June 27, 1997
To Shareholders of the following Series of the Manning & Napier Fund:
Defensive Series
Blended Asset Series I and II
Maximum Horizon Series
Flexible Yield Series I, II, and III
Tax Managed 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 April 30, 1997.
These reports include information about the Series performance as well as
portfolio listings as of that date.
We would be happy to answer any questions you may have about the Semi-Annual
Reports or about your account. Please contact our Fund Services department at
1-800-4MN-FUND
(1-800-466-3863) or your Client Consultant if we can be of assistance.
Sincerely,
Amy J. Williams
Fund Services Coordinator
<PAGE>
Manning & Napier Fund, Inc.
Flexible Yield Series I
Semi-Annual Report
April 30, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
With the end of April comes springtime and little league baseball. At a
recent game, a young boy was overheard saying you have to think a lot when you
play baseball, but when the balls coming at you, you dont have time to think.
This is also a good perspective on investing.
Investing requires a great deal of background thought and research, because
like a sharp ground ball, individual pieces of economic data come quickly and
with different hops and spins. If you try to find deep meaning in any
individual economic release, that is, if you try to extrapolate a trend from a
single data point, youll find the inputs too frequent to be handled
intelligently. As the young ballplayer put it, you have to think a lot, and
that thinking must be done in advance, and not in reaction to economic
releases. Otherwise, you will find yourself changing direction constantly,
given the variability of individual pieces of data.
From this perspective, in considering the question which is most crucial to
bond investors, i.e., whats the direction of inflation, what matters most is
that inflation overall continues to confirm the long-term trend of moderate
pricing pressures. Sure, there are individual pieces of data which can spook
the bond market -- strong economic growth, low unemployment, rising wage data.
However, it increasingly seems to be the case that for every area in which
inflation pressures rise, there is an equal and opposite reaction in another
area. For example, recent data supporting lower inflation are as follows:
The Employment Cost Index, which suggests that although wage growth had
increased slightly, benefit growth had decelerated. The combination of the
two means that overall labor costs have not been accelerating.
Stable to falling commodity prices, especially crude oil prices which have
fallen 20% from last winters highs.
The strengthening of the U.S. dollar relative to other currencies. This
makes imports cheaper and puts pressure on U.S. producers to keep prices down
to stay competitive.
Thinking in advance, rather than in reaction to individual economic releases,
we have formulated an overview that global competition means consumers need
not accept much in the way of price increases. No individual inflation
indicator would confirm or refute this overview, but the net total of the
evidence should suggest that:
1) Consumers are not very accepting of price increases;
2) For every increase that does pop up for a given item or sector,
consumers will demand corresponding decreases in other areas.
The weight of individual evidence confirms this overview; that is, as
discussed above, for every inflationary signal there is a disinflationary
signal. More importantly, the bottom line is the ultimate confirmation: the
Consumer Price Index was up only 2.8% year-over-year through the end of March,
falling right back into the consistently moderate groove of the past
several years.
1
<PAGE>
Management Discussion and Analysis (continued)
To apply this thinking to bond investing, the important factors are not the
month-to-month fluctuations in bond prices, but the long-term yields over and
above inflation. To the extent that fluctuations push those yields higher,
while inflation remains steady, the long-term bond investor can turn this into
opportunity -- after all, higher yields over and above inflation are
literally money in the pockets of bond investors.
The reality is that the media and the bond market will overreact to short-term
data, but this is a losers game. Those who think through their approach
before the ball is hit to them can play the long-term trend and take advantage
of attractive inflation-adjusted yields.
We would once again like to thank you for the opportunity of helping you meet
your investment goals. It is a service in which we take great pride.
Sincerely,
Manning & Napier Advisors, Inc.
<graphic>
<pie chart>
Data for chart to follow:
Effective Maturity - As of 4/30/97
1-2 Years - 29%
2-3 Years - 23%
3-4 Years - 19%
More than 4 Years - 29%
2
<PAGE>
Performance Update as of April 30, 1997 (unaudited)
<graphic>
<line chart>
Data for chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Manning & Napier Fund, Inc. Merrill Lynch U.S. Treasury
Date Flexible Yield Series I Short-Term Index
02/15/94 10,000 10,000
06/30/94 9,860 9,931
12/31/94 9,924 10,030
06/30/95 10,573 10,699
12/31/95 10,995 11,133
04/30/96 10,931 11,179
10/31/96 11,441 11,598
04/30/97 11,509 11,861
</TABLE>
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. - Flexible Yield Series I
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,529 5.29% 5.29%
Inception 2 $ 11,509 15.09% 4.48%
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch U.S. Treasury Short-Term Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,609 6.09% 6.09%
Inception 2 $ 11,861 18.61% 5.46%
</TABLE>
The value of a $10,000 investment in the
Manning & Napier Fund, Inc. - Flexible Yield
Series I from its inception (2/15/94) to
present (4/30/97) as compared to the Merrill
Lynch U.S. Treasury Short-Term Index. 1
1 The Merrill Lynch U.S. Treasury Short-Term Index is a market value weighted
measure of approximately 61 U.S. Treasury Securities. The Index is comprised
of U.S. Treasury securities with maturities greater than one year but less
than three years. The Index returns assume reinvestment of coupons and,
unlike Fund returns, do not reflect any fees or expenses.
2 The Fund and Index performance are calculated from February 15, 1994, the
Fund's inception date. The Fund's performance is historical and may not be
indicative of future results.
3
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT/SHARES (NOTE 2)
<S> <C> <C>
U.S. TREASURY SECURITIES - 89.14%
U.S. TREASURY NOTES
U.S.Treasury Note, 6.125%, 5/15/1998 $ 40,000 $ 40,038
U.S.Treasury Note, 5.875%, 10/31/1998 30,000 29,859
U.S.Treasury Note, 6.50%, 4/30/1999 85,000 85,345
U.S.Treasury Note, 5.875%, 11/15/1999 40,000 39,513
U.S.Treasury Note, 6.75%, 4/30/2000 85,000 85,691
U.S.Treasury Note, 6.375%, 3/31/2001 105,000 104,377
U.S.Treasury Note, 6.25%, 10/31/2001 115,000 113,561
U.S.Treasury Note, 6.25%, 1/31/2002 40,000 39,463
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $542,416) 537,847
---------
SHORT-TERM INVESTMENTS - 10.74%
Dreyfus U.S. Treasury Money Market Reserves 64,824 64,824
(Identified Cost $64,824)
TOTAL INVESTMENTS - 99.88%
(Identified Cost $607,240) 602,671
OTHER ASSETS, LESS LIABILITIES - 0.12% 740
---------
NET ASSETS - 100% $603,411
=========
</TABLE>
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At April 30 1997, the net unrealized depreciation based on
identified cost for federal income tax purposes of $607,351
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 14
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value (4,694)
UNREALIZED DEPRECIATION - NET ($4,680)
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Statement of Assets and Liabilities (unaudited)
<TABLE>
<CAPTION>
APRIL 30, 1997
<S> <C>
ASSETS:
Investments, at value (Identified Cost $607,240)(Note 2) $602,671
Interest receivable 3,440
Receivable from investment advisor (Note 3) 8,315
TOTAL ASSETS 614,426
LIABILITIES:
Accrued Directors' fees (Note 3) 3,392
Audit fee payable 4,764
Other payables and accrued expenses 2,859
TOTAL LIABILITIES 11,015
NET ASSETS FOR 59,506 SHARES OUTSTANDING $603,411
NET ASSETS CONSIST OF:
Capital stock $ 595
Additional paid-in-capital 602,787
Undistributed net investment income 4,280
Accumulated net realized gain on investments 318
Net unrealized depreciation on investments (4,569)
TOTAL NET ASSETS $603,411
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($603,411/59,506 shares) $ 10.14
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Statement of Operations (unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 30, 1997
<S> <C>
INVESTMENT INCOME:
Interest $18,139
EXPENSES:
Management fee (Note 3) 1,054
Directors' fees (Note 3) 3,392
Transfer agent fees (Note 3) 72
Audit fee 4,190
Registration & filing fees 2,183
Custodian fee 174
Miscellaneous 412
Total Expenses 11,477
Less Waiver of Expenses (Note 3) (9,369)
Net Expenses 2,108
NET INVESTMENT INCOME 16,031
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Net realized loss on investments (identified cost basis) (86)
Net change in unrealized depreciation on investments (8,150)
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (8,236)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 7,795
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
For the Six For the Ten For the
Months Ended Month Ended Year Ended
4/30/97 10/31/96 12/31/95
-------------- -------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $16,031 $15,879 $17,412
Net realized gain (loss) on investments (86) 2,919 321
Net change in unrealized appreciation (depreciation)
on investments (8,150) (3,729) 12,825
Net increase in net assets from operations 7,795 15,069 30,558
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (17,087) (10,555) (17,292)
From net realized gain on investments (1,988) -- --
Total distributions to shareholders (19,075) (10,555) (17,292)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital share
transactions (Note 5) 121,794 231,929 12,347
Net increase in net assets 110,514 236,443 25,613
NET ASSETS:
Beginning of period 492,897 256,454 230,841
END OF PERIOD (including undistributed net investment
income of $4,280, $5,336 and $12 respectively) $603,411 $492,897 $256,454
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Financial Highlights (unaudited)
<TABLE>
<CAPTION>
For the Period
For the 2/15/94
For the Six For the Ten Year (commencement
Months Ended Months Ended Ended of operations)
4/30/97 10/31/96 3 12/31/95 to 12/31/94
-------------- -------------- ---------- ----------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period)
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.27 $ 10.26 $ 9.69 $ 10.00
Income from investment operations:
Net investment income 0.217 0.411 0.464 0.241
Net realized and unrealized gain (loss)
on investments (0.063) (0.101) 0.566 (0.317)
Total from investment operations 0.154 0.310 1.030 (0.076)
Less distributions to shareholders:
From net investment income (0.256) (0.300) (0.460) (0.234)
From net realized gain on investments (0.028) -- -- --
Total distributions to shareholders (0.284) (0.300) (0.460) (0.234)
NET ASSET VALUE - END OF PERIOD $ 10.14 $ 10.27 $ 10.26 $ 9.69
Total return 1: 1.52% 3.11% 10.79% (0.76)%
Ratios (to average net assets) / Supplemental Data:
Expenses* 0.70%2 0.70%2 0.70% 0.70%2
Net investment income* 5.32%2 5.25%2 4.99% 4.41%2
Portfolio turnover 29% 36% 60% 38%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 603 $ 493 $ 256 $ 231
</TABLE>
* The investment advisor did not impose its management fee and paid a portion
of the Fund's
expenses. If these expenses had been incurred by the Fund, expenses would
have been limited to
that allowed by state securities law and the net investment income per share
and the ratios would
have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net investment income $ 0.104 $ 0.270 $ 0.297 $ 0.143
Ratios (to average net assets):
Expenses 3.46%2 2.50%2 2.50% 2.50%2
Net investment income 2.56%2 3.45%2 3.19% 2.61%2
1 Represents aggregate total return for the period indicated.
2 Annualized.
3 Effective January 1, 1996, the Fund changed its fiscal year
end from December 31 to October 31.
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Notes to financial Statements (unaudited)
1. ORGANIZATION
Flexible Yield Series I (the "Fund") is a no-load diversified series
of Manning & Napier Fund, Inc. (the "Corporation"). The
Corporation is organized in Maryland and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company.
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 April 30, 1997, 940 million shares have been designated
in total among 19 series, of which 50 million have been designated
as Flexible Yield Series I Class M Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities 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 Advisor under procedures established by
and under the general supervision and responsibility of 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.
9
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
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,
character reclassification between net income and net gains, or
other required tax adjustments. 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.
OTHER
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 0.35%
of the Fund's average daily net assets. The fee amounted to
$1,054 for the six months ended April 30, 1997.
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
10
<PAGE>
Notes to Financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
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 0.70% of average daily net
assets each year. Accordingly, the Advisor did not impose any
of its fee and paid expenses amounting to $8,315 for the six
months ended April 30, 1997, 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 $72 for the six
months ended April 30, 1997.
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 $3,392 for
the six months ended April 30, 1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of United States Government securities, other than
short-term securities, were $241,267 and $163,657, respectively, for the six
months ended April 30, 1997.
5. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of Flexible Yield Series I Class M Common Stock were:
For the Six For the Ten For the
Months Ended Months Ended Year Ended
4/30/97 10/31/96 12/31/95
Shares Amount Shares Amount Shares Amount
------------- ---------- ------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sold 28,189 $ 290,530 46,304 $ 468,224 42,563 $433,846
Reinvested 1,702 17,232 1,049 10,556 1,658 16,778
Repurchased (18,359) (185,968) (24,368) (246,851) (43,058) (438,277)
Total 11,532 $ 121,794 22,985 $ 231,929 1,163 $12,347
</TABLE>
The Advisor owned 12,042 shares on April 30, 1997, 4,042 shares on
October 31, 1996 and 3,924 shares on December 31, 1995.
11
<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 April 30, 1997.
7. CHANGE IN FISCAL YEAR END
Effective January 1, 1996, the Fund changed its fiscal year end from
December 31 to October 31.
12
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Flexible Yield Series II
Semi-Annual Report
April 30, 1997
<PAGE>
Management Discussion and Analysis
With the end of April comes springtime and little league baseball. At a
recent game, a young boy was overheard saying you have to think a lot when
you play baseball, but when the balls coming at you, you dont have time to
think. This is also a good perspective on investing.
Investing requires a great deal of background thought and research,
because like a sharp ground ball, individual pieces of economic data come
quickly and with different hops and spins. If you try to find deep meaning
in any individual economic release, that is, if you try to extrapolate a
trend from a single data point, youll find the inputs too frequent to be
handled intelligently. As the young ballplayer put it, you have to think a
lot, and that thinking must be done in advance, and not in reaction to
economic releases. Otherwise, you will find yourself changing direction
constantly, given the variability of individual pieces of data.
From this perspective, in considering the question which is most crucial
to bond investors, i.e., whats the direction of inflation, what matters most
is that inflation overall continues to confirm the long-term trend of
moderate pricing pressures. Sure, there are individual pieces of data which
can spook the bond market -- strong economic growth, low unemployment, rising
wage data. However, it increasingly seems to be the case that for every area
in which inflation pressures rise, there is an equal and opposite reaction in
another area. For example, recent data supporting lower inflation are as
follows:
The Employment Cost Index, which suggests that although wage growth had
increased slightly, benefit growth had decelerated. The combination of the
two means that overall labor costs have not been accelerating.
Stable to falling commodity prices, especially crude oil prices which have
fallen 20% from last winters highs.
The strengthening of the U.S. dollar relative to other currencies. This
makes imports cheaper and puts pressure on U.S. producers to keep prices down
to stay competitive.
Thinking in advance, rather than in reaction to individual economic
releases, we have formulated an overview that global competition means
consumers need not accept much in the way of price increases. No individual
inflation indicator would confirm or refute this overview, but the net total
of the evidence should suggest that:
1) Consumers are not very accepting of price increases;
2) For every increase that does pop up for a given item or sector,
consumers will demand corresponding decreases in other areas.
1
<PAGE>
Management Discussion and Analysis (continued)
The weight of individual evidence confirms this overview; that is, as
discussed above, for every inflationary signal there is a
disinflationary signal. More importantly, the bottom line is the ultimate
confirmation: the Consumer Price Index was up only 2.8% year-over-year
through the end of March, falling right back into the consistently
moderate groove of the past several years.
To apply this thinking to bond investing, the important factors are not
the month-to-month fluctuations in bond prices, but the long-term yields over
and above inflation. To the extent that fluctuations push those yields
higher, while inflation remains steady, the long-term bond investor can turn
this into opportunity -- after all, higher yields over and above inflation
are literally money in the pockets of bond investors.
The reality is that the media and the bond market will overreact to
short-term data, but this is a losers game. Those who think through their
approach before the ball is hit to them can play the long-term trend and take
advantage of attractive inflation-adjusted yields.
We would once again like to thank you for the opportunity of helping you
meet your investment goals. It is a service in which we take great pride.
Sincerely,
Manning & Napier Advisors, Inc.
Effective Maturity - As of 4/30/97
<graphic>
<pie chart>
Data for chart to follow:
Less than 1 Year - 7%
1-2 Years - 11%
2-3 Years - 8%
3-5 Years - 17%
5-7 Years - 10%
More than 7 Years - 47%
2
<PAGE>
Performance Update as of April 30, 1997 (unaudited)
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Manning & Napier Merrill Lynch Corporate/Government
Date Flexible Yield Series II Intermediate Index
02/15/94 10,000 10,000
06/30/94 9,510 9,727
12/31/94 9,531 9,799
06/30/95 10,576 10,737
12/31/95 11,182 11,301
04/30/96 10,889 11,167
10/31/96 11,336 11,672
04/30/97 11,479 11,887
</TABLE>
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. - Flexible Yield Series II
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,542 5.42% 5.42%
Inception 2 $ 11,479 14.79% 4.39%
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Corporate/Government
Intermediate Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,645 6.45% 6.45%
Inception 2 $ 11,887 18.87% 5.54%
</TABLE>
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
Flexible Yield Series II from its inception (2/15/94) to present (4/30/97) as
compared to the Merrill Lynch Corporate/Government Intermediate Index. 1
1 The Merrill Lynch Corporate/Government Intermediate Index is a market
value weighted measure of approximately 3,554 corporate and government bonds.
The Index is comprised of investment grade bonds with maturities greater than
one year but less than ten years. The Index returns assume reinvestment of
coupons and, unlike Fund returns, do not reflect any fees or expenses.
2 The Fund and Index performance are calculated from February 15, 1994,
the Fund'sinception date. The Fund's performance is historical and may not
be indicative of future results.
3
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PORTFOLIO - APRIL 30, 1997 (unaudited)
<S> <C> <C>
PRINCIPAL VALUE
AMOUNT/SHARES (NOTE 2)
U.S. TREASURY SECURITIES - 97.1%
U.S. TREASURY NOTES
U.S. Treasury Note, 6.00%, 8/31/1997 $ 20,000 $ 20,012
U.S. Treasury Note, 5.875%, 4/30/1998 25,000 24,969
U.S. Treasury Note, 5.875%, 1/31/1999 35,000 34,792
U.S. Treasury Note, 5.00%, 1/31/1999 15,000 14,695
U.S. Treasury Note, 6.50%, 4/30/1999 25,000 25,102
U.S. Treasury Note, 5.50%, 4/15/2000 30,000 29,259
U.S. Treasury Note, 6.75%, 4/30/2000 25,000 25,203
U.S. Treasury Note, 7.875%, 8/15/2001 45,000 47,180
U.S. Treasury Note, 6.25%, 10/31/2001 15,000 14,813
U.S. Treasury Note, 6.25%, 1/31/2002 50,000 49,328
U.S. Treasury Note, 6.25%, 2/15/2003 40,000 39,288
U.S. Treasury Note, 5.875%, 2/15/2004 30,000 28,706
U.S. Treasury Note, 7.25%, 5/15/2004 100,000 103,094
U.S. Treasury Note, 6.50%, 10/15/2006 205,000 201,477
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $650,088) 657,918
SHORT-TERM INVESTMENTS - 2.2%
Dreyfus U.S. Treasury Money Market Reserves
(Identified Cost $15,025) 15,025 15,025
TOTAL INVESTMENTS - 99.3%
(Identified Cost $665,113) 672,943
OTHER ASSETS, LESS LIABILITIES - 0.7% 4,723
NET ASSETS - 100% $677,666
</TABLE>
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At April 30, 1997, the net unrealized appreciation based on identified
cost for federal income tax purposes of $665,113 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 8,954
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (1,124)
UNREALIZED APPRECIATION - NET $ 7,830
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (unaudited)
<S> <C>
APRIL 30, 1997
ASSETS:
Investments, at value (Identified Cost $665,113)(Note 2) $672,943
Interest receivable 7,309
Receivable from investment advisor (Note 3) 7,868
TOTAL ASSETS 688,120
LIABILITIES:
Accrued Directors' fees (Note 3) 3,392
Transfer agent fees payable (Note 3) 67
Audit fee payable 4,764
Other payables and accrued expenses 2,231
TOTAL LIABILITIES 10,454
NET ASSETS FOR 68,893 SHARES OUTSTANDING $677,666
NET ASSETS CONSIST OF:
Capital stock $ 689
Additional paid-in-capital 667,139
Undistributed net investment income 3,010
Accumulated net realized loss on investments (1,002)
Net unrealized appreciation on investments 7,830
TOTAL NET ASSETS $677,666
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($677,666/68,893 shares) $ 9.84
</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 APRIL 30, 1997
<S> <C>
INVESTMENT INCOME:
Interest $17,542
EXPENSES:
Management fees (Note 3) 1,253
Directors' fees (Note 3) 3,392
Transfer agent fees (Note 3) 67
Audit fee 4,456
Registration and filing fees 1,545
Miscellaneous 635
Total Expenses 11,348
Less Waiver of Expenses (Note 3) (9,121)
Net Expenses 2,227
NET INVESTMENT INCOME 15,315
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS:
Net realized loss on investments (identified cost basis) (907)
Net change in unrealized appreciation on investments (8,270)
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (9,177)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $6,138
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
For the Six For the Ten For the
Months Ended Months Ended Year Ended
4/30/97 10/31/96 12/31/95
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 15,315 $ 20,840 $ 25,818
Net realized gain (loss) on investments (907) 289 2,582
Net change in unrealized appreciation
(depreciation) on investments (8,270) (12,780) 45,414
Net increase in net assets from operations 6,138 8,349 73,814
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (21,055) (12,453) (25,351)
From net realized gain on investments (382) (2,503) --
Total distributions to shareholders (21,437) (14,956) (25,351)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital
share transactions (Note 5) 211,671 49,875 (5,951)
Net increase in net assets 196,372 43,268 42,512
NET ASSETS:
Beginning of period 481,294 438,026 395,514
END OF PERIOD (including undistributed net
investment income of $3,010, $8,750 and
$363, respectively) $ 677,666 $ 481,294 $ 438,026
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Financial Highlights (unaudited)
<TABLE>
<CAPTION>
For the Six
Months Ended
4/30/97
<S> <C>
Per share data (for a share outstanding throughout
each period ):
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.10
Income from investment operations:
Net investment income 0.237
Net realized and unrealized gain (loss) on
investments (0.112)
Total from investment operations 0.125
Less distributions to shareholders:
From net investment income (0.377)
From net realized gain on investments (0.008)
Total distributions to shareholders (0.385)
NET ASSET VALUE - END OF PERIOD $ 9.84
Total return 1: 1.26%
Ratios (to average net assets) / Supplemental Data:
Expenses* 0.80%2
Net investment income* 5.52%2
Portfolio turnover 41%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 678
* The investment advisor did not impose its management fee and paid a portion of the Fund's expenses.
If these expenses had been incurred by the Fund, expenses would have been limited to that allowed
by state securities law and the net investment income per share and the ratios would have been as
follows:
Net investment income $ 0.115
Ratios (to average net assets):
Expenses 3.64%2
Net investment income 2.68%2
1 Represents aggregate total return for the period indicated.
2 Annualized
3 Effective January 1, 1996, the Fund changed its fiscal year end from December 31 to October 31.
For the Period
For the 2/15/94
For the Ten Year (commencement
Months Ended Ended of operations) to
10/31/96 3 12/31/95 12/31/94
-------------- ---------- -------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout
each period ):
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.30 $ 9.27 $ 10.00
Income from investment operations:
Net investment income 0.445 0.561 0.269
Net realized and unrealized gain (loss) on
investments (0.315) 1.019 (0.738)
Total from investment operations 0.130 1.580 (0.469)
Less distributions to shareholders:
From net investment income (0.270) (0.550) (0.261)
From net realized gain on investments (0.060) - -
Total distributions to shareholders (0.330) (0.550) (0.261)
NET ASSET VALUE - END OF PERIOD $ 10.10 $ 10.30 $ 9.27
Total return 1: 1.38% 17.33% (4.69%)
Ratios (to average net assets) / Supplemental Data:
Expenses* 0.80%2 0.80% 0.80%2
Net investment income* 5.55%2 5.38% 5.40%2
Portfolio turnover 5% 35% 0%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 481 $ 438 $ 396
* The investment advisor did not impose its management fee and paid a portion of the Fund's expenses.
If these expenses had been incurred by the Fund, expenses would have been limited to that allowed
by state securities law and the net investment income per share and the ratios would have been as
follows:
Net investment income $ 0.309 $ 0.384 $ 0.184
Ratios (to average net assets):
Expenses 2.50%2 2.50% 2.50%2
Net investment income 3.85%2 3.68% 3.70%2
1 Represents aggregate total return for the period indicated.
2 Annualized
3 Effective January 1, 1996, the Fund changed its fiscal year end from December 31 to October 31.
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Flexible Yield Series II (the "Fund") is a no-load diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized in Maryland and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company.
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 April
30, 1997, 940 million shares have been designated in total among 19 series,
of which 50 million have been designated as Flexible Yield Series II Class N
Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities 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 Advisor under procedures established by and under the general
supervision and responsibility of the Funds 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
9
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
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
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, or other required tax adjustments. 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.
OTHER
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
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 0.45% of the Fund's
average daily net assets. The fee amounted to $1,253 for the six months
ended April 30, 1997.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the
10
<PAGE>
Notes to Financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
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 0.80% of average daily net assets each year.
Accordingly, the Advisor did not impose any of its fee and paid expenses
amounting to $7,868 for the six months ended April 30, 1997, 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 $67 for the six months ended April 30,
1997.
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 $3,392 for the
six months ended April 30, 1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of United States Government securities, other than
short-term securities, were $400,572 and $196,262 respectively, for the six
months ended April 30, 1997.
11
<PAGE>
Notes to Financial Statements (unaudited)
5. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of Flexible Yield Series II Class N Common Stock were:
<S> <C> <C>
For the Six Months
Ended 4/30/97
-------------------
Shares Amount
------------------- ----------
Sold 32,430 $ 320,408
Reinvested 2,177 21,438
Repurchased (13,369) (130,175)
Total 21,238 $ 211,671
Transactions in shares of Flexible Yield Series II Class N Common Stock were:
<S> <C> <C> <C> <C>
For the Ten Months For the Year
Ended 10/31/96 Ended 12/31/95
-------------------
Shares Amount Shares Amount
------------------- --------- --------------- ----------
Sold 7,361 $ 72,902 17,414 $ 173,234
Reinvested 1,460 14,399 2,527 25,352
Repurchased (3,711) (37,426) (20,065) (204,537)
Total 5,110 $ 49,875 (124) (5,951)
</TABLE>
The Advisor owned 14,381 shares on April 30, 1997, 13,836 shares on October
31, 1996 and 13,383 shares on December 31, 1995.
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 April 30, 1997.
7. CHANGE IN FISCAL YEAR END
Effective January 1, 1996, the Fund changed its fiscal year end from
December 31 to October 31.
12
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Flexible Yield Series III
Semi-Annual Report
April 30, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
With the end of April comes springtime and little league baseball. At a
recent game, a young boy was overheard saying you have to think a lot when
you play baseball, but when the balls coming at you, you dont have time to
think. This is also a good perspective on investing.
Investing requires a great deal of background thought and research,
because like a sharp ground ball, individual pieces of economic data come
quickly and with different hops and spins. If you try to find deep meaning
in any individual economic release, that is, if you try to extrapolate a
trend from a single data point, youll find the inputs too frequent to be
handled intelligently. As the young ballplayer put it, you have to think a
lot, and that thinking must be done in advance, and not in reaction to
economic releases. Otherwise, you will find yourself changing direction
constantly, given the variability of individual pieces of data.
From this perspective, in considering the question which is most crucial
to bond investors, i.e., whats the direction of inflation, what matters most
is that inflation overall continues to confirm the long-term trend of
moderate pricing pressures. Sure, there are individual pieces of data which
can spook the bond market -- strong economic growth, low unemployment, rising
wage data. However, it increasingly seems to be the case that for every area
in which inflation pressures rise, there is an equal and opposite reaction in
another area. For example, recent data supporting lower inflation are as
follows:
The Employment Cost Index, which suggests that although wage growth had
increased slightly, benefit growth had decelerated. The combination of the
two means that overall labor costs have not been accelerating.
Stable to falling commodity prices, especially crude oil prices which
have fallen 20% from last winters highs.
The strengthening of the U.S. dollar relative to other currencies. This
makes imports cheaper and puts pressure on U.S. producers to keep prices down
to stay competitive.
Thinking in advance, rather than in reaction to individual economic
releases, we have formulated an overview that global competition means
consumers need not accept much in the way of price increases. No individual
inflation indicator would confirm or refute this overview, but the net total
of the evidence should suggest that:
1) Consumers are not very accepting of price increases;
2) For every increase that does pop up for a given item or sector,
consumers will demand corresponding decreases in other areas.
The weight of individual evidence confirms this overview; that is, as
discussed above, for every inflationary signal there is a disinflationary
signal. More importantly, the bottom line
1
<PAGE>
Management Discussion and Analysis (continued)
is the ultimate confirmation: the Consumer Price Index was up only 2.8%
year-over-year through the end of March, falling right back into the
consistently moderate groove of the past several years.
To apply this thinking to bond investing, the important factors are not
the month-to-month fluctuations in bond prices, but the long-term yields over
and above inflation. To the extent that fluctuations push those yields
higher, while inflation remains steady, the long-term bond investor can turn
this into opportunity -- after all, higher yields over and above inflation
are literally money in the pockets of bond investors.
The reality is that the media and the bond market will overreact to
short-term data, but this is a losers game. Those who think through their
approach before the ball is hit to them can play the long-term trend and take
advantage of attractive inflation-adjusted yields.
We would once again like to thank you for the opportunity of helping you
meet your investment goals. It is a service in which we take great pride.
Sincerely,
Manning & Napier Advisors, Inc.
<graphic>
<pie chart>
Data for chart to follow:
Effective Maturity - As of 4/30/97
Less than 1 Year - 5%
1 - 2 Years - 4%
2 - 3 Years - 9%
3 - 5 Years - 9%
5 - 7 Years - 17%
7 - 10 Years - 20%
Over 10 Years - 36%
<graphic>
<pie chart>
Portfolio Composition - As of 4/30/97
Data for chart to follow:
U.S. Treasury Securities - 90%
Mortgage Backed Securities - 5%
Cash & Equivalents - 5%
2
<PAGE>
Performance Update as of April 30, 1997 (unaudited)
<graphic>
<line chart>
Data for chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Manning & Napier Merrill Lynch Corporate/Government
Date Flexible Yield Series III Bond Index
12/20/93 10,000 10,000
12/31/93 9,960 10,013
06/30/94 9,349 9,602
12/31/94 9,380 9,686
06/30/95 10,634 10,815
12/31/95 11,451 11,532
04/30/96 10,868 11,191
10/31/96 11,431 11,778
04/30/97 11,493 11,948
</TABLE>
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. - Flexible Yield Series III
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,575 5.75% 5.75%
Inception 2 $ 11,493 14.93% 4.22%
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Corporate/Government Bond Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,677 6.77% 6.77%
Inception 2 $ 11,948 19.48% 5.43%
</TABLE>
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
Flexible Yield Series III from its inception (12/20/93) to present (4/30/97)
as compared to the Merrill Lynch Corporate/Government Bond Index. 1
1 The Merrill Lynch Corporate/Government Bond Index is a market value
weighted measure of approximately 5,027 corporate and government bonds. The
Index is comprised of investment grade securities with maturities greater
than one year. The Index returns assume reinvestment of coupons and, unlike
Fund returns, do not reflect any fees or expenses.
2 The Fund and Index performance are calculated from December 20, 1993,
the Fund's inception date. The Fund's performance is historical and may not
be indicative of future results.
3
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
U.S. TREASURY SECURITIES - 90.25%
U.S. TREASURY BONDS - 31.09%
U.S. Treasury Bond, 5.625%, 2/15/2006 $ 100,000 $ 92,594
U.S. Treasury Bond, 7.25%, 8/15/2022 200,000 204,062
U.S. Treasury Bond, 6.875%, 8/15/2025 155,000 152,045
TOTAL U.S. TREASURY BONDS
(Identified Cost $431,835) 448,701
-----------
U.S. TREASURY NOTES - 54.18%
U.S. Treasury Note, 5.00%, 1/31/1998 50,000 49,672
U.S. Treasury Note, 5.875%, 4/30/1998 20,000 19,975
U.S. Treasury Note, 5.125%, 11/30/1998 60,000 59,044
U.S. Treasury Note, 6.375%, 7/15/1999 15,000 15,019
U.S. Treasury Note, 5.875%, 11/15/1999 40,000 39,513
U.S. Treasury Note, 7.75%, 11/30/1999 40,000 41,250
U.S. Treasury Note, 5.50%, 4/15/2000 25,000 24,383
U.S. Treasury Note, 6.25%, 8/31/2000 60,000 59,606
U.S. Treasury Note, 6.25%, 4/30/2001 25,000 24,750
U.S. Treasury Note, 7.50%, 11/15/2001 35,000 36,247
U.S. Treasury Note, 6.375%, 8/15/2002 50,000 49,547
U.S. Treasury Note, 5.75%, 8/15/2003 40,000 38,162
U.S. Treasury Note, 5.875%, 2/15/2004 150,000 143,531
U.S. Treasury Note, 6.50%, 8/15/2005 75,000 73,852
U.S. Treasury Note, 6.50%, 10/15/2006 60,000 58,969
U.S. Treasury Note, 6.25%, 2/15/2007 50,000 48,344
TOTAL U.S. TREASURY NOTES
(Identified Cost $781,229) 781,864
-----------
U.S. TREASURY STRIPPED SECURITIES- 4.98%
Interest Stripped - Principal Payment, 5/15/2014 98,000 29,557
Interest Stripped - Principal Payment, 8/15/2014 143,000 42,365
TOTAL U.S. TREASURY STRIPPED SECURITIES
Identified Cost $80,351) 71,922
-----------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $1,293,415) 1,302,487
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Value
Amount/Shares Note 2)
U.S. GOVERNMENT AGENCIES - 4.48%
MORTGAGE BACKED SECURITIES
GNMA, Pool #224199, 9.50%, 7/15/2018 $ 15,817 $ 17,019
GNMA, Pool #299164, 9.00%, 12/15/2020 15,195 15,946
GNMA, Pool #376345, 6.50%, 12/15/2023 33,673 31,674
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $61,352) 64,639
-----------
SHORT-TERM INVESTMENTS - 4.34%
Dreyfus U.S. Treasury Money Market Reserves
(Identified Cost $62,541) 62,541 62,541
TOTAL INVESTMENTS - 99.07%
(Identified Cost $1,417,308) 1,429,667
OTHER ASSETS, LESS LIABILITIES - 0.93% 13,475
NET ASSETS - 100% $1,443,142
</TABLE>
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At April 30, 1997, the net unrealized appreciation based on identified cost for federal
income tax purposes of $1,417,308 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 30,996
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (18,637)
UNREALIZED APPRECIATION - NET $ 12,359
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Statement of Assets and Liabilities (unaudtied)
<TABLE>
<CAPTION>
APRIL 30, 1997
<S> <C>
ASSETS:
Investments, at value (Identified Cost $1,417,308)(Note 2) $1,429,667
Cash 555
Interest receivable 18,065
Receivable from investment advisor (Note 3) 5,205
TOTAL ASSETS 1,453,492
LIABILITIES:
Accrued Directors' fees (Note 3) 3,392
Audit fee payable 4,764
Transfer agent Fees 147
Payable for fund shares redeemed 9
Other payables and accrued expenses 2,038
TOTAL LIABILITIES 10,350
NET ASSETS FOR 147,725 SHARES OUTSTANDING $1,443,142
NET ASSETS CONSIST OF:
Capital stock $ 1,477
Additional paid-in-capital 1,420,321
Undistributed net investment income 10,072
Accumulated net realized loss on investments (1,087)
Net unrealized appreciation on investments 12,359
TOTAL NET ASSETS $1,443,142
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($1,443,142/147,725 shares) $ 9.77
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Operations (unaudited)
<TABLE>
<CAPTION>
<S> <C>
FOR THE SIX MONTHS ENDED APRIL 30, 1997
INVESTMENT INCOME:
Interest $ 41,090
EXPENSES:
Management fees (Note 3) 3,065
Directors' fees (Note 3) 3,392
Transfer agent fees (Note 3) 147
Audit fee 4,190
Custodian fees 248
Miscellaneous 2,439
Total Expenses 13,481
Less Waiver of Expenses (Note 3) (8,270)
Net Expenses 5,211
NET INVESTMENT INCOME 35,879
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments (identified cost basis) (822)
Net change in unrealized appreciation on investments (25,524)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (26,346)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 9,533
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
For the Six For the Ten For the
Months Ended Months Ended Year Ended
4/30/97 10/31/96 12/31/95
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 35,879 $ 53,298 $ 58,364
Net realized gain (loss) on investments (822) 4,772 (132)
Net change in unrealized appreciation on investments (25,524) (60,560) 128,849
Net increase (decrease) in net assets from operations 9,533 (2,490) 187,081
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (42,765) (36,728) (57,528)
From net realized gain on investments (4,865) -- --
Total distributions to shareholders (47,630) (36,728) (57,528)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase (decrease) in net assets from capital
share transactions (Note 5) 383,375 (22,142) 282,134
Net increase (decrease) in net assets 345,278 (61,360) 411,687
NET ASSETS:
Beginning of period 1,097,864 1,159,224 747,537
END OF PERIOD (including undistributed net investment
income of $10,072, $16,958 and $388, respectively) $ 1,443,142 $ 1,097,864 $ 1,159,224
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Financial Highlights (unaudited)
<TABLE>
<CAPTION>
For the Period
For the For the For the For the 12/20/93
Six Months Ten Months Year Year (commencement
Ended Ended Ended Ended of operations)
4/30/97 10/31/96 3 12/31/95 12/31/94 to 12/31/93
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.13 $ 10.51 $ 9.11 $ 9.95 $ 10.00
Income from investment operations:
Net investment income 0.282 0.497 0.582 0.262 0.010
Net realized and unrealized gain (loss)
on investments (0.227) (0.532) 1.393 (0.841) (0.050)
Total from investment operations 0.055 (0.035) 1.975 (0.579) (0.040)
Less distributions to shareholders:
From net investment income (0.370) (0.345) (0.575) (0.261) (0.010)
From net gain on investments (0.045) -- -- -- --
Total distributions to shareholders (0.415) (0.345) (0.575) (0.261) (0.010)
NET ASSET VALUE - END OF PERIOD $ 9.77 $ 10.13 $ 10.51 $ 9.11 $ 9.95
Total return 1: 0.54% (0.18%) 22.09% (5.83%) (0.40%)
Ratios (to average net assets)/Supplemental Data:
Expenses* 0.85%2 0.85%2 0.85% 0.85% 0.85%2
Net investment income* 5.85%2 5.98%2 6.13% 6.22% 3.85%2
Portfolio turnover 18% 5% 6% 1% 0%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 1,443 $ 1,098 $ 1,159 $ 748 $ 75
</TABLE>
* The investment advisor did not impose its management fee and paid a portion
of the Fund's expenses. If these expenses had been incurred by the Fund
for the periods ended December 31, 1993, December 31, 1994, and October
31, 1996, expenses would have been limited to that allowed by state
securities law. If the full expenses allowed by state securities law had
been incurred by the Fund, the net investment income per share and
the ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.217 $ 0.360 $0.429 $0.192 $0.010
Ratios(to average net assets):
Expenses 2.20%2 2.50%2 2.46% 2.50% 2.50%2
Net investment income 4.50%2 4.33%2 4.52% 4.57% 2.20%2
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
3 Effective January 1, 1996, the Fund changed its fiscal year end from
December 31 to October 31.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Flexible Yield Series III (the "Fund") is a no-load diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized in Maryland and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company.
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 April
30, 1997, 940 million shares have been designated in total among 19 series,
of which 50 million have been designated as Flexible Yield Series III Class O
Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities 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 Advisor under procedures established by and under the general
supervision and responsibility of 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
10
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES (continued)
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
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, character reclassification between net
income and net gains, or other tax adjustments. 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.
OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
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 $3,065 for the six months
ended April 30, 1997.
11
<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 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 did not impose any of its fee and paid expenses
amounting to $5,205 for the six months ended April 30, 1997, 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 $147 for the six months ended April 30,
1997.
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 $3,392 for the
six months ended April 30,1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of United States Government securities, other than
short-term securities, were $529,850 and $203,163, respectively, for the six
months ended April 30, 1997.
12
<PAGE>
Notes to Financial Statements (unaudited)
<TABLE>
<CAPTION>
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Flexible Yield Series III Class O Common Stock were:
<S> <C> <C>
For the Six Months
Ended 4/30/97
-------------------
Shares Amount
------------------- ---------
Sold 45,066 $439,745
Reinvested 4,030 39,662
Repurchased (9,798) (96,032)
Total 39,298 $383,375
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Flexible Yield Series III Class O Common Stock were:
<S> <C> <C> <C> <C>
For the Ten Months For the Year
Ended 10/31/96 Ended 12/31/95
-------------------
Shares Amount Shares Amount
------------------- ---------- --------------- ---------
Sold 6,096 $ 60,715 23,843 $236,968
Reinvested 3,073 30,104 4,597 46,488
Repurchased (11,073) (112,961) (129) (1,322)
Total (1,904) $ (22,142) 28,311 $282,134
</TABLE>
The Advisor owned 11,241 shares on April 30, 1997, 10,782 shares on October
31, 1996 and 10,412 shares on December 31, 1995.
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
April 30, 1997.
7. CHANGE IN FISCAL YEAR END
Effective January 1, 1996, the Fund changed its fiscal year end from
December 31 to October 31.
13
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Tax Managed Series
Semi-Annual Report
April 30, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
During the past six months, the stock market has been experiencing
significant volatility often associated with the late stages of an economic
cycle. By February, the Dow Jones Industrial average had reached the 7000
mark, and by mid-March it reached an all time high. Less than a month
following this record, it had given up nearly half of the gains seen for the
year by plunging 9.8%. By the end of April, the Dow was back above the 7000
mark again. Much of the volatility was both in anticipation of and in response
to the Federal Reserves quarter point raise in the Fed Funds rate in March.
According to statements made by Federal Reserve Chairman Alan Greenspan, this
move was prompted by the high level of speculation apparent in the U.S. stock
market. After this turbulence, the level of speculation and valuations in the
U.S. stock market remain extremely high.
As always, the Tax Managed Series draws upon the investment strategies
and disciplines of the Funds Advisor, while seeking to minimize the impact of
taxes on the portfolio. While the Series continues to strive for this
objective with a buy and hold strategy designed to minimize the amount of
realized gains over the short-term, given the type of market conditions that
we have been experiencing, it is also especially important to make selective
adjustments to the investments as the risk of the environment changes. Thus,
the portfolio has been able to take advantage of the good values presented by
the markets volatility. In addition, opportunities abroad have become
especially attractive compared to the generally overvalued domestic stocks.
We have seized this opportunity and increased the international exposure in
the portfolio. The Advisor has also taken steps to offset capital gains by
realizing losses when prudent. As has been the case since the Series
inception, we have managed to dampen the impact of taxes by avoiding the
payment of any dividends.
We are nearing the seventh year of an economic expansion and the tenth
year of a bull market run. It is reasonable to expect that this rapid growth
cannot continue forever. Over the next several months, the Series will
continue to be invested in what the Advisor believes to be sound, long-term
investments at good values, while special attention is paid to minimizing the
impact of taxes. The long-term investment time horizon should serve to ride
out the continued volatility the market may experience over the short term.
We would once again like to thank you for the opportunity to help you
meet your investment goals. It is a service in which we take great pride.
Sincerely,
Manning & Napier Advisors, Inc.
1
<PAGE>
Portfolio Composition - As of April 30, 1997 (unaudited)
<graphic>
<pie chart>
Data for chart to follow:
<TABLE>
<CAPTION>
<S> <C>
Air Transportation 4%
Chemical & Allied Products 6%
Health Services 4%
Paper Mills 5%
Technical Instruments & Supplies 7%
Restaruants 6%
Retail 26%
Software 10%
Semiconductors 6%
Telecommunications 8%
Cash & Equivalents 4%
Miscellaneous* 14%
*Miscellaneous includes:
Apparel
Consumer Products - Misc.
Diamonds
Glass Products
Primary Metal Industries
Printing & Publishing
Utilities - Electric
</TABLE>
2
<PAGE>
Performance Update as of April 30, 1997 (unaudited)
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<C> <S> <C>
Manning & Napier Tax Managed Series Standard & Poor's 500 Total Return Index
11/01/95 10,000 10,000
01/31/96 10,100 11,001
04/30/96 10,980 11,376
07/31/96 10770 11,196
10/31/96 11,630 12,408
01/31/97 12,990 13,898
04/30/97 13,170 14,233
</TABLE>
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. - Tax Managed Series
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 11,995 19.95% 19.95%
Inception 2 $ 13,170 31.70% 20.17%
</TABLE>
<TABLE>
<CAPTION>
Standard & Poor's (S&P) 500 Total Return
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 12,513 25.13% 25.13%
Inception 2 $ 14,233 42.33% 26.56%
</TABLE>
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
Tax Managed Series from its inception (11/1/95) to present (4/30/97) as
compared to the Standard & Poor's (S&P) 500 Total Return Index. 1
1The Standard & Poor's (S&P) 500 Total Return Index is an
unmanagedcapitalization-weighted measure of 500 widely held common stocks
listed on the New York Stock Exchange, American Stock Exchange, and the
Over-the-Counter Market. The Index returns assume reinvestment of income
and, unlike Fund returns, do not reflect any fees or expenses.
2 The Fund and Index performance are calculated from November 1, 1995,
the Fund's inception date. The Fund's performance is historical and may not
be indicative of future results.
3
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK - 96.10%
AIR TRANSPORTATION - 3.61%
Federal Express Corp.* 200 $ 10,775
APPAREL - 2.42%
VF Corp. 100 7,213
CHEMICAL & ALLIED PRODUCTS - 5.83%
Colgate-Palmolive Co. 100 11,100
Procter & Gamble Co. 50 6,287
17,387
CONSUMER PRODUCTS - MISCELLANEOUS - 2.70%
Unilever Plc - ADR (Note 7) 75 8,044
DIAMONDS - 2.41%.
De Beers Centenary AG - ADR (Note 7) 200 7,197
GLASS PRODUCTS - 1.30 %
Libbey, Inc. 125 3,875
HEALTH SERVICES - 4.41%
MedPartners, Inc.* 602 10,986
U. S. Physical Therapy, Inc.* 225 2,166
13,152
PAPER MILLS - 5.45%
Fort Howard Corp.* 175 6,027
Kimberly-Clark Corp. 200 10,250
16,277
PRIMARY METAL INDUSTRIES - 1.64%
Gibraltar Steel Corp.* 200 4,900
PRINTING & PUBLISHING - 1.40%
Playboy Enterprises, Inc. - Class B* 300 4,163
RESTAURANTS - 5.95%
McDonald's Corp. 275 14,747
Morton's Restaurant Group, Inc.* 200 3,025
17,772
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
RETAIL - 25.67%
RETAIL - APPAREL - 3.62%
Nordstrom, Inc. 275 $ 10,794
RETAIL - SPECIALTY STORES - 17.12%
Fingerhut Companies, Inc. 500 7,437
Home Depot, Inc. 275 15,950
Ikon Office Solutions, Inc. 350 9,406
Tandy Corp. 200 10,475
Toys R Us 275 7,838
51,106
RETAIL - WHOLESALE - 4.93%
Coleman Company, Inc.* 950 14,725
76,625
SEMICONDUCTORS - 5.81%
Altera Corp.* 350 17,347
SOFTWARE - 10.26%
Broderbund Software, Inc.* 350 6,562
Maxis, Inc.* 850 5,844
Oracle Corp.* 350 13,912
Symantec Corp.* 300 4,313
30,631
TECHNICAL INSTRUMENTS & SUPPLIES - 7.36%
Eastman Kodak Co. 150 12,525
Millipore Corp. 250 9,437
21,962
TELECOMMUNICATIONS - 8.30%
EQUIPMENT - 2.40%
Motorola, Inc. 125 7,156
SERVICE - 5.90%
Compania Anonima Nacional Telefonos de
Venezuela - ADR* (Note 7) 300 9,000
Telecomunicacoes Brasileiras - ADR (Note 7) 75 8,606
17,606
24,762
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
UTILITIES-ELECTRIC - 1.58%
Enersis S.A.- ADR (Note 7) 150 $ 4,725
TOTAL COMMON STOCK
(Identified Cost $241,716) 286,807
---------
SHORT-TERM INVESTMENTS - 4.40%
Dreyfus U.S. Treasury Money Market Reserves
(Identified Cost $13,128) 13,128 13,128
---------
TOTAL INVESTMENTS - 100.50%
(Identified Cost $254,844) 299,935
OTHER ASSETS, LESS LIABILITIES - (0.50)% (1,485)
---------
NET ASSETS - 100% $298,450
=========
</TABLE>
*Non-income producing security
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At April 30, 1997, the net unrealized appreciation based on identified cost for
federal income tax purposes of $254,844 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $48,254
Aggregate gross unrealized depreciation for all investments in
which there was an excess of tax cost value (3,163)
UNREALIZED APPRECIATION - NET $45,091
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Assets and Liabilities (unaudited)
<TABLE>
<CAPTION>
<S> <C>
APRIL 30, 1997
ASSETS:
Investments, at value (Identified Cost $254,844)(Note 2) $299,935
Dividends receivable 495
Receivable from investment advisor (Note 3) 9,862
TOTAL ASSETS 310,292
LIABILITIES:
Accrued Directors' fees (Note 3) 3,392
Transfer agent fees payable (Note 3) 31
Audit fee payable 4,016
Custodian fee payable 1,227
Other payables and accrued expenses 3,176
TOTAL LIABILITIES 11,842
NET ASSETS FOR 22,657 SHARES OUTSTANDING $298,450
NET ASSETS CONSIST OF:
Capital stock $ 227
Additional paid-in-capital 236,454
Undistributed net investment income 214
Accumulated net realized gain on investments 16,464
Net unrealized appreciation on investments 45,091
TOTAL NET ASSETS $298,450
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($298,450/22,657 shares) $ 13.17
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Operations (unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 30, 1997
<S> <C>
INVESTMENT INCOME:
Dividends $ 1,369
Interest 417
Total Investment Income 1,786
EXPENSES:
Management fees (Note 3) 1,310
Directors' fees (Note 3) 3,392
Transfer agent fees (Note 3) 31
Audit fee 3,967
Custodian fee 1,344
Miscellaneous 2,700
Total Expenses 12,744
Less Waiver of Expenses (Note 3) (11,172)
Net Expenses 1,572
NET INVESTMENT INCOME 214
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments (indentified cost basis) 16,709
Net change in unrealized appreciation on investments 13,940
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 30,649
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 30,863
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
For the Six For the Year
Months Ended Ended
4/30/97 10/31/96
------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 214 $ (390)
Net realized gain (loss) on investments 16,709 (245)
Net change in unrealized appreciation on investments 13,940 31,151
Net increase in net assets from operations 30,863 30,516
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital share transactions
(Note 5) 43,207 193,864
Net increase in net assets 74,070 224,380
NET ASSETS:
Beginning of period 224,380 -
END OF PERIOD (including undistributed net investment income
of $214 and $0, respectively) $ 298,450 $ 224,380
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Financial Highlights (unaudited)
<TABLE>
<CAPTION>
<PAGE>
For the Six For the Year
Months Ended Ended
4/30/97 10/31/96
-------------- --------------
<S> <C> <C>
Per share data (for a share outstanding throughout
each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 11.63 $ 10.00
Income from investment operations:
Net investment income (loss) 0.009 (0.020)
Net realized and unrealized gain (loss) on investments 1.531 1.650
Total from investment operations 1.540 1.630
NET ASSET VALUE - END OF PERIOD $ 13.17 $ 11.63
Total return 1: 13.24% 16.30%
Ratios (to average net assets) / Supplemental Data:
Expenses* 1.20%2 1.20%
Net investment income (loss)* 0.16%2 (0.21%)
Portfolio turnover 51% 78%
Average commission rate paid $ 0.0641 $ 0.0757
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 298 $ 224
</TABLE>
* The investment advisor did not impose its management fee and paid a
portion of the Fund's expenses. If these expenses had been incurred by the
Fund, expenses would have been limited to that allowed by state securities law
and the net investment income per share and the ratios would have been
as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Net investment income (loss) ($0.415) ($0.144)
Ratios (to average net assets):
Expenses 8.73%2 2.50%
Net investment income (loss) (7.37%)2 (1.51%)
1 Represents aggregate total return for the period indicated.
2 Annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Tax Managed Series (the "Fund") is a no-load diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized in Maryland and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company.
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 April
30, 1997, 940 million shares have been designated in total among 19 series,
of which 50 million have been designated as Tax Managed Series Class H 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 Advisor under procedures established by and under the general
supervision and responsibility of 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.
11
<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 April 30, 1997, the Fund, for federal income tax purposes, had a capital
loss carryforward of $245 which will expire on October 31, 2004.
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, character reclassification between net
income and net gains, or other tax adjustments. 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.
OTHER
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
12
<PAGE>
Notes to Financial Statements (unaudited)
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 1.0% of the Fund's
average daily net assets. The fee amounted to $1,310 for the six months
ended April 30, 1997.
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 1.2% of average daily net assets each year.
Accordingly, the Advisor did not impose any of its fee and paid expenses
amounting to $9,862 for the six months ended April 30, 1997, 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 $31 for the six months ended April 30,
1997.
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 $3,392 for the
six months ended April 30, 1997.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term securities, were
$167,625 and $130,241, respectively, for the six months ended April 30, 1997.
13
<PAGE>
Notes to Financial Statements (unaudited)
5. CAPITAL STOCK TRANSACTIONS
<TABLE>
<CAPTION>
Transactions in shares of Tax Managed Series Class H Common Stock were:
For the Six Months For the Year
Ended 4/30/97 Ended 10/31/96
------------------- ---------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
------------------- -------- ------------- ----------
Sold 3,449 $44,338 23,344 $235,926
Repurchased (92) (1,131) (4,044) (42,062)
Total 3,357 $43,207 19,300 193,864
</TABLE>
Transactions in shares of Tax Managed Series Class H Common Stock were:
The Advisor owned 12,500 shares on April 30, 1997 and October 31, 1996.
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 April 30, 1997.
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 domestic companies and the United States
government. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of foreign
companies and foreign governments may be less liquid and their prices more
volatile than those of securities of comparable domestic companies and the
United States government.
14
<PAGE>
<PAGE>
MANNING & NAPIER FUND, INC.
DEFENSIVE SERIES
Semi-Annual Report
April 30, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
In our last annual report, we discussed the late cycle volatility we had
been experiencing in the market. This report has a similar, but even more
dramatic, story to tell. By February, the Dow Jones Industrial average had
reached the 7000 mark, and by mid-March it reached an all time high. Less
than a month following this record, it had given up nearly half of the gains
seen for the year by plunging 9.8%. By the end of April, the Dow was back
above the 7000 mark again with valuations no better than they were at
mid-March highs. The bond market has displayed significant volatility as
well, generally following a downward trend. Yields ended this reporting
period 50 basis points higher than where they started, but at one point were
close to 80 basis points up from their low in the six month period (a basis
point is one-hundredth of a percentage point).
Much of the volatility was both in anticipation of and in response to the
Federal Reserves quarter point raise in the Fed Funds rate in March.
According to statements made by Federal Reserve Chairman Alan Greenspan, this
move was prompted by the high level of speculation apparent in the U.S. stock
market. But at the same time, inflation continues to remain in check. This
is why we find bonds to be a compelling investment. The rise in interest
rates has given us the opportunity to lock in higher long-term bond yields,
while the excessive speculation and high valuation levels warrant a more
conservative equity exposure in the portfolio. The gyrations in the stock
market have not yet presented a broad-based buying opportunity, but we have
been able to take advantage of the downward swings to increase certain stock
positions at good values. In addition, opportunities abroad have become
especially attractive compared to the generally overvalued domestic stock
market. We have seized this opportunity and increased the international
exposure in the portfolio.
We are nearing the seventh year of an economic expansion and the tenth
year of a bull market run. It is reasonable to expect that this rapid growth
cannot continue forever. In terms of equity selection, it is especially
important to be a patient long-term investor. This is why we are remaining
conservatively positioned, while taking advantage of a few good values and
international opportunities. Of course, the U.S. stock market may not see a
significant correction, but rather a drawn out period of flat-to-mediocre
returns. Either possibility warrants a cautious and choosy outlook for
legitimate opportunities. In summary, at this late stage in the economic and
stock market cycles, we continue to focus on efforts to cautiously identify
opportunities as they arise.
1
<PAGE>
Management Discussion and Analysis (continued)
We would once again like to thank you for the opportunity to help you
meet your investment goals. It is a service in which we take great pride.
Sincerely,
Manning & Napier Advisors, Inc.
<graphic>
<pie chart>
Asset Allocation - As of 4/30/97
Data for chart to follow:
Bonds - 81%
Stocks - 14%
Cash & Equivalents - 5%
2
<PAGE>
Performance Update as of April 30, 1997 (unaudited)
<graphic>
<line chart>
Data for chart to follow:
<TABLE>
<CAPTION>
<C> <S> <C> <C>
Manning & Napier Fund, Inc. Lehman Brothers
Defensive Series Intermediate Bond Index 15-85 Blended Index
11/01/95 10,000 10,000 10,000
01/31/96 10,287 10,326 10,425
04/30/96 10,116 10,116 10,301
07/31/96 10,137 10,246 10,389
10/31/96 10,494 10,581 10,847
01/31/97 10,620 10,693 11,140
04/30/97 10,704 10,765 11,243
</TABLE>
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. - Defensive Series
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,581 5.81% 5.81%
Inception 2 $ 10,704 7.04% 4.64%
</TABLE>
<TABLE>
<CAPTION>
Lehman Brothers Intermediate Bond Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,641 6.41% 6.41%
Inception 2 $ 10,765 7.65% 5.04%
</TABLE>
<TABLE>
<CAPTION>
15-85 Blended Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,915 9.15% 9.15%
Inception 2 $ 11,243 12.43% 8.13%
</TABLE>
The value of a $10,000 investment in the
Manning & Napier Fund, Inc. - Defensive
Series from its inception (11/1/95) to present
(4/30/97) as compared to the Lehman
Brothers Intermediate Bond Index and a
15-85 Blended Index. 1
1 The Lehman Brothers Intermediate Bond Index is a market value weighted
measure of approximately 3,651 corporate and government securities. The
Index is comprised of investment grade securities with maturities greater
than one year but less than ten years. The 15-85 Blended Index is 15%
Standard & Poor's (S&P) 500 Total Return Index and 85% Lehman Brothers
Intermediate Bond Index. The 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. Both Indices returns assume reinvestment of income and, unlike Fund
returns, do not reflect any fees or expenses.
2 Performance numbers for the Fund and Indices are calculated from
November 1, 1995, the Fund's inception date. The Fund's performance is
historical and may not be indicative of future results.
3
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK - 13.89%
AIR TRANSPORTATION - 0.60%
Federal Express Corp.* 175 $ 9,428
COMMUNICATIONS - 0.25%
Groupe AB SA - ADR (Note 7) 50 362
Stet Societa Finanziaria Telefonica S.p.A. -
ADR (Note 7) 75 3,553
3,915
COMPUTERS - 0.04%
Bell & Howell Co.* 25 591
CONSUMER PRODUCTS - MISCELLANEOUS - 0.68%
Unilever Plc - ADR (Note 7) 100 10,725
DIAMONDS - 0.57%
De Beers Centenary AG - ADR (Note 7) 250 8,996
DISTRIBUTION - OFFICE EQUIPMENT - 0.77%
Unisource Worldwide, Inc. 825 12,169
ENGINEERING SERVICES - 0.20%
Jacobs Engineering Group, Inc.* 125 3,187
FABRICATED METAL PRODUCTS - 0.03%
Keystone International, Inc. 25 494
GLASS PRODUCTS - 0.05%
Libbey, Inc. 25 775
HEALTH SERVICES - 0.72%
MedPartners, Inc.* 625 11,406
HOLDING COMPANIES - 0.01%
Ek Chor China Motorcycle Co. Ltd. - ADR (Note 7) 25 125
INDUSTRIAL & COMMERCIAL MACHINERY - 0.43%
York International, Inc. 150 6,731
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
PRIMARY METAL INDUSTRIES - 0.12%
American Superconductor Corp.* 25 $ 234
Gibraltar Steel Corp.* 25 612
Special Metals Corp.* 25 353
Wolverine Tube Inc.* 25 650
1,849
PRINTING & PUBLISHING - 0.06%
Playboy Enterprises, Inc. - Class B* 25 347
Scholastic Corp.* 25 625
972
RESTAURANTS - 1.72%
McDonald's Corp. 500 26,813
Morton's Restaurant Group, Inc.* 25 378
27,191
RETAIL - 2.69%
RETAIL - CATALOG & MAIL ORDER - 0.62%
Comcast Corp. - Class A 625 9,844
RETAIL - SPECIALTY STORES - 2.02%
Fabri-Centers of America - Class A* 200 4,025
Fabri-Centers of America - Class B* 175 3,347
Fingerhut Companies, Inc. 700 10,413
Hancock Fabrics, Inc. 300 3,600
Tandy Corp. 200 10,475
31,860
RETAIL - WHOLESALE - 0.05%
Coleman Company, Inc.* 50 775
42,479
SOFTWARE - 0.41%
Broderbund Software, Inc.* 25 469
Maxis, Inc.* 25 172
Oracle Corp.* 125 4,969
Spectrum Holobyte Inc.* 25 153
Symantec Corp.* 50 719
6,482
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Shares/ Principal Value
Amount (Note 2)
<S> <C> <C>
TECHNICAL INSTRUMENTS & SUPPLIES - 2.78%
OPTICAL SUPPLIES - 0.04%
Sola International Inc. 25 $ 625
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.85%
Eastman Kodak Co. 350 29,225
SURGICAL & MEDICAL INSTRUMENTS - 0.89%
Allied Healthcare Products, Inc. 50 344
Lunar Corp.* 25 438
Nellcor Puritan Bennett, Inc.* 775 13,175
13,957
43,807
TELECOMMUNICATIONS - 1.52%
EQUIPMENT - 0.36%
Motorola, Inc. 100 5,725
SERVICE - 1.16%
Compania Anonima Nacional Telefonos
de Venezuela - ADR (Note 7) 325 9,750
Telecomunicacoes Brasileiras - ADR (Note 7) 75 8,606
18,356
24,081
TRANSPORTATION EQUIPMENT - 0.04%
Federal Signal Corp. 25 609
UTILITIES-ELECTRIC - 0.20%
Enersis S.A.- ADR (Note 7) 100 3,150
TOTAL COMMON STOCK
(Identified Cost $205,400) 219,162
---------
U.S. TREASURY SECURITIES - 81.40%
U.S. Treasury Bonds - 30.27%
U.S. Treasury Bond, 6.50%, 5/15/2005 $ 350,000 345,078
U.S. Treasury Bond, 6.875%, 8/15/2025 135,000 132,427
Total U.S. Treasury Bonds
(Identified Cost $486,448) 477,505
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Principal Value
Amount/Shares (Note 2)
<S> <C> <C>
U.S. TREASURY NOTES - 51.13%
U.S. Treasury Note, 6.00%, 8/31/1997 $ 20,000 $ 20,012
U.S. Treasury Note, 6.00%, 8/15/1999 420,000 416,719
U.S. Treasury Note, 6.125%, 9/30/2000 210,000 207,638
U.S. Treasury Note, 6.25%, 2/15/2003 165,000 162,061
TOTAL U.S. TREASURY NOTES 806,430
(Identified Cost $817,356)
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $1,303,804) 1,283,935
SHORT-TERM INVESTMENTS - 1.89%
U.S. Treasury Bill, 5/29/1997
(Identified Cost $29,882) 30,000 29,882
TOTAL INVESTMENTS - 97.18%
(Identified Cost $1,539,086) 1,532,979
OTHER ASSETS, LESS LIABILITIES - 2.82% 44,453
-----------
NET ASSETS - 100% $1,577,432
===========
</TABLE>
*Non-income producing security
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At April 30, 1997, the net unrealized depreciation based on identified cost for federal
income tax purposes of $1,539,086 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of
value over tax cost $ 18,689
Aggregate gross unrealized depreciation for all
investments in which there was an excess of
tax cost over value (24,796)
UNREALIZED DEPRECIATION - NET ($6,107)
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Assets and Liabilities (unaudited)
<TABLE>
<CAPTION>
<S> <C>
APRIL 30, 1997
ASSETS:
Investments, at value (Identified Cost $1,539,086)(Note 2) $1,532,979
Cash 28,987
Interest receivable 21,068
Receivable from investment advisor (Note 3) 5,028
Dividends receivable 501
TOTAL ASSETS 1,588,563
LIABILITIES:
Accrued Directors' fees (Note 3) 3,392
Transfer agent fees payable (Note 3) 153
Audit fee payable 4,016
Custodian fees 196
Other payables and accrued expenses 3,374
TOTAL LIABILITIES 11,131
NET ASSETS FOR 154,078 SHARES OUTSTANDING $1,577,432
NET ASSETS CONSIST OF:
Capital stock $ 1,540
Additional paid-in-capital 1,560,883
Undistributed net investment income 22,402
Accumulated net realized loss on investments (1,286)
Net unrealized depreciation on investments (6,107)
TOTAL NET ASSETS $1,577,432
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($1,577,432/154,078 shares) $ 10.24
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Operations (unaudited)
<TABLE>
<CAPTION>
<S> <C>
FOR THE SIX MONTHS ENDED APRIL 30, 1997
INVESTMENT INCOME:
Interest $ 34,581
Dividends 861
Total Investment Income 35,442
EXPENSES:
Management fees (Note 3) 5,100
Directors' fees (Note 3) 3,392
Transfer agent fees (Note 3) 153
Audit fee 3,967
Registration and filing fees 2,308
Custodian fee 1,131
Miscellaneous 451
Total Expenses 16,502
Less Waiver of Expenses (Note 3) (10,128)
Net Expenses 6,374
NET INVESTMENT INCOME 29,068
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments (identified cost basis) (1,284)
Net change in unrealized depreciation on investments (4,971)
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (6,255)
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 22,813
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Statement of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended 4/30/97 Ended 10/31/96
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 29,068 $ 21,079
Net realized gain (loss) on investments (1,284) 6,509
Net change in unrealized depreciation on investments (4,971) (1,136)
Net increase in net assets from operations 22,813 26,452
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (17,714) (10,031)
From net realized gain on investments (6,511) --
Total distribution to shareholders (24,225) (10,031)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital share
transactions (Note 5) 833,639 728,784
Net increase in net assets 832,227 745,205
NET ASSETS:
Beginning of period 745,205 -
END OF PERIOD (including undistributed net investment
income of $22,402 and $11,048, respectively) $ 1,577,432 $ 745,205
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Financial Highlights (unaudited)
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended 4/30/97 Ended 10/31/96
<S> <C> <C>
Per share data (for a share outstanding throughout
each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.29 $ 10.00
Income from investment operations:
Net investment income 0.177 0.349
Net realized and unrealized gain on investments 0.026 0.137
Total from investment operations 0.203 0.486
Less distributions to shareholders:
From net investment income (0.185) (0.196)
From net realized gain on investments (0.068) --
Total distribution to shareholders (0.253) (0.196)
NET ASSET VALUE - END OF PERIOD $ 10.24 $ 10.29
Total return1: 2.00% 4.94%
Ratios (to average net assets) / Supplemental Data:
Expenses* 1.00%2 1.00%
Net investment income* 4.56%2 4.26%
Portfolio turnover 21% 30%
Average commission rate paid $ 0.0514 $ 0.0691
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 1,577 $ 745
</TABLE>
*The investment advisor did not impose its management fee and paid a
portion of the Fund's expenses. If these expenses had been incurred by the
Fund, expenses would have been limited to that allowed by state securities
law and the net investment income per share and the ratios would have been
as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Net investment income $ 0.119 $0.226
Ratios (to average net assets):
Expenses 2.50%2 2.50%
Net investment income 3.06%2 2.76%
1 Represents aggregate total return for the period indicated.
2 Annualized.
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Defensive Series (the "Fund") is a no-load diversified series of Manning
& Napier Fund, Inc. (the "Corporation"). The Corporation is organized in
Maryland and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
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 April
30, 1997, 940 million shares have been designated in total among 19 series,
of which 50 million have been designated as Defensive Series Class E 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 Advisor under procedures established by and under the general
supervision and responsibility of 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.
12
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
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
semi-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, character reclassification between net
income and net gains, or other tax adjustments. 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.
OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
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 0.8% of the Fund's
average daily net assets. The fee amounted to $5,100 for the six months
ended April 30, 1997.
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.
13
<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 1.0% of average daily net assets each year.
Accordingly, the Advisor did not impose any of its fee and paid expenses
amounting to $5,028 for the six months ended April 30, 1997, 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 $153 for the six months ended April 30,
1997.
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 $3,392 for the
six months ended April 30, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 1997, purchases and sales of
securities, other than United States Government securities and short-term
securities, were $167,114 and $17,949, respectively. Purchases and sales of
United States Government securities were $879,583 and $228,288, respectively.
<TABLE>
<CAPTION>
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Defensive Series Class E Common Stock were:
For the Six Months For the Year
Ended 4/30/97 Ended 10/31/96
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
------------------- ----------- --------------- ----------
Sold 115,341 $1,174,491 76,159 $766,290
Reinvested 2,394 24,225 1,010 10,030
Repurchased (36,099) (365,077) (4,727) (47,536)
Total 81,636 $ 833,639 72,442 $728,784
The Advisor owned 33,269 shares on April 30, 1997, and 12,747 shares
on October 31, 1996.
</TABLE>
14
<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, 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 April 30, 1997.
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 domestic companies and the United States
government. These risks include revaluation of currencies and potential
adverse political and economic developments. Moreover, securities of foreign
companies and foreign governments may be less liquid and their prices more
volitile that those of securities of comparable domestic companies and the
United States government.
15
<PAGE>
<PAGE>
MANNING & NAPIER FUND, INC.
BLENDED ASSET SERIES I
Semi-Annual Report
April 30, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
In our last annual report, we discussed the late cycle volatility we had
been experiencing in the market. This report has a similar, but even more
dramatic, story to tell. By February, the Dow Jones Industrial average had
reached the 7000 mark, and by mid-March it reached an all time high. Less
than a month following this record, it had given up nearly half of the gains
seen for the year by plunging 9.8%. By the end of April, the Dow was back
above the 7000 mark again with valuations no better than they were at mid
March highs. The bond market has displayed significant volatility as well,
generally following a downward trend. Yields ended this reporting period 50
basis points higher than where they started, but at one point were close to
80 basis points up from their low in the six month period (a basis point is
one-hundredth of a percentage point).
Much of the volatility was both in anticipation of and in response to the
Federal Reserves quarter point raise in the Fed Funds rate in March.
According to statements made by Federal Reserve Chairman Alan Greenspan, this
move was prompted by the high level of speculation apparent in the U.S. stock
market. But at the same time, inflation continues to remain in check. This
is why we find bonds to be a compelling investment. The rise in interest
rates has given us the opportunity to lock in higher long-term bond yields,
while the excessive speculation and high valuation levels warrant a more
conservative equity exposure in the portfolio. The gyrations in the stock
market have not yet presented a broad-based buying opportunity, but we have
been able to take advantage of the downward swings to increase certain stock
positions at good values. In addition, opportunities abroad have become
especially attractive compared to the generally overvalued domestic stock
market. We have seized this opportunity and increased the international
exposure in the portfolio.
We are nearing the seventh year of an economic expansion and the tenth
year of a bull market run. It is reasonable to expect that this rapid growth
cannot continue forever. In terms of equity selection, it is especially
important to be a patient long-term investor. This is why we are remaining
conservatively positioned, while taking advantage of a few good values and
international opportunities. Of course, the U.S.
1
<PAGE>
Management Discussion and Analysis (continued)
stock market may not see a significant correction, but rather a drawn out
period of flat-to-mediocre returns. Either possibility warrants a cautious
and choosy outlook for legitimate opportunities. In summary, at this late
stage in the economic and stock market cycles, we continue to focus on
efforts to cautiously identify opportunities as they arise.
We would once again like to thank you for the opportunity to help you
meet your investment goals. It is a service in which we take great pride.
Sincerely,
Manning & Napier Advisors, Inc.
<graphic>
<pie chart>
Asset Allocation - As of 4/30/97
Data for chart to follow:
Bonds - 50%
Stocks - 33%
Cash & Equivalents - 17%
2
<PAGE>
Performance Update as of April 30, 1997 (unaudited)
<graphic>
<line chart>
Data for chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Manning & Napier Lehman Brothers
Date Blended Asset Series I Intermediate Bond Index 30-70 Blended Index
09/15/93 10,000 10,000 10,000
12/31/93 10,092 10,032 10,081
06/30/94 9,671 9,770 9,795
12/31/94 10,012 9,838 9,986
06/30/95 11,578 10,783 11,256
12/31/95 12,123 11,347 12,151
04/30/96 12,292 11,213 12,303
10/31/96 12,806 11,728 13,040
04/30/97 13,262 11,931 13,768
<CAPTION>
Manning & Napier Fund, Inc. - Blended Asset Series I
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,789 7.89% 7.89%
Inception 2 $ 13,262 32.62% 8.09%
</TABLE>
<TABLE>
<CAPTION>
Lehman Brothers Intermediate Bond Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,641 6.41% 6.41%
Inception 2 $ 11,931 19.31% 4.99%
</TABLE>
<TABLE>
<CAPTION>
30-70 Blended Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 11,191 11.91% 11.91%
Inception 2 $ 13,768 37.68% 9.22%
</TABLE>
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
Blended Asset Series I from its inception (9/15/93) to present (4/30/97) as
compared to the Lehman Brothers Intermediate Bond Index and a 30-70 Blended
Index. 1
1 The Lehman Brothers Intermediate Bond Index is a market value weighted
measure of approximately 3,651 corporate and government securities. The Index
is comprised of investment grade securities with maturities greater than one
year but less than ten years. The 30-70 Blended Index is 30% Standard &
Poor's (S&P) 500 Total Return Index and 70% Lehman Brothers Intermediate Bond
Index. The 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 Stocks Exchange, and Over-the-Counter
market. Both Indices' returns assume reinvestment of income and, unlike Fund
returns, do not reflect any fees or expenses.
2 Performance numbers for the Fund and Indices are calculated from
September 15, 1993, the Fund's inception date. The Fund's performance is
historical and may not be indicative of future results.
3
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
VALUE
SHARES (NOTE 2)
COMMON STOCK - 33.07%
AIR TRANSPORTATION- 1.50%
Federal Express Corp.* 5,500 $296,313
COMMUNICATIONS- 1.24%
Groupe AB SA - ADR (Note 7) 1,350 9,787
Stet Societa' Finanziaria Telefonica S.p.A. - ADR
(Note 7) 4,975 235,691
245,478
COMPUTERS - 0.13%
Bell & Howell Co. 950 22,444
Varitronix International Ltd. (Note 7) 3,000 4,183
26,627
CONSUMER PRODUCTS- MISCELLANEOUS- 1.58%
Unilever PLC- Sponsored ADR (Note 7) 2,900 311,025
DIAMONDS- 1.53%
De Beers Centenary AG- ADR (Note 7) 8,400 302,269
DISTRIBUTION - OFFICE EQUIPMENT - 1.50%
Unisource Worldwide, Inc, 20,100 296,475
ENGINEERING SERVICES- 0.50%
Jacobs Engineering Group, Inc.* 3,900 99,450
FABRICATED METAL PRODUCTS- 0.09%
Keystone International, Inc. 875 17,281
FOOD & BEVERAGES- 0.03%
Canandaigua Wine Co., Inc. - Class A* 250 6,406
GLASS PRODUCTS- 0.09%
Libbey, Inc. 600 18,600
HEALTH SERVICES- 1.89%
MedPartners, Inc.* 20,276 370,037
U.S. Physical Therapy, Inc.* 225 2,166
372,203
HOLDING COMPANIES - 0.01%
Ek Chor China Motorcycle Co. Ltd. ADR (Note 7) 500 2,500
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
PRIMARY METAL INDUSTRIES- 0.26%
American Superconductor Corp.* 825 $ 7,734
Gibraltar Steel Corp.* 900 22,050
Special Metals Corp.* 575 8,122
Wolverine Tube, Inc.* 500 13,000
50,906
PRINTING & PUBLISHING- 0.35%
Harte-Hanks Communications 625 17,031
Houghton Mifflin Co. 325 18,241
Playboy Enterprises, Inc. - Class A* 225 2,953
Playboy Enterprises, Inc. - Class B* 925 12,834
Scholastic Corp.* 700 17,500
68,559
RESTAURANTS- 4.28%
McDonald's Corp. 15.475 829,847
Morton's Restaurant Group, Inc.* 1,025 15,503
845,350
RETAIL- 6.98%
RETAIL - CATALOG & MAIL ORDER - 1.31%
Comcast Corp. - Class A 16,400 258,300
RETAIL - SPECIALTY STORES- 5.57%
Fabri-Centers of America - Class A* 8,250 166,031
Fabri-Centers of America - Class B* 7,250 138,656
Fingerhut Companies, Inc. 22,250 330,969
Hancock Fabrics, Inc. 10,525 126,300
Tandy Corp. 6,425 336,509
1,098,465
RETAIL - WHOLESALE- 0.10%
Coleman Company, Inc.* 1,300 20,150
1,376,915
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
SOFTWARE- 1.25%
Activision, Inc.* 325 $ 3,819
Broderbund Software, Inc.* 550 10,312
Electronic Arts, Inc.* 275 6,634
Founder Hong Kong Ltd. (Note 7) 6,000 3,834
Maxis, Inc.* 800 5,500
Oracle Corp.* 4,900 194,775
Spectrum Holobyte, Inc.* 800 4,900
Symantec Corp.* 1,175 16,891
246,665
TECHNICAL INSTRUMENTS & SUPPLIES - 5.94%
OPTICAL SUPPLIES - 0.06%
Sola International, Inc.* 450 11,250
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 4.38%
Eastman Kodak Co. 10,350 864,225
SURGICAL & MEDICAL INSTRUMENTS- 1.50%
Allied Healthcare Products, Inc. 1,100 7,563
Lunar Corp.* 600 10,500
Nellcor Puritan Bennett, Inc.* 16,300 277,100
295,163
1,170,638
TELECOMMUNICATIONS- 3.83%
EQUIPMENT- 0.96%
Motorola, Inc. 3,300 188,925
SERVICES- 2.87%
Compania Anonima Nacional Telefonos
De Venezuala - ADR* (Note 7) 9,300 279,000
Telecomunicacoes Brasileiras - ADR (Note 7) 2,500 286,875
565,875
754,800
TRANSPORTATION EQUIPMENT- 0.09%
Federal Signal Corp. 700 17,062
TOTAL COMMON STOCK
(Identified Cost $6,139,441) 6,525,522
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Principal Value
Amount/Shares (Note 2)
<S> <C> <C>
U.S. TREASURY SECURITIES - 48.90%
U.S. TREASURY BONDS - 20.33%
U.S. Treasury Bond, 7.25%, 5/15/2016 $ 45,000 $ 45,970
U.S. Treasury Bond, 7.25%, 8/15/2022 555,000 566,275
U.S. Treasury Bond, 7.50%, 11/15/2024 3,225,000 3,400,359
TOTAL U.S. TREASURY BONDS
(Identified Cost $4,004,114) 4,012,604
U.S. TREASURY NOTES - 28.57%
U.S. Treasury Note, 5.125%, 12/31/1998 595,000 585,146
U.S. Treasury Note, 6.875%, 8/31/1999 450,000 454,781
U.S. Treasury Note, 7.75%, 12/31/1999 1,215,000 1,254,108
U.S. Treasury Note, 6.625%, 7/31/2001 3,335,000 3,342,297
TOTAL U.S. TREASURY NOTES
(Identified Cost $5,663,185) 5,636,332
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $9,667,299) 9,648,936
U.S. GOVERNMENT AGENCIES - 0.65%
MORTGAGE BACKED SECURITIES
GNMA POOL #174225, 9.50%, 8/15/2016 5,245 5,644
GNMA POOL #286310, 9.00%, 2/15/2020 37,604 39,461
GNMA POOL #385753, 9.00%, 7/15/2024 78,521 82,398
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $126,534) 127,503
SHORT-TERM INVESTMENTS - 16.24%
Dreyfus U.S. Treasury Money Market Reserves 104,160 104,160
Federal Home Loan Bank Discount Note, 5/15/1997 500,000 498,952
U.S. Treasury Note, 5.875%, 4/30/1998 2,605,000 2,601,744
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $3,208,855) 3,204,856
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
(Note 2)
<S> <C>
TOTAL INVESTMENTS - 98.86%
(Identified Cost $19,142,129) $19,506,817
OTHER ASSETS, LESS LIABILITIES - 1.14% 225,504
NET ASSETS - 100% $19,732,321
</TABLE>
*Non-income producing security
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At April 30, 1997, the net unrealized appreciation based on identified cost for
federal income tax purposes of $19,143,300 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 753,349
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (389,832)
UNREALIZED APPRECIATION - NET $ 363,517
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Assets and Liabilities (unaudited)
<TABLE>
<CAPTION>
APRIL 30, 1997
<S> <C>
ASSETS:
Investments, at value (Identified Cost $19,142,129)(Note 2) $19,506,817
Cash 19,560
Interest receivable 224,564
Dividends receivable 16,051
TOTAL ASSETS 19,766,992
LIABILITIES:
Accrued management fees (Note 3) 18,581
Accrued Directors' fees (Note 3) 3,391
Transfer agent fees payable (Note 3) 387
Audit fee payable 5,325
Payable for fund shares redeemed 3,371
Other payables and accrued expenses 3,616
TOTAL LIABILITIES 34,671
NET ASSETS FOR 1,773,260 SHARES OUTSTANDING $19,732,321
NET ASSETS CONSIST OF:
Capital stock $ 17,733
Additional paid-in-capital 18,798,209
Undistributed net investment income 242,993
Accumulated net realized gain on investments 308,698
Net unrealized appreciation on investments 364,688
TOTAL NET ASSETS $19,732,321
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($19,732,321/1,773,260 shares) $ 11.13
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Statement of Operations (unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 30, 1997
<S> <C>
INVESTMENT INCOME:
Interest $435,446
Dividends 27,844
Total Investment Income 463,290
EXPENSES:
Management fees (Note 3) 92,954
Directors' fees (Note 3) 3,392
Transfer agent fees (Note 3) 2,231
Custodian fee 3,223
Audit fee 6,538
Miscellaneous 6,580
Total Expenses 114,918
Less Waiver of Expenses (Note 3) (3,372)
Net Expenses 111,546
NET INVESTMENT INCOME 351,744
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments (identified cost basis) 311,824
Net change in unrealized appreciation on investments (23,758)
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 288,066
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $639,810
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Statement of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
For the Six For the Ten For the
Months Ended Months Ended Year Ended
4/30/97 10/31/96 12/31/95
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 351,744 $ 450,488 $ 254,925
Net realized gain on investments 311,824 299,745 608,702
Net change in unrealized appreciation on investments (23,758) 105,808 341,625
Net increase in net assets from operations 639,810 856,041 1,205,252
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (428,408) (130,831) (254,925)
In excess of net investment income -- -- (3,886)
From net realized gains (296,105) (39,818) (564,923)
Total distributions to shareholders (724,513) (170,649) (823,734)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital share transactions
(Note 5) 2,023,516 7,589,621 4,617,621
Net increase in net assets 1,938,813 8,275,013 4,999,139
NET ASSETS:
Beginning of period 17,793,508 9,518,495 4,519,356
END OF PERIOD (including undistributed net investment
income of $242,993, $319,657 and $0 respectively) $ 19,732,321 $ 17,793,508 $ 9,518,495
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Financial Highlights (unaudited)
<TABLE>
<CAPTION>
For the Period
For the For the For the For the 9/15/93
Six Months Ten Months Year Year (commencement
Ended Ended Ended Ended of operations)
4/30/97 10/31/96 3 12/31/95 12/31/94 to 12/31/93
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 11.20 $ 10.72 $ 9.72 $ 10.05 $ 10.00
Income from investment operations:
Net investment income 0.208 0.293 0.342 0.200 0.045
Net realized and unrealized gain (loss)
on investments 0.141 0.307 1.698 (0.280) 0.045
Total from investment operations 0.349 0.600 2.040 (0.080) 0.090
Less distributions to shareholders:
From net investment income (0.272) (0.092) (0.342) (0.203) (0.040)
In excess of net investment income - - (0.005) - -
From net realized gain on investment (0.147) (0.028) (0.693) (0.040) -
In excess of net realized gains - - - (0.007) -
Total distributions to shareholders (0.419) (0.120) (1.040) (0.250) (0.040)
NET ASSET VALUE - END OF PERIOD $ 11.13 $ 11.20 $ 10.72 $ 9.72 $ 10.05
Total return1: 3.56% 5.64% 21.08% (0.80%) 0.93%
Ratios (to average net assets) /
Supplemental Data:
Expenses 1.20%2** 1.20%2** 1.20%** 1.20%* 1.20%2*
Net investment income 3.78%2** 3.69%2** 3.64%** 3.40%* 2.47%2*
Portfolio turnover 16% 85% 72% 45% 1%
Average commission rate paid $ 0.0370 $ 0.0515 $ 0.0689 - -
NET ASSETS - END OF PERIOD
(000'S OMITTED) $ 19,732 $ 17,794 $ 9,518 $ 4,519 $ 475
</TABLE>
*The investment advisor did not impose its management fee and paid a
portion of the Fund's expenses. If these expenses had been incurred by the
Fund, expenses would have been limited to that allowed by state securities
law.
** The investment advisor waived a portion of its management fee. If the
full expenses had been incurred by the Fund in either instance above, the net
investment income per share and the ratios would be as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income $ 0.206 $ 0.284 $0.311 $0.124 $0.021
Ratios (to average net assets):
Expenses 1.24%2 1.31%2 1.53% 2.50% 2.50%2
Net investment income 3.74%2 3.58%2 3.31% 2.10% 1.17%2
1 Represents aggregate total return for the period indicated.
2 Annualized.
3 Effective January 1, 1996, the Fund changed its fiscal year end from December 31 to October 31.
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Blended Asset Series I (the "Fund") is a no-load diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized in Maryland and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company.
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 April
30, 1997, 940 million shares have been designated in total among 19 series,
of which 50 million have been designated as Blended Asset Series I Class K
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 Advisor under procedures established by and under the general
supervision and responsibility of 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.
13
<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
semi-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) purchases 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
investments that result from fluctuations in foreign currency exchange rates
is not separately stated.
14
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
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 1.0% of the Fund's
average daily net assets. The fee amounted to $92,954 for the six months
ended April 30, 1997.
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 1.20% of average daily net assets each year.
Accordingly, the Advisor waived fees of $3,372 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 $2,231 for the six months ended April
30, 1997.
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 $3,392 for the
six months ended April 30, 1997.
15
<PAGE>
Notes to Financial Statements (unaudited)
4. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 1997, purchases and sales of
securities, other than United States Government securities and short-term
securities, were $2,968,100 and $1,545,512, respectively. Purchases and
sales of United States Government securities were $1,886,862 and $1,039,925,
respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Blended Asset Series I Class K Common Stock
were:
<TABLE>
<CAPTION>
For the Six Months For the Ten Months For the Year
Ended 4/30/97 Ended 10/31/96 Ended 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Shares Amount Shares Amount Shares Amount
------------------- ------------ --------- ------------ --------------- -----------
Sold 299,352 $ 3,311,283 940,658 $10,210,779 406,586 $4,437,737
Reinvested 65,359 713,722 15,624 169,059 75,731 811,707
Repurchased (179,904) (2,001,489) (255,975) (2,790,217) (58,913) (631,823)
Total 184,807 $ 2,023,516 700,307 $ 7,589,621 423,404 $4,617,621
</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 April 30, 1997.
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 domestic companies and the United States
government. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of foreign
companies and foreign governments may be less liquid and their prices more
volatile than those of securities of comparable domestic companies and the
United States government.
8. CHANGE IN FISCAL YEAR END
Effective January 1, 1996, the Fund changed its fiscal year end from
December 31 to October 31.
16
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
BLENDED ASSET SERIES II
Semi-Annual Report
April 30, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
In our last annual report, we discussed the late cycle volatility we had
been experiencing in the market. This report has a similar, but even more
dramatic, story to tell. By February, the Dow Jones Industrial average had
reached the 7000 mark, and by mid-March it reached an all time high. Less
than a month following this record, it had given up nearly half of the gains
seen for the year by plunging 9.8%. By the end of April, the Dow was back
above the 7000 mark again with valuations no better than they were at
mid-March highs. The bond market has displayed significant volatility as
well, generally following a downward trend. Yields ended this reporting
period 50 basis points higher than where they started, but at one point were
close to 80 basis points up from their low in the six month period (a basis
point is one-hundredth of a percentage point).
Much of the volatility was both in anticipation of and in response to the
Federal Reserves quarter point raise in the Fed Funds rate in March.
According to statements made by Federal Reserve Chairman Alan Greenspan, this
move was prompted by the high level of speculation apparent in the U.S. stock
market. But at the same time, inflation continues to remain in check. This
is why we find bonds to be a compelling investment. The rise in interest
rates has given us the opportunity to lock in higher long-term bond yields,
while the excessive speculation and high valuation levels warrant a more
conservative equity exposure in the portfolio. The gyrations in the stock
market have not yet presented a broad-based buying opportunity, but we have
been able to take advantage of the downward swings to increase certain stock
positions at good values. In addition, opportunities abroad have become
especially attractive compared to the generally overvalued domestic stock
market. We have seized this opportunity and increased the international
exposure in the portfolio.
We are nearing the seventh year of an economic expansion and the tenth
year of a bull market run. It is reasonable to expect that this rapid growth
cannot continue forever. In terms of equity selection, it is especially
important to be a patient long-term investor. This is why we are remaining
conservatively positioned, while taking advantage of a few good values and
international opportunities. Of course,
1
<PAGE>
Management Discussion and Analysis (continued)
the U.S. stock market may not see a significant correction, but rather a
drawn out period of flat-to-mediocre returns. Either possibility warrants a
cautious and choosy outlook for legitimate opportunities. In summary, at
this late stage in the economic and stock market cycles, we continue to focus
on efforts to cautiously identify opportunities as they arise.
We would once again like to thank you for the opportunity to help you
meet your investment goals. It is a service in which we take great pride.
Sincerely,
Manning & Napier Advisors, Inc.
<graphic>
<pie chart>
Asset Allocation - As of 4/30/97
Data for chart to follow:
Stocks - 53%
Bonds - 44%
Cash & Equivalents - 3%
2
<PAGE>
Performance Update as of April 30, 1997 (unaudited)
<graphic>
<line chart>
Data for chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Manning & Napier Lehman Brothers
Date Blended Asset Series II Intermediate Bond Index 50-50 Blended Index
10/12/93 10,000 10,000 10,000
12/31/93 9,982 9,956 10,056
06/30/94 9,662 9,695 9,693
12/31/94 10,333 9,764 9,978
06/30/95 12,621 10,701 11,550
12/31/95 13,707 11,261 12,743
04/30/96 14,016 11,127 13,035
10/31/96 15,078 11,639 13,978
04/30/97 16,023 11,841 15,118
</TABLE>
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. - Blended Asset Series II
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 11,432 14.32% 14.32%
Inception 2 $ 16,023 60.23% 14.19%
</TABLE>
<TABLE>
<CAPTION>
Lehman Brothers Intermediate Bond Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 10,641 6.41% 6.41%
Inception 2 $ 11,841 18.41% 4.87%
</TABLE>
<TABLE>
<CAPTION>
50-50 Blended Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 11,598 15.98% 15.98%
Inception 2 $ 15,118 51.18% 12.33%
</TABLE>
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
Blended Asset Series II from its inception (10/12/93) to present (4/30/97) as
compared to the Lehman Brothers Intermediate Bond Index and a 50-50 Blended
Index. 1
1 The Lehman Brothers Intermediate Bond Index is a market value weighted
measure of approximately 3,651 corporate and government securities. The
Index is comprised of investment grade securities with maturities greater
than one year but less than ten years. The 50-50 Blended Index is 50%
Standard & Poor's (S&P) 500 Total Return Index and 50% Lehman Brothers
Aggregate Bond Index. The 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 Lehman Brothers Aggregate Bond Index is a market value weighted
measure of approximately 5,914 corporate, government, and mortgage backed
securities. The Index is comprised of investment grade securities with
maturities greater than one year. Both Indices' returns assume reinvestment
of income and, unlike Fund returns, do not reflect any fees or expenses.
2 Performance numbers for the Fund and Indices are calculated from
October 12, 1993, the Fund's inception date. The Fund's performance is
historical and may not be indicative of future results.
3
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
VALUE
SHARES (NOTE 2)
COMMON STOCK - 52.80%
AIR TRANSPORTATION - 1.44%
Federal Express Corp.* 10,900 $587,238
APPAREL - 1.50%
VF Corp. 8,500 613,063
BROADCAST SERVICES - 0.07%
Groupe AB - ADR (Note 7) 3,850 27,913
CHEMICALS & ALLIED PRODUCTS - 0.22%
International Specialty Products, Inc.* 7,025 91,325
COMMUNICATIONS - 1.34%
Stet Societa Finanziaria Telefonica S.P.A -
ADR (Note 7) 11,525 545,997
COMPUTER EQUIPMENT - 0.18%
Bell & Howell Company, Inc.* 2,550 60,244
Varitronix International Ltd. (Note 7) 8,000 11,153
71,397
CONSUMER PRODUCTS - MISCELLANEOUS - 2.03%
Unilever Plc - ADR (Note 7) 7,700 825,825
CRUDE PETROLEUM & NATURAL GAS - 1.33%
YPF Sociedad Anonima - ADR (Note 7) 19,550 540,069
DIAMONDS - 1.92%
De Beers Centenary AG - ADR (Note 7) 21,700 780,861
DISTRIBUTION - WHOLESALE - 1.59%
Unisource Worldwide, Inc. 43,875 647,156
ENGINEERING SERVICES - 0.48%
Jacobs Engineering Group, Inc.* 7,675 195,713
FABRICATED METAL PRODUCTS - 0.12%
Keystone International, Inc. 2,475 48,881
FOOD & BEVERAGES - 0.06%
Canandaigua Wine Company, Inc. - Class A* 875 22,422
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
GLASS PRODUCTS - 0.12%
Libbey, Inc. 1,625 $ 50,375
HEALTH SERVICES - 2.51%
MedPartners, Inc.* 55,700 1,016,525
U.S. Physical Therapy, Inc.* 750 7,219
1,023,744
HOLDING COMPANIES - 0.02%
Ek Chor China Motorcycle Co. Ltd.
ADR (Note 7) 1,500 7,500
INDUSTRIAL & COMMERCIAL MACHINERY - 1.55%
York International Corp. 14,100 632,738
PAPER MILLS - 1.61%
Fort Howard Corp.* 8,625 297,023
Kimberly-Clark Corp. 7,000 358,750
655,773
PRIMARY METAL INDUSTRIES - 0.33%
American Superconductor Corp.* 2,150 20,156
Gibraltar Steel Corp.* 2,400 58,800
Special Metals Corp.* 1,400 19,775
Wolverine Tube, Inc* 1,350 35,100
133,831
PRINTING & PUBLISHING - 0.36%
Harte-Hanks Communications 1,600 43,600
Houghton Mifflin Co. 300 16,838
Playboy Enterprises, Inc. - Class A* 825 10,828
Playboy Enterprises, Inc. - Class B* 2,175 30,178
Scholastic Corp.* 1,800 45,000
146,444
RESTAURANTS - 3.74%
McDonald's Corp. 27,600 1,480,050
Morton's Restaurant Group, Inc.* 2,875 43,484
1,523,534
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
RETAIL - 10.32%
RETAIL - CATALOG & MAIL ORDER - 1.71%
Comcast Corp. - Class A 44,250 $ 696,938
RETAIL - NONDURABLE GOODS - 0.01%
Mikasa, Inc. 275 3,128
RETAIL - SPECIALTY STORES - 8.46%
Fabri-Centers of America - Class A* 16,575 333,572
Fabri-Centers of America - Class B* 14,225 272,053
Fingerhut Companies, Inc. 42,425 631,072
Hancock Fabrics, Inc. 21,125 253,500
Home Depot, Inc. 15,100 875,800
Tandy Corp. 20,675 1,082,853
3,448,850
RETAIL - WHOLESALE - 014%
Coleman Company, Inc.* 3,650 56,575
4,205,491
SOFTWARE - 3.19%
Activision, Inc.* 800 9,400
Broderbund Software, Inc.* 1,400 26,250
Electronic Arts, Inc.* 800 19,300
Founder Hong Kong Ltd. (Note 7) 14,500 9,265
Maxis, Inc.* 2,200 15,125
Oracle Corp.* 29,075 1,155,731
Spectrum Holobyte, Inc.* 2,275 13,934
Symantec Corp.* 3,475 49,953
1,298,958
TECHNICAL INSTRUMENTS & SUPPLIES - 9.07%
OPTICAL SUPPLIES - 0.07%
Sola International, Inc.* 1,200 30,000
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 5.20%
Eastman Kodak Co. 25,375 2,118,812
SCIENTIFIC INSTRUMENTS - 1.86%
Millipore Corp. 20,150 760,663
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Shares/ Value
Principal Amount (Note 2)
<S> <C> <C>
TECHNICAL INSTRUMENTS & SUPPLIES (continued)
SURGICAL & MEDICAL INSTRUMENTS - 1.94%
Allied Healthcare Products, Inc. 3,125 $ 21,484
Lunar Corp.* 1,600 28,000
Nellcor Puritan Bennett, Inc. * 43,625 741,625
791,109
3,700,584
TELECOMMUNICATIONS - 5.80%
EQUIPMENT - 1.91%
Motorola, Inc. 13,600 778,600
SERVICE - 3.89%
Compania Anonima Nacional Telefonos de
Venezuela (CANTV) - ADR* (Note 7) 26,450 793,500
Telecomunicacoes Brasileiras - ADR (Note 7) 6,900 791,775
1,585,275
2,363,875
TRANSPORTATION EQUIPMENT - 0.11%
Federal Signal Corp. 1,825 44,484
UTILITIES - ELECTRIC - 1.79%
Enersis S.A. - ADR (Note 7) 23,150 729,225
TOTAL COMMON STOCK
(Identified Cost $19,663,119) 21,514,416
U.S. TREASURY SECURITIES - 44.28%
U.S. TREASURY BONDS - 29.47%
U.S. Treasury Bond, 8.00%, 11/15/2021 $ 5,000 5,534
U.S. Treasury Bond, 7.25%, 8/15/2022 2,590,000 2,642,611
U.S. Treasury Bond, 7.125%, 2/15/2023 5,000 5,033
U.S. Treasury Bond, 7.50%, 11/15/2024 3,105,000 3,273,834
U.S. Treasury Bond, 6.875%, 8/15/2025 6,200,000 6,081,816
TOTAL U.S. TREASURY BONDS
(Identified Cost $12,018,067) 12,008,828
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Principal Amount/
Shares (Note 2)
<S> <C> <C>
U.S. TREASURY NOTES - 14.81%
U.S. Treasury Note, 7.75%, 12/31/1999 $ 685,000 $ 707,049
U.S. Treasury Note, 6.25%, 5/31/2000 2,045,000 2,033,497
U.S. Treasury Note, 6.625%, 7/31/2001 3,285,000 3,292,188
TOTAL U.S. TREASURY NOTES
(Identified Cost $6,136,546) 6,032,734
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $18,154,613) 18,041,562
SHORT-TERM INVESTMENTS - 0.97%
Dreyfus U.S. Treasury Money Market Reserves
(Identified Cost $396,467) 396,467 396,467
TOTAL INVESTMENTS - 98.05%
(Identified Cost $38,214,199) 39,952,445
OTHER ASSETS, LESS LIABILITIES - 1.95% 794,795
NET ASSETS - 100% $40,747,240
</TABLE>
*Non-income producing security
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At April 30, 1997, the net unrealized appreciation based on identified cost for federal
income tax purposes of $38,214,199 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of
value over tax cost $2,649,654
Aggregate gross unrealized depreciation for all
investments in which there was an excess of
tax cost over value (911,408)
UNREALIZED APPRECIATION - NET $1,738,246
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Assets and Liabilities (unaudited)
<TABLE>
<CAPTION>
<S> <C>
APRIL 30, 1997
ASSETS:
Investments, at value (Identified Cost $38,214,199)(Note 2) $39,952,445
Cash 234,074
Receivable for securities sold 797,548
Interest receivable 360,128
Dividends receivable 41,979
TOTAL ASSETS 41,386,174
LIABILITIES:
Payable for fund shares redeemed 37
Accrued management fees (Note 3) 32,403
Accrued Directors' fees (Note 3) 3,392
Transfer agent fees payable (Note 3) 778
Payable for securities purchased 590,454
Audit fee payable 5,182
Other payables and accrued expenses 6,688
TOTAL LIABILITIES 638,934
NET ASSETS FOR 3,091,866 SHARES OUTSTANDING $40,747,240
NET ASSETS CONSIST OF:
Capital stock $ 30,918
Additional paid-in-capital 36,302,560
Undistributed net investment income 375,344
Accumulated net realized gain on investments 2,300,172
Net unrealized appreciation on investments 1,738,246
TOTAL NET ASSETS $40,747,240
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($40,747,240/3,091,866 shares) $ 13.18
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Statement of Operations (unaudited)
<TABLE>
<CAPTION>
<S> <C>
FOR THE SIX MONTHS ENDED APRIL 30, 1997
INVESTMENT INCOME:
Interest $ 601,214
Dividends 126,767
Total Investment Income 727,981
EXPENSES:
Management fees (Note 3) 182,255
Directors' fees (Note 3) 3,392
Transfer agent fees (Note 3) 4,374
Audit fee 6,393
Registration & filing fees 4,733
Custodian fee 4,463
Miscellaneous 4,296
Total Expenses 209,906
NET INVESTMENT INCOME 518,075
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments (identified cost basis) 2,299,369
Net change in unrealized appreciation on investments (722,737)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS 1,576,632
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $2,094,707
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Statement of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
For the Six For the Ten For the
Months Ended Months Ended Year Ended
4/30/97 10/31/96 12/31/95
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 518,075 $ 566,893 $ 334,223
Net realized gain on investments 2,299,369 1,053,546 1,934,431
Net change in unrealized appreciation on investments (722,737) 1,209,793 1,107,105
Net increase in net assets from operations 2,094,707 2,830,232 3,375,759
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (618,513) (92,412) (330,774)
From net realized gain on investments (1,048,674) (138,618) (1,817,057)
Total distributions to shareholders (1,667,187) (231,030) (2,147,831)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital share
transactions (Note 5) 7,321,022 9,880,561 12,077,417
Net increase in net assets 7,748,542 12,479,763 13,305,345
NET ASSETS:
Beginning of period 32,998,698 20,518,935 7,213,590
END OF PERIOD (including undistributed net investment
income of $375,344, $475,782 and $1,301
respectively) $ 40,747,240 $ 32,998,698 $20,518,935
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Financial Highlights (unaudited)
<TABLE>
<CAPTION>
For the For the For the Period
Six Ten For the For the 10/12/93
Months Months Year Year (commencement
Ended Ended Ended Ended of operations) to
4/30/97 10/31/96 3 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout
each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 13.04 $ 11.95 $ 10.12 $ 9.98 $ 10.00
Income from investment operations:
Net investment income 0.176 0.227 0.238 0.108 0.014
Net realized and unrealized gain (loss)
on investments 0.619 0.963 3.052 0.243 (0.032)
Total from investment operations 0.795 1.190 3.290 0.351 (0.018)
Less distributions to shareholders:
From net investment income (0.243) (0.040) (0.237) (0.119) (0.002)
From net realized gain on investment (0.412) (0.060) (1.223) (0.092) -
Total distributions to shareholders (0.655) (0.100) (1.460) (0.211) (0.002)
NET ASSET VALUE - END OF PERIOD $ 13.18 $ 13.04 $ 11.95 $ 10.12 $ 9.98
Total return1: 6.27% 10.01% 32.64% 3.52% (0.18%)
Ratios (to average net assets) / Supplemental Data:
Expenses 1.15%2 1.20%2** 1.20%** 1.20%* 1.20%2*
Net investment income 2.84%2 2.51%2** 2.53%** 2.12%* 1.94%2*
Portfolio turnover 26% 57% 63% 19% 0%
Average commission rate paid $ 0.0510 $ 0.0524 $ 0.0635 - -
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 40,747 $ 32,999 $ 20,519 $ 7,214 $ 475
</TABLE>
* The investment advisor did not impose its management fee and paid a
portion of the Fund's expenses. If these expenses had been incurred by the
Fund for the period ended December 31, 1993, expenses would have been limited
to that allowed by state securities law.
** The investment advisor waived a portion of its management fee. If the
full 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:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Net investment income N/A $ 0.225 $0.226 $0.051 $0.005
Ratios (to average net assets):
Expenses N/A 1.22%2 1.33% 2.31% 2.50%2
Net investment income N/A 2.49%2 2.40% 1.01% 0.64%2
1 Represents aggregate total return for the period indicated.
2 Annualized
3 Effective January 1, 1996 the Fund changed its fiscal year end from December 31 to October 31.
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Blended Asset Series II (the "Fund") is a no-load diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized in Maryland and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company.
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 April
30, 1997, 940 million shares have been designated in total among 19 series,
of which 50 million have been designated as Blended Asset Series II Class L
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 Advisor under procedures established by and under the general
supervision and responsibility of 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
13
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAX (continued)
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
semi-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.
OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
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) purchases 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
investments that result from fluctuations in foreign currency exchange rates
is not separately stated.
14
<PAGE>
Notes to Financial Statements (unaudited)
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 1.0% of the Fund's
average daily net assets. The fee amounted to $182,255 for the six months
ended April 30, 1997.
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 1.20% 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 $4,374 for the six months ended April
30, 1997.
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 $3,392 for the
six months ended April 30, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 1997, purchases and sales of
securities, other than United States Government securities and short-term
securities, were $11,251,313 and $8,185,505, respectively. