PRESIDENT'S MESSAGE
May 15, 1998
[Graphic]
John J. Danello
President
Dear Fellow Shareholder:
During the past six months since our last report, the unprecedented bull market
in U.S. equities has continued unabated. Lauren Rublin of Barron's, a business
and financial weekly, captures the current market sentiment by observing that
"The gravity-defying Dow Jones Industrial Average has doubled, and then some, in
the past three years. The economy's stamina has put the Energizer Bunny to
shame. Inflation is on the endangered-species list. Alan Greenspan sits atop
Mount Olympus, and by dint of Viagra alone, sex has surpassed investing as the
national obsession. All of which begs a familiar question for U.S. investors:
Does it get any better than this?"
Analysts with enough grey hair to recall the last extended bear market in the
early 1970's note that it is hard to identify a quantitative measure of market
valuation that does not make stocks look expensive based on historical
experience. The chart below depicts the market value of equities as a percent of
U.S. gross domestic product. Based on first quarter 1998 figures, the stock
market exceeds the size of the U.S. economy by 160%! The previous high was in
1929 when stock's value approximated 85% of the economy. From a long-term
perspective, valuations appear to be disturbingly high.
THE MARKET VALUE OF EQUITIES
AS A PERCENT OF U.S. GROSS DOMESTIC PRODUCT
VALUE DATE
Latest 161.50% March 98
Maximum 161.51% March 98
Average 57.00%
Median 55.76%
Minimum 24.32% April 42
Source: Crandall, Pierce & Company 1998
Despite the lofty valuations the bullish Wall Street analysts argue that
liquidity appears to be ample, inflation (excluding financial assets) dormant
and there is no recession on the immediate horizon. In brief, investment
managers remain wary of the lofty valuations but can't identify a catalyst for a
major [over 10%] decline in the markets.
Burton Malkiel, professor of economics at Princeton University, recently
authored an editorial in The Wall Street Journal entitled "Can Wall Street
Continue Its High-Wire Act?" [April 13, 1998]. Professor Malkiel noted his
discomfort with the rich valuation of U.S. stocks, observing that U.S. stocks
are likely to produce considerably lower returns than in the recent past. He
noted that "The best policy for investors is to reduce risk by diversifying
broadly -- especially into assets that tend to have a low correlation with U.S.
stocks. Over the past 10 years, an investor could do no better than to put his
entire portfolio into large-capitalization U.S. stocks. Ten years from now, I
believe investors will be glad that they diversified their portfolios into
small-cap U.S. stocks, real estate, foreign stocks (including those from the
battered-down emerging markets) and even bonds. DIVERSIFICATION DOES NOT
GUARANTEE THE BEST RETURNS, BUT IT DOES ENSURE THAT YOU WILL HAVE SOME
PARTICIPATION IN THE BEST MARKETS, AND IT SHOULD CERTAINLY ALLOW YOU TO SLEEP
BETTER AT NIGHT BY REDUCING RISK."
Since 1984 we have embraced the philosophy expressed by Professor Malkiel and we
have been managing each of the FundManager Portfolios by creating broadly
diversified mutual fund portfolios for our investors. Although we can not
eliminate investment risk and the volatility of the markets, our goal is to
provide our investors with consistent returns with lower volatility than the
broader markets. We seek to achieve this goal by maximizing diversification
within each FundManager Portfolio on three levels: (1) the number of individual
securities (stocks, bonds, etc.); (2) the number of different asset classes
(small-cap stocks, mid-cap stocks, large-cap stocks, growth stocks, high-yield
stocks, government bonds, corporate bonds, etc.); and (3) the number of
different investments styles (growth, value, etc.). The virtues of
diversification have been overlooked by many investors over the last several
years since the markets have rewarded investors who concentrated their
portfolios in large-capitalization stocks. We are confident, however, that over
the longer term the diversification provided by each of our FundManager
Portfolios will "ensure that you have some participation in the best markets and
allow you to sleep better at night by reducing risk."
We are pleased to announce the addition of the International Portfolio to the
FundManager Family. The argument for international investing is a powerful one.
Today, some of the fastest growing economies are found abroad. In addition, more
than two-third's of the world's stock market value is traded outside of the
United States. The International Portfolio will be widely diversified to tap
this foreign potential, including international, global, and emerging markets
funds. The U.S. stock markets have delivered strong returns the past few years.
If you aren't sure that U.S. markets will consistently outperform the rest of
the world, you should probably consider investing a portion of your assets
globally.
Respectfully submitted,
[Graphic]
ECONOMIC DISCUSSION AND ANALYSIS
[Graphic]
Michael D. Hirsch
Chief Investment Officer
Dear Fellow Shareholder:
THE ECONOMY AND MARKETS
The usual tug of war between opposing trends in the economy was especially
pronounced as the first quarter came to a close. On the one side, the effects of
the economic difficulties in Asia pulled the economy to a slower rate of growth;
while, on the other side, strong domestic demand in the first quarter pulled the
economy higher. As if that were not enough, each of these two opponents seemed
to be disguising its intention.
The consensus economic forecast was correct as we experienced growth in the
first quarter of 1998 and was stronger than had been originally expected, with
most of the forecasters believing the economy will grow at a 3.5% rate. Imbedded
in that rate, however, are two opposing forces. Consumer demand, measured by the
real personal consumption expenditure number in the GDP accounts, grew by
approximately 5.5% during the first quarter. Since these expenditures account
for nearly two-thirds of GDP, growth was significantly higher than 3.5% without
significant drag elsewhere. GDP was reduced by approximately 1.0% by the effect
of Asian difficulties on U.S. net exports, and by approximately 0.5% by a change
in the amount of inventory being accumulated in the first quarter versus the
amount in the fourth quarter.
It had been widely expected that the Asian difficulties would slow U.S. growth.
Just how much growth will slow, however, and when it will do so, remains in
doubt. It also appears that the early effects of the Asian crisis have been, in
fact, stimulative rather than depressing. Interest rates have fallen, oil prices
came down sharply before recently rising, and commodity prices in general have
been quite soft in the absence of Asian demand. All of these, on balance,
contribute to the growth of the economy rather than retard it. As we turn to the
forces on the other side, the strength of consumer demand is impressive.
Real disposable income growth is strong enough that consumer spending growth has
picked up while the savings rate has actually gone up as well. This bodes well
for future spending growth. In addition, home sales have been very strong, which
should translate into spending on home furnishings and appliances.
We tend to believe that the forces pulling the economy slower will prevail over
the strong early showing of the consumer. Corporate earnings could begin to grow
more slowly during this period, putting pressure on equity valuations. But, the
pressure would be less than would be the case with rising interest rates. This
is, however, a very close call. It will be especially important to see signs
both that the economic difficulties in Asia are starting to have an impact on
net exports and that the consumer is beginning to slow the rate of increase in
spending.
First quarter returns in the stock market were impressive. For only the third
time in the last 10 years, the S&P 500 Index* achieved double-digit quarterly
performance (+13.5%). The NASDAQ was even more impressive (up 17%), while the
Russell 2000 Small Stock Index** was up 10% for the quarter [statistics courtesy
of Steven Leuthold, Chairman of The Leuthold Group, an investment research
organization]. Despite this near-term, favorable momentum in the small cap stock
sector, large cap stocks, especially large cap growth stocks, continued to
perform better as they have over the last several years. Earnings are the key to
higher stock prices, although the market throughout the first quarter appeared
to slough off earnings disappointments and focus instead on the low inflation
rate and the continuing strength of the economy. Until either rising interest
rates or disappointing profits become evident, the markets apparently will
continue to be driven by the ample liquidity provided by mutual fund investors
and, more recently, foreigners. However, the lofty valuation of the equity
markets do not provide much room for disappointment of any kind.
