Manning & Napier Fund, Inc.
Diversified Tax
Exempt Series
Semi-Annual Report
June 30, 1996
<PAGE>
Management Discussion & Analysis
Dear Shareholders:
A woman named Irene Peter once said, "Just because everything is different
doesn't mean anything has changed. While she probably was not talking about
the municipal bond market, her words capture our view of that market over the
last six months. Since the end of 1995 everything is different, but from a
longer_term investment perspective, nothing has changed.
What are we trying to get at? At the end of 1995 and early in 1996, there was
a sense that the economy was soft and that there might even be a recession
later in the year. Unfortunately for the fixed income markets, the Bureau of
Labor Statistics (BLS) February jobs report, which was issued in early March,
shattered that perception. After that, additional BLS releases reinforced the
February report, and perceptions about the economy reversed themselves. In
place of worries about a recession, concerns about the economy overheating
began to take center stage. At the same time, concerns about inflation began
to grow. Most investors, including those in the muni markets, were becoming
increasingly concerned about rising commodity prices, and there were growing
concerns that tight labor markets would translate into higher wages.
According to the BLS reports, the average monthly gain in non_farm payrolls
during the last six months of 1995 was just over 175,000. The figure has
increased to slightly more than 220,000 new jobs per month during the first
half of this year. An acceleration in the rate of new job growth generally
coincides with an acceleration in the overall rate of economic growth; hence,
the change in the market's expectations about growth.
Breaking down the BLS figures provides some interesting insights.
Manufacturing job growth has actually been negative year_to_date, declining by
an average of about 15,000 jobs per month. Obviously manufacturers remain
cautious about the prospects for economic growth. On the other hand, the
construction sector of the economy has been rather resilient, adding about
30,000 new jobs each month, and doing that in the face of rising interest
rates. However, the real driving force behind the increase in the economy's
job growth has been the service sector of the economy; "non_goods producing"
jobs are growing at an average monthly rate of close to 210,000.
1
<PAGE>
Management Discussion and Analysis (continued)
On the inflation front, market participants began to focus on the CRB Futures
Index and the Goldman Sachs Commodity Index as the second quarter progressed.
At its peak during the second quarter, the CRB Index was up more than 10%
year_over_year, and 7% year_to_date. At about the same time, the Goldman
Index was up around 18% year_over_year, and 6% year_to_date.
Commodity price increases can be, but are not necessarily, precursors to
rising inflation. In this instance there were extenuating circumstances
behind the increases in both of these indices. The CRB index is dominated by
grains and foodstuffs, and the supply of these goods is highly dependent on
the weather. The more "friendly" the meteorological environment, the greater
the potential supply of grains and foodstuffs. As everyone is quite aware,
the weather at the start of this year would not generally be described as
"friendly". The weather also played a role in the rise in the Goldman Sachs
Index. That index is dominated by crude oil, gasoline, heating oil, and
natural gas. Energy prices were pushed up as the harsh weather began early
last winter, and extended well into this spring. As nice weather started to
dawn, the pressure on both of these indices has mitigated, and both are now
below their levels at the start of the year.
As for the concerns about wages, they have been driven more by the conditions
that are sometimes associated with wage increases than by large actual
increases in wages. A tight labor market, as exhibited by low unemployment,
and accelerating job growth both suggest wage pressures could start to
develop. Year_over_year, the rate of change in hourly earnings has increased;
hovering just below 3% throughout the second half of 1995, increasing to about
3% during the first quarter, and finishing the second quarter at about 3.5%.
But unit labor costs, which take into account the productivity gains that have
characterized this expansion, suggest wages as a cost of production remain
very well behaved.
On the political front, tax reform, which once was a primary concern of the
muni market, has now become a secondary or even tertiary issue. As the
political season progressed, the likelihood of major changes to the tax code,
and especially a flat tax, continued to diminish. At this point, a flat tax
is rarely even mentioned, and the yield premium that had been priced into the
muni market has vanished. This is reflected in the relative performance of
the muni market year-to-date. Two indices with similar interest rate
sensitivities are the Merrill Lynch Intermediate Muni Index and the Merrill
Lynch Intermediate Government_Corporate Index. The muni market, even with its
lower yields, has outperformed the government_corporate index by 75 basis
points.
2
<page >
Management Discussion and Analysis (continued)
Of course that was a good_news/bad_news story; while the muni market has
outperformed, it has not been profitable in the first half of this year.
Changing economic perceptions had a negative effect on all bond markets during
the first half of 1996, and they were more than enough to offset the positive
changes in the political environment for the muni market.
So if everything is different, what hasn't changed? Let's start with a market
reality - changes in perception are often driven by somewhat isolated
economic statistics. Such statistics can contradict themselves from month to
month, and are prone to short_term aberrations. However, even if the economy
does reaccelerate, as some of the indicators suggest, and inflation increases
modestly, the investor should continue to focus on the long_term, more
comprehensive trends. After all, yields are already discounting an increase
in inflation, while longer term positive factors are firmly in place. It is
the long-range picture which has not changed, and which remains the key to
success.
With all the changes that have occurred, we believe our overview remains
firmly in place. The global economy, the proliferation of trade, and the
increase in international competition have put into place a long_term secular
dynamic that supersedes monthly economic releases and cyclical events.
Competition is a wonderful thing. For consumers, it provides a greater number
of choices, forcing businesses to be more competitive, especially when it
comes to price. That dampens inflation. Businesses recognize that they need
to be more competitive and have focused their energies on efficiency and
productivity gains - a virtuous cycle that also limits inflation. And policy
makers, recognizing who their constituents are, know that it is in their best
interest to follow sound fiscal and monetary policies. On those rare
occasions when they do go astray, the importance of the financial markets has
grown to the point where they are only political poll that really matters.
When necessary, they will express their displeasure, generally forcing
policies back on track.
With such an overview, we continue to emphasize high credit quality,
longer_term non_callable issues. We maintain our preference for general
obligation securities, for credit as well as liquidity reasons. Where
necessary we look for insurance overlays, or bonds that are pre_refunded. We
applied this strategy quite aggressively when muni yields reached 6.0% at the
end of the second quarter, a strategy that we have used successfully in the
past.
3
<PAGE>
Management Discussion and Analysis (continued)
At the end of 1995, we mentioned that the market was already discounting the
best case economic scenario. When that is the case, the market is more often
disappointed than it is pleasantly surprised. That has been the case in 1996.
However, while these may be "the times that try investors souls" (excuse the
literary license), they are very often the times of investment opportunity.
We think now is one of those times.
appreciate the opportunity to serve you, and we look forward to our next
opportunity to update you on our progress.
Sincerely.
Manning & Napier Advisors, Inc.
[pie chart]
Portfolio Composition
General Obligation Bonds - 81%
Revenue Bonds - 17%
Pre-Refunded Bonds - 2%
[pie chart]
Quality Ratings*
Aaa - 70%
Aa - 25%
A - 5%
*Using Moodys Ratings
4
<PAGE>
Performance Update as of June 30, 1996 (unaudited)
The value of a $10,000 investment in the
Manning & Napier Fund, Inc. - Diversified
Tax Exempt Series from its inception
(2/14/94) to present (6/30/96) as
compared to the Merrill Lynch Intermediate
Municipal Index.1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
Diversified Tax Exempt Series
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 10,539 5.39% 5.39%
Inception 2 $ 10,867 8.67% 3.56%
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Intermediate Municipal Index
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 10,563 5.63% 5.63%
Inception 2 $ 11,068 10.68% 4.36%
</TABLE>
1 The unmanaged Merrill Lynch Intermediate Municipal Index is a
market value weighted measure of approximately 380 municipal
bonds issued across the United States. The Index is comprised of
investment grade securities. Index returns assume reinvestment of
coupons and, unlike Fund returns, do not reflect any fees or
expenses.
2 The Fund and Index performance numbers are calculated from
February 14, 1994, the Fund's inception date. The Fund's
performance is historical and may not be indicative of future results.
[graphic]
[line chart]
Data for Line Chart to follow:
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. Merrill Lynch Intermdiate
Date Diversified Tax Exempt Series Municipal Index
<S> <C> <C>
01/17/94 $ 10,000 $10,000
06/30/94 9,600 9,652
12/31/94 9,461 9,709
06/30/95 10,311 10,478
12/31/95 11,003 11,009
06/30/96 10,867 11,068
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
MUNICIPAL SECURITIES - 95.2%
ALASKA - 2.1%
Anchorage, G.O. Bond, 6.10%, 8/1/2004 $300,000 $319,722
ARIZONA - 2.9%
Central Arizona Water Conservation District, Revenue
Bond, 4.70%, 5/1/2004 200,000 195,628
Maricopa County School District No. 097 Deer Valley,
G.O. Bond, Series A, 5.20%, 7/1/2007 250,000 248,758
444,386
CALIFORNIA - 1.1%
El Paso County School District No. 020, G.O. Bond,
Series A, 6.20%, 12/15/2007 160,000 173,683
DELAWARE - 2.6%
Delaware, G.O. Bond, Series A, 5.00%, 3/1/2008 200,000 193,628
Wilmington, G.O. Bond, Series B, 5.90%, 4/1/2000 200,000 208,794
402,422
DISTRICT OF COLUMBIA - 1.4%
District of Columbia, G.O. Bond, Series A, 7.65%, 12/1/2003 200,000 219,066
FLORIDA - 3.1%
Dade County School District, G.O. Bond, 6.125%, 8/1/2008 150,000 159,571
Florida State Board of Education Capital Outlay Public Edu.,
G.O. Bond Series C, 5.60%, 6/1/2025 135,000 130,677
Florida State Dept. of Environmental Preservation 2000,
Revenue Bond, Series A, 4.50%, 7/1/2003 200,000 194,262
484,510
GEORGIA - 4.8%
Atlanta, G. O. Bond, 5.60%, 12/1/2018 350,000 337,439
Georgia, G.O. Bond, Series B, 5.65%, 3/1/2012 200,000 202,268
Glynn County Board of Education, G.O. Bond, 5.00%, 7/1/2006 200,000 194,628
734,335
HAWAII - 2.4%
Hawaii, G.O. Bond, Series BO, 6.20%, 8/1/1996 100,000 100,230
Hawaii, G.O. Bond, Series CH, 6.00%, 11/1/2007 260,000 274,890
375,120
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
IDAHO - 0.7%
Ada & Canyon Counties Joint School District No. 2 Meridian,
G.O. Bond, 5.10%, 7/30/2005 $100,000 $100,067
ILLINOIS - 3.8%
Aurora, G.O. Bond, 5.80%, 1/1/2012 190,000 191,214
Chicago Schools Financial Authority, G.O. Bond, 5.00%, 6/1/2007 200,000 192,020
Chicago, G.O. Bond, Series A, 5.875%, 1/1/2022 100,000 98,249
Illinois, Certificate Participation, Series 1995A, 5.60%, 7/1/2010 100,000 98,948
580,431
INDIANA - 1.8%
Bloomington Sewer Works, Revenue Bond, 5.80%, 1/1/2011 150,000 151,243
Lafayette Waterworks, Revenue Bond, 4.90%, 7/1/2006 140,000 133,207
284,450
IOWA - 2.4%
Cedar Rapids, G. O. Bond, 6.45%, 6/1/2014 350,000 365,029
KENTUCKY - 3.6%
Jefferson County School District Finance Corp. School
Building, Revenue Bond, Series A, 5.00%, 2/1/2011 300,000 281,061
Kentucky State Turnpike Authority Revitalization
Projects, Revenue Bond, 6.50%, 7/1/2008 250,000 276,400
557,461
MAINE - 1.9%
Hermon, G.O. Bond, 5.60%, 11/1/2013 75,000 73,769
Portland, G.O. Bond, 6.20%, 4/1/2006 200,000 216,370
290,139
MASSACHUSETTS - 3.5%
Martha's Vineyard Regional High School District No. 100,
G. O. Bond, 6.70%, 12/15/2014 200,000 215,594
Massachusetts Municipal Electric Supply System,
Revenue Bond, Series A, 5.00%, 7/1/2017 200,000 178,926
Massachusetts Water Authority General Ref., Revenue Bond,
Series B, 5.25%, 3/1/2013 155,000 146,904
541,424
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
MARYLAND - 2.4%
Prince Georges County Public Improvement, G.O. Bond,
5.00%, 3/15/2014 $200,000 $184,288
Washington County Public Improvement, G.O. Bond,
4.875%, 1/1/2010 200,000 185,848
370,136
MICHIGAN - 3.7%
Dearborn School District, G.O. Bond, 5.10%, 5/1/2006 200,000 196,452
Farmington Hills, G.O. Bond, 5.80%, 10/1/2006 50,000 51,610
Farmington Hills, G.O. Bond, 5.90%, 10/1/2007 75,000 77,434
Farmington Hills, G.O. Bond, 5.70%, 10/1/2005 65,000 67,069
Pinckney Community Schools, G.O. Bond, 5.00%, 5/1/2014 200,000 182,552
575,117
MINNESOTA - 2.6%
Minnesota Various Purpose, G.O. Bond, 6.60%, 8/1/1999 200,000 212,342
Western Minnesota Municipal Power Agency, Revenue
Bond, 6.625%, 1/1/2016 175,000 190,698
403,040
MISSISSIPPI - 1.4%
Mississippi, G.O. Bond, 6.30%, 12/1/2006 200,000 215,552
MISSOURI - 1.6%
Missouri State Ref.- Third Street Building, G.O. Bond,
Series A, 5.125%, 8/1/2009 250,000 244,740
Montana - 1.2%
Montana Long Range Building Project, G.O. Bond, Series A,
4.875%, 8/1/2010 200,000 185,802
NEVADA - 4.0%
Clark County School District, G.O. Bond, 6.00%, 6/15/2002 100,000 105,574
Henderson Water, G.O. Bond, Series A, 5.65%, 12/1/2003 300,000 312,714
Nevada State Project No. 42, G.O. Bond, 5.70%, 9/1/2008 200,000 204,006
622,294
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note)
<S> <C> <C>
NEW HAMPSHIRE - 1.4%
New Hampshire, G.O. Bond, 6.60%, 9/1/2014 $ 200,000 $213,010
NEW JERSEY - 3.0%
New Jersey State Highway Authority, Garden State
Parkway, Revenue Bond, 5.50%, 1/1/2000 200,000 205,444
West Windsor Plainsboro, G.O. Bond, 5.25%, 12/1/2004 250,000 254,587
460,031
NEW MEXICO - 1.3%
Albuquerque, G.O. Bond, Series A & B, 4.70%, 7/1/2000 200,000 200,506
NEW YORK - 3.7%
New York State Thruway Authority, Revenue Bond,
Series A, 5.50%, 1/1/2023 200,000 189,342
Sands Point, G.O. Bond, 6.70%, 11/15/2013 350,000 375,921
565,263
NORTH CAROLINA - 2.6%
Charlotte Public Improvement, G.O. Bond, 5.70%, 2/1/2002 200,000 210,730
North Carolina State Prison Facilities, G.O. Bond, 4.80%, 3/1/2009 200,000 187,570
398,300
OHIO - 4.3%
Ohio Public Facilities, Community Higher Education,
Revenue Bond, Series II-A, 4.25%, 12/1/2002 200,000 190,674
Summit County Various Purpose, G.O. Bond, 6.625%, 12/1/2012 200,000 214,178
Salem Pedestrian Safety Impts, G.O. Bond, 5.50%, 5/1/2010 255,000 252,787
657,639
PENNSYLVANIA - 3.6%
Cambria County, G.O. Bond, Series A, 6.10%, 8/15/2016 350,000 353,920
Pennsylvania State, G.O. Bond, Second Series, 6.00%, 7/1/2005 90,000 95,392
Pennsylvania State, G.O. Bond, First Series, 5.30%, 5/1/2005 100,000 100,977
550,289
</TABLE>
The accompanying notes are an integral part of the fiinancial statements.
