President's Message
- --------------------------------------------------------------------------------
April 30, 1999
Dear Shareholder:
[PHOTO OF JOHN J. DANELLO]
John J. Danello
President
Many mutual fund investors have been frustrated in recent years because the
investment returns on their portfolios have underperformed certain market
averages, such as the Standard & Poor's 500 Index (the "S&P 500").o Why? In
brief, the market's sharp advance has been very narrow in scope -- a small group
of large-cap stocks have advanced dramatically while the majority of stocks have
been "stuck in neutral." For example, during the first quarter of 1999, the S&P
500 advanced 4.99%, but the share value of 56% of the companies in the S&P 500
(278 companies) declined.
In addition, mutual funds investing in value stocks, small-cap stocksoo and
international stocksooo have not kept pace with the large-cap growth stocks
which have propelled the market in recent years.
Your current mix of mutual funds may be underperforming the S&P 500, but that
doesn't necessarily mean that your investment strategy has gone awry. No
investment strategy works all the time in all markets -- even the principle of
diversification. Even though diversification doesn't assure against market loss,
it is considered a sound strategy for the long-term investor. Although tempting,
we believe that chasing yesterday's top performing mutual fund isn't a prudent
strategy for the investor looking for consistent returns.
At FundManager, we continue to embrace the principle of diversification through
our "fund-of-funds" approach. We believe it is particularly appropriate at this
time to review the principles of diversification since, as The Wall Street
Journal notes in the following quote, appropriately diversified portfolios
"should fit together so that if some perform poorly, others pick up the slack."
o Standard & Poor's 500 Index is an unmanaged capitalization-weighted index
of 500 stocks designed to measure performance of the broad domestic
economy through changes in the aggregate market value of 500 stocks
representing all major industries. Investments cannot be made in an index.
oo Small-cap stocks have historically experienced greater volatility than the
average large-cap or mid-cap stocks.
ooo Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
<PAGE>
"Diversification, diversification, diversification. This has long been the
investing world's mantra. In simplest terms, a well-diversified mutual fund
portfolio can be thought of as a pillow (yes, a pillow): If one part is punched
in, another part puffs out. In other words, your funds should fit together so
that if some perform poorly, others pick up the slack, and the portfolio overall
delivers steady returns so you can sleep well at night.
To be sure, the stunning gains of large-cap growth stocks over the past several
years have made many investors wish they'd never heard of diversification. But
most market pros say the market's infatuation with fast-growing megacaps won't
last forever; investment styles, they maintain, still will wax and wane over the
long term."
The Wall Street Journal
April 5, 1999
The recent dramatic "recovery" of value-oriented, cyclical stocks, as well as
certain international stocks, supports our recommendation that investors may
profit over the longer term by maintaining diversified mutual fund portfolios.
Sincerely,
/s/ John J. Danello
- -------------------
John J. Danello
President
2
<PAGE>
Management Discussion & Analysis
- --------------------------------------------------------------------------------
[PHOTO OF DEXTER A. DODGE]
Dexter A. Dodge
Chairman
Dear FundManager Shareholder:
The latest batch of economic indicators continues to confirm a robust pace of
growth for the U.S. economy in 1999:
o consumer spending remains on a solid upward trend;
o manufacturing activity is recovering from its more sluggish pace during the
second half of 1998; and
o construction has been vigorous both in the commercial and residential
segments as the fallout from the global turmoil of 1998 has dissipated and
economists have raised their estimates for 1999 U.S. growth from 1.90% to
3.00%.
The yield on the 30-year U.S. Treasury Bond has risen from about 5.10% to over
5.50% recently. Recall that interest rates fell dramatically during the third
quarter of 1998, during the global financial markets turmoil. The rise in
interest rates reflects the continued strength of the U.S. economy. Similarly,
oil has risen to over $17 per barrel -- up over 50% from its depressed levels in
1998, reflecting the recovery in the global economy. As the U.S. economy has
regained its momentum, there has been more talk about rising inflation pushing
interest rates higher at some point this year. However, a dramatic increase in
inflation is not apparent in the economic data at this time. We will be watching
closely for any signals that Federal Reserve Board (the "Fed") Chairman Alan
Greenspan may offer in the months ahead to determine if the Fed believes that
the economy is going to need a dose of monetary tightening in order to prevent
an upturn in inflation.
The recovery in interest rates during the first quarter of the year hurt bond
prices. The price of the 30-year U.S. bond fell 6.50% alone in February -- this
was the bond's worst performance since April of 1987 and fifth worst since its
inception in 1977! The average maturity of our FundManager Bond Portfolio was
defensively positioned at approximately 5.2 years throughout the first quarter
of 1999, and consequently the Bond Portfolio was not impacted dramatically by
the rise in interest rates. We believe that U.S. long-term interest rates will
remain in a 5.50%-6.25% range throughout the year.
The market continues to move higher on the expectation that nothing will disrupt
the "strong economy/no inflation" environment of the last several years.
Unfortunately, until recently, the leadership in the stock markets has remained
extremely narrow -- mostly in large-cap stocks and technology stocks. The recent
advance in the Dow and Standard & Poor's 500 Indexo--based on the continued rise
in a small group of stocks -- has masked the fact that the majority of stocks
have not participated in the rise of the markets since April 1998. If the global
recovery continues apace, it will be good news for various cyclical and
commodities based stocks which have not participated in this bull market for
some time.
o Standard & Poor's 500 Index is an unmanaged capitalization-weighted
index of 500 stocks designed to measure performance of the broad
domestic economy through changes in the aggregate market value of 500
stocks representing all major industries. Investments cannot be made in
an index.
3
<PAGE>
Worried about the increasing narrowness of the market, John Manley, equity
strategist at Salomon Smith Barney, offered the following view in a recent
report: "Investors, seeing the robust returns of the biggest stocks, might be
tempted to abandon diversification and target their portfolios toward an ever
narrowing slice of the equity market. This course of action is imprudent and
clearly dangerous. A portfolio fortunate enough to be driven to excess returns
by a narrow focus can be quickly dragged down in the event of a downturn in its
constituents."
Diversification remains the cornerstone of our FundManager Portfolios. We
maintain our focus on mid-cap stock funds in our Aggressive Growth Portfolio.
Valuation measures such as price-to-earnings ratios for mid-cap companies are at
compelling, historical lows when compared to large caps.
We have maintained a core 50% holding in value oriented funds in our Growth
Portfolio. Similarly, our Growth with Income Portfolio is also "value" oriented
because most of the growth and income, equity income and balanced funds in this
Portfolio embrace a philosophy of investing in "blue chip", dividend paying
companies. Although "growth investing" was the clear performance winner in 1998,
value funds have shown recent signs of good performance in 1999.
Our International Portfolio contains a mix of what we believe are some of the
best international portfolio managers around the globe. Our basket of
international mutual funds remain concentrated in European investments, although
many of the managers have begun to consider increasing their investments in Asia
and Japan after being under-weighted in those economies for many years.o We have
also maintained an investment in small-capoo international stocks which continue
to perform very well. This is quite a contrast compared to U.S. small-cap stocks
which have not been "invited" to the U.S. bull market party of the last few
years.
Lastly, we would like to provide the following FundManager Portfolios six-month
total return figures, based on net asset value, as of March 31, 1999.ooo As you
can see, the FundManager Portfolios participated fully in the global stock
market recovery in the 4th quarter of 1998.