Given this backdrop, we believe now is a good time to diversify internationally.
European investments, on balance, still appear to be undervalued compared to
U.S. equities. Additionally, many of the factors that helped buoy U.S. stock
prices earlier in this decade are starting to take hold in Europe. For example,
merger and acquisition activity is increasing, particularly within the financial
sector, and corporations are restructuring their operations to improve
profitability. Furthermore, with the continent scheduled to go to a single
currency in 1999, new investment opportunities are likely to emerge.
Sincerely,
[Graphic]
* The 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.
** The Russell 2000 Small Stock Index is an unmanaged capitalization weighted
index consisting of 2,000 small capitalization common stocks.
Investments cannot be made in an index.
FUNDMANAGER PORTFOLIOS AND ANALYSIS
[Graphic]
Martin S. Orgel
Assistant Portfolio Manager
FUNDMANAGER AGGRESSIVE GROWTH PORTFOLIO is currently targeted toward the mid-cap
range of the market (funds buying stocks with market capitalization in the $1
billion - $5 billion range). While stocks of the largest multinational firms
(like Coca-Cola, Gillete, and Microsoft) have been the darlings of the stock
market for the past few years, we believe the equity market has begun to broaden
its base. Indicative of this belief, we witnessed a spectacular 16.12% return
for T. Rowe Price Mid-Cap Growth (a holding within FundManager Aggressive Growth
Portfolio) during the first quarter of 1998. Other mid-capitalization focused
funds within the portfolio include Barron Asset and FPA Capital. We also
participated in the upsurge of large-capitalization growth stocks, particularly
in the technology sector, with the 15.27% return of Harbor Capital Appreciation
in the first quarter. Our larger than average effective cash allocation at
18.4%, primarily the result of Brandywine's portfolio manager Foster Freiss
shifting more than two-thirds of his fund into cash after becoming extremely
cautious during a visit to many economically disturbed Asian countries, served
as a modest drag on our performance. Since the conclusion of our semi-annual
reporting period, we have liquidated our position in Brandywine for reasons to
be further discussed later in this letter.
FUNDMANAGER GROWTH PORTFOLIO has been tactically shifting assets from a more
aggressive growth orientation towards a more balanced mix between growth and
value styles. After having ridden the strength of large-cap growth funds like
Vanguard Index Trust Growth (+16.20% first quarter) and Davis NY Venture over
this period, our valuation models indicate a more prudent mix of value based
funds going forward. To this end, we have shifted specific fund allocations to
arrive at a 55% growth - 45% value level. Notable standouts from our value funds
include the solid 11.52% return for Vanguard Index Trust Value and 10.75% for
Sound Shore during the past quarter. We have also reduced our position in
long-time holding, Guardian Park Avenue, after news surfaced that portfolio
manager Chuck Albers was leaving to take another position with Oppenheimer
Funds, Inc. We will continue to monitor the situation and then make a final
decision regarding the future of this, our only quantitatively managed fund, in
the portfolio. Another factor helping to propel the performance of FundManager
Growth Portfolio was its overweighting in the financial service sector of 21.4%
relative to its Morningstar benchmark of 16.4%. Many of underlying managers have
expressed a strong belief that the wave of mergers and consolidation among the
banks, brokerage firms, and insurance companies within the financial services
industry will continue for some time.
FUNDMANAGER GROWTH WITH INCOME PORTFOLIO continued to provide consistent capital
appreciation along with modest divided income over the period. Given this Fund's
more conservative composition relative to the other FundManager equity
portfolios, its distinctively large capitalization, dividend paying,
value-orientation remains intact. Washington Mutual Investors contributed a
superb 12.24% return over the quarter with several adroit stock picks in the
integrated oil service providers as well as selected stocks in the
telecommunications sector. All of the other funds within the portfolio performed
well, while AIM Charter distinguished itself from among its growth and income
peers with a 11.87% return over the quarter. Portfolio manager Lanny Sachnowitz
has successfully structured AIM Charter to overweight the pharmaceutical and
financial services sectors.
FUNDMANAGER BOND PORTFOLIO maintained its neutral duration stance over most of
the reporting period. While our long-term outlook for inflation remains low, we
continue to envision good real returns from our fixed-income funds. The Vanguard
index bond funds continue to work well in cost effectively mirroring the
performance of our benchmark Lehman Brother Government Corporate Index. Our
specialty funds, consisting of FPA New Income, MAS Fixed Income Portfolio, Bond
Fund of America, MFS Bond, and PIMCO Total Return, add the desired
mortgage-backed, asset-backed, derivative, and international fixed-income
exposure we seek to create in a diversified bond vehicle such as FundManager
Bond Portfolio. Bond Fund of America produced a marvelous 2.35% return during
the quarter on the strength of superior credit selection in the corporate bond
sector, with its team management approach of Capital Research and Management
Company in California.
FUNDMANAGER MANAGED TOTAL RETURN PORTFOLIO produced respectable performance
among its balanced, asset allocation peer group. In January, we liquidated our
position in Brandywine and replaced it with Harbor Capital Appreciation.
Brandywine was placed on our watch list (funds going through a material change)
and was, therefore, no longer eligible for inclusion in this series. Foster
Freiss, lead portfolio manager of Brandywine, had assessed the potential impact
on U.S. corporations of the financial calamity which befell Asia last year. His
judgment was rather dire. Accordingly, he liquidated most of his holdings, going
to a 75% cash position. While in the long run, Mr. Friess' judgment might prove
correct (please note that Mr. Friess has an outstanding long-term track record),
we do not wish to employ mutual funds that engage in significant market-timing
strategies. The mix of funds in each FundManager Portfolio is a carefully
designed matrix of funds, with each fund assigned a well-defined niche.
Brandywine, by going to a 75% cash position, was no longer filling its niche.
Respectfully submitted,
[Graphic]
PERFORMANCE SUMMARY
FINANCIAL ADVISER CLASS
Average Annual Total Returns* for the Period Ended March 31, 1998
AGGRESSIVE GROWTH PORTFOLIO
WITHOUT WITH
SALES CHARGE SALES CHARGE
1 Year 35.23% 29.13%
5 Year 15.28% 14.22%
10 Year 13.76% 13.24%
GROWTH PORTFOLIO
WITHOUT WITH
SALES CHARGE SALES CHARGE
1 Year 39.22% 32.99%
5 Year 18.60% 17.52%
10 Year 14.97% 14.44%
GROWTH WITH INCOME PORTFOLIO
WITHOUT WITH
SALES CHARGE SALES CHARGE
1 Year 35.68% 29.56%
5 Year 17.58% 16.50%
10 Year 14.41% 13.88%
BOND PORTFOLIO
WITHOUT
SALES CHARGE
1 Year 10.42%
5 Year 5.57%
10 Year 7.02%
MANAGED TOTAL RETURN PORTFOLIO
WITHOUT WITH
SALES CHARGE SALES CHARGE
1 Year 20.79% 15.32%
5 Year 10.07% 9.06%
Start of Performance
(August 4, 1998) 9.88% 9.36%
PERFORMANCE SUMMARY
NO LOAD CLASS
Average Annual Total Returns* for the Period Ended March 31, 1998
AGGRESSIVE GROWTH PORTFOLIO
WITHOUT
SALES CHARGE
1 Year 35.78%
Start of Performance
(October 1, 1995) 17.84%
GROWTH PORTFOLIO
WITHOUT
SALES CHARGE
1 Year 39.89%
Start of Performance
(October 1, 1995) 25.29%
GROWTH WITH INCOME PORTFOLIO
WITHOUT
SALES CHARGE
1 Year 36.37%
Start of Performance
(October 1, 1995) 23.66%
BOND PORTFOLIO
WITHOUT
SALES CHARGE
1 Year 11.21%
Start of Performance
(October 1, 1995) 6.75%
* 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.