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
RHODE ISLAND - 2.1%
Rhode Island State, G.O. Bond, Series A, 6.20%, 6/15/2004 $300,000 $321,864
SOUTH CAROLINA - 1.3%
South Carolina State Capital Improvement, G.O. Bond,
4.10%, 4/1/2001 200,000 194,510
TENNESSEE - 3.1%
Johnson City School Sales Tax, G.O. Bond, 6.70%, 5/1/2021 350,000 373,335
Lawrence County, G.O. Bond, 6.60%, 3/1/2013 100,000 106,416
479,751
TEXAS - 1.3%
Dallas Waterworks & Sewer, Revenue Bond, 5.625%, 4/1/2009 200,000 201,042
UTAH - 4.5%
Alpine School District, G.O. Bond, 5.375%, 3/15/2009 250,000 245,802
Nebo School District, G.O. Bond, 6.00%, 6/15/2018 450,000 450,657
696,459
VIRGINIA - 3.0%
Franklin County Capital Improvement , G.O. Bond,
6.60%, 7/15/2013 250,000 266,683
Loudoun County, G.O. Bond, Series A, 4.50%, 10/1/1997 200,000 201,546
468,229
WASHINGTON - 3.0%
Kitsap County School District, G.O. Bond, 6.625%, 12/1/2008 350,000 373,324
Seattle Met. Municipality, G.O. Bond, 5.65%, 1/1/2020 100,000 94,300
467,624
WISCONSIN - 2.0%
Wisconsin State, G.O. Bond, Series A, 5.75%, 5/1/2001 300,000 313,347
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
TOTAL MUNICIPAL SECURITIES $14,676,790
(Identified Cost $14,540,415)
SHORT-TERM INVESTMENTS - 1.9%
Dreyfus Municipal Reserves (Identified Cost $295,155) 295,155 295,155
TOTAL INVESTMENTS - 97.1% 14,971,945
(Identified Cost $14,835,570)
OTHER ASSETS, LESS LIABILITIES - 2.9% 448,412
NET ASSETS - 100% $15,420,357
</TABLE>
Key -
G.O. Bond - General Obligation Bond
Rev. Bond - Revenue Bond
Dist. - District
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
At June 30, 1996, the net unrealized appreciation based on identified cost for
federal income tax purposes of $14,835,570 was as follows:
<S> <C>
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 291,414
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (155,039)
UNREALIZED APPRECIATION - NET $ 136,375
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (unaudited)
JUNE 30,1996
<S> <C>
ASSETS:
Investments, at value (Identified Cost $14,835,570)(Note 2) $14,971,945
Cash 199,541
Interest receivable 218,483
Receivable for fund shares sold 57,480
TOTAL ASSETS 15,447,449
LIABILITIES:
Accrued management fees (Note 3) 6,021
Accrued Directors' fees (Note 3) 5,239
Transfer agent fees payable (Note 3) 289
Audit fee payable 8,006
Registration & filing fees 5,164
Other payables and accrued expenses 2,373
TOTAL LIABILITIES 27,092
NET ASSETS FOR 1,540,006 SHARES
OUTSTANDING $15,420,357
NET ASSETS CONSIST OF:
Capital stock $ 15,400
Additional paid-in-capital 15,227,358
Undistributed net investment income 49,503
Accumulated net realized loss on investments (8,279)
Net unrealized appreciation on investments 136,375
TOTAL NET ASSETS $15,420,357
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($15,420,357/ 1,540,006 shares) $ 10.01
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<S> <C>
INVESTMENT INCOME:
Interest $ 347,621
EXPENSES:
Management fees (Note 3) 33,927
Directors' fees (Note 3) 3,426
Transfer agent fees (Note 3) 1,629
Audit fee 6,796
Custodian fee 2,984
Registration & filing fees 2,186
Miscellaneous 1,145
Total Expenses 52,093
NET INVESTMENT INCOME 295,528
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (446,678)
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ($151,150)
</TABLE>
The accompaanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (unaudited)
For the Six Months For the Year
Ended 6/30/96 Ended 12/31/95
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income 295,528 453,193
Net realized loss on investments -- (6,797)
Net change in unrealized appreciation on investments (446,678) 1,031,995
Net increase (decrease) in net assets from operations (151,150) 1,478,391
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (253,902) (453,725)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital share
transactions (Note 5) 3,373,261 2,946,569
Net increase in net assets 2,968,209 3,971,235
NET ASSETS:
Beginning of period 12,452,148 8,480,913
End of period (including undistributed net investment
income of $49,503 and $7,877 respectively) $ 15,420,357 $ 12,452,148
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
For the Period
2/14/94
For the Six For the Year (commencement of
Months Ended Ended operations)
6/30/96 12/31/95 to 12/31/94
<S> <C> <C> <C>
Per share data (for a share outstanding throughout
each period )
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.32 $ 9.26 $ 10.00
Income from investment operations:
Net investment income 0.212 0.428 0.210
Net realized and unrealized gain (loss)
on investments (0.342) 1.062 (0.749)
Total from investment operations (0.130) 1.490 (0.539)
Less distributions to shareholders:
From net investment income (0.180) (0.430) (0.201)
NET ASSET VALUE - END OF PERIOD $ 10.01 $ 10.32 $ 9.26
Total return: 1 (1.24)% 16.29% (5.39)%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 0.77%(2) 0.79% 0.85%(2)(3)
Net investment income 4.35%(2) 4.52% 3.71%(2)(3)
Portfolio turnover 0% 5% 4%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 15,420 $ 12,452 $ 8,481
</TABLE>
1 Total return represents aggregate total return for the period indicated.
2 Annualized.
3 The investment advisor waived a portion of its management fee. If the full
fee had been incurred by the Fund, the net investment income per share would
have been $0.186, and the annualized ratios would have been as follows:
Expenses - 1.29%; Net investment income - 3.27%.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Diversified Tax Exempt Series (the "Fund") is a no-load diversified
series of Manning & Napier Fund, Inc. (the "Corporation"). The Corporation
is organized as a Maryland Corporation and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company.
Shares of the Fund are offered to investors, employees and clients of
Manning & Napier Advisors, Inc. (the "Advisor") and its affiliates. The
total authorized capital stock of the Corporation consists of one billion
shares of common stock each having a par value of $0.01. As of June 30,
1996, 940 million shares have been designated in total among 19 series, of
which 50 million have been designated as Diversified Tax Exempt Series Class
R Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Municipal securities will normally be valued on the basis of market
valuations provided by an independent pricing service (the Service). The
Service utilizes the latest price quotations and a matrix system (which
considers such factors as security prices of similar securities, yields,
maturities, and ratings). The Service has been approved by the Funds Board
of Directors.
Securities for which representative prices are not available from the
Fund's pricing service are valued at fair value as determined in good faith
by the Fund's Board of Directors.
Short-term investments that mature in sixty (60) days or less are valued
at amortized cost.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains
on investments in accordance with
16
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICNAT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
requirements of the Internal Revenue Code. Accordingly, no provision for
federal income tax or excise tax has been made in the financial statements.
At June 30, 1996, the Fund, for federal income tax purposes, had a capital
loss carryforward of $8,279. Of this amount, $889 will expire on December
31, 2002 and $7,390 will expire on December 31, 2003.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTION OF INCOME AND GAINS
Distributions to shareholders of net investment income are made
quarterly. Distributions are recorded on the ex-dividend date. Distributions
of net realized gains are distributed annually. An additional distribution
may be necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses or character reclassification between
net income and net gains. As a result, net investment income (loss) and net
investment gain (loss) on investment transactions for a reporting period may
differ significantly from distributions to shareholders during such period.
As a result, the Fund may periodically make reclassification among its
capital accounts without impacting the Fund's net asset value.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier
Advisors, Inc. (the "Advisor"), for which the Fund pays the Advisor a fee,
computed daily and payable monthly, at an annual rate of 0.50% of the Fund's
average daily net assets. The fee amounted to $33,927 for the six months
ended June 30, 1996.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
17
<PAGE>
Notes to Financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
The Advisor has voluntarily agreed to waive its fee and, if necessary,
pay other expenses of the Fund in order to maintain total expenses for the
Fund at no more than 0.85% of average daily net assets each year. The fee
waiver and assumption of expenses by the Advisor is voluntary and may be
terminated at any time.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Fund pays a fee which
is calculated as a percentage of the average daily net assets at an annual
rate of 0.024%; this fee amounted to $1,629 for the six months ended June 30,
1996.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $3,426 for the
six months ended June 30, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term securities, were
$3,125,734 and $0, respectively, for the six months ended June 30, 1996.
5. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of Diversified Tax Exempt Series Class R Common Stock were:
For the Six Months For the Year
Ended 6/30/96 Ended 12/31/95
Shares Amount Shares
<S> <C> <C> <C>
Sold 351,855 $3,565,500 330,682
Reinvested 24,627 244,350 43,117
Repurchased (43,581) (436,589) (82,916)
-------------------------------------------------------------------- ----------- ---------------
Total 332,901 $3,373,261 290,883
Amount
<S> <C>
Sold $3,323,798
Reinvested 433,995
Repurchased (811,224)
-----------
Total $2,946,569
</TABLE>
18
<PAGE>
Notes to Financial Statements (unaudited)
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include
written options and futures contracts and may involve, to a varying degree,
elements of risk in excess of the amounts recognized for financial statement
purposes. No such investments were held by the Fund on June 30, 1996.
7. SPECIAL MEETING OF SHAREHOLDERS
On April 10, 1996, a special meeting of the Corporation was held for the
purpose of electing directors. The following directors have been elected:
Stephen B. Ashley, B. Reuben Auspitz, Martin F. Birmingham, Peter L.
Faber, and Harris H. Rusitzky.
19
<PAGE>
Manning & Napier Fund, Inc.
International Series
Semi-Annual Report
June 30, 1996
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
In the first half of 1996, the International Series outperformed international
indices, such as the Morgan Stanley Capital International World Index, and its
return was also slightly stronger than the U.S. market as represented by the
S&P 500 Total Return Index. Investments in Germany, France, Italy, Spain, and
Mexico, some of the periods best-performing markets, were strong contributors
to the Series performance. As of June 30, 1996, the Series held investments
in Germany (29% of the portfolio), France (28%), Italy (12%), Spain (9%), the
United Kingdom (2%), Mexico (3%), and Hong Kong (5%).
In Europe, the economies are weak and unemployment is high. Monetary policies,
which were at strict levels due to the move towards monetary union, have been
relaxed; however, growth remains sluggish. In addition to this easing of
monetary policy, governments need to implement major restructuring of
burdensome business regulation and social welfare programs. Indeed, the
governments of Germany and France have adopted plans for aggressive
restructuring aimed at reducing bloated government budgets by cutting welfare
programs. These plans have led to public outcry, but the plans have not been
derailed as the importance of reform is clear. We believe that the changes
which will be taking place in Europe will result in impressive increases in
growth in that part of the world, and we have positioned the portfolio in
several European countries in order to benefit from that expected growth.
In Spain, there are also more country-specific changes taking place. In the
Annual Report last December, we wrote that we expected a right wing party to
win the March election and to take reforms further in that country. The
Popular Party did win Spains election in March and a new government was formed
in May. Already, many reforms have been enacted which reduce government
expenditures and reduce business regulations and taxes. The response from the
financial markets has been encouraging - bond yields have fallen sharply and
the Spanish stock market was the best performing in the world for the first
half of the year.
The massive growth potential of the Chinese mainland economy offers
extraordinary potential to the companies that can position themselves to be
beneficiaries of that growth. While the political system in China is still
one based on Communist principles, the economy is far more of a free market
than many realize. As the global economy becomes more integrated, we believe
the Chinese will continue to move even further towards a free market based
system. We expect this movement to enhance the growth rate of the economy and
lead to a re-evaluation of Chinese-based companies. Through holdings of
H-shares (shares of Chinese companies which trade in Hong Kong), we have taken
positions in companies that we believe offer great potential while trading at
very attractive valuations. Limited liquidity, and the volatile nature of a
market undergoing great change, are the reasons we have limited this
investment to its current size.
1
<PAGE>
Management Discussion and Analysis
We initially invested in Mexico in late 1994, when the devaluation of the peso
presented the opportunity to purchase companies which had extremely formidable
market positions and strong balance sheets but which were not dramatically
affected by the devaluation. The devaluation-inspired panic has evolved into
what we believe to be a strong sustainable growth trend as exports have
strengthened. In addition, Mexico has adopted a policy of allowing interest
rates to fluctuate on a free market basis, and this has allowed the currency
to remain stable in the face of inflation, which is still high. The
fundamentals of the Mexican economy are looking more and more stable, and
consensus estimates are for growth of over 2.5% in 1996 and over 4% in 1997.
An important investment theme at Manning & Napier has been the growth of
international competition and the importance of taking a global view in
searching for investment opportunities, and the International Series will
continue to play an important role in our implementation of our strategies in
the international arena.
We appreciate the opportunity to serve you, and we look forward to our next
opportunity to update you on our progress.
Sincerely,
Manning & Napier Advisors, Inc.
[pie chart]
Portfolio Allocation by Country* - As of 6/30/96
France - 32%
Germany - 33%
Hong Kong - 6%
Italy - 14%
Mexico - 3%
Spain - 10%
United Kingdom - 2%
*As a percentage of commom stock
2
<PAGE>
Performance Update as of June 30, 1996
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
International from its inception (8/27/92) to present (6/30/96) as compared
to the Standard & Poor's (S&P) 500 Total Return Index and the Morgan Stanley
Capital International World Index. 1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
International Series
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 11,313 13.13% 13.13%
Inception 2 $ 13,229 32.29% 7.55%
</TABLE>
<TABLE>
<CAPTION>
S&P 500 Total Return Index
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 12,593 25.93% 25.93%
Inception 2 $ 17,956 79.56% 16.44%
</TABLE>
<TABLE>
<CAPTION>
Morgan Stanley
Capital International World Index
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 11,844 18.44% 18.44%
Inception 2 $ 16,439 64.39% 13.79%
</TABLE>
1 The Standard & Poor (S&P) 500 Total Return Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange, and Over-The-Counter
market. The Morgan Stanley Capital International World Index is an market
capitalization-weighted measure of the total return of 1,570 companies listed
on the stock exchanges of the United States, Europe, Canada, Australia, New
Zealand and the Far East. The Morgan Stanley Capital International Index is
denominated in U.S. Dollars. The Indices' returns assume reinvestment of
dividends and, unlike Fund returns, do not reflect any fees or expenses.
2 Performance numbers for the Fund and Indices are calculated from
August 27, 1992, the Fund's inception date. The Fund's performance is
historical and may not be indicative of future results.
[graphic]
line chart
Data for line chart to follow:
<TABLE>
<CAPTION>
Manning & Napier S&P 500 Total Morgan Stanley Capital
Date International Series Return Index International World Index
<S> <C> <C> <C>
08/27/92 10,000 10,000 10,000
12/31/92 10,598 10,643 9,880
12/31/93 13,359 11,709 12,103
12/31/94 11,425 11,868 12,717
12/31/95 11,898 16,312 15,351
06/30/96 13,229 17,955 16,439
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
COMMON STOCK - 88.09%
FRANCE - 28.37%
AEROSPACE & MILITARY TECHNOLOGY - 0.30%
Thomson CSF SA* 14,132 $ 396,690
AUTOMOBILES - 0.76%
PSA Peugeot Citroen 7,545 1,008,458
BANKING - 2.22%
Cie Financiere De Paribas 13,919 820,845
Compagnie de Suez SA 18,822 687,536
Credit Foncier de France 5,232 34,001
Societe Generale Paris 12,813 1,406,846
2,949,228
BEVERAGE & TOBACCO - 2.09%
LVMH (Louis Vuitton Moet-Hennessy) 11,764 2,786,442
BUILDING MATERIALS & COMPONENTS - 0.60%
Lafarge 13,327 805,322
BUSINESS & PUBLIC SERVICES - 1.40%
Compagnie Generale des Eaux 16,665 1,858,885
CHEMICALS - 1.72%
L'Air Liquide 12,960 2,285,326
CONSTRUCTION & HOUSING - 0.29%
Bouygues 3,502 389,949
ELECTRICAL & ELECTRONICS - 1.38%
Alcatel Alsthom 21,010 1,830,003
ENERGY SOURCES - 3.47%
Elf Acquitaine 37,335 2,742,055
Total SA - B 25,288 1,872,965
4,615,020
FINANCIAL SERVICES - 0.54%
Compagnie Bancaire SA 3,827 430,592
Societe Eurafrance SA 743 286,828
717,420
</TABLE>
The accompanying noters are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
FOOD & HOUSEHOLD PRODUCTS - 1.18%
Groupe Danone 10,381 $ 1,568,758
HEALTH & PERSONAL CARE - 2.92%
Sanofi SA 11,667 873,174
L'Oreal 9,103 3,017,908
3,891,082
INDUSTRIAL COMPONENTS - 0.55%
Michelin-B* 14,874 725,968
LEISURE & TOURISM - 0.50%
Accor SA 4,809 671,686
MACHINERY & ENGINEERING - 2.11%
Schneider SA 13,384 701,018
Sidel SA 8,300 2,107,643
2,808,661
MATERIALS & COMMODITIES - 1.53%
Compagnie de Saint-Gobain 15,232 2,035,895
MERCHANDISING - 2.87%
Carrefour Supermarche 6,048 3,383,657
Casino Guichard-Perrachon 10,600 436,962
3,820,619
MULTI-INDUSTRY - 1.94%
AXA 27,573 1,506,246
Chargeurs International SA 1,235 55,127
Lyonnaise des Eaux-Dumex 7,655 730,023
Pathe SA 1,235 289,410
2,580,806
TOTAL FRENCH SECURITIES
(Identified Cost $30,335,405) 37,746,218
GERMANY - 28.65%
AIRLINES - 0.25%
Deutsche Lufthansa AG* 2,370 335,017
</TABLE>
The accompanying noters are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
AUTOMOBILES - 5.04%
Daimler Benz AG 5,954 $ 3,188,862
Daimler Benz AG - Rights, 7/3/1996 5,954 820
Volkswagen AG 9,484 3,524,213
6,713,895
BANKING - 2.91%
Bayerische Vereinsbank AG 49,730 1,389,629
Dresdner Bank AG 99,090 2,482,927
3,872,556
CHEMICALS - 2.21%
Bayer AG 83,750 2,941,813
CONSTRUCTION & HOUSING - 0.76%
Hochtief AG 2,277 1,015,647
ELECTRICAL & ELECTRONICS - 4.83%
Siemens AG 120,000 6,421,488
INSURANCE - 3.01%
Allianz AG Holding 2,307 4,004,130
MACHINERY & ENGINEERING - 2.02%
Mannesmann AG 5,725 1,967,784
M.A.N. AG 2,902 726,211
2,693,995
MATERIALS & COMMODITIES - 0.46%
Degussa AG 1,790 606,449
MULTI-INDUSTRY - 1.99%
Viag AG 6,656 2,645,798
UTILITIES - GAS & ELECTRIC - 5.17%
RWE AG 75,810 2,943,872
VEBA AG 74,150 3,934,870
6,878,742
TOTAL GERMAN SECURITIES
(Identified Cost $29,141,791) 38,129,530
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Share (Note 2)
HONG KONG - 4.98%
<S> <C> <C>
ENERGY SOURCES - OIL/GAS - 0.73%
Zhenhai Refining & Chemical Co Ltd. 3,402,000 $ 966,910
RETAIL - APPAREL - 0.73%
Giordano International Ltd. 1,000,000 968,925
SOFTWARE - 1.10%
Founder Hong Kong Ltd.* 3,500,000 1,458,232
TELECOMMUNICATIONS - 0.39%
Champion Technology Holdings 4,398,729 517,127
TEXTILES & APPAREL - 1.03%
Yizheng Chemical Fibre Co. Ltd. 6,224,000 1,374,974
TRANSPORTATION - MARINE - 0.87%
Shanghai Haixing Shipping Co. 17,600,000 1,159,609
WHOLESALE - SPECIAL LINES - 0.13%
Goldlion Holdings Ltd. 200,000 171,823
TOTAL HONG KONG SECURITIES
(Identified Cost $7,718,378) 6,617,600
ITALY - 12.27%
AUTOMOBILES - 1.13%
Fiat S.p.A. 450,000 1,505,870
BUILDING MATERIAL & COMPONENTS - 0.50%
Italcementi S.p.A. 83,600 670,110
CONSTRUCTION & HOUSING - 0.42%
Sirti S.p.A. 86,500 555,248
ENERGY SOURCES - OIL/GAS - 0.47%
Edison S.p.A. 104,000 626,916
FINANCIAL SERVICES - 1.40%
Banca Commerciale Italiana 242,000 485,736
Banco Ambrosiano Veneto S.p.A. 80,700 216,410
Credito Italiano S.p.A. 288,000 337,080
Istituto Bancario San Paolo di Torina S.p.A. 126,800 818,067
1,857,293
</TABLE>
The accompanying notes are an integral part of hte financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
FOOD & HOUSEHOLD PRODUCTS - 0.23%
Parmalat Finanziaria S.p.A. 233,400 $ 313,330
INSURANCE - 2.80%
Assicurazioni Generali S.p.A. 123,640 2,848,281
R.A.S. S.p.A. 47,575 491,253
S.A.I. 40,400 385,703
3,725,237
MULTI-INDUSTRY - 0.88%
Montedison S.p.A.* 1,211,000 703,163
Pirelli S.p.A.* 288,000 481,409
1,184,572
RETAIL - SPECIALTY STORES - 0.25%
La Rinascente S.p.A. 46,125 329,895
TELECOMMUNICATIONS - 3.49%
Telecom Italia S.p.A. 1,060,000 2,276,123
Telecomm Italia Mobile S.p.A.* 1,060,000 2,365,924
4,642,047
TEXTILES & APPAREL - 0.28%
Benetton Group S.p.A. 28,800 371,614
UTILITIES - GAS & ELECTRIC - 0.42%
Italgas S.p.A. 150,000 559,630
TOTAL ITALIAN SECURITIES
(Identified Cost $16,391,965) 16,341,762
MEXICO - 2.59%
BEVERAGE & TOBACCO - 0.87%
Coca-Cola Femsa S.A. 400,000 1,163,182
FOOD - PROCESSING - 0.84%
Grupo Industrial Maseca S.A. - Series B 1,075,000 1,117,155
REAL ESTATE - 0.17%
Grupo Situr S.A. - Series B 1,575,000 222,251
RETAIL - DEPARTMENT STORES - 0.71%
Cifra, SA - Series B 650,000 937,799
TOTAL MEXICAN SECURITIES
(Identified Cost $2,843,934) 3,440,387
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
SPAIN - 9.17%
<S> <C> <C>
BEVERAGE & TOBACCO - 0.16%
Tabacalera SA - A 4,266 $ 214,488
CONSTRUCTION & HOUSING - 0.26%
Dragados & Construcciones SA 11,988 158,394
Fomento de Construcciones y Contratas SA 2,277 188,144
346,538
ENERGY SOURCES - OIL/GAS - 1.00%
Repsol SA 38,365 1,332,308
FINANCIAL SERVICES - 2.31%
Banco Bilbao Vizcaya 28,290 1,144,516
Banco Central Hispanoamericano SA 18,888 384,280
Banco Santander SA 18,728 873,000
Corp. Bancaria De Espana SA (Argentaria) 15,512 675,929
3,077,725
INSURANCE - 0.11%
Corporacion Mapfre 2,823 143,916
METAL - STEEL - 0.18%
Acerinox SA 2,343 243,823
MULTI-INDUSTRY - 0.25%
Autopistas Concesionaria Espanola SA 28,443 330,357
REAL ESTATE - 0.03%
Inmobiliaria Metropolitana Vasco Central SA 1,128 38,557
TELECOMMUNICATIONS - 1.52%
Telefonica de Espana 110,009 2,023,774
UTILITIES - GAS & ELECTRIC - 3.35%
Empresa Nacional de Electridad (ENDESA) 29,210 1,819,282
Gas Natural SDG - E 4,993 1,046,973
Iberdrola SA 122,474 1,255,427
Union Electrica Fenosa SA 52,126 334,814
4,456,496
TOTAL SPANISH SECURITIES
(Identified Cost $9,484,497) 12,207,982
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount/Shares (Note 2)
UNITED KINGDOM - 1.71%
<S> <C> <C>
MERCHANDISING - 1.71%
Tesco plc 500,000 $ 2,282,029
TOTAL UNITED KINGDOM SECURITIES
(Identified Cost $2,210,890) 2,282,029
UNITED STATES - 0.35%
SOFTWARE - 0.35%
Dassault Systemes S.A.* 15,000 465,000
TOTAL UNITED STATES SECURITIES
(Identified Cost $345,000) 465,000
TOTAL COMMON STOCK
(Identified Cost $98,471,860) 117,230,508
SHORT-TERM INVESTMENTS - 10.79%
Freddie Mac Discount Note, 7/22/96 13,000,000 12,960,112
Dreyfus U.S. Treasury Money Market 1,399,025 1,399,025
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $14,359,137) 14,359,137
TOTAL INVESTMENTS - 98.88%
(Identified Cost $112,830,997) 131,589,645
OTHER ASSETS, LESS LIABILITIES - 1.12% 1,494,447
NET ASSETS -100% $133,084,092
</TABLE>
*Non-income producing security.
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
At June 30, 1996, the net unrealized appreciation based on identified cost for
federal income tax purposes of $112,830,997 was as follows:
<S> <C>
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $24,592,361
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (5,843,009)
UNREALIZED APPRECIATION - NET $18,749,352
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Industry Concentration - June 30, 1996 (unaudited)
Percent of
Net Assets
<S> <C>
INDUSTRY CONCENTRATION (AS A PERCENT OF NET ASSETS)
Aerospace & Military Technology 0.30%
Airlines 0.25%
Automobiles 6.93%
Banking 5.13%
Beverage & Tobacco 3.12%
Building Materials & Components 1.10%
Business & Public Services 1.40%
Chemicals 3.93%
Construction & Housing 1.73%
Electrical & Electronics 6.21%
Energy Sources 5.67%
Financial Services 4.25%
Food & Household Products 1.41%
Food Processing 0.84%
Health & Personal Care 2.92%
Industrial Components 0.55%
Insurance 5.92%
Leisure & Tourism 0.50%
Machinery & Engineering 4.13%
Materials & Commodities 1.99%
Merchandising 4.58%
Metals-Steel 0.18%
Multi-Industry 5.07%
Real Estate 0.20%
Retail 1.68%
Software 1.45%
Telecommunication 5.40%
Textiles & Apparel 1.31%
Transportation - Marine 0.87%
Utilities - Gas & Electric 8.94%
Wholesale - Special Lines 0.13%
-----------
TOTAL COMMON STOCK 88.09%
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (unaudited)
JUNE 30, 1996
<S> <C>
ASSETS:
Investments, at value (Identified Cost $112,830,997)(Note 2) $131,589,645
Foreign currency, at value (cost $759,855) 752,923
Receivable for forward foreign currency exchange
contracts sold (Note 2) 75,643,597
Foreign tax reclaims receivable 629,986
Receivable for fund shares sold 411,350
Dividends receivable 344,224
Prepaid expense 2,028
TOTAL ASSETS 209,373,753
LIABILITIES:
Accrued management fees (Note 3) 115,350
Accrued Directors' fees (Note 3) 5,239
Payable for forward foreign currency contracts sold,
at value (Note 2) 75,652,865
Payable for securities purchased 428,624
Payable for fund shares redeemed 35,112
Custodian fee payable 24,189
Audit fee payable 14,800
Other payables and accrued expenses 13,482
TOTAL LIABILITIES 76,289,661
NET ASSETS FOR 12,504,579 SHARES
OUTSTANDING $133,084,092
NET ASSETS CONSIST OF:
Capital stock $ 125,047
Additional paid-in-capital 112,644,628
Undistributed net investment income 1,736,815
Accumulated net realized loss on investments (159,524)
Net unrealized appreciation on investments, foreign currency, forward currency
contracts, and other assets and liabilities 18,737,126
TOTAL NET ASSETS $133,084,092
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($133,084,092/12,504,579 shares) $ 10.64
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<S> <C>
INVESTMENT INCOME:
Dividends (net of withholding) $ 1,917,952
Interest 592,603
Total Investment Income 2,510,555
EXPENSES:
Management fees (Note 3) 680,466
Directors' fees (Note 3) 3,426
Custodian fee 59,139
Audit fee 14,404
Miscellaneous 16,305
Total Expenses 773,740
NET INVESTMENT INCOME 1,736,815
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain -
On investments (identified cost basis) 9,673
Foreign currency and forward foreign currency
exchange contracts 3,822,179
Net realized gain on investments 3,831,852
Net change in unrealized appreciation -
On investments 8,762,876
Foreign currency and forward currency contracts and other
assets and liabilities 1,487
Net unrealized appreciation on investments 8,764,363
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 12,596,215
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $14,333,030
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (unaudited)
For the Six Months For the Year
Ended 6/30/96 Ended 12/31/95
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,736,815 $ 1,544,241
Net realized gain (loss) on investments 3,831,852 (5,910,357)
Net change in unrealized appreciation on investments 8,764,363 8,433,964
Net increase in net assets from operations 14,333,030 4,067,848
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (1,539,988)
In excess of net investment income -- (2,083,389)
From net realized gains -- (757,156)
Total distributions to shareholders -- (4,380,533)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase (decrease) in net assets from capital share
transactions (Note 5) (9,542,795) 42,642,060
Net increase in net assets 4,790,235 42,329,375
NET ASSETS:
Beginning of period 128,293,857 85,964,482
End of period (including undistributed net investment
income of $1,736,815 and $0 respectively) $ 133,084,092 $ 128,293,857
</TABLE>
The accompanying notes are an integral part of hte financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (unaudited)
For the Six
Months For the Year For the Year For the Year
Ended Ended Ended Ended
6/30/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD):
NET ASSET VALUE - BEGINNING OF PERIOD $ 9.57 $ 9.54 $ 11.33 $ 9.19
Income from investment operations:
Net investment income 0.139 0.123 0.143 0.150
Net realized and unrealized gain (loss)
on investments 0.931 0.262 (1.784) 2.240
Total from investment operations 1.070 0.385 (1.641) 2.390
Less distributions to shareholders:
From net investment income -- (0.118) -- (0.250)
From paid-in-capital -- (0.160) -- --
From net realized gain on investments -- (0.077) (0.149) --
In excess of net realized gains -- -- -- --
Total distributions to shareholders -- (0.355) (0.149) (0.250)
NET ASSET VALUE - END OF PERIOD $ 10.64 $ 9.57 $ 9.54 $ 11.33
Total return (2): 11.18% 4.14% (14.48)% 26.00%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 1.14%(3) 1.20% 1.18% 1.16%
Net investment income 2.55%(3) 1.42% 1.38% 1.39%
Portfolio turnover 0% 14% 31% 20%
Average commission rate paid $ 0.0015 $ 0.0021 - -
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 133,084 $ 128,294 $ 85,964 $ 92,012
Financial Highlights (unaudited)
For the
Period 8/27/92
(commencement
of operations)
to 12/31/92
<S> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD):
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.00
Income from investment operations:
Net investment income 0.030
Net realized and unrealized gain (loss)
on investments 0.570
Total from investment operations 0.600
Less distributions to shareholders:
From net investment income (0.030)
From paid-in-capital --
From net realized gain on investments (1.240)
In excess of net realized gains (0.140)(1)
Total distributions to shareholders (1.410)
NET ASSET VALUE - END OF PERIOD $ 9.19
Total return (2): 6.01%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 1.33%(3)
Net investment income 0.85%(3)
Portfolio turnover 0%
Average commission rate paid -
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 72,163
</TABLE>
1 Distributions differ from net investment income and net realized capital
gains because of book/tax timing differences, primarily due to the requirements
of the Internal Revenue Code.
2 Represents aggregate total return for the period indicated.
3 Annualized.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
International Series (the "Fund") is a no-load non-diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is organized
as a Maryland Corporation and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
Shares of the Fund are offered to clients and employees of Manning &
Napier Advisors, Inc. (The Advisor) and its affiliates. The total authorized
capital stock of the Corporation consists of one billion shares of common
stock each having a par value of $0.01. As of June 30, 1996, 940 million
shares have been designated in total among 19 series, of which 50 million have
been designated as International Series Class G Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including domestic equities, foreign equities,
options and corporate bonds, listed on an exchange are valued at the latest
quoted sales price of the exchange on which the security is traded most
extensively. Securities not traded on valuation date or securities not listed
on an exchange are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed
securities, will normally be valued on the basis of evaluated bid prices.
Securities for which representative prices are not available from the
Fund's pricing service are valued at fair value as determined in good faith by
the Fund's Board of Directors.
Short-term investments that mature in sixty (60) days or less are valued
at amortized cost.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
16
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains on
investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTION OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result, net
investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund may
periodically make reclassification among its capital accounts without
impacting the Fund's net asset value.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis: a) investment securities, other assets and liabilities are converted to
U.S. dollars based upon current exchange rates; and b) purchase and sales of
securities and income and expenses are converted into U.S. dollars based upon
the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are
recorded for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates is
not separately stated.
17
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency contracts in order
to hedge a portfolio position or specific transaction. Risks may arise if the
counterparties to a contract are unable to meet the terms of the contract or
if the value of the foreign currency moves unfavorably.
All forward foreign currency contracts are adjusted daily by the exchange
rate of the underlying currency and, for financial statement purposes, any
gain or loss is recorded as unrealized gain or loss until a contract has been
closed. Realized and unrealized gain or loss arising from a transaction is
included in net realized and unrealized gain (loss) from foreign currency and
forward currency exchange contracts.
The Fund regularly trades forward foreign currency exchange contracts
with off-balance sheet risk in the normal course of its investing activities
to assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the
investment the Fund has in forward foreign currency exchange contracts and
does not necessarily represent the amounts potentially at risk. The
measurement of the risks associated with forward foreign currency exchange
contracts is meaningful only when all related and offsetting transactions are
considered. A summary of obligations for forward currency exchange contracts
sold on June 30, 1996 is as follows:
<TABLE>
<CAPTION>
Net Unrealized
Settlement Contracts In Exchange Contracts Appreciation/
Date to Deliver For At Value (Depreciation)
<C> <S> <C> <C> <C>
07/24/96 Deutsche Marks $ 38,276,883 $38,229,368 ($47,515)
07/24/96 French Francs $ 37,366,686 $37,423,496 $ 56,810
</TABLE>
On June 30, 1996, the Fund had sufficient cash and/or securities to cover
any commitments under there contracts.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier
Advisors, Inc. (the "Advisor"), for which the Fund pays the Advisor a fee,
computed daily and payable monthly, at an annual rate of 1% of the Fund's
average daily net assets. The fee amounted to $680,466 for the six months
ended June 30, 1996.
18
<PAGE>
Notes to Financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
The Advisor has agreed that, in any fiscal year, if the expenses of the
Fund (including the advisory fee but excluding interest, taxes, brokerage
commissions, and extraordinary expenses) exceed the limits set by applicable
regulation of state securities commissions, the Advisor will reduce its fee by
the amount of such excess.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $3,426 for the
six months ended June 30, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term securities, were
$9,506,471 and $8,691, respectively, for the six months ended June 30, 1996.
5. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of International Series Class G Common Stock were:
For the Six Months For the Year
Ended 6/30/96 Ended 12/31/95
<S> <C> <C> <C>
Shares Amount Shares
----------------------------------------------------------- ------------- ---------------
Sold 1,066,075 $ 10,987,233 4,223,049
Reinvested -- -- 460,661
Repurchased (1,967,781) (20,530,028) (287,048)
Total (901,706) ($9,542,795) 4,396,662
<S> <C>
Amount
------------
Sold $41,054,909
Reinvested 4,327,528
Repurchased (2,740,377)
Total $42,642,060
</TABLE>
19
<PAGE>
Notes to Financial Statements (unaudited)
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in securities of U.S. companies and the United States government.
These risks include revaluation of currencies and future adverse political and
economic developments. Moreover, securities of many foreign companies and
foreign governments and their markets may be less liquid and their prices more
volatile than of those securities of comparable U.S. companies and the United
States government.
7. SPECIAL MEETING OF SHAREHOLDERS
On April 10, 1996, a special meeting of the Corporation was held for the
purpose of electing directors. The following directors have been elected:
Stephen B. Ashley, B. Reuben Auspitz, Martin F. Birmingham, Peter L.
Faber, and Harris H. Rusitzky.
20
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
New York
Tax Exempt Series
Semi-Annual Report
June 30, 1996
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
A woman named Irene Peter once said, "Just because everything is different
doesn't mean anything has changed. While she probably was not talking about
the municipal bond market, her words capture our view of that market over the
last six months. Since the end of 1995 everything is different, but from a
longer_term investment perspective, nothing has changed.
What are we trying to get at? At the end of 1995 and early in 1996, there was
a sense that the economy was soft and that there might even be a recession
later in the year. Unfortunately for the fixed income markets, the Bureau of
Labor Statistics (BLS) February jobs report, which was issued in early March,
shattered that perception. After that, additional BLS releases reinforced the
February report, and perceptions about the economy reversed themselves. In
place of worries about a recession, concerns about the economy overheating
began to take center stage. At the same time, concerns about inflation began
to grow. Most investors, including those in the muni markets, were becoming
increasingly concerned about rising commodity prices, and there were growing
concerns that tight labor markets would translate into higher wages.
According to the BLS reports, the average monthly gain in non_farm payrolls
during the last six months of 1995 was just over 175,000. The figure has
increased to slightly more than 220,000 new jobs per month during the first
half of this year. An acceleration in the rate of new job growth generally
coincides with an acceleration in the overall rate of economic growth; hence,
the change in the market's expectations about growth.
Breaking down the BLS figures provides some interesting insights.
Manufacturing job growth has actually been negative year_to_date, declining by
an average of about 15,000 jobs per month. Obviously manufacturers remain
cautious about the prospects for economic growth. On the other hand, the
construction sector of the economy has been rather resilient, adding about
30,000 new jobs each month, and doing that in the face of rising interest
rates. However, the real driving force behind the increase in the economy's
job growth has been the service sector of the economy; "non_goods producing"
jobs are growing at an average monthly rate of close to 210,000.
1
<PAGE>
Management Discussion and Analysis (continued)
On the inflation front, market participants began to focus on the CRB Futures
Index and the Goldman Sachs Commodity Index as the second quarter progressed.
At its peak during the second quarter, the CRB Index was up more than 10%
year_over_year, and 7% year_to_date. At about the same time, the Goldman
Index was up around 18% year_over_year, and 6% year_to_date.
Commodity price increases can be, but are not necessarily, precursors to
rising inflation. In this instance there were extenuating circumstances
behind the increases in both of these indices. The CRB index is dominated by
grains and foodstuffs, and the supply of these goods is highly dependent on
the weather. The more "friendly" the meteorological environment, the greater
the potential supply of grains and foodstuffs. As everyone is quite aware,
the weather at the start of this year would not generally be described as
"friendly". The weather also played a role in the rise in the Goldman Sachs
Index. That index is dominated by crude oil, gasoline, heating oil, and
natural gas. Energy prices were pushed up as the harsh weather began early
last winter, and extended well into this spring. As nice weather started to
dawn, the pressure on both of these indices has mitigated, and both are now
below their levels at the start of the year.
As for the concerns about wages, they have been driven more by the conditions
that are sometimes associated with wage increases than by large actual
increases in wages. A tight labor market, as exhibited by low unemployment,
and accelerating job growth both suggest wage pressures could start to
develop. Year_over_year, the rate of change in hourly earnings has increased;
hovering just below 3% throughout the second half of 1995, increasing to about
3% during the first quarter, and finishing the second quarter at about 3.5%.
But unit labor costs, which take into account the productivity gains that have
characterized this expansion, suggest wages as a cost of production remain
very well behaved.
On the political front, tax reform, which once was a primary concern of the
muni market, has now become a secondary or even tertiary issue. As the
political season progressed, the likelihood of major changes to the tax code,
and especially a flat tax, continued to diminish. At this point, a flat tax
is rarely even mentioned, and the yield premium that had been priced into the
muni market has vanished. This is reflected in the relative performance of
the muni market year-to-date. Two indices with similar interest rate
sensitivities are the Merrill Lynch Intermediate Muni Index and the Merrill
Lynch Intermediate Government_Corporate Index. The muni market, even with its
lower yields, has outperformed the government_corporate index by 75 basis
points.
2
<PAGE>
Management Discussion and Analysis (continued)
Of course that was a good_news/bad_news story; while the muni market has
outperformed, it has not been profitable in the first half of this year.
Changing economic perceptions had a negative effect on all bond markets during
the first half of 1996, and they were more than enough to offset the positive
changes in the political environment for the muni market.
So if everything is different, what hasn't changed? Let's start with a market
reality - changes in perception are often driven by somewhat isolated
economic statistics. Such statistics can contradict themselves from month to
month, and are prone to short_term aberrations. However, even if the economy
does reaccelerate, as some of the indicators suggest, and inflation increases
modestly, the investor should continue to focus on the long_term, more
comprehensive trends. After all, yields are already discounting an increase
in inflation, while longer term positive factors are firmly in place. It is
the long-range picture which has not changed, and which remains the key to
success.
With all the changes that have occurred, we believe our overview remains
firmly in place. The global economy, the proliferation of trade, and the
increase in international competition have put into place a long_term secular
dynamic that supersedes monthly economic releases and cyclical events.
Competition is a wonderful thing. For consumers, it provides a greater number
of choices, forcing businesses to be more competitive, especially when it
comes to price. That dampens inflation. Businesses recognize that they need
to be more competitive and have focused their energies on efficiency and
productivity gains - a virtuous cycle that also limits inflation. And policy
makers, recognizing who their constituents are, know that it is in their best
interest to follow sound fiscal and monetary policies. On those rare
occasions when they do go astray, the importance of the financial markets has
grown to the point where they are only political poll that really matters.
When necessary, they will express their displeasure, generally forcing
policies back on track.
With such an overview, we continue to emphasize high credit quality,
longer_term non_callable issues. We maintain our preference for general
obligation securities, for credit as well as liquidity reasons. Where
necessary we look for insurance overlays, or bonds that are pre_refunded. We
applied this strategy quite aggressively when muni yields reached 6.0% at the
end of the second quarter, a strategy that we have used successfully in the
past.
3
<PAGE>
Management Discussion and Analysis (continued)
At the end of 1995, we mentioned that the market was already discounting the
best case economic scenario. When that is the case, the market is more often
disappointed than it is pleasantly surprised. That has been the case in 1996.
However, while these may be "the times that try investors souls" (excuse the
literary license), they are very often the times of investment opportunity.
We think now is one of those times.
We appreciate the opportunity to serve you, and we look forward to our next
opportunity to update you on our progress.
Sincerely.
Manning & Napier Advisors, Inc.
[pie chart]
Portfolio Composition
General Obligation Bonds - 69%
Revenue Bonds - 25%
Pre-Refunded Bonds - 6%
[pie chart]
Quality Ratings*
Aaa - 82%
Aa - 14%
A - 4%
*Using Moodys Ratings
4
<PAGE>
Performance Update as of June 30, 1996 (unaudited)
The value of a $10,000 investment in the Manning & Napier Fund, Inc. - New
York Tax Exempt Series from its inception (1/17/94) to present (6/30/96) as
compared to the Merrill Lynch Intermediate Municipal Index.1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
New York Tax Exempt Series
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 10,521 5.21% 5.21%
Inception 2 $ 10,733 7.33% 2.92%
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Intermediate Municipal Index
Total Return
Growth of
Through $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 10,563 5.63% 5.63%
Inception 2 $ 11,080 10.80% 4.27%
</TABLE>
1 The unmanaged Merrill Lynch Intermediate Municipal Index is a
market value weighted measure of approximately 380 municipal
bonds issued across the United States. The Index is comprised of
investment grade securities. Index returns assume reinvestment of
coupons and, unlike Fund returns, do not reflect any fees or
expenses.
2 The Fund and Index performance numbers are calculated from
January 17, 1994, the Fund's inception date. The Fund's
performance is historical and may not be indicative of future results.
[graphic]
line chart
Data for Line Chart to Follow:
<TABLE>
<CAPTION>
Manning & Napier Merrill Lynch Intermediate
Date New York Tax Exempt Series Municipal Index
<S> <C> <C>
01/17/94 $ 10,000 $ 10,000
06/30/94 9,460 9,662
12/31/94 9,318 9,719
06/30/95 10,202 10,489
12/31/95 10,882 11,020
06/30/96 10,733 11,080
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES - 96.6%
Albany City School District, G.O. Bond, 4.35%, 2/1/2001 $ 475,000 $465,196
Albany City School District, G.O. Bond, 4.35%, 2/1/2002 150,000 145,133
Albany County, G.O. Bond, 5.75%, 6/1/2010 200,000 202,402
Amherst Public Improvement, G.O. Bond, 4.625%, 3/1/2004 250,000 243,215
Amherst Public Improvement, G.O. Bond, 4.625%, 3/1/2007 200,000 186,686
Battery Park City Authority, Revenue Bond, 7.70%, 5/1/2015 500,000 552,135
Bayport-Blue Point Union Free School District, G.O. Bond,
5.60%, 6/15/2012 250,000 250,860
Brighton Central School District, G.O. Bond, 5.40%, 6/1/2012 250,000 245,797
Brockport Central School District, G.O. Bond, 5.50%, 6/15/2015 300,000 292,074
Broome County Public Safety, Certificate Participation, 5.00%, 4/1/2006 250,000 245,442
Buffalo General Improvement, G.O. Bond, Series A, 4.75%, 2/1/2004 500,000 490,925
Buffalo Schools, G.O. Bond, Series B, 5.05%, 2/1/2009 250,000 237,703
Buffalo, G.O. Bond, 5.00%, 12/1/2009 150,000 141,985
Cattaraugus County Public Improvement, G.O. Bond, 5.00%, 8/1/2007 300,000 293,739
Colonie, G.O. Bond, 5.20%, 8/15/2008 100,000 98,931
East Hampton, G.O. Bond, 4.625%, 1/15/2007 175,000 162,202
East Hampton, G.O. Bond, 4.625%, 1/15/2008 175,000 159,584
Ellenville Central School District, G.O. Bond, 5.375%, 5/1/2009 210,000 210,806
Erie County Public Improvement, G.O. Bond, 5.80%, 1/15/2003 230,000 241,863
Erie County, G.O. Bond, Series B, 5.50%, 6/15/2009 100,000 100,242
Erie County, G.O. Bond, Series B, 5.50%, 6/15/2025 400,000 380,564
Gloversville City School District, G.O. Bond, 5.00%, 6/15/2005 350,000 347,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES (continued)
Guilderland School District, G.O. Bond, 4.75%, 6/15/1998 $ 130,000 $131,235
Guilderland School District, G.O. Bond, 4.75%, 6/15/2008 370,000 348,488
Hempstead Town, G.O. Bond, Series B, 5.625%, 2/1/2010 200,000 201,428
Holland Central School District, G.O. Bond, 6.125%, 6/15/2010 245,000 258,715
Huntington, G.O. Bond, 5.875%, 9/1/2009 250,000 256,718
Huntington, G.O. Bond, 5.90%, 1/15/2007 300,000 315,084
Indian River Central School District, G.O. Bond, Second Series,
4.00%, 12/15/2003 475,000 453,178
Irvington Union Free School District, G.O. Bond, Series B,
5.10%, 7/15/2005 275,000 274,205
Jamesville-Dewitt Central School District, G.O. Bond, 5.75%,
6/15/2009 420,000 431,596
Jordan-El Bridge Central School District, G.O. Bond, 5.875%,
6/15/2008 500,000 521,840
Kingston City School District, Series B, 6.80%, 12/15/1997 100,000 104,086
Le Roy Central School District, G.O. Bond, 0.10%, 6/15/2008 350,000 182,725
Middletown City School District, G.O. Bond, Series A, 5.50%,
11/15/2005 175,000 181,213
Monroe County Public Improvement - Prerefunded, G.O. Bond,
6.00%, 3/1/2002 95,000 100,840
Monroe County Public Improvement - Prerefunded, G.O. Bond,
6.10%, 6/1/2015 20,000 21,777
Monroe County Public Improvement - Unrefunded Balance,
G.O. Bond, 6.00%, 3/1/2002 405,000 428,863
Monroe County Public Improvement - Unrefunded Balance,
G.O. Bond, 6.10%, 6/1/2015 180,000 186,953
Monroe County Public Improvement, G.O. Bond,
4.90%,6/1/2005 250,000 245,667
Monroe County Water Authority, Revenue Bond, Series B,
5.25% 8/1/2011 500,000 479,355
Nassau County, G.O. Bond, Series A, 4.00%, 5/1/1999 100,000 98,283
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES (continued)
Nassau County, G.O. Bond, Series S, 5.00%, 3/1/2005 $ 300,000 $298,104
New Castle, G.O. Bond, 4.75%, 6/1/2010 450,000 409,270
New Rochelle City School District, G.O. Bond, Series A, 4.30%,
2/1/2003 500,000 477,070
New Rochelle, G.O. Bond, Series C, 6.20%, 3/15/2007 175,000 186,821
New York City Municipal Water Authority, Revenue Bond,
Series B, 5.00%, 6/15/2003 400,000 397,672
New York City Municipal Water Authority, Revenue Bond,
Series B, 5.375%, 6/15/2019 250,000 233,898
New York City Municipal Water, Finance Authority, Revenue Bond,
Series B, 5.50%, 6/15/2019 200,000 190,244
New York City, G.O. Bond, Series A, 8.75%, 11/1/2016 250,000 269,630
New York City, G.O. Bond, Series K, 5.50%, 4/1/2007 500,000 501,565
New York Government Assistance Corp., Revenue Bond, Series A,
5.90%, 4/1/2013 500,000 507,665
New York Government Assistance Corp., Revenue Bond, Series A,
6.00%, 4/1/2024 250,000 250,167
New York State Dorm Authority, Columbia University,
Revenue Bond, 4.40%, 7/1/1997 125,000 125,747
New York State Environmental Facilities Corp. Pollution Control,
Revenue Bond, Series A, 4.65%, 6/15/2007 250,000 232,828
New York State Environmental Facilities Corp. Pollution Control,
Revenue Bond, Series A, 5.20%, 6/15/2015 250,000 234,790
New York State Environmental Pollution Control, Revenue Bond,
Pooled LN-B, 6.65%, 9/15/2013 500,000 538,925
New York State Housing Finance Agency, State University
Construction, Revenue Bond, Series A, 8.00%, 5/1/2011 250,000 304,463
New York State Medical Care Facility, Financial Agency,
Revenue Bond, 7.75%, 2/15/2020 380,000 426,425
New York State Mortgage Agency, Homeowners Mortgage,
Revenue Bond, Series 31A, 5.375%, 10/1/2017 500,000 454,875
New York State Power Authority, Revenue Bond, Series CC,
4.80%, 1/1/2005 250,000 242,458
New York State Power Authority, Revenue Bond, Series CC,
5.00%, 1/1/2014 500,000 451,285
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES (continued)
New York State Power Authority, Revenue Bond, Series CC,
5.25%, 1/1/2018 $ 250,000 $230,915
New York State Thruway Authority, Highway & Bridge,
Revenue Bond, Series B, 5.75%, 4/1/2006 100,000 103,694
New York State Thruway Authority, Revenue Bond, Series A,
5.50%, 1/1/2023 1,020,000 965,644
New York State Thruway Authority, Revenue Bond, Series B,
4.90%, 1/1/2007 450,000 431,438
New York State Urban Development Correctional Capital
Facilities, Revenue Bond, Series A, 5.25%, 1/1/2014 500,000 473,690
New York State Urban Development, Corp. Correctional Facility,
Revenue Bond, Series G, 7.00%, 1/1/2017 50,000 54,785
New York, G.O. Bond, 8.00%, 3/15/2016 500,000 560,980
Niagara County, G.O. Bond, Series B, 5.20%, 1/15/2011 400,000 384,132
North Hempstead, G.O. Bond, Series B, 5.90%, 4/1/2004 300,000 319,740
North Hempstead, G.O. Bond, Series C, 4.90%, 8/1/2006 300,000 291,933
Onondaga County, G.O. Bond, 5.85%, 2/15/2002 300,000 314,607
Penfield Central School District, G.O. Bond, 5.20%, 6/15/2010 560,000 548,027
Queensbury, G O. Bond, Series A, 5.50%, 4/15/2011 150,000 149,087
Queensbury, G.O. Bond, Series A, 5.50%, 4/15/2012 350,000 345,968
Rochester, G.O. Bond, Series A, 4.70%, 8/15/2006 250,000 238,757
Rochester, G.O. Bond, Series A, 5.00%, 8/15/2020 250,000 225,678
Rochester, G.O. Bond, Series A, 5.00%, 8/15/2022 95,000 84,597
Sands Point, G.O. Bond, 6.70%, 11/15/2014 700,000 749,210
Schenectady, G.O. Bond, 4.55%, 10/1/2002 200,000 197,502
South County Central School District Brookhaven, G.O. Bond,
5.50%, 9/15/2007 380,000 385,176
Steuben County Public Improvement, G.O. Bond, 5.60%,
5/1/2006 500,000 511,640
Suffolk County Water Authority, Revenue Bond, 5.10%,
6/1/2009 250,000 241,318
Suffolk County Water Authority, Revenue Bond, 7.325%,
6/1/2012 500,000 544,285
Suffolk County, G.O. Bond, Series G, 5.40%, 4/1/2013 400,000 387,956
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES (continued)
Sullivan County Public Improvement, G.O. Bond, 4.375%,
3/15/2001 $ 300,000 $ 293,421
Sullivan County Public Improvement, G.O. Bond, 5.125%, 3/15/2013 330,000 310,372
Three Village Central School District, G.O. Bond, 5.375%, 6/15/2007 230,000 232,178
Tioga County Public Improvement, G.O. Bond, 5.25%, 3/15/2005 250,000 251,712
Tompkins County, G.O. Bond, Series B, 5.625%, 9/15/2011 135,000 135,324
Tompkins County, G.O. Bond, Series B, 5.625%, 9/15/2013 300,000 298,173
Tompkins County, G.O. Bond, Series B, 5.625%, 9/15/2014 300,000 296,439
Triborough Bridge & Tunnel Authority, Revenue Bond, Series A,
3.65%, 1/1/1998 250,000 247,800
Triborough Bridge & Tunnel Authority, Revenue Bond, Series A,
5.00%, 1/1/2012 500,000 459,925
Triborough Bridge & Tunnel Authority, Revenue Bond, Series A,
6.50%, 1/1/2004 200,000 216,358
Tri-Valley Central School District, G.O. Bond, 5.60%, 6/15/2008 120,000 121,459
Westchester County, G.O. Bond, Series A, 4.75%, 12/15/2008 250,000 233,452
Westchester County, G.O. Bond, Series A, 4.75%, 12/15/2009 250,000 229,865
Westchester County, G.O. Bond, Series B, 4.30%, 12/15/2010 215,000 184,696
Westchester County, G.O. Bond, Series B, 4.30%, 12/15/2011 100,000 85,111
White Plains, G.O. Bond, 4.50%, 9/1/2005 180,000 170,635
White Plains, G.O. Bond, 4.50%, 9/1/2007 315,000 290,178
William Floyd Union Free School District, G.O. Bond, 5.70%,
6/15/2008 405,000 415,955
Williamsville Central School District, G.O. Bond, 5.375%, 5/1/2004 800,000 819,728
TOTAL MUNICIPAL SECURITIES
(Identified Cost $32,105,271) $31,684,925
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
SHORT-TERM INVESTMENTS - 3.1%
Dreyfus Basic New York Tax Free Money Market Fund
(Identified Cost $1,022,348) 1,022,348 $ 1,022,348
TOTAL INVESTMENTS
(Identified Cost $33,127,619) 32,707,273
OTHER ASSETS, LESS LIABILITIES - 0.3% 76,813
NET ASSETS - 100% $32,784,086
</TABLE>
Key
G.O. Bond - General Obligation Bond
Rev. Bond - Revenue Bond
Dist. - District
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
At June 30, 1996, the net unrealized depreciation based on identified cost for
federal income tax purposes of $33,127,619 was as follows:
<S> <C>
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 299,619
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (719,965)
UNREALIZED DEPRECIATION - NET ($420,346)
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (unaudited)
JUNE 30, 1996
<S> <C>
ASSETS:
Investments, at value (Identified Cost $33,127,619)(Note 2) $32,707,273
Cash 295
Interest receivable 449,443
Receivable for fund shares sold 81,180
TOTAL ASSETS 33,238,191
LIABILITIES:
Accrued management fees (Note 3) 12,956
Accrued Directors' fees (Note 3) 5,238
Transfer agent fees payable (Note 3) 622
Payable for securities purchased 413,041
Audit fee payable 7,655
Other payables and accrued expenses 14,593
TOTAL LIABILITIES 454,105
NET ASSETS FOR 3,363,298 SHARES
OUTSTANDING $32,784,086
NET ASSETS CONSIST OF:
Capital stock $ 33,634
Additional paid-in-capital 33,086,775
Undistributed net investment income 104,466
Accumulated net realized loss on investments (20,443)
Net unrealized depreciation on investments (420,346)
TOTAL NET ASSETS $32,784,086
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($32,784,086/3,363,298 shares) $ 9.75
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<S> <C>
INVESTMENT INCOME:
Interest $ 737,818
EXPENSES:
Management fees (Note 3) 74,140
Directors' fees (Note 3) 3,426
Transfer agent fees (Note 3) 3,559
Audit fee 6,796
Custodian fee 3,282
Miscellaneous 2,775
Total Expenses 93,978
NET INVESTMENT INCOME 643,840
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Net realized loss on investments (334)
Net change in unrealized depreciation on investments (1,026,212)
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (1,026,546)
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ($382,706)
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (unaudited)
For the Six Months For the Year
Ended 6/30/96 Ended 12/31/95
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 643,840 $ 1,003,236
Net realized loss on investments (334) (6)
Net change in unrealized appreciation (depreciation)
on investments (1,026,212) 2,511,379
Net increase (decrease) in net assets from operations (382,706) 3,514,609
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (552,153) (991,282)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital share
transactions (Note 5) 4,902,122 8,992,775
Net increase in net assets 3,967,263 11,516,102
NET ASSETS:
Beginning of period 28,816,823 17,300,721
End of period (including undistributed net investment
income of $104,466 and $12,779) $ 32,784,086 $ 28,816,823
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (unaudited)
For the Period 1/17/94
For the (commencement
Six Months For the Year of operations)
Ended 6/30/96 Ended 12/31/95 to 12/31/94
<S> <C> <C> <C>
Per share data (for a share outstanding throughout
each period )
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.07 $ 8.98 $ 10.00
Income from investment operations:
Net investment income 0.211 0.404 0.338
Net realized and unrealized gain (loss)
on investments (0.351) 1.086 (1.020)
Total from investment operations (0.140) 1.490 (0.682)
Less distributions to shareholders:
From net investment income (0.180) (0.400) (0.338)
NET ASSET VALUE - END OF PERIOD $ 9.75 $ 10.07 $ 8.98
Total return: 1 (1.37)% 16.78% (6.82)%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 0.63%2 0.65% 0.79% 2
Net investment income 4.34%2 4.36% 3.82%2
Portfolio turnover 7% 0% 6%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 32,784 $ 28,817 $ 17,301
</TABLE>
Total return represents aggregate total return for the period
indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
New York Tax Exempt Series (the "Fund") is a no-load diversified series
of Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized as a Maryland Corporation and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company.
