[FREEDOM LOGO
FUND MANAGER PORTOLIOS
- --------------------------------------------------------
Selecting Leading Fund Managers for Investors Since 1984]
Annual Report
September 30, 1999
o Aggressive Growth Portfolio
o Growth Portfolio
o Growth with Income Portfolio
o International Portfolio
o Managed Total Return Portfolio
o Bond Portfolio
<PAGE>
[PHOTO OF JOHN J. DANELLO]
John J. Danello
President
President's Message
- --------------------------------------------------------------------------------
November 15, 1999
Dear Shareholder:
A much improved global economy for the Portfolios' fiscal year ended September
30, 1999 led to positive stock market returns and lower bond prices. The U.S.
economy exhibited steady growth, as stability returned to Asia and other foreign
economies. But as the U.S. economy thrived, the threat of inflation intensified.
Interest rates rose across the board during the period, and bond prices slid.
Mutual fund investors have been slow to recognize the strength of the global
economic recovery, and will be surprised to discover that many international
funds continue to outperform their domestic peers.
U.S Stock Markets
The healthy domestic economy and recovery in corporate earnings propelled the
Standard & Poor's Composite Index of 500 stocks (S&P 500 Index)* to a 27.80%
one-year return through September 30, 1999. Large cap growth stocks continued to
lead the market's climb, particularly in the technology sector. During the
second quarter of 1999, however, value stocks -- especially producers of
commodity products such as oil and chemicals -- outperformed compared to growth
stocks during that period. Returns on smaller cap stocks have continued to
disappoint investors, despite the fact that many smaller company stocks are
selling at attractive valuations based on a historical basis. The stock market's
positive gains for this period have disguised what many experts have coined a
"stealth bear market." According to the Wall Street Journal (9/20/99), 62% of
all New York Stock Exchange, 58% of all American Stock Exchange and 49% of all
NASDAQ stocks were underwater for the year-to-date basis through September 17,
1999.
U.S. Bond Markets
Too much global prosperity has been bad news for the bond market. Yields on U.S.
Treasury bonds rose by over 1% over the past twelve months -- a very significant
rise for a short time period. Bond prices, which move in the opposite direction
from interest rates, fell. The Lehman Government/Corporate Bond Index,** a
benchmark for investment grade taxable bonds, fell 1.62% for the twelve-month
period ended September 30, 1999. Although the economy appears to still be going
strong, inflation remains notable by its absence. Excluding food, energy and
tobacco, the core Consumer Price Index is up only 1.6% from a year ago.
International Stock Market
International stock prices generated very strong returns over the past twelve
months. Overall, the developed markets outside the United States gained 30.95%,
as measured by the Morgan Stanley Capital International Europe, Australia, Far
East (EAFE) Index.*** The biggest increases were in the Japanese and Pacific
region. More recently, European stocks have showed healthy gains, reflecting
strength in the economic development of the newly unified economic community now
known as Euroland.
Outlook
Views on today's U.S. equity market can be divided into two camps: "classic"
and "new era." Those of the more "classic" persuasion see higher inflation
resulting from the strong U.S. economy and global economic recovery. According
to this view, the U.S. stock market will face tough sledding as rising interest
rates will hurt the highest P/E
<PAGE>
stocks [e.g. technology stocks]. Under this scenario, your U.S. equity portfolio
should tilt toward value stocks and away from the growth stocks that have led
the markets over the past several years. On the other hand, the "new era" camp
sees continued high labor productivity resulting from technological advances and
benign inflation because the competitive global economy will discourage
companies from raising prices. Under this scenario, rising earnings should
continue to drive U.S. stock prices and you should stick with growth rather than
value, including the highest P/E stocks.
At FundManager, we remain steadfast in our belief that creating and maintaining
a balanced investment program tailored to your goals, time horizon and risk
tolerance is the surest route to long-term investment success.
As you review the following detailed investment reports on each of our
FundManager Portfolios, you will note that each Portfolio is diversified among
different types of mutual funds. For example, our FundManager Growth Portfolio
and International Portfolio combine both growth funds and value funds.
Investors who take a short-term view of the financial markets can find it
difficult to justify a place for bonds in their investment program, especially
during times of rising interest rates. Long term investors understand that the
benefits of bonds -- diversification and compound interest income -- can be
substantial. FundManager Bond Portfolio and Managed Total Return Portfolio can
provide you with this valuable diversification and deserve consideration despite
the current difficult environment for fixed income investments.
Sincerely,
/s/ John J. Danello
- -------------------
John J. Danello
President
* 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.
** The Lehman Government/Corporate Bond Index is composed of all bonds that are
investment grade rated Baa or higher by Moody's Investor Services or BBB or
higher by Standard & Poor's, if unrated by Moody's. Issues must have at
least one year to maturity. Total return comprises price
appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.
*** Morgan Stanley Capital International Europe, Australia, Far East Index is an
unmanaged market capitalization-weighted equity index comprising 20 of the
48 countries in the MSCI universe and representing the developed world
outside of North America. Each MSCI country index is created separately,
then aggregated, without change, into regional MSCI indices. EAFE
performance data is calculated in U.S. dollars and in local currency.
2
<PAGE>
- --------------------------------------------------------------------------------
November 15, 1999
[PHOTO OF MARTIN S. ORGEL]
Martin S. Orgel, CFA
Portfolio Manager
FundManager Portfolios
Dear Shareholder:
I am pleased to present you with our annual report for the twelve-month
reporting period ended September 30, 1999. This investment review addresses the
various strategies implemented for each of the FundManager Portfolios within the
past year, and provides some perspective into our outlook for the months ahead.
FundManager Aggressive Growth Portfolio
o Returned 31.58%* for this period versus 28.58% return for the equity benchmark
Standard & Poor's Composite Index of 500 stocks** (S&P 500). Positioning the
majority of assets toward mid-capitalization issues and adroit selection of
some new funds during the year contributed to our success.
The addition of the Miller Anderson & Sherrerd Mid Cap Growth Fund during the
end of 1998 was extremely beneficial. Over the reporting period, Portfolio
Manager Arden Armstrong has guided this fund up an astounding 64.24% through her
selection of rapidly growing firms exhibiting increasing rates of profitability.
FPA Capital and Longleaf Partners contributed performances in excess of 20%
during the period, the former a long-time value oriented holding and the latter
a concentrated mid-cap blend fund added to the portfolio late last year.
Two of our fund holdings, Royce Total Return and Oakmark Small Cap, concentrate
their investments in small-cap value stocks. Despite the fact that the small-cap
value universe of stocks appears to be attractively undervalued vis a vis their
larger-cap brethren, the returns of these two funds were disappointing.
Small-cap stocks have generally been out of favor over the past several years,
and we are currently reviewing our investments in the small-cap value segment to
determine if a catalyst for better performance can be expected over the near
term.
In our pursuit of increasing our overall exposure to the technology sector, we
exchanged our position in the T. Rowe Price Mid-Cap Growth Fund for a position
in the T. Rowe Price Science and Technology Fund. Since our fiscal year end of
September 30, 1999, we initiated a position in the Gabelli Global Interactive
Couch Potato Fund in order to gain dedicated coverage of the rapidly evolving
telecommunications and Internet related multimedia industries.
* Performance quoted represents past performance and is no guarantee of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Performance for the FundManager Portfolios is based on net
asset value for Class A Shares. As of September 30, 1999, total returns
based on offering price, were 24.33% for Aggressive Growth Portfolio, 18.06%
for Growth Portfolio, 13.80% for Growth With Income Portfolio, 26.97% for
International Portfolio, (0.25)% for Managed Total Return Portfolio, and
(2.01)% for Bond Portfolio. Performance shown for all underlying mutual
funds owned by FundManager Portfolios is at net asset value because
FundManager Portfolios do not pay a sales load due to volume purchases.
** 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.
3
<PAGE>
FundManager Growth Portfolio
o Returned 24.91%* versus 28.58% for the benchmark S&P 500.
Over the past several years, an enormous valuation gap between growth and value
has developed. In 1998 for example, growth stocks outperformed value stocks by
28% [based on a comparison of the S&P Barra Growth and Value Indices***].
Although value stocks showed some renewed vigor in the second quarter of 1999,
the markets have rotated back to favor growth stocks. Nonetheless, we have
maintained our "tactical style strategy" to favor value funds because we believe
that the continued strength of the global economy will bode well for
manufacturing, industrial and natural resource companies. We therefore increased
our position in Davis NY Venture (+27.62%) and Dodge & Cox Stock (+26.52%)
during the reporting period in order to capitalize on these expected trends. We
expect to maintain our strategic weighting in value-oriented funds going forward
since we do not believe that the narrow leadership of a few growth stocks is
sustainable. In the long run, equity prices always reflect the intrinsic value
of the companies they represent. We believe that the cheap valuations currently
reflected in value funds will be realized sooner rather than later.
Given the increasingly prominent role technology has in our economy, we decided
to add the Harbor Capital Appreciation Fund to the FundManager Growth Portfolio.
Portfolio Manager Sig Segalas has adeptly maneuvered this growth-oriented fund
into and out of large-capitalization global brand name firms (with an emphasis
in technology issues) for the past nine years with tremendous success. His fund
posted a 47.77%* total return over the reporting period. Finally, strong gains
were also recorded by our two index holdings making up core positions within our
fund as the Vanguard Growth Index returned 33.57%* and the Vanguard Value Index
contributed a healthy 21.39%* over the previous 12 months.
FundManager Growth with Income Portfolio
o Returned 20.40%* versus 28.58% for the equity benchmark S&P 500 for the
reporting period. As this is our most conservative domestic equity portfolio,
we are pleased with the consistent, low volatility performance of the
FundManager Growth with Income Portfolio. The fund maintains its large-cap
value orientation in well-established firms producing consistent earnings and
oftentimes dividend income distributions.