FUNDMANAGER PORTFOLIOS
SCHEDULE OF INVESTMENTS
MARCH 31, 1998 (UNAUDITED)
AGGRESSIVE GROWTH PORTFOLIO
High capital appreciation. Seeks capital appreciation without regard to current
income.
MARKET
SHARES VALUE
MID CAP FUNDS -- (51.4%)
122 AIM Aggressive Growth Fund $ 6,284
155,492 Barron Asset Fund 8,346,793
201,579 FPA Capital Fund 7,720,464
24 John Hancock Regional Bank Fund
(Class A) 1,383
169,145 T. Rowe Price Mid-Cap Growth
Fund 5,617,307
TOTAL MID CAP FUNDS 21,692,231
LARGE CAP FUNDS -- (30.5%)
227,898 Harbor Capital Appreciation Fund 7,741,704
162,031 Brandywine Fund 5,147,715
TOTAL LARGE CAP FUNDS 12,889,419
GLOBAL FUNDS -- (17.5%)
351,809 Mutual Discovery Fund 7,391,517
TOTAL INVESTMENTS AT MARKET VALUE
(COST $33,285,429)(A) 41,973,167
OTHER ASSETS NET OF LIABILITIES 233,888
NET ASSETS (100.0%) $ 42,207,055
[Graphic representation omitted; see Appendix A.]
GROWTH PORTFOLIO
Modest capital appreciation. Primarily seeks long-term capital appreciation.
Current income is a secondary consideration.
MARKET
SHARES VALUE
GROWTH FUNDS -- (54.2%)
222,380 Davis New York Venture Fund $ 5,368,254
70,424 Guardian Park Avenue Fund, Inc. 3,596,537
341,299 Vanguard Index Trust Growth Fund 8,918,133
361,541 Yacktman Fund 5,462,884
TOTAL GROWTH FUNDS 23,345,808
VALUE FUNDS -- (45.4%)
7 FPA Paramount Fund, Inc. 99
32,073 Clipper Fund 2,640,575
26,813 Dodge & Cox Stock Fund 2,730,908
138,184 MAS Value Portfolio 2,711,166
118,241 Mutual Beacon Fund 1,824,457
85,988 Sound Shore Fund, Inc. 2,720,651
303,717 Vanguard Index Trust Value Fund 6,924,756
TOTAL VALUE FUNDS 19,552,612
TOTAL INVESTMENTS AT MARKET VALUE
(COST $34,555,404)(B) 42,898,420
OTHER ASSETS NET OF LIABILITIES 202,855
NET ASSETS (100.0%) $ 43,101,275
[Graphic representation omitted; see Appendix B.]
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
SCHEDULE OF INVESTMENTS
MARCH 31, 1998 (UNAUDITED)
GROWTH WITH INCOME PORTFOLIO
Income and modest capital appreciation. Seeks a combination of capital
appreciation and current income.
MARKET
SHARES VALUE
GROWTH AND INCOME FUNDS -- (55.0%)
543,575 AIM Charter Fund $ 7,463,279
284,848 Fundamental Investors Fund 8,608,117
535,979 Lord Abbett Affiliated Fund 8,275,512
TOTAL GROWTH AND INCOME FUNDS 24,346,908
BALANCED FUNDS -- (9.6%)
262,529 UAM FPA Crescent Portfolio 4,260,849
EQUITY INCOME FUNDS -- (35.0%)
158,905 Hotchkis & Wiley Equity
Income Fund 3,621,441
207,346 T. Rowe Price Equity
Income Fund 5,826,420
178,492 Washington Mutual Investors Fund 6,054,457
TOTAL EQUITY INCOME FUNDS 15,502,318
TOTAL INVESTMENTS AT MARKET VALUE
(COST $35,530,758)(C) 44,110,075
OTHER ASSETS NET OF LIABILITIES 177,154
NET ASSETS (100.0%) $ 44,287,229
[Graphic representation omitted; see Appendix C.]
BOND PORTFOLIO
Monthly income. Seeks a high level of current income.
MARKET
SHARES VALUE
SHORT MATURITY FUNDS -- (33.8%)
477,550 FPA New Income Fund $ 5,381,989
444,497 MAS Fixed Income Portfolio 5,387,298
543,173 Vanguard Admiral Funds, Inc. --
Short-Term U.S. Treasury Portfolio 5,480,617
137,047 Vanguard Fixed Income Securities
Fund -- Short-Term U.S. Treasury
Portfolio 1,399,253
TOTAL SHORT MATURITY FUNDS 17,649,157
INTERMEDIATE MATURITY FUNDS -- (53.9%)
386,685 Bond Fund of America, Inc. 5,421,327
396,396 MFS Bond Fund (Class A) 5,375,130
510,882 PIMCO Total Return Fund 5,425,571
624,192 Vanguard Admiral Funds, Inc. --
Intermediate Term U.S. Treasury
Portfolio 6,535,294
363,667 Vanguard Fixed Income Securities
Fund -- Intermediate Term Corporate
Portfolio 3,611,209
169,324 Vanguard Fixed Income Securities
Fund -- Intermediate Term
U.S. Treasury Portfolio 1,806,692
TOTAL INTERMEDIATE
MATURITY FUNDS 28,175,223
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
SCHEDULE OF INVESTMENTS
MARCH 31, 1998 (UNAUDITED)
BOND PORTFOLIO -- CONTINUED
MARKET
SHARES VALUE
LONG MATURITY FUNDS -- (11.2%)
93,608 Vanguard Admiral Funds, Inc. --
Long-Term U.S. Treasury Portfolio 1,024,072
353,502 Vanguard Fixed Income Securities
Fund -- Long-Term Corporate
Portfolio 3,234,546
151,082 Vanguard Fixed Income Securities
Fund -- Long-Term U.S. Treasury
Portfolio 1,604,490
TOTAL LONG MATURITY FUNDS 5,863,108
TOTAL INVESTMENTS AT MARKET VALUE
(COST $50,342,693)(D) 51,687,488
OTHER ASSETS NET OF LIABILITIES 557,494
NET ASSETS (100.0%) $ 52,244,982
[Graphic representation omitted; see Appendix D.]
MANAGED TOTAL RETURN PORTFOLIO
Asset allocation. Seeks high total return through disciplined asset allocation.