Shares of the Fund are offered to investors, employees and clients of
Manning & Napier Advisors, Inc. (the "Advisor") and its affiliates. The
total authorized capital stock of the Corporation consists of one billion
shares of common stock each having a par value of $0.01. As of June 30,
1996, 940 million shares have been designated in total among 19 series, of
which 50 million have been designated as New York Tax Exempt Series Class P
Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Municipal securities will normally be valued on the basis of market
valuations provided by an independent pricing service (the Service). The
Service utilizes the latest price quotations and a matrix system (which
considers such factors as security prices of similar securities, yields,
maturities, and ratings). The Service has been approved by the Funds Board
of Directors.
Securities for which representative prices are not available from the
Fund's pricing service are valued at fair value as determined in good faith
by the Fund's Board of Directors.
Short-term investments that mature in sixty (60) days or less are valued
at amortized cost.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains
on investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
16
<PAGE>
Notes to financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
At June 30, 1996, the Fund, for federal income tax purposes, had a capital
loss carryforward of $20,109. Of this amount, $2,550 will expire on
December 31, 2002 and $17,559 will expire on December 31, 2003.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTION OF INCOME AND GAINS
Distributions to shareholders of net investment income are made
quarterly. Distributions are recorded on the ex-dividend date. Distributions
of net realized gains are distributed annually. An additional distribution
may be necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses or character reclassification between
net income and net gains. As a result, net investment income (loss) and net
investment gain (loss) on investment transactions for a reporting period may
differ significantly from distributions to shareholders during such period.
As a result, the Fund may periodically make reclassification among its
capital accounts without impacting the Fund's net asset value.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier
Advisors, Inc. (the "Advisor"), for which the Fund pays the Advisor a fee,
computed daily and payable monthly, at an annual rate of 0.50% of the Fund's
average daily net assets. The fee amounted to $74,140 for the six months
ended June 30, 1996.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
The Advisor has voluntarily agreed to waive its fee and, if necessary,
pay other expenses of the Fund in order to maintain total expenses for the
Fund at no more than 0.85% of average daily net assets each year.
17
<PAGE>
Notes to financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Fund pays a fee which
is calculated as a percentage of the average daily net assets at an annual
rate of 0.024%; this fee amounted to $3,559 for the six months ended June 30,
1996.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $3,426 for the
six months ended June 30, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term securities, were
$7,840,998 and $1,991,542, respectively, for the six months ended June 30,
1996.
5. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of New York Tax Exempt Series Class P Common Stock were:
For the Six For the Year
Months Ended
Ended 6/30/96 12/31/95
Shares Amount Shares
<S> <C> <C> <C>
Sold 572,780 $ 5,621,777 905,817
Reinvested 56,254 543,476 99,114
Repurchased (126,615) (1,263,131) (70,547)
Total 502,419 $ 4,902,122 934,384
Amount
<S> <C>
Sold $8,705,001
Reinvested 973,495
Repurchased (685,721)
Total $8,992,775
</TABLE>
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include
written options and futures contracts and may involve, to a varying degree,
elements of risk in excess of the amounts recognized for financial statement
purposes. No such investments were held by the Fund on June 30, 1996.
18
<PAGE>
Notes To Financial Statements (unaudited)
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of New York
and its political subdivisions, agencies, and public authorities to obtain
funds for various public purposes. The Fund is more susceptible to
factors adversely affecting issues of New York municipal securities than
is a municipal bond fund that is not concentrated in these issues to the
same extent.
8. SPECIAL MEETING OF SHAREHOLDERS
On April 10, 1996, a special meeting of the Corporation was held for the
purpose of electing directors. The following directors have been elected:
Stephen B. Ashley
B. Reuben Auspitz, Martin F. Birmingham, Peter L. Faber, and Harris H.
Rusitzky.
19
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Ohio Tax Exempt Series
Semi-Annual Report
June 30, 1996
<PAGE>
Management Discussion & Analysis
Dear Shareholders:
A woman named Irene Peter once said, "Just because everything is different
doesn't mean anything has changed. While she probably was not talking about
the municipal bond market, her words capture our view of that market over the
last six months. Since the end of 1995 everything is different, but from a
longer_term investment perspective, nothing has changed.
What are we trying to get at? At the end of 1995 and early in 1996, there was
a sense that the economy was soft and that there might even be a recession
later in the year. Unfortunately for the fixed income markets, the Bureau of
Labor Statistics (BLS) February jobs report, which was issued in early March,
shattered that perception. After that, additional BLS releases reinforced the
February report, and perceptions about the economy reversed themselves. In
place of worries about a recession, concerns about the economy overheating
began to take center stage. At the same time, concerns about inflation began
to grow. Most investors, including those in the muni markets, were becoming
increasingly concerned about rising commodity prices, and there were growing
concerns that tight labor markets would translate into higher wages.
According to the BLS reports, the average monthly gain in non_farm payrolls
during the last six months of 1995 was just over 175,000. The figure has
increased to slightly more than 220,000 new jobs per month during the first
half of this year. An acceleration in the rate of new job growth generally
coincides with an acceleration in the overall rate of economic growth; hence,
the change in the market's expectations about growth.
Breaking down the BLS figures provides some interesting insights.
Manufacturing job growth has actually been negative year_to_date, declining by
an average of about 15,000 jobs per month. Obviously manufacturers remain
cautious about the prospects for economic growth. On the other hand, the
construction sector of the economy has been rather resilient, adding about
30,000 new jobs each month, and doing that in the face of rising interest
rates. However, the real driving force behind the increase in the economy's
job growth has been the service sector of the economy; "non_goods producing"
jobs are growing at an average monthly rate of close to 210,000.
1
<PAGE>
Management Discussion and Analysis (continued)
On the inflation front, market
participants began to focus on the CRB Futures Index and the Goldman Sachs
Commodity Index as the second quarter progressed. At its peak during the
second quarter, the CRB Index was up more than 10% year_over_year, and 7%
year_to_date. At about the same time, the Goldman Index was up around 18%
year_over_year, and 6% year_to_date.
Commodity price increases can be, but are not necessarily, precursors to
rising inflation. In this instance there were extenuating circumstances
behind the increases in both of these indices. The CRB index is dominated by
grains and foodstuffs, and the supply of these goods is highly dependent on
the weather. The more "friendly" the meteorological environment, the greater
the potential supply of grains and foodstuffs. As everyone is quite aware,
the weather at the start of this year would not generally be described as
"friendly". The weather also played a role in the rise in the Goldman Sachs
Index. That index is dominated by crude oil, gasoline, heating oil, and
natural gas. Energy prices were pushed up as the harsh weather began early
last winter, and extended well into this spring. As nice weather started to
dawn, the pressure on both of these indices has mitigated, and both are now
below their levels at the start of the year.
As for the concerns about wages, they have been driven more by the conditions
that are sometimes associated with wage increases than by large actual
increases in wages. A tight labor market, as exhibited by low unemployment,
and accelerating job growth both suggest wage pressures could start to
develop. Year_over_year, the rate of change in hourly earnings has increased;
hovering just below 3% throughout the second half of 1995, increasing to about
3% during the first quarter, and finishing the second quarter at about 3.5%.
But unit labor costs, which take into account the productivity gains that have
characterized this expansion, suggest wages as a cost of production remain
very well behaved.
On the political front, tax reform, which once was a primary concern of the
muni market, has now become a secondary or even tertiary issue. As the
political season progressed, the likelihood of major changes to the tax code,
and especially a flat tax, continued to diminish. At this point, a flat tax
is rarely even mentioned, and the yield premium that had been priced into the
muni market has vanished. This is reflected in the relative performance of
the muni market year-to-date. Two indices with similar interest rate
sensitivities are the Merrill Lynch Intermediate Muni Index and the Merrill
Lynch Intermediate Government_Corporate Index. The muni market, even with its
lower yields, has outperformed the government_corporate index by 75 basis
points.
2
<PAGE>
Management Discussion and Analysis (continued)
Of course that was a good_news/bad_news story; while the muni market has
outperformed, it has not been profitable in the first half of this year.
Changing economic perceptions had a negative effect on all bond markets during
the first half of 1996, and they were more than enough to offset the positive
changes in the political environment for the muni market.
So if everything is different, what hasn't changed? Let's start with a market
reality - changes in perception are often driven by somewhat isolated
economic statistics. Such statistics can contradict themselves from month to
month, and are prone to short_term aberrations. However, even if the economy
does reaccelerate, as some of the indicators suggest, and inflation increases
modestly, the investor should continue to focus on the long_term, more
comprehensive trends. After all, yields are already discounting an increase
in inflation, while longer term positive factors are firmly in place. It is
the long-range picture which has not changed, and which remains the key to
success.
With all the changes that have occurred, we believe our overview remains
firmly in place. The global economy, the proliferation of trade, and the
increase in international competition have put into place a long_term secular
dynamic that supersedes monthly economic releases and cyclical events.
Competition is a wonderful thing. For consumers, it provides a greater number
of choices, forcing businesses to be more competitive, especially when it
comes to price. That dampens inflation. Businesses recognize that they need
to be more competitive and have focused their energies on efficiency and
productivity gains - a virtuous cycle that also limits inflation. And policy
makers, recognizing who their constituents are, know that it is in their best
interest to follow sound fiscal and monetary policies. On those rare
occasions when they do go astray, the importance of the financial markets has
grown to the point where they are only political poll that really matters.
When necessary, they will express their displeasure, generally forcing
policies back on track.
With such an overview, we continue to emphasize high credit quality,
longer_term non_callable issues. We maintain our preference for general
obligation securities, for credit as well as liquidity reasons. Where
necessary we look for insurance overlays, or bonds that are pre_refunded. We
applied this strategy quite aggressively when muni yields reached 6.0% at the
end of the second quarter, a strategy that we have used successfully in the
past.
3
<PAGE>
Management Discussion and Analysis (continued)
At the end of 1995, we mentioned that the market was already discounting the
best case economic scenario. When that is the case, the market is more often
disappointed than it is pleasantly surprised. That has been the case in 1996.
However, while these may be "the times that try investors souls" (excuse the
literary license), they are very often the times of investment opportunity.
We think now is one of those times.
We appreciate the opportunity to serve you, and we look forward to our next
opportunity to update you on our progress.
Sincerely.
Manning & Napier Advisors, Inc.
[graphic]
[pie chart]
Portfolio Composition
General Obligation Bonds - 63%
Revenue Bonds - 31%
Pre-Refunded Bonds - 6%
[pie chart]
Quuality Ratings*
Aaa - 90%
Aa - 5%
A - 3%
Not Rated - 2%
*Using Moodys Rating
4
<PAGE>
Performance Update as of June 30, 1996 (unaudited)
The value of a $10,000 investment in the
Manning & Napier Fund, Inc. - Ohio
Tax Exempt Series from its inception
(2/14/94) to present (6/30/96) as
compared to the Merrill Lynch Intermediate
Municipal Index.1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
Ohio Tax Exempt Series
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 10,525 5.25% 5.25%
Inception 2 $ 10,828 8.28% 3.40%
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Intermediate Municipal Index
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 10,563 5.63% 5.63%
Inception 2 $ 11,068 10.68% 4.36%
</TABLE>
1 The unmanaged Merrill Lynch Intermediate Municipal Index is a
market value weighted measure of approximately 380 municipal
bonds issued across the United States. The Index is comprised of
investment grade securities. Index returns assume reinvestment of
coupons and, unlike Fund returns, do not reflect any fees or
expenses.
2 The Fund and Index performance numbers are calculated from
February 14, 1994, the Fund's inception date. The Fund's
performance is historical and may not be indicative of future results.
[graphic]
line chart
Data for Line Chart to follow:
<TABLE>
<CAPTION>
Date Ohio Merrill Lynch
<S> <C> <C>
01/17/94 $10,000 $ 10,000
06/30/94 9,540 9,652
12/31/94 9,377 9,709
06/30/95 10,288 10,478
12/31/95 10,985 11,009
06/30/96 10,828 11,068
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
<S> <C> <C>
OHIO MUNICIPAL SECURITIES - 97.5%
Akron Bath Copley Joint Twnshp. Childrens Hos. Med.
Ctr., Revenue Bond, 7.45%, 11/15/2020 50,000 56,144
Akron Limited Tax, G.O. Bond, 4.10%, 12/1/2001 65,000 62,601
Akron Waterworks, Revenue Management Bond, 5.70%
3/1/2007 100,000 102,532
Allen County, G.O. Bond, 5.30%, 12/1/2007 100,000 99,488
Amherst Police & Jail Facility, G.O. Bond, 5.375%,
12/1/2012 50,000 49,115
Avon Lake, G.O. Bond, 6.00%, 12/1/2009 40,000 40,926
Avon Lake, G.O. Bond, 5.70%,12/1/2006 60,000 61,366
Bedford Heights, G.O. Bond, Series A, 5.65%, 12/1/2014 60,000 59,997
Belmont County, G.O. Bond, 5.15%, 12/1/2010 100,000 96,541
Bexley City School District, G.O. Bond, 6.50%, 12/1/2016 20,000 21,946
Cincinnati, G.O. Bond, 4.60%,12/1/2003 50,000 48,934
Clermont County Hospital Facilities Mercy Health Care
System, Revenue Bond, Series A, 7.625%, 1/1/2015 25,000 26,805
Cleveland City School District, G.O. Bond, 5.875%,
12/1/2011 125,000 125,984
Cleveland Public Power System Improvement, Revenue
Bond, 1st Mtg., 8.375%, 8/1/2017 50,000 53,404
Cleveland Waterworks Revenue Ref. & Impt. - First Meeting,
Revenue Bond, Series H, 5.50%, 1/1/2010 170,000 168,244
Cleveland Waterworks, Revenue Bond, 1st Mtg., Series G,
5.50%, 1/1/2013 100,000 98,719
Cleveland, G.O. Bond, Series B, 4.95%, 7/1/1996 20,000 20,002
Columbus Limited Tax, G.O. Bond, Series A, 4.85%,
7/1/2004 50,000 49,764
Columbus, G.O. Bond, Series B, 6.10%, 1/1/2003 100,000 107,078
Columbus, G.O. Bond, Series D, 5.50%, 9/15/2008 50,000 50,572
Crawford County, G.O. Bond, 6.75%, 12/1/2019 175,000 189,570
Cuyahoga County, G.O. Bond, Series A, 4.30%,
10/1/1999 50,000 49,548
Cuyahoga Falls, G.O. Bond, 7.20%, 12/1/2010 75,000 82,419
Delaware City School District, Construction & Impt.,
G.O. Bond, Series B, 5.20%, 12/1/2016 100,000 93,321
Fairfield County Hospital Impt., Lancaster-Fairfield
Community Hospital, Revenue Bond, 7.00%, 6/15/2012 50,000 55,667
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
OHIO MUNICIPAL SECURITIES (CONTINUED)
<S> <C> <C>
Findlay Water, Revenue Bond, 5.45%, 11/1/2008 $100,000 $100,391
Franklin County, G.O. Bond, 4.95%, 12/1/2004 50,000 50,032
Gahanna-Jefferson City School District, G.O. Bond,
4.75%, 12/1/1999 50,000 50,312
Green Local School District - Summit, G.O. Bond,
5.20%, 12/1/2003 75,000 76,197
Greene County Sewer System, Revenue Bond, 5.50%,
12/1/2018 30,000 28,987
Hamilton County Building Impt. - Museum Center,
G.O. Bond, 5.85%, 12/1/2001 50,000 52,699
Hamilton County Sewer System Ref. & Impt. - Metro
Sewer District, Revenue Bond, Series A, 5.00%, 12/1/2014 125,000 114,692
Hamilton County Sewer System Ref. & Impt. - Metro
Sewer District, Revenue Bond, Series A, 4.75%, 12/1/2000 50,000 50,276
Hilliard School District, G.O. Bond, 6.35%, 12/1/2003 60,000 65,233
Hilliard School District, G.O. Bond, Series A, 5.00%,
12/1/2020 225,000 201,636
Huber Heights Water Systems, Revenue Bond, 5.25%,
12/1/2007 200,000 199,312
Kettering City School District School Impt., G.O. Bond,
5.30%, 12/1/2014 125,000 118,654
Kettering City School District, G.O. Bond, 4.85%, 12/1/2006 40,000 38,639
Kettering City School District, G.O. Bond, 5.25%, 12/1/2022 60,000 55,564
Kings Local School District, G.O. Bond, 5.50%, 12/1/2021 115,000 110,436
Lakewood City School District, G.O. Bond, 5.55%, 12/1/2013 100,000 99,005
Lakota Local School District, G.O. Bond, 7.00%, 12/1/2008 100,000 115,324
Lakota Local School District, G.O. Bond, 7.90%, 12/1/2011 45,000 48,734
Lakota Local School District, G.O. Bond, 5.75%, 12/1/2006 50,000 51,800
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
OHIO MUNICIPAL SECURITIES (continued)
<S> <C> <C>
Lorain Water System, Revenue Bond, 4.75%, 4/1/2005 $ 125,000 $ 121,244
Lucas County, G.O. Bond, Series I, 5.40%, 12/1/2003 100,000 102,651
Mahoning County Limited Tax, G.O. Bond, 5.65%,12/1/1998 20,000 20,619
Mahoning County, G.O. Bond, 5.70%, 12/1/2009 150,000 152,467
Mahoning County, G.O. Bond, 5.70%, 12/1/2006 100,000 103,654
Mason City School District, G.O. Bond, 5.00%, 12/1/2007 120,000 115,744
Montgomery County, G.O. Bond, 5.30%, 9/1/2007 65,000 65,192
Montgomery County, Moraine-Beaver Creek Sewers,
Revenue Bond, 5.60%, 9/1/2011 100,000 100,056
North Canton City School District, G.O. Bond, 5.85%,
12/1/2007 40,000 41,587
Northeast Ohio Regional Sewer District Waste & Water
Impt., Revenue Bond, 6.50%, 11/15/2016 100,000 108,894
Northwood Local School District, G.O. Bond, 5.55%, 12/1/2006 65,000 67,180
Northwood Local School District, G.O. Bond, 6.20%, 12/1/2013 40,000 41,745
Ohio Building Authority, Local Jail Grant, Revenue Bond,
Series A, 4.65%, 10/1/2005 50,000 47,748
Ohio Building Authority, State Facilities - Administration
Building, Revenue Bond, 5.50%, 10/1/2005 50,000 51,494
Ohio Higher Education Facility, University of Dayton Project,
Revenue Bond, 5.80%, 12/1/2019 100,000 99,741
Ohio Public Facilities, Higher Education, Revenue Bond,
Series II-A, 4.25%, 12/1/2002 50,000 47,668
Ohio Turnpike, Revenue Bond, Series A, 5.40%, 2/15/2009 250,000 247,953
Ohio Water Development Authority Ref. & Impt. - Pure Water,
Revenue Bond, 5.75%, 12/1/2005 60,000 62,474
Ohio Water Development Authority Pure Water, Revenue
Bond, Series I, 6.00%, 12/1/2016 40,000 40,818
Ohio, G.O. Bond, 6.50%, 8/1/2011 50,000 53,558
Ottawa County, G.O. Bond, 5.45%, 9/1/2006 30,000 30,608
Pickerington Local School District Construction & Impt.,
G.O. Bond, 5.375%, 12/1/2019 150,000 140,606
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Principal Value
Amount (Note 2)
OHIO MUNICIPAL SECURITIES (continued)
<S> <C> <C>
Pickerington Water Systems Improvements, G.O. Bond, 5.85%, 12/1/2013 $ 50,000 $ 50,432
Reynoldsburg City School District, G.O. Bond, 6.55%,
12/1/2017 175,000 186,398
Rocky River City School District, G.O. Bond, Series A, 6.375%,
12/1/1998 25,000 26,196
Rocky River City School District, G.O. Bond, Series A, 6.90%,
12/1/2011 50,000 54,053
Rural Lorain Water Authority Ref. & Impt., Revenue Bond,
5.30%, 10/1/2012 110,000 106,043
South-Western City School District, Franklin & Pickway
Counties G.O. Bond, 4.80%, 12/1/2006 100,000 95,108
Stark County Hospital, Doctors Hospital, Inc., Revenue
Bond, 8.625%, 4/1/2018 30,000 32,723
Stark County, G.O. Bond, 5.70%, 11/15/2017 100,000 99,139
Summit County, G.O. Bond, 5.75%, 12/1/2008 175,000 178,692
Toledo Sewer System, Revenue Bond, 6.35%, 11/15/2017 185,000 192,985
Toledo, G.O. Bond, 5.95%,12/1/2015 175,000 176,288
Trumbull County, G.O. Bond, 6.20%, 12/1/2014 100,000 103,407
Warren County Waterworks, Revenue Bonds, 5.45%,
12/1/2015 140,000 134,014
Warren County Waterworks, Revenue Bond, 6.00%,
12/1/2014 100,000 101,649
Warren, G.O. Bond, 5.20%,11/15/2013 50,000 46,532
Wood County, G.O. Bond, 5.40%,12/1/2013 50,000 48,785
Youngstown, G.O. Bond, 6.125%,12/1/2014 50,000 51,413
TOTAL MUNICIPAL SECURITIES
(Identified Cost $6,975,510) 7,046,167
SHORT-TERM INVESTMENTS - 3.0%
Dreyfus Municipal Reserves (Identified Cost $214,900) 214,900 214,900
TOTAL INVESTMENTS - 100.5%
(Identified Cost $7,190,410) 7,261,067
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
(Note 2)
<S> <C>
LIABILITIES, LESS OTHER ASSETS - (0.5)% $ (30,567)
NET ASSETS - 100% $7,230,500
</TABLE>
Key -
G.O. Bond - General Obligation Bond
Rev. Bond - Revenue Bond
Impt. Improvement
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
At June 30, 1996, the net unrealized appreciation based on identified cost for
federal income tax purposes of $7,190,410 was as follows:
<S> <C>
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $140,229
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (69,572)
UNREALIZED APPRECIATION - NET $ 70,657
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (unaudited)
JUNE 30, 1996
<S> <C>
ASSETS:
Investments, at value (Identified Cost $7,190,410)(Note 2) $7,261,067
Cash 83,842
Interest receivable 56,047
TOTAL ASSETS 7,400,956
LIABILITIES:
Accrued management fees (Note 3) 12,291
Accrued Directors' fees (Note 3) 5,239
Transfer agent fees payable (Note 3) 761
Payable for securities purchased 139,840
Audit fee payable 8,553
Other payables and accrued expenses 3,772
TOTAL LIABILITIES 170,456
NET ASSETS FOR 725,337 SHARES OUTSTANDING $7,230,500
NET ASSETS CONSIST OF:
Capital stock $ 7,253
Additional paid-in-capital 7,134,704
Undistributed net investment income 19,748
Accumulated net realized loss on investments (1,862)
Net unrealized appreciation on investments 70,657
TOTAL NET ASSETS $7,230,500
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($7,230,500/725,337 shares) $ 9.97
</TABLE>
Tha accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<S> <C>
INVESTMENT INCOME:
Interest $ 165,315
EXPENSES:
Management fees (Note 3) 15,846
Directors' fees (Note 3) 3,426
Transfer agent fees (Note 3) 761
Audit fee 6,796
Custodian fee 2,274
Miscellaneous 1,390
Total Expenses 30,493
Less Waiver of Expenses (Note 3) (3,555)
Net Expenses 26,938
NET INVESTMENT INCOME 138,377
NET CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (219,366)
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ($80,989)
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (unaudited)
For the Six Months For the Year
Ended 6/30/96 Ended 12/31/95
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 138,377 $ 213,139
Net realized loss on investments -- (667)
Net change in unrealized appreciation on investments (219,366) 507,287
Net increase (decrease) in net assets from operations (80,989) 719,759
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (119,705) (215,626)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital share
transactions (Note 5) 1,287,618 1,738,597
Net increase in net assets 1,086,924 2,242,730
NET ASSETS:
Beginning of period 6,143,576 3,900,846
End of period (including undistributed net investment
income of $19,748 and $1,076, respectively) $ 7,230,500 $ 6,143,576
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (unaudited)
For the Six Months
Ended 6/30/96
<S> <C>
Per share data (for a share outstanding throughout
each period )
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.31
Income from investment operations:
Net investment income 0.215
Net realized and unrealized gain (loss)
on investments (0.365)
Total from investment operations (0.150)
Less distributions to shareholders:
From net investment income (0.190)
NET ASSET VALUE - END OF PERIOD $ 9.97
Total Return: 1 (1.43)%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 0.85%**(2)
Net investment income 4.36%**(2)
Portfolio turnover 0%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 7,231
* The investment advisor did not impose its management fee and paid a portion of the Fund's
expenses.
** The investment advisor waived a portion of its management fee.
If these expenses had been incurred by the Fund in either instance above, the net investment income
per share and the ratios would have been as follows:
Net Investment Income $ 0.210
Ratios (to average net assets):
Expenses 0.96%(2)
Net investment income 4.25%(2)
1 Total return represents aggregate total return for the period indicated.
2 Annualized.
Financial Highlights (unaudited)
For the Period
2/14/94
(commencement
For the Year of operations)
Ended 12/31/95 to 12/31/94
<S> <C> <C>
Per share data (for a share outstanding throughout
each period )
NET ASSET VALUE - BEGINNING OF PERIOD $ 9.18 $ 10.00
Income from investment operations:
Net investment income 0.419 0.205
Net realized and unrealized gain (loss)
on investments 1.136 (0.828)
Total from investment operations 1.555 (0.623)
Less distributions to shareholders:
From net investment income (0.425) (0.197)
NET ASSET VALUE - END OF PERIOD $ 10.31 $ 9.18
Total Return: 1 17.14% (6.23)%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 0.85%** 0.85%*(2)
Net investment income 4.50%** 4.03%*(2)
Portfolio turnover 1% 2%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 6,144 $ 3,901
* The investment advisor did not impose its management fee and paid a portion of the Fund's
expenses.
** The investment advisor waived a portion of its management fee.
If these expenses had been incurred by the Fund in either instance above, the net investment income
per share and the ratios would have been as follows:
Net Investment Income $ 0.411 $ 0.141
Ratios (to average net assets):
Expenses 0.94% 2.07%(2)
Net investment income 4.41% 2.81%(2)
1 Total return represents aggregate total return for the period indicated.
2 Annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Ohio Tax Exempt Series (the "Fund") is a no-load diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized as a Maryland Corporation and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company.
Shares of the Fund are offered to investors, employees and clients of
Manning & Napier Advisors, Inc. (the "Advisor") and its affiliates. The
total authorized capital stock of the Corporation consists of one billion
shares of common stock each having a par value of $0.01. As of June 30,
1996, 940 million shares have been designated in total among 19 series, of
which 50 million have been designated as Ohio Tax Exempt Series Class Q
Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Municipal securities will normally be valued on the basis of market
valuations provided by an independent pricing service (the Service). The
Service utilizes the latest price quotations and a matrix system (which
considers such factors as security prices of similar securities, yields,
maturities, and ratings). The Service has been approved by the Funds Board
of Directors.
Securities for which representative prices are not available from the
Fund's pricing service are valued at fair value as determined in good faith
by the Fund's Board of Directors.
Short-term investments that mature in sixty (60) days or less are valued
at amortized cost.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
15
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains
on investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
At June 30, 1996, the Fund, for federal income tax purposes, had a capital
loss carryforward of $1,862. Of this amount, $1,195 will expire on December
31, 2002 and $667 will expire on December 31, 2003.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTION OF INCOME AND GAINS
Distributions to shareholders of tax exempt income are made quarterly.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses or character reclassification between
net income and net gains. As a result, net investment income (loss) and net
investment gain (loss) on investment transactions for a reporting period may
differ significantly from distributions to shareholders during such period.
As a result, the Fund may periodically make reclassification among its
capital accounts without impacting the Fund's net asset value.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier
Advisors, Inc. (the "Advisor"), for which the Fund pays the Advisor a fee,
computed daily and payable monthly, at an annual rate of 0.50% of the Fund's
average daily net assets. The fee amounted to $15,846 for the six months
ended June 30, 1996.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
16
<PAGE>
Notes to Financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
The Advisor has voluntarily agreed to waive its fee and, if necessary,
pay other expenses of the Fund in order to maintain total expenses for the
Fund at no more than 0.85% of average daily net assets each year.
Accordingly, the Advisor waived fees of $3,555, which is reflected as a
reduction of expenses on the Statement of Operations. The fee waiver and
assumption of expenses by the Advisor is voluntary and may be terminated at
any time.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Fund pays a fee which
is calculated as a percentage of the average daily net assets at an annual
rate of 0.024%; this fee amounted to $761 for the six months ended June 30,
1996.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $3,426 for the
six months ended June 30, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term securities, were
$1,333,186 and $0, respectively, for the six months ended June 30, 1996.
5. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of Ohio Tax Exempt Series Class Q Common Stock were:
For the Six Months For the Year
Ended 6/30/96 Ended 12/31/95
Shares Amount Shares
------------------------------------------------------------------- ----------- ---------------
<S> <C> <C> <C>
Sold 155,620 $1,557,210 163,241
Reinvested 12,124 119,707 21,448
Repurchased (38,350) (389,299) (13,614)
Total 129,394 $1,287,618 171,075
Amount
-----------
<S> <C>
Sold $1,658,399
Reinvested 215,626
Repurchased (135,428)
Total $1,738,597
</TABLE>
17
<PAGE>
Notes to Financial Statements (unaudited)
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include
written options and futures contracts and may involve, to a varying degree,
elements of risk in excess of the amounts recognized for financial statement
purposes. No such investments were held by the Fund on June 30, 1996.
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of Ohio and
its political subdivisions, agencies, and public authorities to obtain
funds for various public purposes. The Fund is more susceptible to
factors adversely affecting issues of Ohio municipal securities than is a
municipal bond fund that is not concentrated in these issues to the same
extent.
8. SPECIAL MEETING OF SHAREHOLDERS
On April 10, 1996, a special meeting of the Corporation was held for the
purpose of electing directors. The following directors have been elected:
Stephen B. Ashley, B. Reuben Auspitz, Martin F. Birmingham, Peter L. Faber,
and Harris H. Rusitzky.
18
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Small Cap Series
Semi-Annual Report
June 30, 1996
<PAGE>
Management Discussion ans Analysis
Dear Shareholders:
The first half of 1996 has been a good time to be invested in small cap stocks
in general, and the Small Cap Series has outperformed the Russell 2000 Total
Return Index, a widely-used small cap index.
As we wrote in our 1995 annual report last December, We believe that the
valuations in retail stocks are very attractive and we have been taking
advantage of opportunities by increasing our exposure to this sector. We made
significant investments in selected retail stocks when bad news in that area
provided the opportunity to buy stocks of some good companies at what our
analysis shows to be attractive prices. In the first six months of 1996,
these stocks have made strong contributions to the performance of the Series.
This reliance on patience and fundamental analysis is a cornerstone of our
investment philosophy.
We have often said that our investment strategies and disciplines are of great
importance both in choosing investments for our portfolios and in our
decisions to sell securities. We believe in investing on the basis of
fundamental value, and once a stock is purchased for the portfolio, the
situation is continually monitored to assure that the investment is on track.
While there is often stock-price volatility in the shorter periods, these
price variations should be viewed as opportunities to buy at even better
prices.
Often, speculators (as opposed to investors) rely on what is known as the
Greater Fool Theory; that is they buy a stock on the premise that some
greater fool will come around to buy it from them at a profit. This theory
tends to be widely practiced as bull markets become mature, and they usually
end quite painfully for the greatest fool. During the first half of 96 our
discipline may have kept us out of some of the high-flying stocks, but it did
not inhibit our performance as we were able to keep pace with the markets.
1
<PAGE>
Management Discussion and Analysis (continued)
The speculator is like the sprinter in the 100 meter dash; the race is short,
intense, exciting, but any minor slip-up will likely ruin any chances for
victory or success. The investor is more like the marathoner; relaxed,
thoughtful, and calculating. The necessity of physical preparedness is
obvious, but it is often the mental preparedness that decides the victor.