AIM Charter contributed a strong market showing with a 37.16%* return during the
reporting period, while our other growth and income holdings followed closely
behind as Fundamental Investors gained 28.36%,* and Lord Abbett Affiliated added
24.38%.* While the general financial market appears to have lost interest in the
importance of dividends, we believe the risk-reducing benefits from holding
income-producing funds within a diversified investment portfolio are still
important. Our two long-standing investments in T. Rowe Price Equity Income and
Washington Mutual Investors, both equity-income funds, continued to perform well
relative to their peers.
*** The S&P 500/Barra Growth Index and the S&P 500/Barra Value Index are
capitalization-weighted indices of all stocks in the S&P 500 that have high
price-to-book ratios.
4
<PAGE>
FundManager International Portfolio
o Returned 34.34%* versus 30.95% for the Morgan Stanley Capital International
Europe, Australia, Far East Index+ during the reporting period. As our newest
fund, we couldn't be more pleased with the progress of the FundManager
International Portfolio since its inception on June 8, 1998. With a fairly
equal balance of growth, blend, and value-oriented funds, the FundManager
International Portfolio consistently continues to beat not only its benchmark
index, but also the international and global mutual fund peer group averages.
Markets in Asia, Latin America, and the emerging markets rebounded strongly from
last fall's crisis proportions; whereas, European issues have been the laggards
in relative terms. The decline in the value of the European common currency, the
Euro, since its inception at the beginning of 1999 has contributed to the
weakness of holding European equities. While only gaining 17.35% over the
reporting period, the BT Investment International Equity Fund trailed our other
funds due to its larger than average proportion of European stocks. We continue
to believe in the restructuring process underway, privatization programs being
completed, and greater focus on the enhancement of shareholder equity that is
occurring throughout Europe.
Over the past several quarters, small-cap international stocks have outperformed
their large-cap siblings. As this trend appears to be gaining momentum, we
increased our holding in the Nicholas Applegate International Small-Cap Growth
Fund during the third quarter. Even though the fund has gained 45.95%
year-to-date through September 30, 1999 and a phenomenal 73.24% over the
reporting period, we believe the strong rally among international small-cap
stocks should continue. Strong performance in excess of 35% was also returned by
three of our other holdings, Putnam International Growth, Tweedy Browne Global
Value, and Janus Overseas.
FundManager Managed Total Return Portfolio
o Returned 5.56%* versus -1.62% for the Lehman Brothers Government/Corporate
Bond Index++ over the reporting period. On a historical basis, the stock
market continues to trade at unprecedented valuation levels. During the past
year, we increased exposure to fixed income mutual funds in recognition of
these lofty valuations. Unfortunately, the strength of the global economic
recovery from last year's international economic turbulence has been very
strong, and U.S. interest rates have risen by over
+ Morgan Stanley Capital International Europe, Australia, Far East Index is an
unmanaged market capitalization-weighted equity index comprising 20 of the 48
countries in the MSCI universe and representing the developed world outside of
North America. Each MSCI country index is created separately, then aggregated,
without change, into regional MSCI indices. EAFE performance data is
calculated in U.S. dollars and in local currency.
++The Lehman Government/Corporate Bond Index is composed of all bonds that are
investment grade rated Baa or higher by Moody's Investor Services or BBB or
higher by Standard & Poor's, if unrated by Moody's. Issues must have at least
one year to maturity. Total return comprises price appreciation/depreciation
and income as a percentage of the original investment. Indexes are rebalanced
monthly by market capitalization.
5
<PAGE>
1%. Rising interest rates have provided a hostile environment for all bond
funds during the reporting period. Nonetheless, we believe inflation still
appears to be relatively dormant and the worst of the rise in interest rates
is now behind us.
Leading the equity funds contained within this portfolio, the low cost Fidelity
Spartan U.S. Equity Index returned 27.54%* over the reporting period. Our timely
addition of high-yield bond funds also paid off as the Fidelity High-Income Fund
returned 11.90%* and the Loomis Sayles Bond Fund contributed 7.61%* during the
past twelve months
FundManager Bond Portfolio
o Returned -2.01%* versus -1.62% for the Lehman Brothers Government/Corporate
Bond Index++ over the reporting period. As long-term interest rates have
increased in response to Federal Reserve Board (Fed) tightening of the money
supply and raises in the discount rate, bond mutual funds and fixed income
investors have suffered.
During the reporting period, we have retained a nearly neutral stance [9.9 years
average maturity and 5.5 years average duration for the Portfolio] relative to
the benchmark index throughout the year as conflicting signals over the future
direction of interest rates continues. While inflation remains subdued in the
1.5% to 2.5% range, the real rate of return from 6.0% government securities and
6.5% corporate bonds continues to be appealing. Tempering that view is the fact
that the U.S. economy shows few signs of slowing down, which may force the Fed
to raise interest rates further to stave off the threat of future inflation.
Highlights from the past year include our holding in FPA New Income, which
returned 3.87%* over the reporting period in large measure from portfolio
manager Bob Rodriquez's position in Treasury Inflation Protection bonds. Our
holding in the Bond Fund of America gained a relatively impressive 2.61%* over
the reporting period as many of its high-yielding corporate securities
appreciated in spite of the rise in interest rates. Sincerely,
/s/ Martin S. Orgel
- -------------------
Martin S. Orgel, CFA
Portfolio Manager
6
<PAGE>
Performance Summary
- --------------------------------------------------------------------------------
Aggressive Growth Portfolio -- Class A Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Aggressive
Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class A
Shares of the Aggressive Growth Portfolio (AGP) from October 1, 1989 to
September 30, 1999, compared to the Russell 2000 Index (R2000)+.
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
9/89 10000 10000
9/90 8478 7285
9/91 11432 10569
9/92 12155 11514
9/93 14571 15332
9/94 15049 15741
9/95 18704 19419
9/96 20962 21968
9/97 26026 29259
9/98 22635 23694
9/99 29783 28213
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns (which reflect all applicable sales charges) for
the Period Ended September 30, 1999
1 Year..................................................................24.3%
5 Year..................................................................13.3%
10 Year.................................................................10.9%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
1 year..................................................................31.6%
5 year..................................................................14.6%
10 year.................................................................11.5%
Past performance is no guarantee 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 has been adjusted to reflect reinvestment of
dividends on securities in the index. On October 1, 1989, the Portfolio did
not impose any sales charges. The current maximum sales charges, as reflected
in the Average Annual Total Returns, is 5.50%.
+ 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.
Aggressive Growth Portfolio -- Class B Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Aggressive
Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class B
Shares of the Aggressive Growth Portfolio (AGP) from February 22, 1999 (start of
performance) to September 30, 1999, compared to the Russell 2000 Index (R2000)+.
[MOUNTAN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
2/99 10000 10000
9/99 10067 10994
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns (which reflect all applicable sales charges) for
the Period Ended September 30, 1999
Start of Performance (2/22/99) (cumulative)..............................0.6%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
Start of Performance (2/22/99) (cumulative)..............................5.7%
Past performance is no guarantee 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 has been adjusted to reflect reinvestment of
dividends on securities in the index. The Portfolio imposes a maximum
deferred sales charge of 5.00%.
+ 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.
7
<PAGE>
Performance Summary
- --------------------------------------------------------------------------------
Growth Portfolio -- Class A Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class A
Shares of the Growth Portfolio (GP) from October 1, 1989 to September 30, 1999,
compared to the Standard & Poors 500 Index (S&P 500)+.
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
9/89 10000 10000
9/90 8565 9075
9/91 11009 11896
9/92 12047 13204
9/93 13971 14920
9/94 14596 15472
9/95 17889 20074
9/96 20296 24157
9/97 27790 33928
9/98 27175 37006
9/99 33945 47297
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns (which reflect all applicable sales charges) for
the Period Ended September 30, 1999
1 Year..................................................................18.1%
5 Year..................................................................17.1%
10 Year.................................................................12.4%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
1 year..................................................................24.9%
5 year..................................................................18.4%
10 year.................................................................13.0%
Past performance is no guarantee 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 has been adjusted to reflect reinvestment of
dividends on securities in the index. On October 1, 1989, the Portfolio did
not impose any sales charges. The current maximum charges, as reflected in
the Average Annual Total Returns, is 5.50%.
+ 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.
Growth Portfolio -- Class B Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class B
Shares of the Growth Portfolio (GP) from February 16, 1999 (start of
performance) to September 30, 1999, compared to the Standard & Poors 500 Index
(S&P 500)+.
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
2/99 10000 10000
9/99 9741 10438
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns (which reflect all applicable sales charges) for
the Period Ended September 30, 1999
Start of Performance (2/16/99) (cumulative)............................(2.6)%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
Start of Performance (2/16/99) (cumulative)..............................2.4%
Past performance is no guarantee 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 has been adjusted to reflect reinvestment of
dividends on securities in the index. The Portfolio imposes a maximum
deferred sales charge of 5.00%.
+ 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.
8
<PAGE>
Performance Summary
- --------------------------------------------------------------------------------
Growth with Income Portfolio -- Class A Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth with
Income Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class A
Shares of the Growth with Income Portfolio (GIP) from October 1, 1989 to
September 30, 1999, compared to the Standard & Poors 500 Index (S&P 500)+.