MARKET
SHARES VALUE
AGGRESSIVE GROWTH FUNDS -- (15.7%)
14,360 FPA Capital Fund $ 549,992
16,955 Harbor Capital Appreciation Fund 575,958
28,385 Mutual-Discovery Fund (Class Z) 596,365
TOTAL AGGRESSIVE GROWTH FUNDS 1,722,315
GROWTH FUNDS -- (20.4%)
11,443 Clipper Fund 942,092
26,782 Davis New York Venture Fund
(Class A) 646,512
12,501 Guardian Park Avenue Fund, Inc. 638,449
TOTAL GROWTH FUNDS 2,227,053
GROWTH & INCOME FUNDS -- (20.0%)
36,424 Fundamental Investors, Inc. 1,100,746
30,998 T. Rowe Price Equity Income Fund 871,047
13,329 UAM FPA Cresent Portfolio 216,330
TOTAL GROWTH AND INCOME FUNDS 2,188,123
FIXED INCOME FUNDS -- (38.7%)
84,957 Bond Fund of America, Inc. 1,191,100
136,902 MFS Bond Fund 1,856,387
111,580 PIMCO Total Return Fund 1,184,984
TOTAL FIXED INCOME FUNDS 4,232,471
TOTAL INVESTMENTS AT MARKET VALUE
(COST $9,423,874)(E) 10,369,962
OTHER ASSETS NET OF LIABILITIES 566,554
NET ASSETS (100.0%) $ 10,936,516
[Graphic representation omitted; see Appendix E.]
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
SCHEDULE OF INVESTMENTS
MARCH 31, 1998 (UNAUDITED)
(a) Aggregate cost for federal income tax purposes is $33,285,429. The gross
unrealized appreciation is $8,785,680; the gross unrealized depreciation is
$97,942, resulting in net unrealized appreciation of $8,687,738 for federal
income tax purposes.
(b) Aggregate cost for federal income tax purposes is $34,555,404. The gross
unrealized appreciation is $8,343,016; the gross unrealized depreciation is $0,
resulting in net unrealized appreciation of $8,343,016 for federal income tax
purposes.
(c) Aggregate cost for federal income tax purposes is $35,530,758. The gross
unrealized appreciation is $8,579,317; the gross unrealized depreciation is $0,
resulting in net unrealized appreciation of $8,579,317 for federal income tax
purposes.
(d) Aggregate cost for federal income tax purposes is $50,342,693. The gross
unrealized appreciation is $1,344,795; the gross unrealized depreciation is $0,
resulting in net unrealized appreciation of $1,344,795 for federal income tax
purposes.
(e) Aggregate cost for federal income tax purposes is $9,423,874. The gross
unrealized appreciation is $959,528; the gross unrealized depreciation is
$13,440, resulting in net unrealized appreciation of $946,088 for federal income
tax purposes.
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH WITH MANAGED
GROWTH GROWTH INCOME BOND TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Assets:
Investments, at value* $41,973,167 $42,898,420 $44,110,075 $51,687,488 $10,369,962
Cash 373,164 332,940 290,977 587,066 616,856
Receivable for fund shares -- -- 1,200 -- --
sold
Dividend receivable -- -- -- 32,644 10,445
Other receivables -- 452 -- 20,196 9,664
Total assets 42,346,331 43,231,812 44,402,252 52,327,394 11,006,927
Liabilities:
Payable for fund shares 95,116 29,384 -- -- --
redeemed
Administrative fee payable 9,342 9,342 9,342 9,342 6,370
Distribution expense -- 39,065 50,614 39,683 28,933
payable
Custodian fee payable 1,256 1,099 6,796 2,002 8,700
Accrued expenses 33,562 51,647 48,271 31,385 26,408
Total liabilities 139,276 130,537 115,023 82,412 70,411
Net Assets $42,207,055 $43,101,275 $44,287,229 $52,244,982 $10,936,516
Financial Adviser Class:
Shares Outstanding 2,319,437 2,463,916 2,403,053 4,963,676 957,512
Net Assets $40,146,271 $41,622,536 $43,267,311 $50,950,937 $10,936,516
Net Asset Value $17.31 $16.89 $18.01 $10.26 $11.42
No-Load Class:
Shares Outstanding 118,609 87,243 57,262 125,059 --
Net Assets $ 2,060,784 $ 1,478,739 $ 1,019,918 $ 1,294,045 --
Net Asset Value $17.37 $16.95 $17.81 $10.35 --
Net Assets consist of:
Paid in capital $31,777,802 $31,574,031 $31,492,449 $53,730,601 $ 9,212,750
Distributions in excess of
net
investment income (910,577) (576,668) (612,759) (164,309) (70,384)
Accumulated net realized
gain (loss)
on investments 2,652,092 3,760,896 4,828,222 (2,666,105) 848,062
Net unrealized appreciation
on investments 8,687,738 8,343,016 8,579,317 1,344,795 946,088
Net Assets $42,207,055 $43,101,275 $44,287,229 $52,244,982 $10,936,516
*Investments, at cost $33,285,429 $34,555,404 $35,530,758 $50,342,693 $ 9,423,874
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
GROWTH
AGGRESSIVE WITH MANAGED
GROWTH GROWTH INCOME BOND TOTAL RETURN
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C>
Income:
Dividend income $ 283,554 $ 343,969 $ 410,111 $ 1,706,304 $ 229,291
Expenses:
Advisory fee 100,395 100,079 104,406 134,477 27,693
Transfer agent 36,016 31,554 30,634 24,944 14,550
Distribution and
shareholder
service 95,359 96,588 102,001 130,783 27,689
expenses--Financial
Adviser Class
Administrative fee 48,734 48,614 49,170 52,902 30,976
Audit fees 11,000 15,335 15,335 9,217 15,335
Printing & Postage 10,614 8,698 9,809 6,296 5,515
Custodian and fund 18,244 16,824 11,990 19,821 11,540
accounting fees
Legal fees 8,661 16,367 7,624 7,072 3,772
Registration fees 20,967 14,352 13,157 1,417 8,161
Trustee fees 2,547 2,172 2,332 4,215 734
Insurance expense 852 697 735 1,409 239
Miscellaneous 1,054 1,346 1,378 1,101 1,250
expenses
Total expenses 354,443 352,626 348,571 393,654 147,454
Waiver of (879) (809) (883) (1,381) (260)
administrative fee
Custodian earnings (9,903) (14,277) (11,528) (8,373) (10,473)
credits (Note 6)
Net expenses 343,661 337,540 336,160 383,900 136,721
Net investment (60,107) 6,429 73,951 1,322,404 92,570
income (loss)
Realized and
Unrealized Gain
(Loss)
on Investments:
Net realized gains 534,156 1,479,990 1,060,136 589,006 430,458
on investments
Net realized gains
received from
underlying funds 2,669,476 2,075,858 3,416,306 309,005 525,573
Net change in
unrealized
appreciation
(depreciation) (200,765) 1,287,220 (130,383) (301,718) (336,751)
Net realized and
unrealized gain
on investments 3,002,867 4,843,068 4,346,059 596,293 619,280
Net increase in net
assets
resulting from $2,942,760 $4,849,497 $4,420,010 $1,918,697 $ 711,850
operations
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
AGGRESSIVE GROWTH GROWTH PORTFOLIO GROWTH WITH INCOME
PORTFOLIO PORTFOLIO
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER
1998 30, 1998 30, 1998 30,
(UNAUDITED) 1997 (UNAUDITED) 1997 (UNAUDITED) 1997
<S> <C> <C> <C> <C> <C> <C>
INCREASE
(DECREASE) IN
NET ASSETS
FROM:
Operations
Net investment $ (60,107) $ (272,391) $ 6,429 $ 80,281 $ 73,951 $ 501,155
income (loss)
Net realized 3,203,632 3,664,284 3,555,848 5,911,570 4,476,442 5,684,405
gain (loss) on
investments and
underlying
funds
