.40 1.18 (0.16)
-------- -------- -------- -------- --------
Total from investment operations ..................... 0.21 1.83 0.82 1.46 0.02
-------- -------- -------- -------- --------
Less dividends
Distributions from net investment income .............. (0.31) (0.32) (0.50) (0.30) (0.31)
Distributions from net realized gain on
investments ........................................... (1.15) (0.90) (0.52) (0.75) (0.50)
-------- -------- -------- -------- --------
Total distributions .................................. (1.46) (1.22) (1.02) (1.05) (0.81)
-------- -------- -------- -------- --------
Net asset value, end of period ......................... $ 10.81 $ 12.06 $ 11.45 $ 11.65 $ 11.24
======== ======== ======== ======== ========
Total return(c) ........................................ 1.75% 17.42% 7.58% 14.30% 0.10%
Ratios/Supplemental data
Net assets, end of period (in 000's) .................. $ 9,762 $ 11,606 $ 12,123 $ 14,749 $ 17,515
Ratio of expenses to average net assets ............... 2.65% 2.08% 2.21% 2.09% 1.94%
Ratio of net investment income to average net
assets ................................................ 1.40% 2.26% 3.68% 2.29% 1.60%
Ratio of expense waivers to average net assets(d) ..... -- 0.11% 0.06% -- --
Portfolio turnover .................................... 98% 73% 159% 50% 50%
Paid from realized net short-term gain ................ $ 0.11 $ -- $ 0.01 $ -- $ 0.13
</TABLE>
- --------------------------------------------------------------------------------
(a) On February 21, 1995, Freedom Capital Management Corporation became
Investment Adviser.
(b) Per share information is based on average shares outstanding. (c) Based on
net asset value, which does not reflect the sales charge payable
on purchases of shares. Effective January 31, 1998, the Portfolio imposed
a maximum sales charge of 4.50%.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
30
<PAGE>
International Portfolio: Financial Adviser Class
Financial Highlights
- --------------------------------------------------------------------------------
Selected data for a share outstanding throughout the:
<TABLE>
<CAPTION>
Period
Ended
September
30,
--------------
1998(a)
--------------
<S> <C>
Net Asset Value, beginning of period .......................... $ 10.00
----------
Income from investment operations
Net investment loss .......................................... (0.07)(b)
Net realized and unrealized loss on investments .............. (1.66)
----------
Total from investment operations ............................ (1.73)
----------
Less distributions
Distributions from net investment income ..................... --
Distributions from net realized gain on investments+ ......... --
----------
Total distributions ......................................... --
----------
Net Asset Value, end of period ................................ $ 8.27
==========
Total return(c) ............................................... (17.30)%(d)
Ratios/Supplemental data
Net assets, end of period (in 000's) ......................... $ 10,196
Ratio of expenses to average net assets ...................... 2.72%(e)
Ratio of net investment loss to average net assets ........... (2.50)%(e)
Ratio of expense waivers to average net assets ............... --(e)
Portfolio turnover ........................................... 18%
+Paid from realized net short-term gain ...................... $ --
</TABLE>
- --------------------------------------------------------------------------------
(a) Portfolio commenced investment operations on June 6, 1998. (b) Per share
information is based on average shares outstanding. (c) Total Return for the
period from commencement of operations (June 6, 1998)
through September 30, 1998, based on net asset value, which does not reflect
the sales charge payable on purchases of shares. The fund imposes a maximum
sales charge of 4.50%.
(d) Not annualized.
(e) Annualized.
(See Notes which are an integral part of the Financial Statements)
31
<PAGE>
FundManager Portfolios
Notes to Financial Statements
September 30, 1998
- --------------------------------------------------------------------------------
1. Description and Shares of the Portfolios. FundManager Portfolios (the
"Trust") consists of a series of six separately managed portfolios
(collectively, the "Portfolios"), each with distinct investment objectives.
Following is the investment objective of each of the six portfolios presented
herein: Aggressive Growth Portfolio (capital appreciation without regard to
current income), Growth Portfolio (long-term capital appreciation with current
income a secondary consideration), Growth with Income Portfolio (combination of
capital appreciation and current income), Bond Portfolio (high level of current
income), Managed Total Return Portfolio (high total return, through capital
appreciation and current income), and International Portfolio (long-term capital
appreciation without regard to current income). The Trust is registered under
the Investment Company Act of 1940, as amended, (the "Act") as an open-end,
diversified management investment company established as a "Delaware business
trust." The Trust offers a Financial Adviser Class of shares. The No-Load Class
of shares was liquidated on September 23, 1998 for all applicable portfolios.
2. Significant Accounting Policies. The following is a summary of the Trust's
significant accounting policies:
(A) Security Valuation. Shares of other open-end investment companies are
valued at their net asset value as reported by such companies. In the
absence of readily available market quotations, investments are valued at
fair value as determined by the Board of Trustees (the "Trustees").
(B) Security Transactions and Related Investment Income. Investment
transactions are accounted for on the trade date. Dividend income is
recorded on the ex-dividend date. Interest income is accrued as earned.
Identified cost of investments sold is used to calculate gains and losses
for both financial statement and federal income tax purposes.
(C) Expense Allocation. The Portfolios bear all costs of their operations
other than expenses specifically assumed by the investment adviser or the
distributors. Expenses directly attributable to a Portfolio are charged to
that Portfolio. Expenses incurred by the Trust with respect to any two or
more Portfolios are allocated in proportion to the net asset levels of each
Portfolio; except where allocations of direct expenses to each Portfolio can
otherwise be made fairly.
(D) Federal Income Taxes. Each Portfolio is treated as a separate taxable
entity for federal tax purposes. Each Portfolio has qualified and intends to
continue to qualify as a "regulated investment company" under Subchapter M
of the Internal Revenue Code, as amended, and to distribute substantially
all of its taxable income, including any net realized gains, to its
shareholders.
Accordingly, no provision for federal income or excise tax is required. At
September 30, 1998, the Bond Portfolio has net capital loss carryforwards on
the basis of identified cost, for federal income tax purposes of
approximately $3,009,015. These capital loss carryforwards will be used to
offset any future realized gains to the extent permitted by the Internal
Revenue Code and thus will reduce the amount of distributions to
shareholders which would otherwise be necessary to relieve the Bond
Portfolio of any liability for federal income tax. The capital losses of
$478,849, $1,762,365, and $767,801 will expire September 30, 2005, September
30, 2004, and September 30, 1999, respectively.
(E) Distributions to Shareholders. Dividends and distributions to
shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted account-
32
<PAGE>
FundManager Portfolios
Notes to Financial Statements
- --------------------------------------------------------------------------------
ing principles. These differences are primarily due to losses deferred on
wash sales, post October 31 losses, and short-term capital gain
distributions received by the Portfolios from other open-end investment
companies.
(F) Use of Estimates. The preparation of financial statements in accordance
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of increases and decreases in net assets from operations during the
reporting period. Actual results could differ from those estimates.
(G) Reclassification of Net Asset Accounts. During the year ended September
30, 1998, the Portfolios reclassified the effects of certain differences
between the financial statement amounts and distributions determined in
accordance with income tax regulations. These differences were reclassified
[increase/(decrease)] between undistributed net investment income and
accumulated net realized gain/(loss) on investments:
<TABLE>
<CAPTION>
Accumulated
Undistributed Net Realized
Net Gain/(Loss)
Investment on
Income Investments
--------------- ---------------
<S> <C> <C>
Aggressive Growth
Portfolio ................ $725,034 $(725,034)
Growth Portfolio ......... 554,267 (554,267)
Growth with Income
Portfolio ................ 749,924 (749,924)
Bond Portfolio ........... 152,708 (152,708)
Managed Total Return
Portfolio ................ 109,429 (109,429)
</TABLE>
3. Advisory Fees and Other Transactions with Affiliates.
(A) Advisory Fees. The Trust retains Freedom Capital Management Corporation
("Freedom") to act as Investment Adviser ("Adviser"). Freedom is responsible
for the investment management of each Portfolio's assets, including the
responsibility for making the investment decisions and placing orders for
the purchase and sale of the Portfolios' investments directly with the
issuers or with brokers or dealers selected by it in its discretion,
including the distributors. Freedom also furnished to the Trustees, who have
overall responsibility for the business affairs of the Trust, periodic
reports on the investment performance of the Portfolios. For its services as
Adviser, Freedom receives from each Portfolio a fee, payable monthly, at the
annual rate of 0.50% of each Portfolio's average daily net assets up to $500
million and 0.40% of average daily net assets in excess of $500 million.
(B) Administration. Federated Administrative Services ("FAS"), an indirect,
wholly-owned subsidiary of Federated Investors, Inc., provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Portfolios. FAS provides these
at an annual rate which relates to the average aggregate daily net assets of
the Portfolios as specified below:
<TABLE>
<CAPTION>
Maximum
Administrative Average Aggregate
Fee Daily Net Assets
---------------- ------------------------------------
<S> <C>
.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
</TABLE>
The administrative fee received during any fiscal year shall be at least
$75,000 per Portfolio. FAS may voluntarily choose to waive a portion of its
fee or minimums from time to time at its sole discretion.
(C) Distribution Fee and Shareholder Servicing Expenses. Edgewood Services,
Inc., Freedom Distributors Corporation, Sutro & Co., Inc., and Tucker
Anthony Incorporated (the "Distributors") are co-
33
<PAGE>
FundManager Portfolios
Notes to Financial Statements
- --------------------------------------------------------------------------------
distributors of the Trust. The Trust has adopted a non-compensatory
Distribution Plan and Agreement (the "Plan") pursuant to Rule 12b-1 of the
Act for the Financial Adviser Class of shares. The Plan provides for a
monthly payment by the Portfolios to the Distributors in amounts
representing actual expenses incurred by the Distributors for marketing
costs and services rendered in distributing the Portfolios' Financial
Adviser Class of shares at an annual rate not to exceed 0.50% of the average
daily net assets of each Portfolio's Financial Adviser Class of Shares. Up
to a maximum of 0.25% of such payments may be made as Shareholder Servicing
Expenses pursuant to contracts that the Trust has with various banks, trust
companies, broker-dealers (other than the Distributors) or other financial
organizations (collectively, "Service Organizations") to provide
administrative services to the Trust, such as maintaining shareholder
accounts and records, for shares owned by Financial Adviser Class
shareholders with whom the Service Organization has a relationship.
(D) Transfer and Dividend Disbursing Agent Fees and Expenses. Federated
Shareholder Services Company ("FSSC"), a subsidiary of Federated Investors,
Inc. serves as transfer agent, dividend disbursing agent and shareholder
servicing agent for the Portfolios.
(E) Trustees' Fees. Trustees who are not affiliated with Freedom receive
compensation and out-of-pocket expenses from each Portfolio.
4. Investment Transactions. Purchase and sale transactions for the period ended
September 30, 1998, were as follows:
<TABLE>
<CAPTION>
Portfolios Purchases Sales
- -------------------------------- -------------- -------------
<S> <C> <C>
Aggressive Growth Portfolio $13,264,505 $24,355,208
Growth Portfolio $12,206,180 $19,438,490
Growth with Income Portfolio $ 8,765,209 $ 5,890,000
Bond Portfolio $18,560,472 $25,649,017
Managed Total Return Portfolio $ 8,945,051 $10,041,491
International Portfolio $13,127,898 $ 1,759,511
</TABLE>
5. Expense Offset Arrangements. Each Portfolio's Statement of Operations
reflects custodial earnings credits. These amounts are used to offset the
custody fee payable by the Portfolios to the custodian bank. The credits are
earned when the Portfolio maintains a balance of uninvested cash at the
custodian bank.
6. Year 2000 Issue (Unaudited). Similar to other financial organizations, the
Trust could be adversely affected if the computer systems used by the Trust's
service providers do not properly process and calculate date-related information
and data from and after January 1, 2000. The Trust's service providers,
including the Adviser and Administrator, are taking measures that they believe
are reasonably designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that comparable steps
are being taken by each of the Trust's other service providers. At this time,
however, there can be no assurance that these steps will be sufficient to avoid
any adverse impact to the Trust.
34
<PAGE>
FundManager Portfolios
Report of Independent Auditors
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of FundManager Portfolios:
We have audited the accompanying statement of assets and liabilities, including
the schedules of investments of FundManager Portfolios (comprising,
respectively, Aggressive Growth, Growth, Growth with Income, Bond, Managed Total
Return, and International Portfolios, collectively, the "Trust") as of September
30, 1998, and the related statement of operations for the period then ended, the
statement of changes in net assets and the financial highlights for each of the
periods presented therein. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of September 30, 1998, by correspondence with the custodian
and a broker. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting FundManager Portfolios at September
30, 1998, the results of their operations for the period then ended, and changes
in their net assets and their financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 13, 1998
<PAGE>
[logo]
FundManagerPortfolios
- -----------------------------------------------------------
Selecting Leading Fund Managers for Investors Since 1984
[end logo]
Investment Adviser
Freedom Capital Management Corporation
One Beacon Street
Boston, MA 02108
For Shareholder Information: (800) 344-9033
Distributors
Freedom Distributors Corporation
One Beacon Street
Boston, MA 02108
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, PA 15237-5829
This report is for the information of the shareholders of the FundManager
Portfolios. Its use in connection with any offering of the Portfolios' shares is
authorized only in case of a concurrent or prior delivery of the Portfolios'
current prospectus.
G01933-01 (11/98)
[logo]
FundManagerPortfolios
- -----------------------------------------------------------
Selecting Leading Fund Managers for Investors Since 1984
[end logo]
Annual Report
September 30, 1998
Aggressive Growth Portfolio
Growth Portfolio
Growth with Income Portfolio
Bond Portfolio
Managed Total Return Portfolio
International Portfolio