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
9/89 10000 10000
9/90 8517 9075
9/91 10751 11896
9/92 11807 13204
9/93 13633 14820
9/94 14086 15472
9/95 17368 20074
9/96 19753 24157
9/97 26522 33928
9/98 26095 37006
9/99 31418 47297
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns (which reflect all applicable sales charges) for
the Period Ended September 30, 1999
1 Year..................................................................13.8%
5 Year..................................................................16.1%
10 Year.................................................................11.5%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
1 year..................................................................20.4%
5 year..................................................................17.4%
10 year.................................................................12.1%
Past performance is no guarantee 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 has been adjusted to reflect reinvestment of
dividends on securities in the index. On October 1, 1989, the Portfolio did
not impose any sales charges. The current maximum sales charges, as reflected
in the Average Annual Total Returns, is 5.50%.
+ 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.
Growth with Income Portfolio -- Class B Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Growth with
Income Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class B
Shares of the Growth with Income Portfolio (GIP) from February 22, 1999 (start
of performance) to September 30, 1999, compared to the Standard & Poors 500
Index (S&P 500)+.
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C> <C>
2/99 10000 10000 10000
9/99 9801 10438 10363
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns (which reflect all applicable sales charges) for
the Period Ended September 30, 1999
Start of Performance (2/22/99) (cumulative)............................(2.0)%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
Start of Performance (2/22/99) (cumulative)..............................3.0%
Past performance is no guarantee 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 has been adjusted to reflect reinvestment of
dividends on securities in the index. The Portfolio imposes a maximum
deferred sales charge of 5.00%.
+ 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.
9
<PAGE>
Performance Summary
- --------------------------------------------------------------------------------
International Portfolio -- Class A Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in International Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class A
Shares of the International Portfolio (IP) from June 6, 1998 (start of
performance) to September 30, 1999, compared to the Morgan Stanley Capital
International Europe Australia Far East Index (MSCI).+
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
6/98 9550 10000
9/98 7898 8495
9/99 10610 10969
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns (which reflect all applicable sales charges) for
the Period Ended September 30, 1999
1 Year..................................................................27.0%
Start of Performance (6/6/98) (cumulative)...............................5.0%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
1 year..................................................................34.3%
Start of Performance (6/6/98) (cumulative)..............................11.1%
Past performance is no guarantee 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 a sales charge of 4.50% ($10,000 investment minus $450 sales
charge=$9,550), which was in effect at the Portfolio's start of performance.
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. Effective January 8, 1999, the
Portfolio imposed a maximum sales charge of 5.50%.
+ 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.
International Portfolio -- Class B Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in International Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class B
Shares of the International Portfolio from February 22, 1999 (start of
performance) to September 30, 1999, compared to the Morgan Stanley Capital
International Europe Australia Far East Index (MSCI).+
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
2/99 10000 10000
9/99 11188 11061
</TABLE>
[END PLOT POINTS]
Average Total Returns (which reflect all applicable sales charges) for the
Period Ended September 30, 1999
Start of Performance (2/22/99)(cumulative)..............................11.9%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
Start of Performance (2/22/99) (cumulative).............................16.9%
Past performance is no guarantee 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 MSCI EAFE Index has been adjusted to reflect reinvestment
of dividends on securities in the index. The Portfolio imposes a maximum
deferred sales charge of 5.00%.
+ 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.
10
<PAGE>
Performance Summary
- --------------------------------------------------------------------------------
Managed Total Return Portfolio -- Class A Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Managed Total
Return Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class A
Shares of the Managed Total Return Portfolio (MTRP) from October 1, 1989 to
September 30, 1999, compared to the Lehman Government/Corporate Total Index
(LG/CI).+
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
9/89 10000 10000
9/90 9562 10675
9/91 10890 11769
9/92 11810 13326
9/93 13089 14853
9/94 13107 14239
9/95 14984 16282
9/96 16119 17016
9/97 18927 17690
9/98 19243 19961
9/99 20334 19636
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns (which reflect all applicable sales charges) for
the Period Ended September 30, 1999
1 Year.................................................................(0.3)%
5 Year...................................................................7.9%
10 Year..................................................................7.3%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
1 year...................................................................5.6%
5 year...................................................................9.1%
10 year..................................................................7.9%
Past performance is no guarantee 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 has been adjusted to reflect reinvestment of
dividends on securities in the index. On October 1, 1989, the Portfolio did
not impose any sales charges. The current maximum sales charges, as reflected
in the Average Annual Total Returns, is 5.50%.
+ 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.
Managed Total Return Portfolio -- Class B Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Managed Total
Return Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class B
Shares of the Managed Total Return Portfolio from February 22, 1999 (start of
performance) to September 30, 1999, compared to the Lehman Government/Corporate
Total Index (LG/CI).+
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
2/99 10000 10000
9/99 9465 9993
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns (which reflect all applicable sales charges) for
the Period Ended September 30, 1999
Start of Performance (2/22/99) (cumulative)............................(5.4)%
Absent the sales charge, the average annual total returns for the period ended
September 30, 1999 are:
Start of Performance (2/22/99) (cumulative)............................(0.4)%
Past performance is no guarantee 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 has been adjusted to reflect reinvestment of
dividends on securities in the index. The Portfolio imposes a maximum
deferred sales charge of 5.00%.
+ 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.
11
<PAGE>
Performance Summary
- --------------------------------------------------------------------------------
Bond Portfolio Class A Shares
- --------------------------------------------------------------------------------
Growth of $10,000 Invested in Bond Portfolio
The graph below illustrates the hypothetical investment of $10,000 in Class A
Shares of the Bond Portfolio (BP) from October 1, 1989 to September 30, 1999,
compared to the Lehman Government/ Corporate Total Index (LG/CI)+.
[MOUNTAIN CHART PLOT POINTS]
<TABLE>
<S> <C> <C>
9/89 10000 10000
9/90 10248 10675
12/90 10710 11219
9/91 11751 12369
9/92 13173 14006
9/93 14543 15611
9/94 14027 14965
9/95 15480 17112
9/96 16065 17884
9/97 17423 19599
9/98 18937 22115
9/99 18594 21755
</TABLE>
[END PLOT POINTS]
Average Annual Total Returns for the Period Ended September 30, 1999
1 Year.................................................................(2.0)%
5 Year...................................................................5.8%
10 Year..................................................................6.4%
Past performance is no guarantee 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 has been adjusted to reflect reinvestment of
dividends on securities in the index.
+ 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.
12
<PAGE>
FundManager Portfolios
Schedule of Investments
September 30, 1999
- --------------------------------------------------------------------------------
Aggressive Growth Portfolio
- --------------------------------------------------------------------------------
High capital appreciation. Seeks capital appreciation without regard to current
income.
<TABLE>
<CAPTION>
Market
Share Mutual Fund Value
- --------- ------------------------------------------ --------------
<C> <S> <C>
Small Cap Funds -- (29.6%)
124 AIM Aggressive Growth (Class A) .......... $ 6,557
51,720 Baron Asset .............................. 2,667,193
89,593 Oakmark Small Cap ........................ 1,243,556
178,122 Royce Total Return ....................... 1,300,287
-----------
Total Small Cap Funds .................... 5,217,593
-----------
Mid Cap Funds -- (55.9%)
100,880 FPA Capital .............................. 3,258,440
126,397 Longleaf Partners ........................ 3,166,237
133,249 MAS Mid Cap Growth ....................... 3,435,155
54 Mutual Discovery (Class Z) ............... 1,023
-----------
Total Mid Cap Funds ...................... 9,860,855
-----------
Sector Funds -- (12.0%)
25 Hancock Regional Bank (Class A) .......... 1,163
39,654 T. Rowe Price Science &
Technology ............................... 2,108,031
-----------
Total Sector Funds ....................... 2,109,194
-----------
Total Investments at Market Value
(Cost $15,344,240) (a).................... 17,187,642
Other assets net of liabilities (2.5%) 441,240
-----------
Net Assets (100.0%) ...................... $17,628,882
===========
</TABLE>
[PIE CHART PLOT POINTS]
Mid Cap 55.9%
Small Cap 29.6%
Sector 12.0%
Other Net Assets 2.5%
[END PLOT POINTS]
Growth Portfolio
- --------------------------------------------------------------------------------
Modest capital appreciation. Seeks long- term capital appreciation. Current
income is a secondary consideration.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- ---------- -------------------------------------- -------------
<C> <S> <C>
Growth Funds -- (34.1%)
70,302 Harbor Capital Appreciation .......... $ 3,035,625
91,734 Vanguard Growth Index ................ 3,085,924
-----------
Total Growth Funds ................... 6,121,549
-----------
Value Funds -- (62.9%)
95,829 Davis New York Venture ............... 2,520,313
29,479 Dodge & Cox Stock .................... 2,915,496
56 Mutual Beacon (Class Z) .............. 778
147,437 UAM Clipper Focus .................... 1,701,425
187,394 Vanguard Value Index ................. 4,175,134
-----------
Total Value Funds .................... 11,313,146
-----------
Total Investments at Market Value
(Cost $14,439,182) (b) ............... 17,434,695
Other assets net of liabilities (3.0%) 541,120
-----------
Net Assets (100.0%) .................. $17,975,815
===========
</TABLE>
[PIE CHART PLOT POINTS]
Value 62.9%
Growth 34.1%
Other Net Assets 3.0%
[END PLOT POINTS]
(See Notes to Financial Statements which are an integral part of the Financial
Statements)
13
<PAGE>
FundManager Portfolios
Schedule of Investments -- (continued)
September 30, 1999
- --------------------------------------------------------------------------------
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
- --------- ---------------------------------------- -------------
<C> <S> <C>
Growth and Income Funds -- (58.8%)
246,037 AIM Charter (Class A) .................. $ 3,985,805
126,785 Fundamental Investors .................. 3,954,417
252,514 Lord Abbett Affiliated ................. 3,916,487
-----------
Total Growth and Income Funds .......... 11,856,709
-----------
Equity Income Funds -- (38.8%)
148,408 T. Rowe Price Equity Income ............ 3,929,835
120,693 Washington Mutual Investors ............ 3,895,955
-----------
Total Equity Income Funds .............. 7,825,790
-----------
Total Investments at Market Value
(Cost $17,277,686) (c) ................. 19,682,499
Other assets net of liabilities (2.4%) 476,701
-----------
Net Assets (100.0%) .................... $20,159,200
===========
</TABLE>
[PIE CHART PLOT POINTS]
Growth and Income 58.8%
Equity Income 38.8%
Other Net Assets 2.4%
[END PLOT POINTS]
International Portfolio
- --------------------------------------------------------------------------------
High capital appreciation. Seeks long-term capital appreciation. Current income
is a secondary consideration.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- -------- ----------------------------------------- -------------
<C> <S> <C>
International Equity Funds -- (94.7%)
52,196 American AAdvantage International
Equity .................................. $1,000,592
26,032 BT Investment International Equity ...... 630,225
43,736 Janus Overseas .......................... 1,017,295
40,958 Nicholas-Applegate International
Small Cap Growth (Institutional
Class) .................................. 1,165,655
39,989 Putnam International Growth ............. 911,345
49,544 Tweedy, Browne Global Value ............. 1,015,149
----------
Total International Equity Funds
(Cost $5,169,941) (d) ................... 5,740,261
Other assets net of liabilities (5.3%) 321,788
----------
Net Assets (100.0%) ..................... $6,062,049
==========
</TABLE>
[PIE CHART PLOT POINTS]
International Equity 94.7%
Other Net Assets 5.3%
[END PLOT POINTS]
(See Notes to Financial Statements which are an integral part of the Financial
Statements)
14
<PAGE>
FundManager Portfolios
Schedule of Investments -- (continued)
September 30, 1999
- --------------------------------------------------------------------------------
Managed Total Return Portfolio
- --------------------------------------------------------------------------------
Asset allocation. Seeks high total return (capital appreciation and current
income) through disciplined asset allocation.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- ---------- ----------------------------------------- -------------
<C> <S> <C>
Equity and Balanced Funds -- (35.1%)
60,348 Fidelity Puritan ........................ $ 1,123,074
34,929 Fidelity Spartan U.S. Equity Index ...... 1,594,840
120,123 T. Rowe Price Equity Income ............. 3,180,869
-----------
Total Equity and Balanced Funds ......... 5,898,783
-----------
Fixed Income Funds -- (62.1%)
195,172 Fidelity High-Income .................... 2,330,355
196,902 Loomis Sayles Bond ...................... 2,303,753
218,375 PIMCO High-Yield ........................ 2,343,159
345,577 PIMCO Total Return ...................... 3,476,509
-----------
Total Fixed Income Funds ................ 10,453,776
-----------
Total Investments at Market Value
(Cost $17,029,389) (e) .................. 16,352,559
Other assets net of liabilities (2.8%) 476,922
-----------
Net Assets (100.0%) ..................... $16,829,481
===========
</TABLE>
[PIE CHART PLOT POINTS]
Fixed Income 62.1%
Equity and Balanced 35.1%
Other Net Assets 2.8%
[END PLOT POINTS]
Bond Portfolio
- --------------------------------------------------------------------------------
Monthly income. Seeks a high level of current income.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- -------- --------------------------------------- -------------
<C> <S> <C>
Short Maturity Funds -- (20.0%)
87,550 FPA New Income ........................ $ 942,910
96,474 Vanguard Admiral Short-Term
Treasury .............................. 961,846
----------
Total Short Maturity Funds ............ 1,904,756
----------
Intermediate Maturity Funds -- (60.1%)
73,643 Bond Fund of America .................. 958,100
76,937 MFS Bond (Class A) .................... 954,017
86,274 MAS Fixed Income ...................... 970,587
96,291 PIMCO Total Return .................... 968,685
93,993 Vanguard Admiral Intermediate-
Term Treasury ......................... 954,029
97,955 Vanguard Intermediate-Term
Corporate ............................. 914,903
----------
Total Intermediate Maturity Funds 5,720,321
----------
Long Maturity Funds -- (17.1%)
81,646 Vanguard Admiral Long-Term
Treasury .............................. 842,590
94,462 Vanguard Long-Term Corporate .......... 785,924
----------
Total Long Maturity Funds ............. 1,628,514
----------
Total Investments at Market Value
(Cost $9,750,549) (f) ................. 9,253,591
Other assets net of liabilities (2.8%) 258,537
----------
Net Assets (100.0%) ................... $9,512,128
==========
</TABLE>
[PIE CHART PLOT POINTS]
Intermediate Maturity 60.1%
Short Maturity 20.0%
Long Maturity 17.1%
Other Net Assets 2.8%
[END PLOT POINTS]
(See Notes to Financial Statements which are an integral part of the Financial
Statements)
15
<PAGE>
FundManager Portfolios
Schedule of Investments -- (continued)
September 30, 1999
- --------------------------------------------------------------------------------
(a) Aggregate cost for federal income tax purposes is $15,344,240. The gross
unrealized appreciation is $2,032,780; the gross unrealized depreciation is
$189,378, resulting in net unrealized appreciation of $1,843,402 for federal
income tax purposes.
(b) Aggregate cost for federal income tax purposes is $14,439,859. The gross
unrealized appreciation is $3,256,908; the gross unrealized depreciation is
$262,072, resulting in net unrealized appreciation of $2,994,836 for federal
income tax purposes.
(c) Aggregate cost for federal income tax purposes is $17,277,686. The gross
unrealized appreciation is $2,467,134; the gross unrealized depreciation is
$62,321, resulting in net unrealized appreciation of $2,404,813 for federal
income tax purposes.
(d) Aggregate cost for federal income tax purposes is $5,169,941. The gross
unrealized appreciation is $605,797; the gross unrealized depreciation is
$35,477, resulting in net unrealized appreciation of $570,320 for federal
income tax purposes.
(e) Aggregate cost for federal income tax purposes is $16,352,975. The gross
unrealized appreciation is $7,832; the gross unrealized depreciation is
$685,078, resulting in net unrealized depreciation of $677,246 for federal
income tax purposes.
(f) Aggregate cost for federal income tax purposes is $9,770,738. The gross
unrealized appreciation is $3,102; the gross unrealized depreciation is
$521,126, resulting in net unrealized depreciation of $518,024 for federal
income tax purposes.
- --------------------------------------------------------------------------------
Federal Tax Information (unaudited)
The portfolios have designated the following as capital gain dividends for
the 1999 fiscal year:
Aggressive Growth Portfolio...................................$3,222,936
Growth Portfolio..............................................$3,639,140
Growth with Income Portfolio..................................$4,548,387
International Portfolio.......................................$ --
Managed Total Return Portfolio................................$1,334,147
Bond Portfolio................................................$ --
- --------------------------------------------------------------------------------
(See Notes to Financial Statements which are an integral part of the Financial
Statements)
16
<PAGE>
FundManager Portfolios
Statement of Assets and Liabilities
September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive
Growth Growth
Portfolio Portfolio
---------------- ----------------
<S> <C> <C>
Assets:
Investments, at value* .................. $ 17,187,642 $ 17,434,695
Cash .................................... 422,327 547,548
Receivable for fund shares sold ......... 22,034 52,967
Dividend receivable ..................... -- --
Prepaid expenses ........................ -- --
Miscellaneous receivable ................ -- 452
Receivable from advisor ................. 26,045 18,331
------------ ------------
Total assets ........................... 17,658,048 18,053,993
------------ ------------
Liabilities:
Payable for fund shares
redeemed ................................ 1,772 49,179
Distribution expense payable ............ 4,948 5,649
Accrued expenses ........................ 22,446 23,350
------------ ------------
Total liabilities ...................... 29,166 78,178
------------ ------------
Net assets ............................... $ 17,628,882 $ 17,975,815
============ ============
Class A:
Shares outstanding ...................... 1,025,004 1,047,700
Net assets .............................. $ 16,884,324 $ 17,399,701
Net asset value ......................... $ 16.47 $ 16.61
============ ============
Offering price per share ................ $ 17.43 $ 17.58
============ ============
Class B:
Shares outstanding ...................... 45,409 34,805
Net assets .............................. $ 744,558 $ 576,114
Net asset value and offering
price per share ........................ $ 16.40 $ 16.55
============ ============
Net assets consist of:
Paid in capital ......................... $ 9,678,764 $ 7,991,531
Undistributed (distribution in
excess of) net investment
income .................................. -- --
Accumulated net realized gain (loss) 6,106,716 6,988,771
Net unrealized appreciation
(depreciation) .......................... 1,843,402 2,995,513
------------ ------------
Net assets ............................... $ 17,628,882 $ 17,975,815
============ ============
*Investments, at cost ................... $ 15,344,240 $ 14,439,182
============ ============
<CAPTION>
Growth with Managed
Income International Total Return Bond
Portfolio Portfolio Portfolio Portfolio
---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments, at value* .................. $ 19,682,499 $ 5,740,261 $ 16,352,559 $ 9,253,591
Cash .................................... 356,588 140,168 473,090 218,856
Receivable for fund shares sold ......... 150,274 179,903 30,000 20,000
Dividend receivable ..................... -- -- 34 5,880
Prepaid expenses ........................ -- -- -- 15,764
Miscellaneous receivable ................ -- -- -- --
Receivable from advisor ................. -- 7,266 11,755 --
------------ ----------- ------------ ------------
Total assets ........................... 20,189,361 6,067,598 16,867,438 9,514,091
------------ ----------- ------------ ------------
Liabilities:
Payable for fund shares
redeemed ................................ -- -- -- --
Distribution expense payable ............ 5,140 1,893 3,620 1,963
Accrued expenses ........................ 25,021 3,656 34,337 --
------------ ----------- ------------ ------------
Total liabilities ...................... 30,161 5,549 37,957 1,963
------------ ----------- ------------ ------------
Net assets ............................... $ 20,159,200 $ 6,062,049 $ 16,829,481 $ 9,512,128
============ =========== ============ ============
Class A:
Shares outstanding ...................... 1,156,887 498,683 1,747,314 966,959
Net assets .............................. $ 19,877,593 $ 5,542,732 $ 16,780,789 $ 9,512,128
Net asset value ......................... $ 17.18 $ 11.11 $ 9.60 $ 9.84
============ =========== ============ ============
Offering price per share ................ $ 18.18 $ 11.76 $ 10.16 $ --
============ =========== ============ ============
Class B:
Shares outstanding ...................... 16,448 46,879 5,074 --
Net assets .............................. $ 281,607 $ 519,317 $ 48,692 --
Net asset value and offering
price per share ........................ $ 17.12 $ 11.08 $ 9.60 --
============ =========== ============ ============
Net assets consist of:
Paid in capital ......................... $ 9,635,404 $ 5,259,514 $ 17,095,818 $ 12,670,687
Undistributed (distribution in
excess of) net investment
income .................................. -- -- 264,368 439,821
Accumulated net realized gain (loss) 8,118,983 232,215 146,125 (3,101,422)
Net unrealized appreciation
(depreciation) .......................... 2,404,813 570,320 (676,830) (496,958)
------------ ----------- ------------ ------------
Net assets ............................... $ 20,159,200 $ 6,062,049 $ 16,829,481 $ 9,512,128
============ =========== ============ ============
*Investments, at cost ................... $ 17,277,686 $ 5,169,941 $ 17,029,389 $ 9,750,549
============ =========== ============ ============
</TABLE>
(See Notes to Financial Statements which are an integral part of the Financial
Statements)
17
<PAGE>
FundManager Portfolios
Statement of Operations
Fiscal Year Ended September 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive Growth with Managed
Growth Growth Income International Total Return Bond
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- -------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividend income ..................... $ 125,505 $ 261,969 $ 559,047 $ 116,679 $ 652,587 $ 2,726,037
Expenses:
Advisory fee ........................ 117,278 140,782 174,103 46,211 61,269 224,041
Transfer agent fees ................. 70,793 63,898 64,507 31,801 47,642 40,771
Distribution and shareholder
service expenses ................... 76,147 92,476 112,960 30,740 37,070 149,677
Administrative fee .................. 75,000 75,000 75,000 75,000 75,000 82,093
Audit fee ........................... 34,066 32,099 33,232 26,340 30,083 30,578
Printing & postage .................. 20,492 18,600 17,984 5,300 14,488 16,216
Custodian fees and fund
accounting fees ..................... 33,001 31,799 32,449 25,377 28,607 29,189
Legal fee ........................... 10,113 10,799 11,728 3,774 4,543 14,363
Registration fees ................... 17,033 15,900 14,465 10,119 12,524 24,555
Trustee fees ........................ 3,460 4,200 4,300 884 982 5,560
Insurance expense ................... 267 300 391 80 245 463
Miscellaneous expense ............... 1,596 1,200 1,565 794 10,647 20,660
---------- ---------- ---------- ---------- ---------- ------------
Total expenses ..................... 459,246 487,053 542,684 256,420 323,100 638,166
Waiver of advisory fee .............. (49,499) (42,502) -- (46,211) (48,759) --
Custodian earnings credits .......... (22,066) (19,082) (14,482) (28,692) (20,622) (17,546)
---------- ---------- ---------- ---------- ---------- ------------
Net expenses ....................... 387,681 425,469 528,202 181,517 253,719 620,620
---------- ---------- ---------- ---------- ---------- ------------
Net investment income ................ $ (262,176) $ (163,500) $ 30,845 $ (64,838) $ 398,868 $ 2,105,417
---------- ---------- ---------- ---------- ---------- ------------
Net Realized and Unrealized Gain (Loss):
Net realized gain (loss) on
investments ......................... 5,669,910 5,829,416 6,031,417 51,580 (34,562) (983,845)
Net realized gains received from
underlying funds .................... 1,101,065 1,330,246 2,740,356 203,784 239,313 761,866
Net change in unrealized
appreciation (depreciation) ......... 933,141 625,849 (698,234) 2,593,680 (345,648) (3,051,567)
---------- ---------- ---------- ---------- ---------- ------------
Net realized and unrealized gain
(loss) ............................... 7,704,116 7,785,511 8,073,539 2,849,044 (140,897) (3,273,546)
---------- ---------- ---------- ---------- ---------- ------------
Net increase (decrease) in net
assets resulting from operations ..... $7,441,940 $7,622,011 $8,104,384 $2,784,206 $ 257,971 $ (1,168,129)
========== ========== ========== ========== ========== ============
</TABLE>
(See Notes to Financial Statements which are an integral part of the Financial
Statements)
18
<PAGE>
[This Page Intentionally Left Blank]
19
<PAGE>
FundManager Portfolios
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive Growth Portfolio
---------------------------------
Year Ended
September 30,
1999 1998
---------------- ----------------
<S> <C> <C>
Increase (decrease) in Net Assets from:
Operations
Net investment income (loss) .................................. $ (262,176) $ (256,395)
Net realized gain on investments and underlying funds ......... 6,770,975 5,495,216
Net change in unrealized appreciation (depreciation) .......... 933,141 (7,978,242)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations ................................................... 7,441,940 (2,739,421)
-------------- --------------
Class A
Dividends and distributions from:
Net investment income ......................................... -- (806,597)
Net realized gains ............................................ (3,205,863) (3,851,235)
-------------- --------------
Total distributions .......................................... (3,205,863) (4,657,832)
-------------- --------------
Capital share transactions:
Proceeds from sales of shares ................................. 4,704,897 12,072,686
Reinvestment of dividends ..................................... 3,114,913 4,313,633
Payments for shares redeemed .................................. (19,170,993) (21,325,338)
-------------- --------------
Total from share transactions ................................ (11,351,183) (4,939,019)
-------------- --------------
Class B
Dividends and distributions from:
Net investment income ......................................... -- (52,885)
Net realized gains ............................................ -- (204,489)
-------------- --------------
Total distributions .......................................... -- (257,374)
-------------- --------------
Capital share transactions:
Proceeds from sales of shares ................................. 800,355 454,507
Reinvestment of dividends ..................................... -- 247,873
Payments for shares redeemed .................................. (2) (2,285,886)
--------------- --------------
Total from share transactions ................................ 800,353 (1,583,507)
-------------- --------------
Total Increase (Decrease) in Net Assets ........................ (6,314,753) (14,177,153)
Net Assets:
Beginning of period ........................................... 23,943,635 38,120,788
-------------- --------------
End of period ................................................. $ 17,628,882 $ 23,943,635
============== ==============
Undistributed Net Investment Income .......................... $ -- $ --
============== ==============
Shares Outstanding:
Class A
Beginning of period ........................................... 1,701,201 1,963,321
Shares sold ................................................... 285,533 715,177
Reinvestment of dividends ..................................... 198,529 275,632
Shares redeemed ............................................... (1,160,259) (1,252,928)
-------------- --------------
End of period ................................................. 1,025,004 1,701,201
============== ==============
Class B
Beginning of period* .......................................... -- --
Shares sold ................................................... 45,409 --
Reinvestment of dividends ..................................... -- --
Shares redeemed ............................................... -- --
-------------- --------------
End of period ................................................. 45,409 --
============== ==============
<CAPTION>
Growth Portfolio
---------------------------------
Year Ended
September 30,
1999 1998
---------------- ----------------
<S> <C> <C>
Increase (decrease) in Net Assets from:
Operations
Net investment income (loss) .................................. $ (163,500) $ (115,376)
Net realized gain on investments and underlying funds ......... 7,159,662 5,427,652
Net change in unrealized appreciation (depreciation) .......... 625,849 (4,686,132)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations ................................................... 7,622,011 626,144
-------------- --------------
Class A
Dividends and distributions from:
Net investment income ......................................... -- (561,585)
Net realized gains ............................................ (3,631,857) (5,379,099)
-------------- --------------
Total distributions .......................................... (3,631,857) (5,940,684)
-------------- --------------
Capital share transactions:
Proceeds from sales of shares ................................. 5,386,962 11,237,552
Reinvestment of dividends ..................................... 3,520,754 5,552,487
Payments for shares redeemed .................................. (24,952,841) (14,818,143)
-------------- --------------
Total from share transactions ................................ (16,045,125) 1,971,896
-------------- --------------
Class B
Dividends and distributions from:
Net investment income ......................................... -- (21,512)
Net realized gains ............................................ -- (190,374)
-------------- --------------
Total distributions .......................................... -- (211,886)
-------------- --------------
Capital share transactions:
Proceeds from sales of shares ................................. 602,576 334,657
Reinvestment of dividends ..................................... -- 203,743
Payments for shares redeemed .................................. (3,110) (1,652,357)
-------------- --------------
Total from share transactions ................................ 599,466 (1,113,957)
-------------- --------------
Total Increase (Decrease) in Net Assets ........................ (11,455,505) (4,668,486)
Net Assets:
Beginning of period ........................................... 29,431,320 34,099,807
-------------- --------------
End of period ................................................. $ 17,975,815 $ 29,431,320
============== ==============
Undistributed Net Investment Income .......................... $ -- $ --
============== ==============
Shares Outstanding:
Class A
Beginning of period ........................................... 1,986,992 1,843,969
Shares sold ................................................... 316,121 666,690
Reinvestment of dividends ..................................... 218,816 362,197
Shares redeemed ............................................... (1,474,229) (885,864)
-------------- --------------
End of period ................................................. 1,047,700 1,986,992
============== ==============
Class B
Beginning of period* .......................................... -- --
Shares sold ................................................... 34,983 --
Reinvestment of dividends ..................................... -- --
Shares redeemed ............................................... (178) --
-------------- --------------
End of period ................................................. 34,805 --
============== ==============
</TABLE>
*Class B shares were effective January 8, 1999.
(See Notes to Financial Statements which are an integral part of the Financial
Statements)
20
<PAGE>
FundManager Portfolios
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth with Income Portfolio International Portfolio
- ---------------------------------- ----------------------------------
Year Ended Year Ended
September 30, September 30,
1999 1998 1999 1998
- ------------------ --------------- ------------------ ---------------
<S> <C> <C> <C>
$ 30,845 $ 71,547 $ (64,838) $ (84,700)
8,771,773 5,380,264 255,364 9,511
(698,234) (5,606,653) 2,593,680 (2,023,360)
------------- ------------ ------------- ------------
8,104,384 (154,842) 2,784,206 (2,098,549)
------------- ------------ ------------- ------------
(687,822) (745,365) -- --
(4,001,790) (5,060,401) -- --
------------- ------------ ------------- ------------
(4,689,612) (5,805,766) -- --
------------- ------------ ------------- ------------
3,691,846 8,739,488 3,238,895 12,727,934
4,337,237 5,338,014 -- --
(28,832,251) (8,098,887) (10,660,593) (433,575)
------------- ------------ ------------- ------------
(20,803,168) 5,978,615 (7,421,698) 12,294,359
------------- ------------ ------------- ------------
-- (20,452) -- --
-- (123,575) -- --
------------- ------------ ------------- ------------
-- (144,027) -- --
------------- ------------ ------------- ------------
291,677 295,796 503,733 --
-- 138,956 -- --
(2) (1,127,347) (2) --
---------------- ------------ ---------------- ------------
291,675 (692,595) 503,731 --
--------------- ------------ --------------- ------------
(17,096,721) (818,615) (4,133,761) 10,195,810
37,255,921 38,074,536 10,195,810 --
--------------- ------------ --------------- ------------
$ 20,159,200 $ 37,255,921 $ 6,062,049 $ 10,195,810
=============== ============ =============== ============
$ -- $ 56,653 $ -- $ --
=============== ============ =============== ============
2,323,640 1,965,232 1,232,125 --
209,141 487,108 314,346 1,278,370
264,199 325,003 -- --
(1,640,093) (453,704) (1,047,788) (46,245)
--------------- ------------ --------------- ------------
1,156,887 2,323,640 498,683 1,232,125
=============== ============ =============== ============
-- -- -- --
16,448 -- 46,879 --
-- -- -- --
-- -- -- --
--------------- ------------ --------------- ------------
16,448 -- 46,879 --
=============== ============ =============== ============
<CAPTION>
Managed Total Return Portfolio Bond Portfolio
--------------------------------- ---------------------------------
Year Ended Year Ended
September 30, September 30,
1999 1999 1998 1999 1998
- ------------------ ----------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
$ 30,845 $ 398,868 $ 151,099 $ 2,105,417 $ 2,663,050
8,771,773 204,751 1,672,307 (221,979) 1,199,572
(698,234) (345,648) (1,614,021) (3,051,567) 908,096
--------------- ------------ ------------- -------------- --------------
8,104,384 257,971 209,385 (1,168,129) 4,770,718
--------------- ------------ ------------- -------------- --------------
(687,822) (396,123) (284,225) (2,052,573) (3,199,284)
(4,001,790) (1,288,597) (1,001,878) -- --
--------------- ------------ ------------- -------------- --------------
(4,689,612) (1,684,720) (1,286,103) (2,052,573) (3,199,284)
--------------- ------------ ------------- -------------- --------------
3,691,846 10,181,492 804,996 3,069,959 15,451,056
4,337,237 1,628,752 1,241,594 1,202,443 1,629,827
(28,832,251) (3,366,148) (2,814,504) (51,619,581) (22,008,626)
--------------- ------------ ------------- -------------- --------------
(20,803,168) 8,444,096 (767,914) (47,347,179) (4,927,743)
--------------- ------------ ------------- -------------- --------------
-- (180) -- -- (97,109)
-- -- -- -- --
--------------- ------------ ------------- -------------- --------------
-- (180) -- -- (97,109)
--------------- ------------ ------------- -------------- --------------
291,677 50,470 -- -- 380,169
-- 171 -- -- 95,245
(2) (2) -- -- (2,720,148)
---------------- -------------- ------------- -------------- --------------
291,675 50,639 -- -- (2,244,733)
--------------- ------------- ------------- -------------- --------------
(17,096,721) 7,067,806 (1,844,632) (50,567,881) (5,698,151)
37,255,921 9,761,675 11,606,307 60,080,009 65,778,160
--------------- ------------- ------------- -------------- --------------
$ 20,159,200 $16,829,481 $ 9,761,675 $ 9,512,128 $ 60,080,009
=============== ============= ============= ============== ==============
$ -- $ 264,368 $ 36,186 $ 439,821 $ --
=============== ============= ============= ============== ==============
2,323,640 903,317 962,429 5,704,681 6,184,570
209,141 1,017,019 70,171 299,722 1,501,298
264,199 166,640 113,991 117,694 158,828
(1,640,093) (339,662) (243,273) (5,155,138) (2,140,015)
--------------- ------------- ------------- -------------- --------------
1,156,887 1,747,314 903,317 966,959 5,704,681
=============== ============= ============= ============== ==============
-- -- -- -- --
16,448 5,057 -- -- --
-- 17 -- -- --
-- -- -- -- --
--------------- ------------- ------------- -------------- --------------
16,448 5,074 -- -- --
=============== ============= ============= ============== ==============
</TABLE>
(See Notes to Financial Statements which are an integral part of the Financial
Statements)
21
<PAGE>
FundManager Portfolios
Financial Highlights
- --------------------------------------------------------------------------------
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
Net Asset Net Net Realized Distributions Distributions
Value, Investment and Unrealized Total From From Net from Net
Beginning Income Gain/(Loss) on Investment Investment Realized Gain
Year Ended September 30, of Period (Loss) Investments Operations Income on Investments
- --------------------------------------- ----------- ---------------- ---------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Aggressive Growth Portfolio: Class A
1995(a) .............................. $ 15.57 (0.13) 3.70 3.57 -- (0.83)
1996 ................................. $ 18.31 0.12(b) 1.64 1.76 (0.38) (2.89)
1997 ................................. $ 16.80 (0.12)(b) 3.75 3.63 (0.07) (1.92)
1998 ................................. $ 18.44 0.16 (2.34) (2.18) (0.38) (1.81)
1999.................................. $ 14.07 (0.30) 4.65 4.35 -- (1.95)
Aggressive Growth Portfolio: Class B
1999(g) .............................. $ 15.52 (0.08) 0.96 0.88 -- --
Growth Portfolio: Class A
1995(a) .............................. $ 14.09 (0.02) 2.99 2.97 -- (0.92)
1996 ................................. $ 16.14 0.01(b) 1.85 1.86 (0.24) (2.77)
1997 ................................. $ 14.99 0.04(b) 4.91 4.95 (0.30) (1.83)
1998 ................................. $ 17.81 0.18 (0.48) (0.30) (0.26) (2.44)
1999 ................................. $ 14.81 (0.10) 3.73 3.63 -- (1.83)
Growth Portfolio: Class B
1999(h) .............................. $ 16.16 (0.08) 0.47 0.39 -- --
Growth with Income Portfolio: Class A
1995(a) .............................. $ 15.99 0.27 3.19 3.46 (0.33) (0.84)
1996 ................................. $ 18.28 0.60(b) 1.60 2.20 (0.86) (2.93)
1997 ................................. $ 16.69 0.26(b) 4.78 5.04 (0.43) (2.33)
1998 ................................. $ 18.97 0.37 (0.62) (0.25) (0.34) (2.35)
1999 ................................. $ 16.03 (0.20) 3.38 3.18 (0.30) (1.73)
Growth with Income Portfolio: Class B
1999(g) .............................. $ 16.62 (0.07) 0.57 0.50 -- --
International Portfolio: Class A
1998(f) .............................. $ 10.00 (0.07)(b) (1.66) (1.73) -- --
1999 ................................. $ 8.27 (0.18) 3.02 2.84 -- --
International Portfolio: Class B
1999(g) .............................. $ 9.48 (0.03) 1.63 1.60 -- --
Managed Total Return Portfolio: Class A
1995(a) .............................. $ 11.24 0.28 1.18 1.46 (0.30) (0.75)
1996 ................................. $ 11.65 0.42(b) 0.40 0.82 (0.50) (0.52)
1997 ................................. $ 11.45 0.28(b) 1.55 1.83 (0.32) (0.90)
1998 ................................. $ 12.06 0.29 (0.08) 0.21 (0.31) (1.15)
1999 ................................. $ 10.81 0.39 0.21 0.60 (0.38) (1.43)
Managed Total Return Portfolio: Class B
1999(g) .............................. $ 9.74 0.17 (0.20) (0.03) (0.11) --
Bond Portfolio
1995(a) .............................. $ 9.66 0.52 0.49 1.01 (0.46) --
1996 ................................. $ 10.21 0.52(b) (0.14) 0.38 (0.59) --
1997 ................................. $ 10.00 0.51(b) 0.31 0.82 (0.54) --
1998 ................................. $ 10.28 0.54 0.32 0.86 (0.61) --
1999 ................................. $ 10.53 0.91 (1.12) (0.21) (0.48) --
- --------------------------------------- ------- ------ ------ ------ ----- -----
</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 or
contingent deferred sales charge, if applicable.
(d) During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
(e) Total return for the period from commencement of operations through end of
period and is not annualized.
22
<PAGE>
FundManager Portfolios
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios to Average Net Assets
---------------------------------------------------------------------
Net Net Investment
Net Asset Investment Expense Income
Total Value, End Total Income (after (Loss) (after
Distributions of Period Return(c) Expenses(d) (Loss)(d) waivers) waivers)
- --------------- ------------ ------------------- --------------- ------------------ --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
(0.83) $ 18.31 24.30% 1.65% (0.68)% 1.65% (0.68)%
(3.27) $ 16.80 12.10% 1.73% 0.68% 1.67% 0.74%
(1.99) $ 18.44 24.16% 1.62% (0.73)% 1.59% (0.70)%
(2.19) $ 14.07 (13.03)% 1.78% (0.74)% 1.78% (0.74)%
(1.95) $ 16.47 31.58% 1.95% (1.32)% 1.74% (1.11)%
-- $ 16.40 5.67%(e) 3.13%(i) (2.67)%(i) 2.92%(i) (2.46)%(i)
(0.92) $ 16.14 22.60% 1.71% (0.11)% 1.71% (0.11)%
(3.01) $ 14.99 13.46% 1.67% (0.01)% 1.61% 0.05%
(2.13) $ 17.81 36.92% 1.70% 0.18% 1.65% 0.23%
(2.70) $ 14.81 (2.21)% 1.70% (0.32)% 1.70% (0.32)%
(1.83) $ 16.61 24.91% 1.72% (0.73)% 1.57% (0.58)%
-- $ 16.55 2.41%(e) 2.68%(i) (1.51)%(i) 2.53%(i) (1.36)%(i)
(1.17) $ 18.28 23.30% 1.59% 1.72% 1.59% 1.72%
(3.79) $ 16.69 13.73% 1.83% 3.51% 1.77% 3.57%
(2.76) $ 18.97 34.27% 1.67% 1.44% 1.62% 1.49%
(2.69) $ 16.03 (1.61)% 1.61% 0.16% 1.61% 0.16%
(2.03) $ 17.18 20.40% 1.55% 0.09% 1.55% 0.09%
-- $ 17.12 3.01%(e) 2.89%(i) (1.32)%(i) 2.89%(i) (1.32)%(i)
-- $ 8.27 (17.30)%(e) 2.72%(i) (2.50)%(i) 2.72%(i) (2.50)%(i)
-- $ 11.11 34.34% 2.77% (1.20)% 2.27% (0.70)%
-- $ 11.08 16.88%(e) 3.63%(i) (1.86)(i) 3.13%(i) (1.36)%(i)
(1.05) $ 11.65 14.30% 2.09% 2.29% 2.09% 2.29%
(1.02) $ 11.45 7.58% 2.27% 3.62% 2.21% 3.68%
(1.22) $ 12.06 17.42% 2.19% 2.15% 2.08% 2.26%
(1.46) $ 10.81 1.75% 2.65% 1.40% 2.65% 1.40%
(1.81) $ 9.60 5.56% 2.64% 2.86% 2.24% 3.26%
(0.11) $ 9.60 (0.37)%(e) 3.36%(i) 2.26%(i) 2.86%(i) 2.76%(i)
(0.46) $ 10.21 10.80% 1.45% 5.38% 1.45% 5.38%
(0.59) $ 10.00 3.78% 1.52% 5.14% 1.47% 5.19%
(0.54) $ 10.28 8.45% 1.47% 5.03% 1.43% 5.07%
(0.61) $ 10.53 8.69% 1.47% 4.69% 1.47% 4.69%
(0.48) $ 9.84 (2.01)% 1.42% 4.70% 1.42% 4.70%
------- ------- ------ ---- ----- ---- -----
<CAPTION>
Paid from
Net Assets, Portfolio Realized
Total End of Period Turnover Net S/T
Distributions (000's omitted) Rate Gain
- --------------- ----------------- ----------- ----------
<S> <C> <C> <C>
(0.83) $33,668 50% $ 0.04
(3.27) $38,944 158% $ 0.27
(1.99) $36,200 56% $ 0.28
(2.19) $23,944 38% --
(1.95) $16,884 63% --
-- $ 745 63% --
(0.92) $26,022 68% $ 0.10
(3.01) $26,639 93% $ 0.48
(2.13) $32,835 95% $ 0.12
(2.70) $29,431 33% $ 0.28
(1.83) $17,400 62% --
-- $ 576 62% --
(1.17) $35,643 12% --
(3.79) $31,571 85% $ 0.06
(2.76) $37,274 61% --
(2.69) $37,256 14% $ 0.31
(2.03) $19,878 16% --
-- $ 282 16% --
-- $10,196 18% --
-- $ 5,543 31% --
-- $ 519 31% --
(1.05) $14,749 50% --
(1.02) $12,123 159% $ 0.01
(1.22) $11,606 73% --
(1.46) $ 9,762 98% $ 0.11
(1.81) $16,781 127% --
(0.11) $ 49 127% --
(0.46) $77,419 53% --
(0.59) $70,166 93% --
(0.54) $63,557 142% --
(0.61) $60,080 33% --
(0.48) $ 9,512 18% --
------- ------- --- ------
</TABLE>
(f) Portfolio commenced investment operations on June 6, 1998. (g) The Portfolio
commenced investment operations on February 22, 1999. (h) The Portfolio
commenced investment operations on February 16, 1999.
(i) Annualized.
(See Notes to Financial Statements which are an integral part of the Financial
Statements)
23
<PAGE>
FundManager Portfolios
Notes to Financial Statements
September 30, 1999
- --------------------------------------------------------------------------------
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 (capital appreciation with current income a
secondary consideration), Growth with Income Portfolio (combination of capital
appreciation and current income), International Portfolio (long-term capital
appreciation with current income a secondary consideration), Managed Total
Return Portfolio (high total return, through capital appreciation and current
income), and Bond Portfolio (high level of current income ). The Trust is
registered under the Investment Company Act of 1940, as amended, (the "Act") as
an open-end, diversified management investment company established as a Delaware
business trust. The Trust, with the exception of the Bond Portfolio, offers
Class A and Class B shares. All Class B shares were effective on January 8,
1999. The Bond Portfolio offers only Class A 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, 1999, the Bond Portfolio has net capital loss carryforwards on
the basis of identified cost, for federal income tax purposes of
approximately $2,200,072. 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 and $1,721,223 will expire September 30, 2005 and September 30,
2004 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
24
<PAGE>
FundManager Portfolios
Notes to Financial Statements
- --------------------------------------------------------------------------------
which may differ from generally accepted accounting principals. 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,
1999, 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 paid in capital, undistributed net investment
income and accumulated net realized gain/(loss) on investments:
<TABLE>
<CAPTION>
Undistributed Accumulated
Paid Net Net Realized
in Investment Gain/(Loss) on
Capital Income Investments
------------- --------------- ---------------
<S> <C> <C> <C>
Aggressive Growth Portfolio $1,033,030 $644,008 $(1,677,038)
Growth Portfolio ................ 1,309,762 307,706 (1,617,468)
Growth and Income
Portfolio ....................... 1,032,795 600,324 (1,633,119)
International Portfolio ......... (116,878) 149,538 (32,660)
Managed Total Return
Portfolio ....................... (679) 225,618 (224,939)
Bond Portfolio .................. (34,751) 396,942 (362,191)
</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 furnishes 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. The
Adviser may voluntarily choose to waive a portion of its fee at its sole
discretion.
(B) Administration. Federated Administrative Services ("FAS"), a 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.
25
<PAGE>
FundManager Portfolios
Notes to Financial Statements
- --------------------------------------------------------------------------------
(C) Distribution Plan. The Portfolios have adopted a Distribution Plan under
Rule 12b-1 of the Investment Company Act of 1940, which allows them to pay a
distribution and shareholder servicing fee of up to 0.25% of the Class A
Shares assets and up to 1.00% of the Class B Shares assets. Payments under
the Distribution Plan are designed to compensate the Distributors for costs
and expenses incurred by the Distributors in connection with the sale,
distribution and customer servicing of the Portfolios' Class A Shares and
Class B Shares.
(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 saletransactions for the period ended
September 30, 1999, were as follows:
<TABLE>
<CAPTION>
Portfolios Purchases Sales
- -------------------------------- -------------- --------------
<S> <C> <C>
Aggressive Growth Portfolio $14,247,687 $24,601,904
Growth Portfolio 16,442,215 30,327,258
Growth with Income Portfolio 5,338,994 27,938,708
International Portfolio 2,670,463 8,930,000
Managed Total Return Portfolio 22,469,877 15,055,088
Bond Portfolio 7,760,527 54,375,079
</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.
26
<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, the Aggressive Growth, Growth, Growth with Income, International
Portfolios, Managed Total Return, and Bond, collectively, the "Trust") as of
September 30, 1999, and the related statement of operations for the year then
ended, and the statements of changes in net assets and financial highlights for
each of the periods indicated 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, 1999, by correspondence with the custodian.
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, 1999, the results of their operations for the year then ended, and changes
in their net assets and their financial highlights for each of the periods
indicated in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 12, 1999
<PAGE>
[FREEDOM LOGO
FUND MANAGER PORTOLIOS
- --------------------------------------------------------
Selecting Leading Fund Managers for Investors Since 1984]
Investment Adviser
Freedom Capital Management Corporation
One Beacon Street
Boston, MA 02108
For Shareholder Information: (800) 344-9033
www.fund-manager.com
Distributors
Freedom Distributors Corporation
One Beacon Street
Boston, MA 02108
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, PA 15237-5829
- ---------|----------------------
NOT | May lose value
FDIC |
INSURED | Not bank guaranteed
- ---------|----------------------
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 (11/99)
Aggressive Growth Portfolio - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Aggressive
Growth Portfolio Class A Shares are represented by a solid line. The Russell
2000 Index (the "R2000") is represented by a dotted line.The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class A Shares of the fund and the R2000. The "x"
axis reflects computation periods from 10/1/89 to 9/30/99. The "y" axis reflects
the cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the fund's Class A Shares as compared to the R2000.
The ending values were $29,783 and $30,000, respectively. The legend in the
bottom quadrant of the graphic presentation indicates the fund's Class A Shares
Average Annual Total Returns for the one-year, five-year and 10-year periods
ended 9/30/99. The total returns were 24.3%, 13.3%, and 10.9%, respectively.
Absent the sales charge, the avaerage annual total returns for the period ended
9/30/99 were: 31.6%, 14.6%, and 11.5%, respectively.
Aggressive Growth Portfolio - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Aggressive
Growth Portfolio Class B Shares are represented by a solid line. The Russell
2000 Index (the "R2000") is represented by a dotted line.The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class B Shares of the fund and the R2000. The "x"
axis reflects computation periods from 2/22/99 to 9/30/99. The "y" axis reflects
the cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the fund's Class B Shares as compared to the R2000.
The ending values were $10,000 and $10,994, respectively. The legend in the
bottom quadrant of the graphic presentation indicates the fund's Class B Shares
Cummulative Total Return from the start of performance to 9/30/99. The total
return was 0.6%.
Absent the sales charge, the avaerage annual total return for the period ended
9/30/99 was 5.7%.
Growth Portfolio - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Growth
Portfolio Class A Shares are represented by a solid line. The Standard & Poor's
500 Index (S&P 500) is represented by a dotted line.The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class A Shares of the fund and theS&P 500. The "x" axis
reflects computation periods from 10/1/89 to 9/30/99. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the fund's Class A Shares as compared to the S&P 500.
The ending values were $33,945 and $50,000, respectively. The legend in the
bottom quadrant of the graphic presentation indicates the fund's Class A Shares
Average Annual Total Returns for the one-year, five-year and 10-year periods
ended 9/30/99. The total returns were 18.1%, 17.1%, and 12.4%, respectively.
Absent the sales charge, the avaerage annual total returns for the period ended
9/30/99 were: 24.9%, 17.1%, and 12.4%, respectively.
Growth Portfolio - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Growth
Portfolio Class B Shares are represented by a solid line. The Standard & Poor's
500 Index (S&P 500 Index) is represented by a dotted line.The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class B Shares of the fund and the S&P 500. The
"x" axis reflects computation periods from 2/16/99 to 9/30/99. The "y" axis
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the fund's Class B Shares as compared to the
S&P 500. The ending values were $9,741 and $10,500, respectively. The legend in
the bottom quadrant of the graphic presentation indicates the fund's Class B
Shares Cummulative Total Return from the start of performance to 9/30/99. The
total returns was (2.6)%.
Absent the sales charge, the avaerage annual total return for the period ended
9/30/99 was 2.4%.
Growth with Income Portfolio - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Growth
with Income Portfolio Class A Shares are represented by a solid line. The
Standard & Poor's 500 Index (S&P 500) is represented by a dotted line. The line
graph is a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class A Shares of the fund and theS&P 500. The
"x" axis reflects computation periods from 10/1/89 to 9/30/99. The "y" axis
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the fund's Class A Shares as compared to the
S&P 500. The ending values were $31,418 and $50,000, respectively. The legend in
the bottom quadrant of the graphic presentation indicates the fund's Class A
Shares Average Annual Total Returns for the one-year, five-year and 10-year
periods ended 9/30/99. The total returns were 13.8%, 16.1%, and 11.5%,
respectively.
Absent the sales charge, the avaerage annual total returns for the period ended
9/30/99 were 20.4%, 17.4%, and 12.1%, respectively.
Growth with Income Portfolio - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Growth
with Income Portfolio Class B Shares are represented by a solid line. The
Standard & Poor's 500 Index (S&P 500 Index) is represented by a dotted line.The
line graph is a visual representation of a comparison of change in value of a
$10,000 hypothetical investment in the Class B Shares of the fund and the S&P
500. The "x" axis reflects computation periods from 2/22/99 to 9/30/99. The "y"
axis reflects the cost of the investment. The right margin reflects the ending
value of the hypothetical investment in the fund's Class B Shares as compared to
the S&P 500. The ending values were $9,801 and $10,500, respectively. The legend
in the bottom quadrant of the graphic presentation indicates the fund's Class B
Shares Cummulative Total Return from the start of performance to 9/30/99. The
total return was (2.0)%.
Absent the sales charge, the avaerage annual total return for the period ended
9/30/99 was 3.0%.
International Portfolio - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
International Portfolio Class A Shares are represented by a solid line. The
Morgan Stanley Capital International Europe Australia Far East Index (MSCI) is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
A Shares of the fund and the MSCI. The "x" axis reflects computation periods
from 6/6/98 (start of performance) to 9/30/99. The "y" axis reflects the cost of
the investment. The right margin reflects the ending value of the hypothetical
investment in the fund's Class A Shares as compared to the MSCI. The ending
values were $10,610 and $11,500, respectively. The legend in the bottom quadrant
of the graphic presentation indicates the fund's Class A Shares Average Annual
Total Return for the one-year period and since inception to the period ended
9/30/99. The total returns were 27.0%, and 5.0%, respectively.
Absent the sales charge, the avaerage annual total returns for the period ended
9/30/99 were 34.3% and 11.1%, respectively.
International Portfolio - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The
International Portfolio Class B Shares are represented by a solid line. The
Morgan Stanley Capital International Europe Australia Far East Index (MSCI) is
represented by a dotted line.The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
B Shares of the fund and the MSCI. The "x" axis reflects computation periods
from 2/22/99 to 9/30/99. The "y" axis reflects the cost of the investment. The
right margin reflects the ending value of the hypothetical investment in the
fund's Class B Shares as compared to the MSCI. The ending values were $11,000
and $11,188, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the fund's Class B Shares Cummulative Total Return from
the start of performance to 9/30/99. The total return was 11.9%.
Absent the sales charge, the average annual total return for the period ended
9/30/99 was 16.9%.
Managed Total Return Portfolio - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Managed
Total Return Portfolio Class A Shares are represented by a solid line. The
Lehman Government/Corporate Index (LG/CI)) is represented by a broken line. The
line graph is a visual representation of a comparison of change in value of a
$10,000 hypothetical investment in the Class A Shares of the fund and the LG/CI.
The "x" axis reflects computation periods from 10/1/89 (start of performance) to
9/30/99. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the fund's Class A
Shares as compared to the LG/CI. The ending values were $18,000 and $20,313,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the fund's Class A Shares Average Annual Total Return for the
one-year, five-year, and 10-year periods ended 9/30/99. The total returns were
(0.3)%, 7.9%, and 7.3%, respectively.
Absent the sales charge, the avaerage annual total returns for the period ended
9/30/99 were 5.6%, 9.1% and 7.9%, respectively.
Managed Total Return Portfolio - Class B Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Managed
Total Return Portfolio Class B Shares are represented by a solid line. The
Lehman Government/Corporate Total Index (LG/CI) is represented by a broken
line.The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class B Shares of the fund and
the LG/CI. The "x" axis reflects computation periods from 2/22/99 to 9/30/99.
The "y" axis reflects the cost of the investment. The right margin reflects the
ending value of the hypothetical investment in the fund's Class B Shares as
compared to the LG/CI. The ending values were $9,465 and $10,000, respectively.
The legend in the bottom quadrant of the graphic presentation indicates the
fund's Class B Shares Cummulative Total Return from the start of performance to
9/30/99. The total return was (5.4)%.
Absent the sales charge, the avaerage annual total return for the period ended
9/30/99 was (0.4)%%.
A8. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated American Leaders Fund, Inc. are represented by a solid line.
The S&P 500 is represented by a broken line and the LGIFA is represented by a
dotted line. The line graph is a visual representation of a comparison of change
in value of a $10,000 hypothetical investment in the Class B Shares of the fund,
the S&P 500 and the LGIFA. The "x" axis reflects computation periods from
7/25/94 to 3/31/96. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the fund's
Class B Shares as compared to the S&P 500 and the LGIFA. The ending values were
$13,560, $14,867, and $13,771, respectively. The legend in the bottom quadrant
of the graphic presentation indicates the fund's Class B Shares Average Annual
Total Return for the one-year period ended 3/31/96 and from the start of
performance of Class B Shares (7/25/94) to 3/31/96. The total returns were
25.40% and 19.85%, respectively.
Bond Portfolio - Class A Shares
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Bond
Portfolio Class A Shares are represented by a solid line. The Lehman
Government/Corporate Index (LG/CI)) is represented by a dotted line. The line
graph is a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class A Shares of the fund and the LG/CI. The "x"
axis reflects computation periods from 10/1/89 (start of performance) to
9/30/99. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the fund's Class A
Shares as compared to the LG/CI. The ending values were $18,556 and $20,300,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the fund's Class A Shares Average Annual Total Return for the
one-year, five-year, and 10-year periods ended 9/30/99. The total returns were
(2.0)%, 5.8%, and 6.4%, respectively.