Change in (200,765) 5,133,734 1,287,220 3,662,887 (130,383) 3,631,243
unrealized
appreciation
(depreciation)
Net increase 2,942,760 8,525,627 4,849,497 9,654,738 4,420,010 9,816,803
(decrease) in
net assets
resulting from
operations
Financial Adviser
Class
Dividends and
distributions from:
Net investment (806,597) (147,770) (561,585) (510,906) (669,212) (693,670)
income
Net realized (3,851,235) (4,353,531) (5,379,100) (3,077,506) (5,060,401) (4,130,314)
gains
Total (4,657,832) (4,501,301) (5,940,685) (3,588,412) (5,729,613) (4,823,984)
distributions
Capital share
transactions:
Proceeds from 7,978,685 8,781,300 8,464,873 5,445,210 6,022,463 5,226,373
sales of shares
Reinvestment of 4,313,633 4,412,280 5,552,487 3,236,436 5,287,184 4,215,023
dividends
Payments for (6,635,300) (19,564,579) (4,029,747) (8,184,865) (3,905,853) (8,502,204)
shares redeemed
Total from 5,657,018 (6,370,999) 9,987,613 496,781 7,403,794 939,192
share
transactions
No-Load Class
Dividends and
distributions from:
Net investment (52,885) (14,095) (21,512) (26,438) (17,498) (25,855)
income
Net realized (204,489) (176,417) (190,374) (116,120) (123,574) (97,318)
gains
Total (257,374) (190,512) (211,886) (142,558) (141,072) (123,173)
distributions
Capital share
transactions:
Proceeds from 479,340 696,951 301,031 465,686 261,423 294,004
sales of shares
Reinvestment of 247,873 1,639 203,743 6,380 136,088 16,388
dividends
Payments for (325,518) (417,057) (187,845) (309,640) (137,937) (237,458)
shares redeemed
Total from 401,695 281,533 316,929 162,426 259,574 72,934
share
transactions
Total Increase 4,086,267 (2,255,652) 9,001,468 6,582,975 6,212,693 5,881,772
(Decrease) in
Net Assets
Net Assets:
Beginning of 38,120,788 40,376,440 34,099,807 27,516,832 38,074,536 32,192,764
period
End of period $42,207,055 $38,120,788 $43,101,275 $34,099,807 $ $
44,287,229 38,074,536
Undistributed $ -- $ 9,012 $ -- $ -- $ -- $ --
Net Investment
Income
Shares Outstanding:
Financial Adviser
Class
Beginning of 1,963,321 2,318,177 1,843,969 1,776,631 1,965,232 1,891,259
period
Shares sold 467,073 535,301 497,843 356,666 330,934 298,724
Reinvestment of 275,631 292,718 362,197 230,169 322,193 273,767
dividends
Shares redeemed (386,588) (1,182,875) (240,093) (519,497) (215,306) (498,518)
End of period 2,319,437 1,963,321 2,463,916 1,843,969 2,403,053 1,965,232
No-Load Class
Beginning of 103,510 84,732 70,876 58,324 42,633 37,188
period
Shares sold 18,714 43,615 14,308 30,883 14,232 18,095
Reinvestment of 15,798 106 13,256 397 8,395 1,049
dividends
Shares redeemed (19,413) (24,943) (11,197) (18,728) (7,998) (13,699)
End of period 118,609 103,510 87,243 70,876 57,262 42,633
</TABLE>
<TABLE>
<CAPTION>
BOND PORTFOLIO MANAGED TOTAL
RETURN PORTFOLIO
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
MARCH 31, SEPTEMBER MARCH 31, SEPTEMBER
1998 30, 1998 30,
(UNAUDITED) 1997 (UNAUDITED) 1997
<S> <C> <C> <C> <C>
INCREASE (DECREASE)
IN NET ASSETS
FROM:
Operations
Net investment $ 1,322,404 $ 3,459,316 $ 92,570 $ 263,642
income (loss)
Net realized 898,011 41,868 956,031 1,051,278
gain (loss) on
investments and
underlying
funds
Change in (301,718) 1,923,463 (336,751) 540,852
unrealized
appreciation
(depreciation)
Net increase 1,918,697 5,424,647 711,850 1,855,772
(decrease) in
net assets
resulting from
operations
Financial Adviser
Class
Dividends and
distributions from:
Net investment (1,900,542) (3,534,481) (222,837) (385,086)
income
Net realized -- -- (1,001,878) (889,268)
gains
Total (1,900,542) (3,534,481) (1,224,715) (1,274,354)
distributions
Capital share
transactions:
Proceeds from 3,829,942 27,364,356 672,068 1,198,275
sales of shares
Reinvestment of 967,431 1,647,269 1,182,631 1,320,233
dividends
Payments for (17,384,497) (37,319,454) (2,011,625) (3,616,172)
shares redeemed
Total from (12,587,124) (8,307,829) (156,926) (1,097,664)
share
transactions
No-Load Class
Dividends and
distributions from:
Net investment (56,843) (125,228) -- -
income
Net realized -- -- -- -
gains
Total (56,843) (125,228) -- -
distributions
Capital share
transactions:
Proceeds from 33,162 655,314 -- -
sales of shares
Reinvestment of 56,573 67,264 -- -
dividends
Payments for (997,101) (555,748) -- -
shares redeemed
Total from (907,366) 166,830 -- -
share
transactions
Total Increase (13,533,178) (6,376,061) (669,791) (516,246)
(Decrease) in
Net Assets
Net Assets:
Beginning of 65,778,160 72,154,221 11,606,307 12,122,55
period
End of period $ 52,244,982 $ 65,778,160 $10,936,516 $11,606,30
Undistributed $ -- $ 470,672 $ -- $ 59,883
Net Investment
Income
Shares Outstanding:
Financial Adviser
Class
Beginning of 6,184,570 7,015,708 962,428 1,058,564
period
Shares sold 375,051 2,689,498 57,913 105,534
Reinvestment of 94,303 163,682 108,860 122,005
dividends
Shares redeemed (1,690,248) (3,684,318) (171,689) (323,675)
End of period 4,963,676 6,184,570 957,512 962,428
No-Load Class
Beginning of 214,805 198,015 -- -
period
Shares sold 1,132 64,621 -- -
Reinvestment of 5,475 6,665 -- -
dividends
Shares redeemed (96,353) (54,496) -- -
End of period 125,059 214,805 -- -
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AGGRESSIVE GROWTH PORTFOLIO: FINANCIAL ADVISER CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31,
1998 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $18.44 $16.80 $18.31 $15.57 $16.70 $14.71
PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (0.03)(b) (0.12)(b) 0.12(b) (0.13) (0.08) (0.04)
(operating loss)
Net realized and unrealized
gain
on investments 1.09 3.75 1.64 3.70 0.62 2.87
Total from investment 1.06 3.63 1.76 3.57 0.54 2.83
operations
LESS DISTRIBUTIONS
Distributions from net (0.38) (0.07) (0.38) -- -- --
investment income
Distributions from net
realized gain
on investments+ (1.81) (1.92) (2.89) (0.83) (1.67) (0.84)
Total distributions (2.19) (1.99) (3.27) (0.83) (1.67) (0.84)
NET ASSET VALUE, END OF PERIOD $17.31 18.44 $16.80 $18.31 $15.57 $16.70
TOTAL RETURN(C) 7.00% 24.16% 12.10% 24.30% 3.30% 19.90%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in $40,146 36,200 $38,944 $33,668 $37,766 $31,201
000's)
Ratio of expenses to average 1.71%* 1.62% 1.67% 1.65% 1.70% 1.52%
net assets
Ratio of net investment
income to
average net assets (0.32%)* (0.70%) 0.74% (0.68%) (0.57%) (0.24%)
Ratio of expense waivers to
average
net assets(d) 0.06%* 0.03% 0.06% -- -- --
Portfolio turnover 8% 51% 158% 50% 43% 35%
+Paid from realized net $ -- $0.28 $0.27 $0.04 $0.25 $ --
short-term gain
</TABLE>
* Computed on an annualized basis.