There may be setbacks along the way, but there is time to recoup, adjust your
strategy, let the strategy play out, and still be able to achieve success.
While we admire the athletic ability of the sprinter, our investment
methodology is more akin to the marathoner. A willingness to temporarily lag
behind the rabbits in the field has served us well over the years, and has
done so again so far this year.
We appreciate the opportunity to serve you, and we look forward to our next
opportunity to update you on our progress.
Sincerely,
Manning & Napier Advisors, Inc.
[graphic]
[pie chart]
Portfolio Compisition
Electronics & Electrical Equipment - 9.0%
Fabricated Metal Products - 8.8%
Glass Products - 3.3%
Health Services - 4.0%
Primary Metal Industries - 6.1%
Restaurants - 4.4%
Shoes - 4.4%
Software - 11.1%
Retail - 29.2%
Miscellaneous - 14.4%
Cash & Equivalents - 5.3%
2
<PAGE>
Performance Upadate as of June 30, 1996 (unaudited)
The value of a $10,000 investment in the
Manning & Napier Fund, Inc. - Small Cap
Series from its inception (4/30/92)
to present (6/30/96) as compared to the
Standard & Poor's (S&P) 500 Total Return
Index. 1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. - Small Cap Series
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 11,106 11.06% 11.06%
Inception 2 $ 18,248 82.48% 15.51%
</TABLE>
<TABLE>
<CAPTION>
S&P 500 Total Return Index
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 12,593 25.93% 25.93%
Inception 2 $ 18,093 80.93% 15.27%
</TABLE>
[graphic]
line chart
Data for Line Chart to follow:
<TABLE>
<CAPTION>
Manning & Napier S&P 500 Total
Small Cap Series Return Index
<S> <C> <C>
04/30/92 10,000 10,000
12/31/92 11,610 10,725
12/31/93 13,317 11,799
12/31/94 14,383 11,959
12/31/95 16,497 16,437
06/30/96 18,248 18,093
</TABLE>
1 The Standard and Poor's (S&P) 500 Total Return Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange, and Over-The-Counter
Market. S&P 500 Total Return Index returns assume reinvestment of dividends
and, unlike Fund returns, do not reflect any fees or expenses.
2 The Fund and Index performance numbers are calculated from April 30, 1992,
the Fund's inception date. The Fund's performance is historical and may not
be
indicative of future results.
3
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
COMMON STOCK - 94.7%
COMPUTER EQUIPMENT - 1.4%
PSC, Inc.* 136,000 $1,360,000
ELECTRONICS & ELECTRICAL EQUIPMENT - 9.0%
Coleman Company, Inc.* 105,900 4,487,512
BroadBand Technologies, Inc.* 140,000 4,515,000
9,002,512
FABRICATED METAL PRODUCTS - 8.8%
Keystone International, Inc. 214,000 4,442,575
Material Sciences Corp.* 250,000 4,312,500
8,755,075
FOOD & BEVERAGES - 2.3%
Canandaigua Wine Co.* 75,000 2,250,000
GLASS PRODUCTS - 3.3%
Libbey, Inc. 120,000 3,330,000
HEALTH SERVICES - 4.0%
Rehabcare Corp.* 195,000 3,315,000
U. S. Physical Therapy, Inc.* 65,000 633,750
3,948,750
INDUSTRIAL ORGANIC CHEMICALS - 1.5%
Varitronix International Ltd. (Note 7) 725,000 1,512,653
INVESTORS - 1.4%
EK Chor China Motorcycle Co. Ltd. 100,600 1,358,100
PLASTIC PRODUCTS - 1.7%
Sun Coast Industries, Inc.* 390,000 1,657,500
PRIMARY METAL INDUSTRIES - 6.1%
American Superconductor Corp.* 115,000 1,638,750
Gibraltar Steel Corp.* 220,000 4,455,000
6,093,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
PRINTING & PUBLISHING - 3.0%
Playboy Enterprises, Inc. - Class A* 93,000 $1,383,375
Playboy Enterprises, Inc. - Class B* 107,000 1,578,250
2,961,625
RESTAURANTS - 4.4%
Morton Restaurant Group, Inc. 249,000 4,357,500
RETAIL - 29.2%
RETAIL - DEPARTMENT STORES - 4.1%
Neiman Marcus Group, Inc.* 150,000 4,050,000
RETAIL - HOME FURNISHING STORES - 4.8%
Pier 1 Imports, Inc. 324,500 4,826,938
RETAIL - SHOE STORES - 4.0%
Brown Group, Inc. 230,000 3,996,250
RETAIL - SPECIALTY STORES - 12.0%
Fabri-Centers of America - Class A* 414,000 6,837,600
Fabri-Centers of America - Class B* 184,400 2,789,050
Hancock Fabrics, Inc. 213,500 2,348,500
11,975,150
RETAIL - VARIETY STORES - 4.3%
Family Dollar Stores, Inc. 250,000 4,343,750
29,192,088
SHOES - 4.4%
Wolverine World Wide, Inc. 134,550 4,372,875
SOFTWARE - 11.1%
Black Box Corp.* 170,000 4,037,500
Electronic Arts, Inc.* 79,000 2,113,250
Founder Hong Kong Ltd.* (Note 7) 2,700,000 1,124,922
Symantec Corp.* 300,000 3,750,000
11,025,672
SURGICAL & MEDICAL INSTRUMENTS - 2.5%
Allied Healthcare Products, Inc. 271,000 2,506,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
TEXTILES - 0.6%
Fieldcrest Cannon, Inc.* 29,600 $ 580,900
TOTAL COMMON STOCK
(Identified Cost $79,806,640) 94,265,750
SHORT-TERM INVESTMENTS - 2.6%
Dreyfus U.S. Treasury Money Market Reserves
(Identified Cost $2,634,054) 2,634,054 2,634,054
TOTAL INVESTMENTS - 97.3%
(Identified Cost $82,440,694) 96,899,804
OTHER ASSETS, LESS LIABILITIES - 2.7% 2,645,108
NET ASSETS - 100% $99,544,912
</TABLE>
* Non-income producing security
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
At June 30, 1996, the net unrealized appreciation based on identified cost for
federal income tax purposes of $82,440,694 was as follows:
<S> <C>
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $22,108,987
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (7,649,877)
UNREALIZED APPRECIATION - NET $14,459,110
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (unaudited)
JUNE 30, 1996
<S> <C>
ASSETS:
Investments, at value (Identified Cost $82,440,694)(Note 2) $96,899,804
Cash 246,449
Foreign currency, at value (cost $49,539) 49,524
Receivable for securities sold 1,567,416
Receivable for fund shares sold 841,860
Dividends receivable 126,432
Prepaid expense 2,462
TOTAL ASSETS 99,733,947
LIABILITIES:
Accrued management fees (Note 3) 122,572
Accrued Directors' fees (Note 3) 5,238
Payable for fund shares redeemed 20,768
Audit fee payable 11,221
Other payables and accrued expenses 29,236
TOTAL LIABILITIES 189,035
NET ASSETS FOR 7,668,923 SHARES
OUTSTANDING $99,544,912
NET ASSETS CONSIST OF:
Capital stock $ 76,688
Additional paid-in-capital 86,512,343
Undistributed net investment income 183,660
Accumulated net realized loss on investments (1,686,874)
Net unrealized appreciation on investments and other assets 14,459,095
TOTAL NET ASSETS $99,544,912
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($99,544,912/7,668,923 shares) $ 12.98
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<S> <C>
INVESTMENT INCOME:
Interest $ 500,699
Dividends 461,895
Total Investment Income 962,594
EXPENSES:
Management fees (Note 3) 727,292
Directors' fees (Note 3) 3,426
Custodian fee 16,275
Audit fee 11,221
Registration & filing fees 9,213
Miscellaneous 11,507
Total Expenses 778,934
NET INVESTMENT INCOME 183,660
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments (1,686,498)
Net change in unrealized appreciation on investments 16,611,693
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 14,925,195
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $15,108,855
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (unaudited)
For the Six Months For the Year
Ended 6/30/96 Ended 12/31/95
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 183,660 ($40,525)
Net realized gain (loss) on investments (1,686,498) 31,290,477
Net change in unrealized appreciation on investments 16,611,693 15,430,101
Net increase in net assets from operations 15,108,855 15,819,851
DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains (2,633,631) (28,009,998)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase (decrease) in net assets from capital share
transactions (Note 5) (55,933,354) 49,670,946
Net increase (decrease) in net assets (43,458,130) 37,480,799
NET ASSETS:
Beginning of period 143,003,042 105,522,243
End of period (including undistributed net investment
income of $183,660 and $0 respectively) $ 99,544,912 $ 143,003,042
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (unaudited)
For the Six For the Year For the Year For the Year
Months Ended Ended Ended
Ended 6/30/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period )*
NET ASSET VALUE - BEGINNING OF PERIOD $ 11.95 $ 12.92 $ 12.52 $ 11.24
Income from investment operations:
Net investment income (loss) 0.024 (0.004) (0.066) (0.040)
Net realized and unrealized gain (loss)
on investments 1.223 1.934 1.051 1.700
Total from investment operations 1.247 1.930 0.985 1.660
Less distributions to shareholders:
From net realized gain on investments (0.217) (2.900) (0.585) (0.380)
In excess of net realized gains - - - -
Redemption of initial capitalization* - - - -
Total distributions to shareholders (0.217) (2.900) (0.585) (0.380)
NET ASSET VALUE - END OF PERIOD $ 12.98 $ 11.95 $ 12.92 $ 12.52
Total Return: 5 10.62% 14.70% 8.01% 14.64%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses (7) 1.07%(8) 1.07% 1.10% 1.13%
Net investment income (loss) 0.25%(8) (0.03)% (0.58)% (0.43)%
Portfolio turnover 14% 77% 31% 12%
Average commission rate paid $ 0.0254 $ 0.0500 - -
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 99,545 $ 143,003 $ 105,522 $ 70,734
Footnotes on next page.
Financial Highlights (unaudited)
For the Period For the Period
4/30/92(1) to 1/1/89 to
12/31/92 7/24/89(2)
<S> <C> <C>
Per share data (for a share outstanding throughout
each period )*
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.00(3) $ 8.96
Income from investment operations:
Net investment income (loss) (0.020) (0.390)
Net realized and unrealized gain (loss)
on investments 1.630 -
Total from investment operations 1.610 (0.390)
Less distributions to shareholders:
From net realized gain on investments (0.290) -
In excess of net realized gains (0.080)(4) -
Redemption of initial capitalization* - (8.570)
Total distributions to shareholders (0.370) (8.570)
NET ASSET VALUE - END OF PERIOD $ 11.24 -
Total Return: 5 16.20% - (6)
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses (7) 1.27%(8) 14.59%(8)(6)
Net investment income (loss) (0.26)%(8) (8.02)%(8)(6)
Portfolio turnover 24% 0%
Average commission rate paid - -
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 33,079 -
Footnotes on next page.
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Financial Highlights - Footnotes (unaudited)
*Prior to July 8, 1993, the investment practice of the Fund resulted in the
active operation of the investment portfolio for discrete periods. On April
30, 1992, the Fund resumed sales of shares to advisory clients and employees
of Manning & Napier Advisors, Inc. (the "Advisor") and its affiliates. On
July 8, 1993, the Fund began offering shares directly to investors.
Previously, the Fund was in active operation from November 11, 1986 to May 14,
1987 and from December 1, 1987 to April 13, 1988.
During the periods of January 6, 1986 to November 10, 1986, May 15, 1987 to
November 30, 1987 and April 14, 1988 to July 24, 1989 the only shareholders of
the Fund were the shareholders who provided the initial capitalization for the
Fund (the "Initial Shareholders"). During periods when the only shareholders
of the Fund were the Initial Shareholders, assets of the Fund were invested in
U.S. Treasury securities. On July 11 and 24, 1989 the shares held by the
Initial Shareholders were redeemed in full and the Fund remained dormant until
April 30, 1992.
Per share data for periods before May 18, 1988 were restated to reflect the 10
for 1 stock dividend effected on May 18, 1988.
1Recommencement of operations.
2Date of complete redemption.
3Initial offering price upon recommencement of operations on April 30, 1992.
4Distributions differ from net investment income and net realized capital
gains because of book/tax timing differences, primarily the requirements of
the excise tax regulations enacted as part of the 1986 Tax Reform Act. The
regulations required the Fund to measure capital gains through October 31,
1992. The excise tax regulations also required the Fund to distribute those
gains before December 31, 1992 to avoid payment of excise tax.
5Total return represents aggregate total return for the period indicated.
6During the period January 1, 1989 to July 24, 1989, the only shareholders and
resulting assets were those of the Initial Shareholders, as described in the
note with the asterisk, who redeemed their shares on July 11 and 24, 1989;
therefore, the ratios and total return presented may not be representative of
an actively operating fund.
7During the period 1/1/89 to 7/24/89, absent waivers of investment advisory
fees, the ratio of expenses to average daily net assets was: 15.57%.
8Annualized.
11
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Small Cap Series (the "Fund") is a no-load diversified series of Manning
& Napier Fund, Inc. (the "Corporation"). The Corporation is organized as a
Maryland Corporation and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company.
On April 30, 1992, the Fund resumed sales of shares to advisory clients
and employees of Manning & Napier Advisors, Inc. (the "Advisor") and its
affiliates. On July 8, 1993, the Fund began offering shares directly to
investors. Previously, the Fund was in active operation from November 11,
1986 to May 14, 1987 and from December 1, 1987 to April 13, 1988.
During the periods of January 6, 1986 to November 10, 1988, May 15, 1987
to November 30, 1987, and April 14, 1988 to July 24, 1989, the only
shareholders of the Fund were the shareholders who provided the initial
capitalization for the Fund (the "Initial Shareholders"). During periods when
the only shareholders of the Fund were the Initial Shareholders, assets of the
Fund were invested in U.S. Treasury securities. On July 11 and 24, 1989, the
shares held by the Initial Shareholders were redeemed in full and the Fund
remained dormant until April 30, 1992.
The total authorized capital stock of the Corporation consists of one
billion shares of common stock each having a par value of $0.01. As of June
30, 1996, 940 million shares have been designated in total among 19 series, of
which 50 million have been designated as Small Cap Series Class A Common
Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including domestic equities, foreign equities,
options and corporate bonds, listed on an exchange are valued at the latest
quoted sales price of the exchange on which the security is traded most
extensively. Securities not traded on valuation date or securities not listed
on an exchange are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed
securities, will normally be valued on the basis of evaluated bid prices.
Securities for which representative prices are not available from the
Fund's pricing service are valued at fair value as determined in good faith by
the Fund's Board of Directors.
Short-term investments that mature in sixty (60) days or less are valued
at amortized cost.
12
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains on
investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTION OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result, net
investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund may
periodically make reclassification among its capital accounts without
impacting the Fund's net asset value.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis: a) investment securities, other assets and liabilities are converted to
U.S. dollars based upon current exchange rates; and b) purchase and sales of
securities and income and expenses are converted into U.S. dollars based upon
the currency exchange rates prevailing on the respective dates of such
transactions.
13
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FOREIGN CURRENCY TRANSLATION (continued)
Gains and losses attributable to foreign currency exchange rates are
recorded for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates is
not separately stated.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency contracts in order
to hedge a portfolio position or specific transaction. Risks may arise if the
counterparties to a contract are unable to meet the terms of the contract or
if the value of the foreign currency moves unfavorably.
At June 30, 1996, the Fund had no open foreign currency exchange
contracts.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier
Advisors, Inc. (the "Advisor"), for which the Fund pays the Advisor a fee,
computed daily and payable monthly, at an annual rate of 1% of the Fund's
average daily net assets. The fee amounted to $727,292 for the six months
ended June 30, 1996.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
The Advisor has agreed that, in any fiscal year, if the expenses of the
Fund (including the advisory fee but excluding interest, taxes, brokerage
commissions, and extraordinary expenses) exceed the limits set by applicable
regulation of state securities commissions, the Advisor will reduce its fee by
the amount of such excess.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $3,426 for the
six months ended June 30, 1996.
14
<PAGE>
Notes to Financial Statements (unaudited)
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term securities, were
$19,574,296 and $75,759,589 respectively, for the six months ended June 30,
1996.
5. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of Small Cap Series Class A Common Stock were:
For the Six For the
Months Year
Ended Ended
6/30/96 12/31/95
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
Sold 1,051,464 $ 12,753,328 1,840,553 $26,713,110
Reinvested 221,291 2,611,233 2,289,934 27,662,435
Repurchased (5,569,880) (71,297,915) (331,604) (4,704,599)
Total (4,297,125) $(55,933,354) 3,798,883 $49,670,946
</TABLE>
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options, forward foreign currency exchange contracts, and futures contracts
and may involve, to a varying degree, elements of risk in excess of the
amounts recognized for financial statement purposes. No such investments were
held by the Fund on June 30, 1996.
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in securities of U.S. companies and the United States government.
There risks include revaluation of currencies and future adverse political and
economic developments. Moreover, securities of many foreign companies and
foreign governments and their markets may be less liquid and their prices more
volatile than those of securities of comparable U.S. companies and the United
States government.
8. SPECIAL MEETING OF SHAREHOLDERS
On April 10, 1996, a special meeting of the Corporation was held for the
purpose of electing directors. The following directors have been elected:
Stephen B. Ashley, B. Reuben Auspitz, Martin F. Birmingham, Peter L. Faber,
and Harris H. Rusitzky.
15
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Technology Series
Semi-Annual Report
June 30, 1996
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
In 1995, the Technology Series was able to benefit from what was an
exceptional year in the market in general and in the technology sector in
particular. While the Series posted solid returns for the first half of 1996,
returns in the technology sector and of the Technology Series have slowed from
the remarkable pace of last year, as we expected.
As we discussed in the Annual Report, many technology stocks declined late in
1995. We had sold shares from client accounts earlier in the year to lock in
some gains and as a defensive measure. This past January we took advantage of
the decline in the sector to buy additional shares of the Series for client
accounts. The Series rebounded well from that point through the end of June.
Much of the excitement about technology stocks early in 1995 was tied to the
much-hyped introduction of Windows 95. It was expected that this would spur a
boom in the industry as many companies which produced related products or
components would stand to benefit from the rush to purchase the new operating
system. At the time, our analysis led to the conclusion that the forecasts
were too optimistic, and we avoided some areas of the technology sector for
this reason. Although Windows 95 did sell extremely well, it fell far short
of the overblown expectations, and this disappointment led to declines in the
prices of many stocks. We have used this as an opportunity to add holdings in
areas, such as semiconductors, which we feel have reached attractive
valuations.
We have recently increased international holdings to 12% of the Technology
Series, in keeping with our view that the global trend toward free trade means
that many investment opportunities are to be found in other countries. Many
of the U.S. companies in the portfolio are also expected to benefit from this
trend.
In the second half of the year, we expect a new corporate upgrade cycle in
personal computers to commence. One factor leading to this upgrade cycle is
the introduction of Window NT, although this introduction has not been
anticipated with the great level of enthusiasm that preceded Windows 95.
Lower personal computer prices, caused by lower semiconductor component
prices, should also contribute to an increase in corporate personal computer
upgrades. Several of the companies in which the Fund has holdings are
positioned to benefit from this trend.
Looking further ahead, we are optimistic about opportunities in the technology
sector. In earlier reports we have cited three main reasons for our positive
outlook: increased consumer acceptance, increased corporate use to bolster
productivity, and continued international penetration. Our analysis indicates
that these trends will continue to be important forces in the technology area.
appreciate the opportunity to serve you, and we look forward to our next
opportunity to update you on our progress.
Sincerely,
Manning & Napier Advisors, Inc.
1
<PAGE>
Performance Update as of June 30, 1996 (unaudited)
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
Technology
Series from its inception (8/29/94) to present (6/30/96) as compared to the
Standard & Poor's (S&P) 500 Total Return Index. 1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. - Technology Series
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 11,315 13.15% 13.15%
Inception 2 $ 16,674 66.74% 32.01%
</TABLE>
<TABLE>
<CAPTION>
S&P 500 Total Return Index
Total Return
Through Growth of $10,000 Average
06/30/96 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 12,593 25.93% 25.93%
Inception 2 $ 14,787 47.87% 23.67%
</TABLE>
1 The Standard and Poor's (S&P) 500 Total Return Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange, and Over-The-Counter
Market. S&P 500 Total Return Index returns assume reinvestment of dividends
and, unlike Fund returns, do not reflect any fees or expenses.
2 The Fund and Index performance numbers are calculated from August 29,
1994, the Fund's inception date. The Fund's performance is historical and may
not be indicative of future results.
[graphic]
line chart
Data for Line Chart to follow:
<TABLE>
<CAPTION>
Date Manning & Napier Technology Series S&P 500 Total Return Index
<S> <C> <C>
08/29/94* $10,000 $ 10,000
12/31/94 11,350 9,773
06/30/95 14,736 11,742
12/31/95 15,918 13,433
06/30/96 16,674 14,787
</TABLE>
* Inception date
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (note 2)
<S> <C> <C>
COMMON STOCK - 92.1%
COMPUTER EQUIPMENT - 8.9%
Cisco Systems, Inc. 84,000 $ 4,756,500
Digital Equipment Corp.* 72,800 3,276,000
PSC, Inc.* 51,125 511,250
8,543,750
INDUSTRIAL ORGANIC CHEMICALS - 2.2%
Varitronix International Ltd. (Note 6) 1,000,000 2,086,419
PRIMARY METAL INDUSTRIES - 2.6%
American Superconductor Corp.* 173,000 2,465,250
RETAIL - SPECIALTY STORES - 3.9%
Tandy Corp. 79,000 3,742,625
SEMICONDUCTORS - 16.2%
Altera Corp. 105,000 3,990,000
Intel Corp. 158,000 11,603,125
15,593,125
SOFTWARE - 25.3%
Dassault Systemes S.A.* 10,000 310,000
Electronic Arts, Inc.* 170,000 4,547,500
Founder Hong Kong Ltd.* (Note 6) 2,200,000 916,603
Informix Corp.* 182,000 4,095,000
Microsoft Corp.* 40,000 4,805,000
Oracle Corp.* 124,425 4,907,011
Parametric Technology Co.* 69,000 2,992,875
Symantec Corp.* 143,000 1,787,500
24,361,489
SPECIAL INDUSTRIAL INSTRUMENTS - 2.1%
Measurex Corp. 71,000 2,076,750
TELECOMMUNICATION EQUIPMENT - 30.9%
ADC Telecommunications, Inc.* 113,000 5,085,000
BroadBand Technologies, Inc.* 98,000 3,160,500
Champion Technology Holdings (Note 6) 3,665,608 430,940
DSC Communications Corp. * 133,000 4,006,625
ECI Telecommunications Ltd. 159,200 3,701,400
General Instrument Corp.* 295,700 8,538,337
Northern Telecom Ltd. 86,800 4,719,750
29,642,552
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
Investment Portfolio - June 30, 1996 (unaudited)
Value
Shares (Note 2)
<S> <C> <C>
TOTAL COMMON STOCK
(Identified Cost $74,400,473) $88,511,960
SHORT-TERM INVESTMENTS - 6.6%
Fannie Mae Discount Note, 7/08/96 2,000,000 1,997,962
Farm Credit Discount Note, 7/22/96 4,000,000 3,987,726
Galaxy Government Fund 320,487 320,487
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $6,306,175) 6,306,175
TOTAL INVESTMENTS - 98.7%
(Identified Cost $80,706,648) 94,818,135
OTHER ASSETS, LESS LIABILITIES - 1.3% 1,232,523
NET ASSETS - 100% $96,050,658
</TABLE>
*Non-income producing security
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
At June 30, 1996, the net unrealized appreciation based on identified cost for
federal income tax purposes of $80,706,648 was as follows:
<S> <C>
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $17,399,914
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (3,288,427)
UNREALIZED APPRECIATION - NET $14,111,487
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (unaudited)
JUNE 30, 1996
<S> <C>
ASSETS:
Investments, at value (Identified Cost $80,706,648)(Note 2) $94,818,135
Foreign currency, at value (cost $58,687) 58,677
Cash 13,852
Receivable for securities sold 1,997,934
Receivable for fund shares sold 299,600
Dividends receivable 15,800
Prepaid expense 1,154
TOTAL ASSETS 97,205,152
LIABILITIES:
Accrued management fees (Note 3) 78,528
Accrued Directors' fees (Note 3) 5,240
Payable for securities purchased 1,032,500
Registration & filing fees 17,337
Audit fee payable 11,911
Other payables and accrued expenses 8,978
TOTAL LIABILITIES 1,154,494
NET ASSETS FOR 8,815,458 SHARES
OUTSTANDING $96,050,658
NET ASSETS CONSIST OF:
Capital stock $ 88,155
Additional paid-in-capital 85,709,807
Undistributed net investment income 59,770
Accumulated net realized loss on investments (3,918,552)
Net unrealized appreciation on investments and other assets 14,111,478
TOTAL NET ASSETS $96,050,658
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($96,050,658/8,815,458 shares) $ 10.90
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations (unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<S> <C>
INVESTMENT INCOME:
Interest $ 354,210
Dividends 159,868
Total Investment Income 514,078
EXPENSES:
Management fees (Note 3) 428,350
Directors' fees (Note 3) 3,426
Custodian fee 4,678
Audit fee 8,287
Miscellaneous 9,194
Total Expenses 453,935
NET INVESTMENT INCOME 60,143
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments (3,786,695)
Net change in unrealized appreciation on investments 8,760,166
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 4,973,471
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 5,033,614
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
Statement of Changes in Net Assets (unaudited)
For the Six
Months For the Year
Ended 6/30/96 Ended 12/31/95
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 60,143 $ 71,018
Net realized gain (loss) on investments (3,786,695) 19,400,886
Net change in unrealized appreciation (depreciation)
on investments 8,760,166 (268,944)
Net increase in net assets from operations 5,033,614 19,202,960
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (37,668) (33,723)
From net realized gains (2,465,985) (17,390,172)
Total distributions to shareholders (2,503,653) (17,423,895)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase (decrease) in net assets from capital share
transactions (Note 5) 40,373,654 (561,295)
Net increase in net assets 42,903,615 1,217,770
NET ASSETS:
Beginning of period 53,147,043 51,929,273
End of period (including undistributed net investment
income of $59,770 and $37,295) $ 96,050,658 $ 53,147,043
</TABLE>
The accompanying notes are an integral part of the fianancial statements.
7
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights (unaudited)
For the Six For the For the For the
Months Year Period Period For the For the
Ended Ended 8/29/94(1) 1/1/92 to Year Ended Year Ended
6/30/96 12/31/95 to 12/31/94 5/11/92(2) 12/31/91 12/31/90
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD )*
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.71 $ 11.35 $ 10.00(3) $ 10.25 $ 8.00 $ 9.41
Income from investment operations:
Net investment income 0.004 0.018 (0.013) 0.010 (0.040) 0.020
Net realized and unrealized gain (loss)
on investments 0.486 4.515 1.363 1.530 2.930 (0.830)
Total from investment operations 0.490 4.533 1.350 1.540 2.890 (0.810)
Less distributions to shareholders:
From net investment income (0.005) (0.010) -- -- -- (0.030)
From net realized gain on investments (0.295) (5.163) -- (1.940) (0.640) (0.570)
Redemption of capital -- -- -- (9.850) -- --
Total distributions to shareholders (0.300) (5.173) -- (11.790) (0.640) (0.600)
NET ASSET VALUE - END OF PERIOD $ 10.90 $ 10.71 $ 11.35 $ 0.00 $ 10.25 $ 8.00
Total return (4): 4.75% 40.25% 13.5% -(5) 36.1% (8.9)%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 1.06%(6) 1.12% 1.32%(6) 1.35%(6)(5) 1.13% 1.14%
Net investment income 0.14%(6) 0.13% (0.40)%(6) 0.20%(6)(5) (0.33)% 0.20%(7)
Portfolio turnover 42% 107% 5% 0% 4% 25%
Average commission rate paid $ 0.0169 $ 0.0156 -- -- -- --
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 96,051 $ 53,147 $ 51,929 - $ 5,594 $ 5,835
</TABLE>
* The investment practice of the Fund results in the active operation of the
investment portfolio for discrete period. The Fund
was in active operation from November 4, 1988 to May 11, 1992. On May 11,
1992, the Fund redeemed all shares held. The
Fund recommenced investment operations on August 29, 1994.
1 Recommencement of operations.
2 Date of complete redemption.
3 Initial offering price upon recommencement of operations on August 29, 1994.
4 Total return represents aggregate total return for the period indicated.
5 The Fund ceased investment operations on May 11, 1992; therefore, ratios and
total return would not be representative of an actively operating fund.
6 Annualized.
7 Investment income per share is comprised of recurring dividends and interest
income which amounted to $0.07 per share and special dividends from Bell
Industries and Tempest Technologies, Inc.
The accompanying notes are an integral part of the fianacial statements.
8
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Technology Series (the "Fund") is a no-load non-diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized as a Maryland Corporation and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment
company.
Shares of the Fund are offered to clients and employees of Manning &
Napier Advisors, Inc. (the Advisor) and its affiliates. The investment
practice of the Fund results in the active operation of the investment
portfolio for discrete periods. As of June 30, 1996, the Fund has been in
active operation from November 4, 1988 to May 11, 1992 and from August 29,
1994 to June 30, 1996.
The total authorized capital stock of the Corporation consists of one
billion shares of common stock each having a par value of $0.01. As of June
30, 1996, 940 million shares have been designated in total among 19 series,
of which 50 million have been designated as Technology Series Class DCommon
Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including domestic equities, foreign equities,
options and corporate bonds, listed on an exchange are valued at the latest
quoted sales price of the exchange on which the security is traded most
extensively. Securities not traded on valuation date or securities not
listed on an exchange are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed
securities, will normally be valued on the basis of evaluated bid prices.
Securities for which representative prices are not available from the
Fund's pricing service are valued at fair value as determined in good faith
by the Fund's Board of Directors.
Short-term investments that mature in sixty (60) days or less are valued
at amortized cost.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
9
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains
on investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTION OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result,
net investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund may
periodically make reclassification among its capital accounts without
impacting the Fund's net asset value.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis: a) investment securities, other assets and liabilities are converted
to U.S. dollars based upon current exchange rates; and b) purchase and sales
of securities and income and expenses are converted into U.S. dollars based
upon the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are
recorded for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates
is not separately stated.
10
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency contracts in order
to hedge a portfolio position or specific transaction. Risks may arise if
the counterparties to a contract are unable to meet the terms of the contract
or if the value of the foreign currency moves unfavorably.
At June 30, 1996, the Fund had no open foreign currency exchange
contracts.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier
Advisors, Inc. (the "Advisor"), for which the Fund pays the Advisor a fee,
computed daily and payable monthly, at an annual rate of 1% of the Fund's
average daily net assets. The fee amounted to $428,350 for the six months
ended June 30, 1996.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
The Advisor has agreed that, in any fiscal year, if the expenses of the
Fund (including the advisory fee but excluding interest, taxes, brokerage
commissions, and extraordinary expenses) exceed the limits set by applicable
regulation of state securities commissions, the Advisor will reduce its fee
by the amount of such excess.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $3,426 for the
six months ended June 30, 1996.
11
<PAGE>
Notes to Financial Statements (unaudited)
.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term securities, were
$71,662,833 and $30,236,481, respectively, for the six months ended June 30,
1996.
5. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of Technology Series Class D Common Stock were:
For the Six
Months For the Year
Ended 6/30/96 Ended 12/31/95
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 3,860,417 $40,540,418 1,415,392 $ 17,145,335
Reinvested 243,127 2,487,188 1,612,684 17,272,178
Repurchased (251,399) (2,653,952) (2,641,988) (34,978,808)
Total 3,852,145 $40,373,654 386,088 $ (561,295)
</TABLE>
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in securities of U.S. companies and the United States government.
These risks include revaluation of currencies and future adverse political
and economic developments. Moreover, securities of many foreign companies
and foreign governments and their markets may be less liquid and their prices
more volatile than those of securities of comparable U.S. companies and the
United States government.
7. TECHNOLOGY SECURITIES
The Fund may focus its investments in certain related technology
industries; hence, the Fund may subject itself to a greater degree of risk
than a fund that is more diversified.
8. SPECIAL MEETING OF SHAREHOLDERS
On April 10, 1996, a special meeting of the Corporation was held for the
purpose of electing directors. The following directors have been elected:
Stephen B. Ashley, B. Reuben Auspitz, Martin F. Birmingham, Peter L. Faber,
and Harris H. Rusitzky.
12
<PAGE>
<PAGE>
August 21, 1996
To Shareholders of the following series of the Manning & Napier Fund:
Small Cap Series
Technology Series
International Series
New York Tax Exempt Series
Ohio Tax Exempt Series
Diversified Tax Exempt Series
Dear Shareholder:
Enclosed are copies of the Semi-Annual Reports for each of the above Series of
the Manning & Napier Fund in which you were invested as of June 30, 1996. The
reports include information about the Series performance as well as portfolio
listings as of that date.
Please contact our Fund Services department at 1-800-4MN-FUND (1-800-466-3863)
or your Client Consultant if you have any questions about the Fund.
Sincerely,
/s/ Amy J. Williams
Amy J. Williams
Fund Services Coordinator
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<RESTATED>
<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> DIVERSIFIED TAX EXEMPT SERIES
<NUMBER> 18
<CAPTION>
<S> <C>
<MULTIPLIER> 1
<CURRENCY> 1
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 14,835,570
<INVESTMENTS-AT-VALUE> 14,971,945
<RECEIVABLES> 275,963
<ASSETS-OTHER> 199,541
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,447,449
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 27,092
<TOTAL-LIABILITIES> 27,092
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,242,758
<SHARES-COMMON-STOCK> 1,540,006
<SHARES-COMMON-PRIOR> 1,207,105
<ACCUMULATED-NII-CURRENT> 49,503
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8,279)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 136,375
<NET-ASSETS> 15,420,357
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 347,621
<OTHER-INCOME> 0
<EXPENSES-NET> 52,093
<NET-INVESTMENT-INCOME> 295,528
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (446,678)
<NET-CHANGE-FROM-OPS> (151,150)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 253,902
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 351,855
<NUMBER-OF-SHARES-REDEEMED> 43,581
<SHARES-REINVESTED> 24,627
<NET-CHANGE-IN-ASSETS> 2,968,209
<ACCUMULATED-NII-PRIOR> 7,877
<ACCUMULATED-GAINS-PRIOR> (8,279)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 33,927
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 52,093
<AVERAGE-NET-ASSETS> 13,767,892
<PER-SHARE-NAV-BEGIN> 10.32
<PER-SHARE-NII> 0.212
<PER-SHARE-GAIN-APPREC> (0.342)
<PER-SHARE-DIVIDEND> 0.18
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.01
<EXPENSE-RATIO> 0.77
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<RESTATED>
<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> INTERNATIONAL SERIES
<NUMBER> 7
<CAPTION>
<S> <C>
<MULTIPLIER> 1
<CURRENCY> 1
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 112,830,997
<INVESTMENTS-AT-VALUE> 131,589,645
<RECEIVABLES> 77,029,157
<ASSETS-OTHER> 754,951
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 209,373,753
<PAYABLE-FOR-SECURITIES> 76,081,489
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 208,172
<TOTAL-LIABILITIES> 76,289,661
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 112,769,675
<SHARES-COMMON-STOCK> 12,504,579
<SHARES-COMMON-PRIOR> 13,406,285
<ACCUMULATED-NII-CURRENT> 1,736,815
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (159,524)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 18,737,126
<NET-ASSETS> 133,084,092
<DIVIDEND-INCOME> 1,917,952
<INTEREST-INCOME> 592,603
<OTHER-INCOME> 0
<EXPENSES-NET> 773,740
<NET-INVESTMENT-INCOME> 1,936,815
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