<TABLE>
<CAPTION>
Portfolio (Class A Shares) Return
- ---------------------------------- -----------
<S> <C>
FundManager Aggressive Growth 26.95%
FundManager Growth 25.36%
FundManager Growth with Income 18.23%
FundManager Bond -0.83%
FundManager Managed Total Return 6.68%
FundManager International 17.78%
</TABLE>
Sincerely,
/s/ Dexter A. Dodge
- -------------------
Dexter A. Dodge
Chairman
o Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
oo Small-cap stocks have historically experienced greater volatility than
the average large-cap or mid-cap stocks.
ooo Performance quoted is based on net asset value for Class A Shares,
represents past performance and is not indicative of future results.
Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. As of March 31, 1999, the six-month total return, based
on offering price, was 19.96% for FundManager Aggressive Growth
Portfolio, 18.48% for FundManager Growth Portfolio, 11.74% for
FundManager Growth with Income Portfolio, 0.81% for FundManager Managed
Total Return Portfolio, and 11.31% for FundManager International
Portfolio. The Bond Portfolio does not have a sales charge.
4
<PAGE>
Is Value Investing Dead?
- --------------------------------------------------------------------------------
[PHOTO OF MARTIN S. ORGEL]
Martin S. Orgel
Assistant Portfolio
Manager
Dear FundManager Shareholder:
Cumulatively, from August 1994 through the end of 1998, growth stocks returned
approximately 70% more than their value stock counterparts. Last year alone,
growth routed value -- giving value its worst relative showing in decades --
returning 42.1% versus 14.7%, according to S&P/Barra.o This more than 27%
divergence between these two styles of investing is unprecedented. In our
opinion, the huge valuation differential between growth and value stocks will
not continue in the months to come. Value investing is not dead!
Although growth has dominated value over the past five years, historical
analysis shows that the market goes through alternating cycles of favoring
different types of stocks depending upon such factors as the direction of
interest rates, inflation levels, industrial production, productivity gains,
commodity prices, tax policy, international and political events.
Growth stocks are commonly distinguished by firms with rapidly growing revenues/
sales levels, but often small or non-existent earnings; and epitomized by
technology and healthcare firms that are constantly redeploying dollars into
research and development. These stocks tend to outperform during the later
stages of economic expansion, declining inflation and new technological
advances. As the U.S. economy continues into its ninth year (longest of
post-World War II period) of prosperity, these factors have all contributed
toward the extraordinary gains in growth stocks, such as Dell Computer,
Microsoft, and Pfizer.
Conversely, value stocks are characterized by firms in mature industries, such
as industrial manufacturing, financial services, and utilities. The stocks of
these firms have lower than market level price/earnings and price/book ratios in
addition to above-average dividend/yields. When markets correct downward over
extended periods of time, value stocks tend to decline less than growth stocks
due to the tangible values and dividend streams of income provided.
o S&P Barra Large-Cap Growth Index is a market capitalization-weighted index
of the stocks in the Standard & Poor's 500 Index that have the highest
price-to-book ratios. The index consists of approximately half of the
Standard & Poor's 500 Index on a market capitalization basis. S&P Barra
Large-Cap Value Index is a market capitalization-weighted index of the
stocks in the Standard & Poor's 500 Index having the lowest price-to-book
ratios. The index consists of approximately half of the Standard & Poor's
500 Index on a market capitalization basis. These indexes are unmanaged and
investments cannot be made in an index.
5
<PAGE>
Suffice it to say, as it appears that value stocks have begun to turn the corner
of outperformance over their growth stock peers, we have positioned the
FundManager Portfolios to take advantage of the situation as market conditions
change. With its emphasis on mutual funds looking for dividend paying stocks,
the FundManager Growth with Income Portfolio is our most value-oriented fund
with about 80% of its assets invested in value funds, followed by the
FundManager Growth Portfolio with approximately 50%, the FundManager Aggressive
Growth Portfolio with 40%, and the FundManager International Portfolio with 35%.
Growth vs. Value
Performance
[Graphic representation omitted; see Appendix A.]
Large-Cap Growth Versus Value Performance
Russell 1000 Growth Indexo Outperforms
Russell 1000 Value Indexo Outperforms
Past performance does not guarantee future results.
Source of index information: Ibbotson Associates.
Indices are unmanaged and are not available for direct investment.
Sincerely,
/s/ Martin S. Orgel
- -------------------
Martin S. Orgel
o The Russell 1000 Growth Index is an unmanaged index that measures the
performance of those Russell 1000 companies with higher price-to-book ratios
and higher forcasted growth values. The Russell 1000 Value Index is an
unmanaged index that measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth
values. Investments cannot be made in these indexes.
6
<PAGE>
FundManager Portfolios
Performance Summary
- --------------------------------------------------------------------------------
Average Annual Total Returns for Periods Ended March 31, 1999
<TABLE>
<CAPTION>
cumulative
six-month 1 year 5-year 10-year since inception
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Portfolio
Class A Shares ............... 26.95% 3.19% 14.42% 12.91% 12.85% (11/13/84)
Class B Shares ............... N/A N/A N/A N/A 2.26% (02/22/99)
Growth Portfolio
Class A Shares ............... 25.36% 9.93% 19.37% 14.58% 14.14% (11/13/84)
Class B Shares ............... N/A N/A N/A N/A 3.09% (02/16/99)
Growth With Income Portfolio
Class A Shares ............... 18.23% 5.42% 18.06% 13.40% 13.32% (11/13/84)
Class B Shares ............... N/A N/A N/A N/A 1.50% (02/22/99)
Bond Portfolio
Class A Shares ............... (0.83%) 4.12% 5.78% 7.04% 7.31% (11/13/84)
Managed Total Return Portfolio
Class A Shares ............... 6.68% 1.56% 9.69% 8.96% 9.06% (08/04/88)
Class B Shares ............... N/A N/A N/A N/A 1.03% (02/22/99)
International Portfolio
Class A Shares ............... 17.78% N/A N/A N/A (2.60%) (06/06/98)
Class B Shares ............... N/A N/A N/A N/A 2.74% (02/22/99)
</TABLE>
Past performance is not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Total returns shown above are based on net asset value and are unadjusted for
sales charges or contingent deferred sales charges associated with Class A
Shares and Class B Shares, respectively.
Following are the cumulative six-month total returns and annualized total
returns for the 1-year, 5-year, 10-year and since inception periods,
respectively, for Class A Shares and Class B Shares, all of which have been
adjusted for any sales charges. Class A Shares returns reflect the maximum 5.5%
sales charge, except for the Bond Portfolio, which does not have a sales charge.
Class B Shares returns reflect the contingent deferred sales charge, which is a
maximum of 5% declining to 1% in the 7th year and 0% thereafter. The Bond
Portfolio does not offer Class B Shares.
Aggressive Growth Portfolio, Class A Shares -- 19.96% cumulative six-month total
return, (2.50%), 13.13%, 12.27%, and 12.41%; Class B Shares--(2.77%) cumulative
total return since 02/22/99 inception.
Growth Portfolio, Class A Shares--18.48% cumulative six-month total return,
3.90%, 18.03%, 13.94%, and 13.70%; Class B Shares-- (1.92%) cumulative total
return since 02/16/99 inception.
Growth With Income Portfolio, Class A Shares--11.74% cumulative six-month total
return, (0.39%), 16.74%, 12.75%, and 12.87%; Class B Shares--(3.49%) cumulative
total return since 02/22/99 inception.
Managed Total Return Portfolio, Class A Shares--0.81% cumulative six-month total
return, (3.99%), 8.46%, 8.35%, and 8.49%; Class B Shares--(4.00%) cumulative
total return since 02/22/99 inception.
International Portfolio, Class A Shares--11.31% cumulative six-month total
return, (7.94%) cumulative total return since 06/06/98 inception; Class B
Shares--(2.22%) cumulative total return since 02/22/99 inception.
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
7
<PAGE>
FundManager Portfolios
Schedule of Investments
March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Aggressive Growth Portfolio
- --------------------------------------------------------------------------------
High capital appreciation. Seeks capital appreciation without regard to current
income.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- ---------- ---------------------------------------- --------------
<S> <C> <C>
Small Cap Funds -- (26.1%)
124 AIM Aggresive Growth ................... $ 5,544
70,758 Barron Asset ........................... 3,832,987
25 John Hancock Regional Bank
(Class A) .............................. 1,276
53 Mutual Discovery ....................... 959
89,593 Oakmark Small Cap ...................... 1,206,823
176,242 Royce Total Return ..................... 1,201,968
-----------
Total Small Cap Funds .................. 6,249,557
-----------
Mid Cap Funds -- (69.7%)
102,125 Boston Partners Mid Cap Value .......... 1,092,733
128,079 FPA Capital ............................ 3,885,931
145,080 Longleaf Partners ...................... 3,759,025
178,058 MAS Mid Cap Growth ..................... 4,045,477
115,543 T. Rowe Price Mid Cap Growth ........... 3,906,498
-----------
Total Mid Cap Funds .................... 16,689,664
-----------
Total Investments at Market Value
(Cost $19,993,302) (a) ................. 22,939,221
Other assets net of liabilities (4.2%) 997,790
-----------
Net Assets (100.0%) .................... $23,937,011
===========
</TABLE>
Growth Portfolio
- --------------------------------------------------------------------------------
Modest capital appreciation. Primarily seeks long- term capital appreciation.
Current income is a secondary consideration.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- ---------- -------------------------------------- -------------
<S> <C> <C>
Growth Funds -- (49.6%)
43,176 Guardian Park Avenue ................. $ 2,290,944
111,302 Harbor Capital Appreciation .......... 4,739,243
222,920 Vanguard Growth Index ................ 7,505,709
-----------
Total Growth Funds ................... 14,535,896
-----------
Value Funds -- (48.8%)
26,504 Clipper Fund ......................... 1,930,812
95,829 Davis New York Venture ............... 2,473,356
6,573 Dodge & Cox Stock .................... 612,361
7 FPA Paramount ........................ 60
55,336 MAS Value ............................ 786,332
55 Mutual Beacon ........................ 756
92,919 Sound Shore .......................... 2,636,109
261,354 Vanguard Value Index ................. 5,841,251
-----------
Total Value Funds .................... 14,281,037
-----------
Total Investments at Market Value
(Cost $22,471,324) (b) ............... 28,816,933
Other assets net of liabilities (1.6%) 455,837
-----------
Net Assets (100.0%) .................. $29,272,770
===========
</TABLE>
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
8
<PAGE>
FundManager Portfolios
Schedule of Investments -- (continued)
March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Growth with Income Portfolio
- --------------------------------------------------------------------------------
Income and modest capital appreciation. Seeks a combination of capital
appreciation and current income.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- --------- ----------------------------------------- ---------------
<S> <C> <C>
Growth and Income Funds -- (56.8%)
444,547 AIM Charter ............................. $ 7,166,103
233,975 Fundamental Investors ................... 7,037,977
460,474 Lord Abbett Affiliated .................. 6,957,768
------------
Total Growth and Income Funds ........... 21,161,848
------------
Balanced Funds -- (6.3%)
161,199 UAM FPA Crescent ........................ 2,364,781
------------
Equity Income Funds -- (35.0%)
115,917 Hotchkis & Wiley Equity Income .......... 2,052,887
214,266 T. Rowe Price Equity Income ............. 5,530,195
166,496 Washington Mutual Investors ............. 5,467,727
------------
Total Equity Income Funds ............... 13,050,809
------------
Total Investments at Market Value
(Cost $30,753,429) (c) .................. 36,577,438
Other assets net of liabilities (1.9%) 697,210
------------
Net Assets (100.0%) ..................... $37,274,648
============
</TABLE>
Bond Portfolio
- --------------------------------------------------------------------------------
Monthly income. Seeks a high level of current income.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- --------- ---------------------------------------- -------------
<S> <C> <C>
Short Maturity Funds -- (22.3%)
536,315 FPA New Income ......................... $ 5,835,103
625,198 Vanguard Admiral Funds, Inc. -
Short-Term U.S. Treasury ............... 6,320,753
-----------
Total Short Maturity Funds ............. 12,155,856
-----------
Intermediate Maturity Funds -- (61.3%)
426,439 Bond Fund of America ................... 5,735,606
425,514 MFS Bond Fund (Class A) ................ 5,561,467
504,101 MAS Fixed Income ....................... 5,918,141
533,940 PIMCO Total Return ..................... 5,531,624
637,835 Vanguard Admiral Funds, Inc. -
Intermediate-Term U.S. Treasury ........ 6,716,403
402,250 Vanguard Fixed Income Securities
Fund - Intermediate-Term
Corporate .............................. 3,925,964
-----------
Total Intermediate Maturity Funds 33,389,205
-----------
Long Maturity Funds -- (14.4%)
336,616 Vanguard Admiral Funds, Inc. -
Long-Term U.S. Treasury Portfolio ...... 3,675,846
470,926 Vanguard Fixed Income Securities
Fund - Long-Term Corporate
Portfolio .............................. 4,191,239
-----------
Total Long Maturity Funds .............. 7,867,085
-----------
Total Investments at Market Value
(Cost $53,696,429) (d) ................. 53,412,146
Other assets net of liabilities (2.0%) 1,099,888
-----------
Net Assets (100.0%) .................... $54,512,034
===========
</TABLE>
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
9
<PAGE>
FundManager Portfolios
Schedule of Investments -- (continued)
March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
Managed Total Return Portfolio
- --------------------------------------------------------------------------------
Asset allocation. Seeks high total return through disciplined asset allocation.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- ---------- ----------------------------------------- -------------
<S> <C> <C>
Equity and Balanced Funds -- (41.8%)
37,373 Fidelity Puritan ........................ $ 754,193
13,230 Fidelity Spartan U.S. Equity Index ...... 607,905
47,881 Income Fund of America .................. 818,770
32,459 T. Rowe Price Equity Income ............. 837,774
34,480 Vanguard Wellesley Income ............... 727,174
----------
Total Equity and Balanced Funds ......... 3,745,816
----------
Fixed Income Funds -- (58.7%)
108,461 Fidelity High Income .................... 1,379,620
94,339 Loomis Sayles Bond ...................... 1,167,917
115,956 PIMCO High Yield ........................ 1,302,187
135,275 PIMCO Total Return ...................... 1,401,448
----------
Total Fixed Income Funds ................ 5,251,172
----------
Total Investments at Market Value
(Cost $8,941,521) (e) ................... 8,996,988
Other assets net of liabilities (-0.5%) (45,577)
----------
Net Assets (100.0%) ..................... $8,951,411
==========
</TABLE>
International Portfolio
- --------------------------------------------------------------------------------
High capital appreciation. Seeks long-term capital appreciation without regard
to current income.
<TABLE>
<CAPTION>
Market
Shares Mutual Fund Value
- --------- -------------------------------------- -------------
<S> <C> <C>
International Equity Funds -- (97.8%)
121,963 American AAdvantage International
Equity ............................... $ 2,090,450
74,164 BT Investment International Equity 1,713,198
79,788 Janus Overseas ....................... 1,670,755
30,282 Nicholas-Applegate International
Small Cap Growth ..................... 639,545
103,902 Putnam International Growth .......... 2,105,061
116,558 Tweedy, Browne Global Value .......... 2,107,371
-----------
Total International Equity Funds
(Cost $10,651,375) (f) ............... 10,326,380
Other assets net of liabilities (2.2%) 227,897
-----------
Net Assets (100.0%) .................. $10,554,277
===========
</TABLE>
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
10
<PAGE>
FundManager Portfolios
Schedule of Investments -- (continued)
March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
(a) Aggregate cost for federal income tax purposes is $19,993,302. The gross
unrealized appreciation is $3,402,501; the gross unrealized depreciation is
$456,582, resulting in net unrealized appreciation of $2,945,919 for
federal income tax purposes.
(b) Aggregate cost for federal income tax purposes is $22,471,324. The gross
unrealized appreciation is $6,580,088; the gross unrealized depreciation is
$234,479, resulting in net unrealized appreciation of $6,345,609 for
federal income tax purposes.
(c) Aggregate cost for federal income tax purposes is $30,753,429. The gross
unrealized appreciation is $6,148,130; the gross unrealized depreciation is
$324,121, resulting in net unrealized appreciation of $5,824,009 for
federal income tax purposes.
(d) Aggregate cost for federal income tax purposes is $53,696,429. The gross
unrealized appreciation is $185,048; the gross unrealized depreciation is
$469,331, resulting in net unrealized depreciation of $284,283 for federal
income tax purposes.
(e) Aggregate cost for federal income tax purposes is $8,941,521. The gross
unrealized appreciation is $161,231; the gross unrealized depreciation is
$105,764, resulting in net unrealized appreciation of $55,467 for federal
income tax purposes.
(f) Aggregate cost for federal income tax purposes is $10,651,375. The gross
unrealized appreciation is $126,448; the gross unrealized depreciation is
$451,443, resulting in net unrealized depreciation of $324,995 for federal
income tax purposes.
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
11
<PAGE>
FundManager Portfolios
Statement of Assets and Liabilities
March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive Growth with Managed
Growth Growth Income Bond Total Return International
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------------- ---------------- ---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at value* .......... $ 22,939,221 $ 28,816,933 $ 36,577,438 $ 53,412,146 $ 8,996,988 $ 10,326,380
Cash ............................ 1,079,051 819,863 637,069 874,317 180,951 211,599
Receivable for fund shares sold.. 22,017 16,873 36,268 10,557 3,060 4,000
Dividend receivable ............. -- -- -- 153,456 -- --
Prepaid expenses ................ 44,147 19,312 28,979 52,190 17,202 28,703
Miscellaneous receivable ........ -- 451 -- 20,196 9,664 --
------------ ------------ ------------ ------------- ----------- ------------
Total assets ................... 24,084,436 29,673,433 37,279,754 54,522,862 9,207,865 10,570,682
------------ ------------ ------------ ------------- ----------- ------------
Liabilities:
Payable for fund shares
redeemed ........................ 147,425 400,663 5,106 10,828 256,454 2,395
Accrued Expenses ................ -- -- -- -- -- 14,010
------------ ------------ ------------ ------------- ----------- ------------
Total liabilities .............. 147,425 400,663 5,106 10,828 256,454 16,405
------------ ------------ ------------ ------------- ----------- ------------
Net Assets ....................... $ 23,937,011 $ 29,272,770 $ 37,274,648 $ 54,512,034 $ 8,951,411 $ 10,554,277
============ ============ ============ ============= =========== ============
Class A:
Shares Outstanding .............. 1,506,661 1,753,017 2,205,076 5,319,857 909,704 1,082,359
Net Assets ...................... $ 23,936,853 $ 29,219,245 $ 37,211,118 $ 54,512,034 $ 8,948,745 $ 10,541,048
Net Asset Value ................. $ 15.89 $ 16.67 $ 16.88 $ 10.25 $ 9.84 $ 9.74
============ ============ ============ ============= =========== ============
Offering Price Per Share ........ $ 16.81 $ 17.64 $ 17.86 -- $ 10.39 $ 10.31
============ ============ ============ ============= =========== ============
Class B:
Shares Outstanding .............. 10 3,213 3,766 -- 271 1,359
Net Assets ...................... $ 158 $ 53,525 $ 63,530 -- $ 2,666 $ 13,229
Net Asset Value and Offering
Price Per Share ................. $ 15.87 $ 16.66 $ 16.87 -- $ 9.84 $ 9.74
============ ============ ============ ============= =========== ============
Net Assets consist of:
Paid in capital ................. $ 16,152,707 $ 18,254,846 $ 27,167,941 $ 56,101,881 $ 8,651,428 $ 10,856,513
Undistributed (distribution in
excess of) net investment
income .......................... (437,430) (83,463) (524,403) 613,256 2,803 (70,401)
Accumulated realized gain (loss) 5,275,815 4,755,778 4,807,101 (1,918,820) 241,713 93,160
Net unrealized appreciation
(depreciation) .................. 2,945,919 6,345,609 5,824,009 (284,283) 55,467 (324,995)
------------ ------------ ------------ ------------- ----------- ------------
Net Assets ....................... $ 23,937,011 $ 29,272,770 $ 37,274,648 $ 54,512,034 $ 8,951,411 $ 10,554,277
============ ============ ============ ============= =========== ============
*Investments, at cost ........... $ 19,993,302 $ 22,471,324 $ 30,753,429 $ 53,696,429 $ 8,941,521 $ 10,651,375
============ ============ ============ ============= =========== ============
</TABLE>
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
12
<PAGE>
FundManager Portfolios
Statement of Operations
Six Months Ended March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive Growth with Managed
Growth Growth Income Bond Total Return International
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
-------------- ------------- ------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividend income ........................ $ 95,649 $ 169,460 $ 386,035 $ 1,882,545 $ 224,838 $ 116,679
Expenses:
Advisory fee ........................... 66,265 83,199 100,492 146,162 24,503 28,226
Transfer agent fees .................... 20,513 21,728 20,408 20,189 10,860 11,639
Distribution and shareholder
service expenses ....................... 49,559 62,184 75,327 110,514 18,567 21,071
Administrative fee ..................... 37,397 37,397 37,397 43,847 37,397 37,397
Audit .................................. 15,589 16,296 16,582 20,189 8,218 15,558
Printing & Postage ..................... 4,454 5,432 4,191 5,901 1,937 3,859
Custodian fees and fund
accounting fees ........................ 12,750 12,810 13,800 15,049 12,750 12,750
Legal .................................. 3,399 5,281 4,009 5,901 592 772
Registration fees ...................... 5,392 4,677 5,648 7,455 2,664 5,403
Trustee fees ........................... 1,993 2,113 2,005 3,417 484 415
Insurance expense ...................... 352 303 364 622 135 238
Miscellaneous expense .................. 938 1,207 911 1,864 619 951
---------- ---------- ---------- ------------- --------- ----------
Total expenses ........................ 218,601 252,627 281,134 381,110 118,726 138,279
Custodian earnings credits ............. (10,913) (10,306) (5,103) (4,967) (10,381) (12,750)
Waiver of advisory fee ................. -- -- -- -- (11,876) --
---------- ---------- ---------- ------------- --------- ----------
Net expenses .......................... 207,688 242,321 276,031 376,143 96,469 125,529
---------- ---------- ---------- ------------- --------- ----------
Net investment income (loss) ............ $ (112,039) $ (72,861) $ 110,004 $ 1,506,402 $ 128,369 $ (8,850)
---------- ---------- ---------- ------------- --------- ----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on
investments ............................ 3,299,716 2,156,606 1,135,840 281,011 (63,533) (96,986)
Net realized gains received from
underlying funds ....................... 1,019,576 1,286,260 2,665,571 645,959 191,047 203,784
Net change in unrealized
appreciation (depreciation) ............ 2,035,658 3,975,945 2,720,962 (2,838,892) 386,649 1,698,365
---------- ---------- ---------- ------------- --------- ----------
Net realized and unrealized gain
(loss) on investments ................... 6,354,950 7,418,811 6,522,373 (1,911,922) 514,163 1,805,163
---------- ---------- ---------- ------------- --------- ----------
Net increase (decrease) in net assets
resulting from operations ............... $6,242,911 $7,345,950 $6,632,377 $ (405,520) $ 642,532 $1,796,313
========== ========== ========== ============= ========= ==========
</TABLE>
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
13
<PAGE>
FundManager Portfolios
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Aggressive Growth Portfolio
-----------------------------------
Six Months Ended Year Ended
March 31, 1999 September 30,
(unaudited) 1998
------------------ ----------------
<S> <C> <C>
Increase (decrease) in Net Assets from:
Operations
Net investment income (loss) .............................. $ (112,039) $ (256,395)
Net realized gain on investments and underlying funds ..... 4,319,292 5,495,216
Change in unrealized appreciation (depreciation) .......... 2,035,658 (7,978,242)
------------ --------------
Net increase (decrease) in net assets resulting from
operations ............................................... 6,242,911 (2,739,421)
------------ --------------
Class A
Dividends and distributions from:
Net investment income ..................................... -- (806,597)
Net realized gains ........................................ (3,205,679) (3,851,235)
------------ --------------
Total distributions ...................................... (3,205,679) (4,657,832)
------------ --------------
Capital share transactions:
Proceeds from sales of shares ............................. 2,397,483 12,072,686
Reinvestment of dividends ................................. 3,114,728 4,313,633
Payments for shares redeemed .............................. (8,556,218) (21,325,338)
------------ --------------
Total from share transactions ............................ (3,044,007) (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 ............................. 151 454,507
Reinvestment of dividends ................................. -- 247,873
Payments for shares redeemed .............................. -- (2,285,886)
------------ --------------
Total from share transactions ............................ 151 (1,583,507)
------------ --------------
Total Increase (Decrease) in Net Assets .................... (6,624) (14,177,153)
Net Assets:
Beginning of period ....................................... 23,943,635 38,120,788
------------ --------------
End of period ............................................. $ 23,937,011 $ 23,943,635
============ ==============
Undistributed Net Investment Income ...................... $ -- $ --
============ ==============
Shares Outstanding:
Class A
Beginning of period ....................................... 1,701,201 1,963,321
Shares sold ............................................... 151,237 715,177
Reinvestment of dividends ................................. 198,517 275,632
Shares redeemed ........................................... (544,294) (1,252,928)
------------ --------------
End of period ............................................. 1,506,661 1,701,201
============ ==============
Class B
Beginning of period* ...................................... -- --
Shares sold ............................................... 10 --
Reinvestment of dividends ................................. -- --
Shares redeemed ........................................... -- --
------------ --------------
End of period ............................................. 10 --
============ ==============
<CAPTION>
Growth Portfolio
-----------------------------------
Six Months Ended Year Ended
March 31, 1999 September 30,
(unaudited) 1998
------------------ ----------------
<S> <C> <C>
Increase (decrease) in Net Assets from:
Operations
Net investment income (loss) .............................. $ (72,861) $ (115,376)
Net realized gain on investments and underlying funds ..... 3,442,866 5,427,652
Change in unrealized appreciation (depreciation) .......... 3,975,945 (4,686,132)
------------ --------------
Net increase (decrease) in net assets resulting from
operations ............................................... 7,345,950 626,144
------------ --------------
Class A
Dividends and distributions from:
Net investment income ..................................... -- (561,585)
Net realized gains ........................................ (3,631,918) (5,379,099)
------------ --------------
Total distributions ...................................... (3,631,918) (5,940,684)
------------ --------------
Capital share transactions:
Proceeds from sales of shares ............................. 2,269,963 11,237,552
Reinvestment of dividends ................................. 3,520,815 5,552,487
Payments for shares redeemed .............................. (9,716,649) (14,818,143)
------------ --------------
Total from share transactions ............................ (3,925,871) 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 ............................. 53,289 334,657
Reinvestment of dividends ................................. -- 203,743
Payments for shares redeemed .............................. -- (1,652,357)
------------ --------------
Total from share transactions ............................ 53,289 (1,113,957)
------------ --------------
Total Increase (Decrease) in Net Assets .................... (158,550) (4,668,486)
Net Assets:
Beginning of period ....................................... 29,431,320 34,099,807
------------ --------------
End of period ............................................. $ 29,272,770 $ 29,431,320
============ ==============
Undistributed Net Investment Income ...................... $ -- $ --
============ ==============
Shares Outstanding:
Class A
Beginning of period ....................................... 1,986,992 1,843,969
Shares sold ............................................... 135,706 666,690
Reinvestment of dividends ................................. 218,820 362,197
Shares redeemed ........................................... (588,501) (885,864)
------------ --------------
End of period ............................................. 1,753,017 1,986,992
============ ==============
Class B
Beginning of period* ...................................... -- --
Shares sold ............................................... 3,213 --
Reinvestment of dividends ................................. -- --
Shares redeemed ........................................... -- --
------------ --------------
End of period ............................................. 3,213 --
============ ==============
</TABLE>
*Class B shares were effective January 8, 1999.
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
14
<PAGE>
FundManager Portfolios
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Growth with Income Portfolio Bond Portfolio
- ---------------------------------- -----------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
March 31, 1999 September 30, March 31, 1999 September 30,
(unaudited) 1998 (unaudited) 1998
- ------------------ --------------- ------------------ ----------------
<S> <C> <C> <C>
$ 110,004 $ 71,547 $ 1,506,402 $ 2,663,050
3,801,411 5,380,264 926,970 1,199,572
2,720,962 (5,606,653) (2,838,892) 908,096
------------ ------------ ------------ --------------
6,632,377 (154,842) (405,520) 4,770,718
------------ ------------ ------------ --------------
(665,699) (745,365) (1,211,720) (3,199,284)
(4,001,790) (5,060,401) -- --
------------ ------------ ------------ --------------
(4,667,489) (5,805,766) (1,211,720) (3,199,284)
------------ ------------ ------------ --------------
1,554,946 8,739,488 2,180,419 15,451,056
4,322,298 5,338,014 659,826 1,629,827
(7,887,188) (8,098,887) (6,790,980) (22,008,626)
------------ ------------ ------------ --------------
(2,009,944) 5,978,615 (3,950,735) (4,927,743)
------------ ------------ ------------ --------------
-- (20,452) -- (97,109)
-- (123,575) -- --
------------ ------------ ------------ --------------
-- (144,027) -- (97,109)
------------ ------------ ------------ --------------
63,783 295,796 -- 380,169
-- 138,956 -- 95,245
-- (1,127,347) -- (2,720,148)
------------ ------------ ------------ --------------
63,783 (692,595) -- (2,244,733)
------------ ------------ ------------ --------------
18,727 (818,615) (5,567,975) (5,698,151)
37,255,921 38,074,536 60,080,009 65,778,160
------------ ------------ ------------ --------------
$ 37,274,648 $ 37,255,921 $ 54,512,034 $ 60,080,009
============ ============ ============ ==============
$ -- $ 56,653 $ 613,256 $ --
============ ============ ============ ==============
2,323,640 1,965,232 5,704,681 6,184,570
89,962 487,108 211,203 1,501,298
263,315 325,003 63,724 158,828
(471,841) (453,704) (659,751) (2,140,015)
------------ ------------ ------------ --------------
2,205,076 2,323,640 5,319,857 5,704,681
============ ============ ============ ==============
-- -- -- --
3,766 -- -- --
-- -- -- --
-- -- -- --
------------ ------------ ------------ --------------
3,766 -- -- --
============ ============ ============ ==============
<CAPTION>
Managed Total Return Portfolio International Portfolio
- ---------------------------------- ---------------------------------
Six Months Ended Year Ended Six Months Ended Year Ended
March 31, 1999 September 30, March 31, 1999 September 30,
(unaudited) 1998 (unaudited) 1998
- ------------------ --------------- ------------------ --------------
<S> <C> <C> <C>
$ 128,369 $ 151,099 $ (8,850) $ (84,700)
127,514 1,672,307 106,798 9,511
386,649 (1,614,021) 1,698,365 (2,023,360)
------------- ------------- ------------ ------------
642,532 209,385 1,796,313 (2,098,549)
------------- ------------- ------------ ------------
(213,865) (284,225) -- --
(1,288,597) (1,001,878) -- --
------------- ------------- ------------ ------------
(1,502,462) (1,286,103) -- --
------------- ------------- ------------ ------------
195,140 804,996 964,205 12,727,934
1,449,583 1,241,594 -- --
(1,597,707) (2,814,504) (2,415,201) (433,575)
------------- ------------- ------------ ------------
47,016 (767,914) (1,450,996) 12,294,359
------------- ------------- ------------ ------------
-- -- -- --
-- -- -- --
------------- ------------- ------------ ------------
-- -- -- --
------------- ------------- ------------ ------------
2,650 -- 13,150 --
-- -- -- --
-- -- -- --
------------- ------------- ------------ ------------
2,650 -- 13,150 --
------------- ------------- ------------ ------------
(810,264) (1,844,632) 358,467 10,195,810
9,761,675 11,606,307 10,195,810 --
------------- ------------- ------------ ------------
$ 8,951,411 $ 9,761,675 $ 10,554,277 $ 10,195,810
============= ============= ============ ============
$ -- $ 36,186 $ -- $ --
============= ============= ============ ============
903,317 962,429 1,232,125 --
19,055 70,171 105,043 1,278,370
148,535 113,991 -- --
(161,203) (243,273) (254,809) (46,245)
------------- ------------- ------------ ------------
909,704 903,317 1,082,359 1,232,125
============= ============= ============ ============
-- -- -- --
271 -- 1,359 --
-- -- -- --
-- -- -- --
------------- ------------- ------------ ------------
271 -- 1,359 --
============= ============= ============ ============
</TABLE>
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
15
<PAGE>
FundManager Portfolios
Financial Highlights
- --------------------------------------------------------------------------------
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
Net Asset Net
Value, Investment
Beginning Income
Year Ended September 30, of Period (Loss)
- ------------------------------------------------ ----------- ----------------
<S> <C> <C>
Aggressive Growth Portfolio: Class A
1994........................................... $ 16.70 (0.08)
1995(a) ....................................... $ 15.57 (0.13)
1996........................................... $ 18.31 0.12(b)
1997........................................... $ 16.80 (0.12)(b)
1998........................................... $ 18.44 0.16
Six Months Ended March 31, 1999(j) ............ $ 14.07 (0.08)
Aggressive Growth Portfolio: Class B
Six Months Ended March 31, 1999(g)(j) ......... $ 15.52 (0.03)
Growth Portfolio: Class A
1994........................................... $ 14.62 (0.05)
1995(a) ....................................... $ 14.09 (0.02)
1996........................................... $ 16.14 0.01(b)
1997........................................... $ 14.99 0.04(b)
1998........................................... $ 17.81 0.18
Six Months Ended March 31, 1999(j) ............ $ 14.81 0.01
Growth Portfolio: Class B
Six Months Ended March 31, 1999(h)(j) ......... $ 16.16 0.02
Growth with Income Portfolio: Class A
1994........................................... $ 16.50 0.35
1995(a) ....................................... $ 15.99 0.27
1996........................................... $ 18.28 0.60(b)
1997........................................... $ 16.69 0.26(b)
1998........................................... $ 18.97 0.37
Six Months Ended March 31, 1999(j) ............ $ 16.03 0.06
Growth with Income Portfolio: Class B
Six Months Ended March 31, 1999(g)(j) ......... $ 16.62 0.01
Bond Portfolio
1994........................................... $ 10.67 0.48
1995(a) ....................................... $ 9.66 0.52
1996........................................... $ 10.21 0.52(b)
1997........................................... $ 10.00 0.51(b)
1998........................................... $ 10.28 0.54
Six Months Ended March 31, 1999(j) ............ $ 10.53 0.33
Managed Total Return Portfolio: Class A
1994........................................... $ 12.03 0.18
1995(a) ....................................... $ 11.24 0.28
1996........................................... $ 11.65 0.42(b)
1997........................................... $ 11.45 0.28(b)
1998........................................... $ 12.06 0.29
Six Months Ended March 31, 1999(j) ............ $ 10.81 0.20
Managed Total Return Portfolio: Class B
Six Months Ended March 31, 1999(g)(j) ......... $ 9.74 0.04
International Portfolio: Class A
1998(f) ....................................... $ 10.00 (0.07)(b)
Six Months Ended March 31, 1999(j) ............ $ 8.27 --
International Portfolio: Class B
Six Months Ended March 31, 1999(g)(j) ......... $ 9.48 (0.01)
- ------------------------------------------------ ------- ------
<CAPTION>
Net Realized Distributions Distributions
and Unrealized Total From From Net from Net
Gain/(Loss) on Investment Investment Realized Gain
Year Ended September 30, Investment Operations Income on Investments
- ------------------------------------------------ ---------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C>
Aggressive Growth Portfolio: Class A
1994........................................... 0.62 0.54 -- (1.67)
1995(a) ....................................... 3.70 3.57 -- (0.83)
1996........................................... 1.64 1.76 (0.38) (2.89)
1997........................................... 3.75 3.63 (0.07) (1.92)
1998........................................... (2.34) (2.18) (0.38) (1.81)
Six Months Ended March 31, 1999(j) ............ 3.85 3.77 -- (1.95)
Aggressive Growth Portfolio: Class B
Six Months Ended March 31, 1999(g)(j) ......... 0.32 0.35 -- --
Growth Portfolio: Class A
1994........................................... 0.69 0.64 -- (1.17)
1995(a) ....................................... 2.99 2.97 -- (0.92)
1996........................................... 1.85 1.86 (0.24) (2.77)
1997........................................... 4.91 4.95 (0.30) (1.83)
1998........................................... (0.48) (0.30) (0.26) (2.44)
Six Months Ended March 31, 1999(j) ............ 3.68 3.69 -- (1.83)
Growth Portfolio: Class B
Six Months Ended March 31, 1999(h)(j) ......... 0.48 0.50 -- --
Growth with Income Portfolio: Class A
1994........................................... 0.18 0.53 (0.30) (0.74)
1995(a) ....................................... 3.19 3.46 (0.33) (0.84)
1996........................................... 1.60 2.20 (0.86) (2.93)
1997........................................... 4.78 5.04 (0.43) (2.33)
1998........................................... (0.62) (0.25) (0.34) (2.35)
Six Months Ended March 31, 1999(j) ............ 2.81 2.87 (0.29) (1.73)
Growth with Income Portfolio: Class B
Six Months Ended March 31, 1999(g)(j) ......... 0.24 0.25 -- --
Bond Portfolio
1994........................................... (0.84) (0.36) (0.53) (0.12)
1995(a) ....................................... 0.49 1.01 (0.46) --
1996........................................... (0.14) 0.38 (0.59) --
1997........................................... 0.31 0.82 (0.54) --
1998........................................... 0.32 0.86 (0.61) --
Six Months Ended March 31, 1999(j) ............ (0.40) (0.07) (0.21) --
Managed Total Return Portfolio: Class A
1994........................................... (0.16) 0.02 (0.31) (0.50)
1995(a) ....................................... 1.18 1.46 (0.30) (0.75)
1996........................................... 0.40 0.82 (0.50) (0.52)
1997........................................... 1.55 1.83 (0.32) (0.90)
1998........................................... (0.08) 0.21 (0.31) (1.15)
Six Months Ended March 31, 1999(j) ............ 0.50 0.70 (0.24) (1.43)
Managed Total Return Portfolio: Class B
Six Months Ended March 31, 1999(g)(j) ......... 0.06 0.10 -- --
International Portfolio: Class A
1998(f) ....................................... (1.66) (1.73) -- --
Six Months Ended March 31, 1999(j) ............ 1.47 1.47 -- --
International Portfolio: Class B
Six Months Ended March 31, 1999(g)(j) ......... 0.27 0.26 -- --
- ------------------------------------------------ ------ ------ ----- -----
</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) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Total Return for the period from commencement of operations through end of
period and is not annualized.
(See Notes to Financial Statements which are an integral part of the
Financial Statements)
16
<PAGE>
FundManager Portfolios
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ratios to Average Net Assets
- ----------------------------------------------------------------
Net Asset
Total Value, End Total
Distributions of Period Return(c) Expenses
- --------------- ------------ ------------------- ---------------
<S> <C> <C> <C>
(1.67) $15.57 3.30% 1.70%
(0.83) $18.31 24.30% 1.65%
(3.27) $16.80 12.10% 1.67%
(1.99) $18.44 24.16% 1.59%
(2.19) $14.07 (13.03)% 1.78%
(1.95) $15.89 26.95% 1.65%
-- $15.87 2.26%(e) 2.39%(i)
(1.17) $14.09 4.50% 1.71%
(0.92) $16.14 22.60% 1.71%
(3.01) $14.99 13.46% 1.61%
(2.13) $17.81 36.92% 1.65%
(2.70) $14.81 (2.21)% 1.70%
(1.83) $16.67 25.36% 1.52%
-- $16.66 3.09%(e) 1.77%(i)
(1.04) $15.99 3.30% 1.55%
(1.17) $18.28 23.30% 1.59%
(3.79) $16.69 13.73% 1.77%
(2.76) $18.97 34.27% 1.62%
(2.69) $16.03 (1.61)% 1.61%
(2.02) $16.88 18.23% 1.40%
-- $16.87 1.50%(e) 2.24%(i)
(0.65) $ 9.66 (3.60)% 1.43%
(0.46) $10.21 10.80% 1.45%
(0.59) $10.00 3.78% 1.47%
(0.54) $10.28 8.45% 1.43%
(0.61) $10.53 8.69% 1.47%
(0.21) $10.25 (0.83)% 1.30%
(0.81) $11.24 0.10% 1.94%
(1.05) $11.65 14.30% 2.09%
(1.02) $11.45 7.58% 2.21%
(1.22) $12.06 17.42% 2.08%
(1.46) $10.81 1.75% 2.65%
(1.67) $ 9.84 6.68% 2.18%
-- $ 9.84 1.03%(e) 2.52%(i)
-- $ 8.27 (17.30)%(e) 2.72%(i)
-- $ 9.74 17.78% 2.45%
-- $ 9.74 2.74%(e) 2.86%(i)
- --------------------------------------------------------------------------------
<CAPTION>
Net Paid from
Investment Expense Net Assets, Portfolio Realized
Income Waiver/ End of Period Turnover Net S/T
(Loss) Reimbursement(d) (000's omitted) Rate Gain
- ------------------ ------------------ ----------------- ----------- ----------
<S> <C> <C> <C> <C>
(0.57)% -- $37,766 43% $ 0.25
(0.68)% -- $33,668 50% $ 0.04
0.74% 0.06% $38,944 158% $ 0.27
(0.70)% 0.03% $36,200 56% $ 0.28
(0.74)% -- $23,944 38% --
(0.85)% -- $23,937 46% --
(2.13)%(i) -- -- 46% --
(0.52)% -- $34,205 44% $ 0.22
(0.11)% -- $26,022 68% $ 0.10
0.05% 0.06% $26,639 93% $ 0.48
0.23% 0.05% $32,835 95% $ 0.12
(0.32)% -- $29,431 33% $ 0.28
(0.44)% -- $29,219 38% --
(0.54)%(i) -- $ 54 38% --
1.88% -- $52,595 35% $ 0.14
1.72% -- $35,643 12% --
3.57% 0.06% $31,571 85% $ 0.06
1.49% 0.05% $37,274 61% --
0.16% -- $37,256 14% $ 0.31
0.55% -- $37,211 8% --
3.22%(i) -- $ 64 8% --
4.67% -- $76,769 41% --
5.38% -- $77,419 53% --
5.19% 0.05% $70,166 93% --
5.07% 0.04% $63,557 142% --
4.69% -- $60,080 33% --
5.15% -- $54,512 11% --
1.60% -- $17,515 50% $ 0.13
2.29% -- $14,749 50% --
3.68% 0.06% $12,123 159% $ 0.01
2.26% 0.11% $11,606 73% --
1.40% -- $ 9,762 98% $ 0.11
2.62% 0.24% $ 8,949 132% --
7.64%(i) 0.24% $ 3 132% --
(2.50)%(i) -- $10,196 18% --
(0.16) -- $10,541 10% --
(2.86)(i) -- $ 13 10% --
----- ---- ------- --- ------
</TABLE>
(f) Portfolio commenced investment operations on June 6, 1998. (g) The Share
Class commenced investment operations on February 22, 1999. (h) The Share Class
commenced investment operations on February 16, 1999.
(i) Annualized.
(j) Unaudited.
17
<PAGE>
FundManager Portfolios
Notes to Financial Statements
March 31, 1999 (unaudited)
- --------------------------------------------------------------------------------
1. Description and Shares of the Portfolios. FundManager Portfolios (the
"Trust") consists of a series of six separately managed portfolios
(collectively, the "Portfolios"), each with distinct investment objectives.
Following is the investment objective of each of the six portfolios presented
herein: Aggressive Growth Portfolio (capital appreciation without regard to
current income), Growth Portfolio (long-term capital appreciation with current
income a secondary consideration), Growth with Income Portfolio (combination of
capital appreciation and current income), Bond Portfolio (high level of current
income), Managed Total Return Portfolio (high total return, through capital
appreciation and current income), and International Portfolio (long-term capital
appreciation without regard to current income). The Trust is registered under
the Investment Company Act of 1940, as amended, (the "Act") as an open-end,
diversified management investment company established as a Delaware business
trust. The Trust, with the exception of the Bond Portfolio, offers Class A and
Class B shares for each Portfolio. The Bond Portfolio offers only Class A
shares. Class B shares were effective on January 8, 1999.
2. Significant Accounting Policies. The following is a summary of the Trust's
significant accounting policies:
(A)Security Valuation. Shares of other open-end investment companies are valued
at their net asset value as reported by such companies. In the absence of
readily available market quotations, investments are valued at fair value as
determined by the Board of Trustees (the "Trustees").
(B)Security Transactions and Related Investment Income. Investment transactions
are accounted for on the trade date. Dividend income is recorded on the
ex-dividend date. Interest income is accrued as earned. Identified cost of
investments sold is used to calculate gains and losses for both financial
statement and federal income tax purposes.
(C)Expense Allocation. The Portfolios bear all costs of their operations other
than expenses specifically assumed by the investment adviser or the
distributors. Expenses directly attributable to a Portfolio are charged to
that Portfolio. Expenses incurred by the Trust with respect to any two or
more Portfolios are allocated in proportion to the net asset levels of each
Portfolio; except where allocations of direct expenses to each Portfolio can
otherwise be made fairly.
(D)Federal Income Taxes. Each Portfolio is treated as a separate taxable entity
for federal tax purposes. Each Portfolio has qualified and intends to
continue to qualify as a "regulated investment company" under Subchapter M
of the Internal Revenue Code, as amended, and to distribute substantially
all of its taxable income, including any net realized gains, to its
shareholders.
Accordingly, no provision for federal income or excise tax is required. At
September 30, 1998, the Bond Portfolio has net capital loss carryforwards on the
basis of identified cost, for federal income tax purposes of approximately
$3,009,015. These capital loss carryforwards will be used to offset any future
realized gains to the extent permitted by the Internal Revenue Code and thus
will reduce the amount of distributions to shareholders which would otherwise be
necessary to relieve the Bond Portfolio of any liability for federal income tax.
The capital losses of $478,849, $1,762,365, and $767,801 will expire September
30, 2005, September 30, 2004, and September 30, 1999, respectively.
(E)Distributions to Shareholders. Dividends and distributions to shareholders
are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted account-
18
<PAGE>
FundManager Portfolios
Notes to Financial Statements
- --------------------------------------------------------------------------------
ing 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 form operations during the
reporting period. Actual results could differ from those estimates.
(G)Reclassification of Net Asset Accounts. During the period ended March 31,
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 undistributed net investment income and
accumulated net realized gain/(loss) on investments:
<TABLE>
<CAPTION>
Undistributed Accumulated
Net Net Realized
Investment Gain/(Loss) on
Income Investments
--------------- ---------------
<S> <C> <C>
Aggressive Growth Portfolio $56,212 $(56,212)
Growth Portfolio ................ 139,665 (139,665)
Growth with Income
Portfolio ....................... 76,095 (76,095)
Bond Portfolio .................. 328,538 (328,538)
Managed Total Return
Portfolio ....................... 52,114 (52,114)
International Portfolio ......... 23,149 (23,149)
</TABLE>
3. Advisory Fees and Other Transactions with Affiliates.
(A) Advisory Fees. The Trust retains Freedom Capital Management Corporation
("Freedom") to act as Investment Adviser ("Adviser"). Freedom is responsible
for the investment management of each Portfolio's assets, including the
responsibility for making the investment decisions and placing orders for
the purchase and sale of the Portfolios' investments directly with the
issuers or with brokers or dealers selected by it in its discretion,
including the distributors. Freedom also furnished to the Trustees, who have
overall responsibility for the business affairs of the Trust, periodic
reports on the investment performance of the Portfolios. For its services as
Adviser, Freedom receives from each Portfolio a fee, payable monthly, at the
annual rate of 0.50% of each Portfolio's average daily net assets up to $500
million and 0.40% of average daily net assets in excess of $500 million. The
Adviser may voluntarily choose to waive a portion of its fee from time to
time at its sole discretion. The Adviser has agreed to waive its advisory
fee for the International Portfolio until the earlier of September 30, 1999
or when total fund assets exceed $20 million.
(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 and $35,000 per each additional class of shares. FAS may
19
<PAGE>
FundManager Portfolios
Notes to Financial Statements
- --------------------------------------------------------------------------------
voluntarily choose to waive a portion of its fee or minimums from time to
time at its sole discretion.
(C) Distribution Fee and Shareholder Servicing Expenses. The Portfolios have
adopted a 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 sale transactions for the period ended
March 31, 1999, were as follows:
<TABLE>
<CAPTION>
Portfolios Purchases Sales
- -------------------------------- -------------- --------------
<S> <C> <C>
Aggressive Growth Portfolio $11,715,225 $15,050,185
Growth Portfolio 12,105,719 14,285,810
Growth with Income Portfolio 3,051,606 7,280,000
Bond Portfolio 6,653,552 10,578,079
Managed Total Return Portfolio 12,093,896 12,738,003
International Portfolio 1,020,463 1,650,000
</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. 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 be 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.
20
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<PAGE>
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<PAGE>
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<PAGE>
FundManager Portfolios
- ------------------------------------------
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
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.
G01933-02 (5/99)
FundManager Portfolios
- --------------------------------------------------------
Selecting Leading Fund Managers for Investors Since 1984
Semi-Annual
Report
March 31, 1999
o Aggressive Growth Portfolio
o Growth Portfolio
o Growth with Income Portfolio
o Bond Portfolio
o Managed Total Return Portfolio
o International Portfolio
Appendix A.
The graphic presentation displayed here consists of a line graph. The line graph
is entitled "Growth vs. Value Performance" and it consists of a jagged line that
fluctuates above and below a horizontal line that represents "0." When the
Russell 1000 Growth Index total return outperforms the Russell 1000 Value Index
total return, the jagged line is in positive territory (above the horizontal
line). When the Russell 1000 Value Index total return outperforms the Russell
1000 Growth Index total return, the jagged line is in negative territory (below
the horizontal line). The "x" axis reflects time periods from December 1980
through December 1998. The "y" axis reflects the relative return percentage
difference between the two indexes, ranging from -20% to 30%.