(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.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
AGGRESSIVE GROWTH PORTFOLIO: NO-LOAD CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 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 (operating loss) 0.02(a) (0.04)(a) 0.04(a)
Net realized and unrealized gain on investments 1.07 3.76 1.83
Total from investment operations 1.09 3.72 1.87
LESS DISTRIBUTIONS
Distributions from net investment income (0.47) (0.15) (0.38)
Distributions from net realized gain on investments+ (1.81) (1.92) (2.89)
Total distributions (2.28) (2.07) (3.27)
NET ASSET VALUE, END OF PERIOD $17.37 $18.56 $16.91
TOTAL RETURN(B) 7.17% 24.76% 12.77%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $2,061 $1,921 $1,432
Ratio of expenses to average net assets 1.21%* 1.12% 1.15%
Ratio of net investment income to average net assets 0.18%* (0.25%) 0.24%
Ratio of expense waivers to average net assets(c) 0.06%* 0.03% 0.06%
Portfolio turnover 8% 51% 158%
+Paid from realized net short-term gain $ -- $0.28 $0.27
</TABLE>
* Computed on an annualized basis.
(a) Per share information is based on average shares outstanding.
(b) Based on net asset value.
(c) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GROWTH PORTFOLIO: FINANCIAL ADVISER CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31,
1998 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $17.81 $14.99 $16.14 $14.09 $14.62 $14.40
PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.001(b) 0.04(b) 0.01(b) (0.02) (0.05) 0.02
(operating loss)
Net realized and unrealized
gain
on investments 1.78 4.91 1.85 2.99 0.69 2.10
Total from investment 1.78 4.95 1.86 2.97 0.64 2.12
operations
LESS DISTRIBUTIONS
Distributions from net (0.26) (0.30) (0.24) -- -- --
investment income
Distributions from net realized
gain
on investments+ (2.44) (1.83) (2.77) (0.92) (1.17) (1.90)
Total distributions (2.70) (2.13) (3.01) (0.92) (1.17) (1.90)
NET ASSET VALUE, END OF PERIOD $16.89 $17.81 $14.99 $16.14 $14.09 $14.62
TOTAL RETURN(C) 11.52% 36.92% 13.46% 22.60% 4.50% 16.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in $41,623 $32,835 $26,639 $26,022 $34,205 $21,919
000's)
Ratio of expenses to average 1.71%* 1.70% 1.81% 1.71% 1.71% 1.70%
net assets
Ratio of net investment income
to average
net assets 0.02%* 0.23% 0.05% (0.11%) (0.52%) 0.15%
Ratio of expense waivers to
average
net assets(d) 0.08%* 0.05% 0.06% -- -- --
Portfolio turnover 14% 95% 98% 68% 44% 40%
+Paid from realized net $0.28 $0.12 $0.48 $0.10 $0.22 $0.16
short-term gain
</TABLE>
* Computed on an annualized basis.
(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.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GROWTH PORTFOLIO: NO-LOAD CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 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 (operating loss) 0.04(a) 0.11(a) (0.06)(a)
Net realized and unrealized gain on investments 1.79 4.93 2.02
Total from investment operations 1.83 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 $16.95 $17.84 $15.04
TOTAL RETURN(B) 11.82% 37.59% 14.21%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,479 $1,264 $877
Ratio of expenses to average net assets 1.21%* 1.20% 1.30%
Ratio of net investment income to average net assets 0.52%* 0.69% (0.39)%
Ratio of expense waivers to average net assets(c) 0.08%* 0.05% 0.06%
Portfolio turnover 14% 95% 98%
+Paid from realized net short-term gain $0.28 $0.12 --
</TABLE>
* Computed on an annualized basis.
(a) Per share information is based on average shares outstanding.
(b) Based on net asset value.
(c) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GROWTH WITH INCOME PORTFOLIO: FINANCIAL ADVISER CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31,
1998 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $18.97 $16.69 $18.28 $15.99 $16.50 $15.11
PERIOD
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03(b) 0.26(b) 0.60(b) 0.27 0.35 0.28
Net realized and unrealized gain
on investments 1.67 4.78 1.60 3.19 0.18 1.97
Total from investment 1.70 5.04 2.20 3.46 0.53 2.25
operations
LESS DISTRIBUTIONS
Distributions from net (0.31) (0.43) (0.86) (0.33) (0.30) (0.33)
investment income
Distributions from net realized
gain
on investments+ (2.35) (2.33) (2.93) (0.84) (0.74) (0.53)
Total distributions (2.66) (2.76) (3.79) (1.17) (1.04) (0.86)
NET ASSET VALUE, END OF PERIOD $18.01 $18.97 $16.69 $18.28 $15.99 $16.50
TOTAL RETURN(C) 10.34% 34.27% 13.73% 23.30% 3.30% 15.50%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in $43,267 $37,274 $31,571 $35,643 $52,595 $40,269
000's)
Ratio of expenses to average net 1.62%* 1.67% 1.77% 1.59% 1.55% 1.49%
assets
Ratio of net investment income
to
average net assets 0.34%* 1.49% 3.57% 1.72% 1.88% 1.77%
Ratio of waiver to average net 0.06%* 0.05% 0.06% -- -- --
assets(d)
Portfolio turnover 7% 61% 85% 12% 35% 24%
+Paid from realized net $0.31 $ -- $0.06 $ -- $0.14 $0.09
short-term gain
</TABLE>
* Computed on an annualized basis.
(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.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GROWTH WITH INCOME PORTFOLIO: NO-LOAD CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 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 0.07(a) 0.32(a) 0.39(a)
Net realized and unrealized gain on investments 1.65 4.73 1.86
Total from investment operations 1.72 5.07 2.25
LESS DISTRIBUTIONS
Distributions from net investment income (0.33) (0.68) (0.89)
Distributions from net realized gain on investments+ (2.35) (2.33) (2.93)
Total distributions (2.68) (3.01) (3.82)
NET ASSET VALUE, END OF PERIOD $17.81 $18.77 $16.71
TOTAL RETURN(B) 10.60% 34.89% 14.06%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,020 $800 $621
Ratio of expenses to average net assets 1.12%* 1.17% 1.28%
Ratio of net investment income to average net assets 0.84%* 1.84% 2.42%
Ratio of waiver to average net assets(c) 0.06%* 0.05% 0.06%
Portfolio turnover 7% 61% 85%
+Paid from realized net short-term gain $0.31 $ -- $0.06
</TABLE>
* Computed on an annualized basis.
(a) Per share information is based on average shares outstanding.
(b) Based on net asset value.
(c) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
BOND PORTFOLIO : FINANCIAL ADVISER CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31,
1998 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $10.28 $10.00 $10.21 $9.66 $10.67 $10.28
PERIOD
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.27 0.51(b) 0.52(b) 0.52 0.48 0.60
Net realized and unrealized
gain (loss)
on investments 0.09 0.31 (0.14) 0.49 (0.84) 0.43
Total from investment 0.36 0.82 0.38 1.01 (0.36) 1.03
operations
LESS DISTRIBUTIONS
Distributions from net (0.38) (0.54) (0.59) (0.46) (0.53) (0.54)
investment income
Distributions from net
realized gain
on investments -- -- -- -- (0.12) (0.10)
Total distributions (0.38) (0.54) (0.59) (0.46) (0.65) (0.64)
NET ASSET VALUE, END OF PERIOD $10.26 $10.28 $10.00 $10.21 $9.66 $10.67
TOTAL RETURN(C) 3.53% 8.45% 3.78% 10.80% (3.60%) 10.40%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in $50,951 $63,557 $70,166 $77,419 $76,769 $54,057
000's)
Ratio of expenses to average 1.44%* 1.43% 1.47% 1.45% 1.43% 1.29%
net assets
Ratio of net investment income
to average
net assets 4.90%* 5.07% 5.19% 5.38% 4.67% 5.70%
Ratio of expense waivers to
average
net assets(d) 0.04%* 0.04% 0.05% -- -- --
Portfolio turnover 5% 142% 93% 53% 41% 53%
</TABLE>
* Computed on an annualized basis.
(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.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
BOND PORTFOLIO: NO-LOAD CLASS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 SEPTEMBER 30,
(UNAUDITED) 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 0.32 0.57(a) 0.55(a)
Net realized and unrealized gain (loss) on investments 0.09 0.30 (0.16)
Total from investment operations 0.41 0.87 0.39
LESS DISTRIBUTIONS
Distributions from net investment income (0.40) (0.57) (0.56)
Distributions from net realized gain on investments -- -- --
Total distributions (0.40) (0.57) (0.56)
NET ASSET VALUE, END OF PERIOD $10.35 $10.34 $10.04
TOTAL RETURN(B) 4.06% 8.92% 3.88%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000's) $1,294 $2,221 $1,988
Ratio of Expenses to average net assets 0.94%* 0.93% 0.99%
Ratio of net investment income to average net assets 5.40%* 5.57% 5.57%
Ratio of Expense waivers to average net assets(c) 0.04%* 0.04% 0.05%
Portfolio turnover 5% 142% 93%
</TABLE>
* Computed on an annualized basis.
(a) Per share information is based on average shares outstanding.
(b) Based on net asset value.
(c) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
MANAGED TOTAL RETURN PORTFOLIO
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31,
1998 YEAR ENDED SEPTEMBER 30,
(UNAUDITED) 1997 1996 1995(A) 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $12.06 $11.45 $11.65 $11.24 $12.03 $11.48
PERIOD
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.10(b) 0.28(b) 0.42(b) 0.28 0.18 0.29
Net realized and unrealized gain
(loss)
on investments 0.65 1.55 0.40 1.18 (0.16) 0.90
Total from investment 0.75 1.83 0.82 1.46 0.02 1.19
operations
LESS DISTRIBUTIONS
Distributions from net (0.25) (0.32) (0.50) (0.30) (0.31) (0.26)
investment income
Distributions from net realized
gain
on investments+ (1.14) (0.90) (0.52) (0.75) (0.50) (0.38)
Total distributions (1.39) (1.22) (1.02) (1.05) (0.81) (0.64)
NET ASSET VALUE, END OF PERIOD $11.42 $12.06 $11.45 $11.65 $11.24 $12.03
TOTAL RETURN(C) 6.80% 17.42% 7.58% 14.30% 0.10% 10.80%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in $10,937 $11,606 $12,123 $14,749 $17,515 $25,519
000's)
Ratio of expenses to average net 2.47%* 2.19% 2.21% 2.09% 1.94% 1.80%
assets
Ratio of net investment income
to average
net assets 1.67%* 2.26% 3.68% 2.29% 1.60% 2.54%
Ratio of expense waivers to
average
net assets(d) 0.19%* 0.11% 0.06% -- -- --
Portfolio turnover 50% 73% 159% 50% 50% 40%
+Paid from realized net $0.11 $ -- $0.01 $ -- $0.13 $0.08
short-term gain
</TABLE>
* Computed on an annualized basis.
(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.
(d) The voluntary expense waivers and earnings credits are reflected in both the
expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FUNDMANAGER PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 (UNAUDITED)
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 five Portfolios presented
herein: Aggressive Growth Portfolio (capital appreciation without regard to
current income), Growth Portfolio (long-term capital appreciation with current
income a secondary consideration), Growth with Income Portfolio (combination of
capital appreciation and current income), Bond Portfolio (high level of current
income), and Managed Total Return Portfolio (high total return, through capital
appreciation and current income). The International Portfolio is effective but
did not commence operations as of the end of this period. The Trust is
registered under the Investment Company Act of 1940, as amended, (the "Act") as
an open-end, diversified management investment company established as a
"Delaware business trust."
The Trust, with the exception of the Managed Total Return Portfolio and
International Portfolio, offers both a Financial Adviser Class and a No-Load
Class (commenced operations on October 1, 1995) of shares. Managed Total Return
Portfolio and International Portfolio only offer a Financial Adviser Class. Both
classes of shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that the Financial Adviser Class pays
certain distribution expenses and has exclusive voting rights with respect to
its distribution plan. Income and expenses of each Portfolio are borne pro rata
by each class of shares except that the Financial Adviser Class bears
distribution and shareholder service expenses unique to that class of shares.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the Trust's
significant accounting policies:
(A) Security Valuation. Shares of other open-end investment companies are valued
at their net asset value as reported by such companies. In the absence of
readily available market quotations, investments are valued at fair value as
determined by the Board of Trustees (the "Trustees").
(B) Security Transactions and Related Investment Income. Investment transactions
are accounted for on the trade date. Dividend income is recorded on the
ex-dividend date. Interest income is accrued as earned. Identified cost of
investments sold is used to calculate gains and losses for both financial
statement and federal income tax purposes.
(C) Expense Allocation. The Portfolios bear all costs of their operations other
than expenses specifically assumed by the investment adviser or the
distributors. Expenses directly attributable to a Portfolio are charged to that
Portfolio. Expenses incurred by the Trust with respect to any two or more
Portfolios are allocated in proportion to the net asset levels of each
Portfolio; except where allocations of direct expenses to each Portfolio can
otherwise be made fairly.
(D) Federal Income Taxes. Each Portfolio is treated as a separate taxable entity
for federal tax purposes. Each Portfolio has qualified and intends to continue
to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code, as amended, and to distribute substantially all of its
taxable income, including any net realized gains, to its shareholders.
Accordingly, no provision for federal income or excise tax is required. At
September 30, 1997, the Bond Portfolio has net capital loss carryforwards on the
basis of identified cost, for federal income tax purposes of approximately
$3,008,814. These capital loss carryforwards will be used to offset any future
realized gains to the extent permitted by the Internal Revenue Code and thus
will reduce the amount of distributions to shareholders which would otherwise be
necessary to relieve the Bond Portfolio of any liability for federal income tax.
The capital losses of $478,848, $1,762,165, and $767,801 will expire September
30, 2005, September 30, 2003, and September 30, 1998, respectively.
(E) Distributions to Shareholders. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to losses deferred on wash sales, post
October 31 losses, and short-term capital gain distributions received by the
Portfolios from other open-end investment companies.
(F) Use of Estimates. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting period. Actual
results could differ from those estimates.
3. ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES.
(A) Advisory Fees. The Trust retains Freedom Capital Management Corporation
("Freedom") to act as Investment Adviser ("Adviser"). Freedom is responsible for
the investment management of each Portfolio's assets, including the
responsibility for making the investment decisions and placing orders for the
purchase and sale of the Portfolios' investments directly with the issuers or
with brokers or dealers selected by it in its discretion, including the
distributors. Freedom also furnished to the Trustees, who have overall
responsibility for the business affairs of the Trust, periodic reports on the
investment performance of the Portfolios. For its services as Adviser, Freedom
receives from each Portfolio a fee, payable monthly, at the annual rate of 0.50%
of each Portfolio's average daily net assets up to $500 million and 0.40% of
average daily net assets in excess of $500 million.
(B) Administration. Federated Administrative Services ("FAS"), a wholly owned
subsidiary of Federated Investors, provides administrative personnel and
services (including certain legal and financial reporting services) necessary to
operate the Portfolios. FAS provides these at an annual rate which relates to
the average aggregate daily net assets of the Portfolios as specified below:
MAXIMUM
ADMINISTRATIVE AVERAGE AGGREGATE
FEE DAILY NET ASSETS
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least $75,000
per Portfolio and $35,000 per each additional class of shares. FAS may
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-distributors of the Trust. The Trust
has adopted a non-compensatory Distribution Plan and Agreement (the "Plan")
pursuant to Rule 12b-1 of the Act for the Financial Adviser Class of shares. The
Plan provides for a monthly payment by the Portfolios to the Distributors in
amounts representing actual expenses incurred by the Distributors for marketing
costs and services rendered in distributing the Portfolios' Financial Adviser
Class of shares at an annual rate not to exceed 0.50% of the average daily net
assets of each Portfolios' Financial Adviser Class of Shares. Up to a maximum of
0.25% of such payments may be made as Shareholder Servicing Expenses pursuant to
contracts that the Trust has with various banks, trust companies, broker-dealers
(other than the Distributors) or other financial organizations (collectively,
"Service Organizations") to provide administrative services to the Trust, such
as maintaining shareholder accounts and records, for shares owned by Financial
Adviser Class shareholders with whom the Service Organization has a
relationship.
(D) Transfer and Dividend Disbursing Agent Fees and Expenses. Federated
Shareholder Services Company, a subsidiary of Federated Investors, 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. YEAR 2000 ISSUES. 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 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 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.
5. INVESTMENT TRANSACTIONS. Purchase and sale transactions for the period ended
March 31, 1998, were as follows:
PORTFOLIOS PURCHASES SALES
Aggressive Growth Portfolio $ 7,253,030 $ 3,340,000
Growth Portfolio 11,718,166 5,345,000
Growth with Income Portfolio 8,375,480 2,990,000
Bond Portfolio 1,929,440 14,012,000
Managed Total Return Portfolio 5,266,187 6,016,152
6. EXPENSE OFFSET ARRANGEMENTS. Each Portfolio's Statement of Operations
reflects custodial earnings credits. These amounts are used to offset the
custody fees 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.
7. SUBSEQUENT EVENT. There will be a change in control of ownership of Freedom
Securities Corporation, the parent company of the Adviser and certain of the
Distributors; the change of control is anticipated to occur in May 1998. Upon
the change of control, the Master Investment Advisory Contract, under which the
Adviser provides investment advisory services to the Trust, will be
automatically terminated as required by the 1940 Act. At a special board meeting
on March 30, 1998, the Trustees unanimously approved a new Master Investment
Advisory Contract with the Adviser. There are no changes to the advisory fees or
services under the new Master Investment Advisory Contract. The effectiveness of
the Master Investment Advisory Contract is subject to approval of the Trust's
shareholders, which is scheduled for May 20, 1998, and receipt of an exemptive
order of the Securities and Exchange Commission, anticipated to be granted
before May 31, 1998.
In addition, the change in control also will result in automatic termination of
the Master Distribution Contracts that the Trust has with Freedom Distributors
Corp., Tucker Anthony Incorporated, and Sutro & Co., Incorporated. The Trustees
also unanimously approved at a special board meeting on March 30, 1998, new
distribution contracts (with the same fees and services) with these
distributors.
[Graphic]
INVESTMENT ADVISER
Freedom Capital Management Corporation
One Beacon Street
Boston, MA 02108
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 Portfolio's shares is
authorized only in case of a concurrent or prior delivery of the Portfolio's
current prospectus.
FOR SHAREHOLDER INFORMATION: (800) 344-9033
G01933-02 (5/98)
[Graphic]
MARCH 31, 1998
* AGGRESSIVE GROWTH PORTFOLIO
* GROWTH PORTFOLIO
* GROWTH WITH INCOME PORTFOLIO
* BOND PORTFOLIO
* MANAGED TOTAL RETURN PORTFOLIO
Appendix A. The graphic representation here displayed consists of a pie chart
entitled "FundManager Portfolios Schedule of Investments - Aggressive Growth
Portfolio." The information is as follows: Mid Cap, 51.4%; Large Cap, 30.5%;
Global, 17.5%; and Cash and Other Assets Net of Liabilities, 0.6%.
Appendix B. The graphic representation here displayed consists of a pie
chart entitled "FundManager Portfolios Schedule of Investments - Growth
Portfolio." The information is as follows: Growth, 54.2%; Value, 45.4%; and Cash
and Other Assets Net of Liabilities, 0.4%.
Appendix C. The graphic representation here displayed consists of a pie
chart entitled "FundManager Portfolios Schedule of Investments - Growth with
Income Portfolio." The information is as follows: Growth and Income, 55.0%;
Equity Income, 35.0%; Balanced, 9.6%; and Cash and Other Assets Net of
Liabilities, 0.4%.
Appendix D. The graphic representation here displayed consists of a pie
chart entitled "FundManager Portfolios Schedule of Investments - Bond
Portfolio." The information is as follows: Intermediate Maturity, 53.9%; Short
Maturity, 33.8%; Long Maturity, 11.2%; and Cash and Other Assets Net of
Liabilities, 1.1%.
Appendix E. The graphic representation here displayed consists of a pie chart
entitled "FundManager Portfolios Schedule of Investments - Managed Total Return
Portfolio." The information is as follows: Fixed Income, 38.7%; Growth, 20.4%;
Growth and Income, 20.0%; Aggressive Growth, 15.7%; and Cash and Other Assets
Net of Liabilities, 5.2%.
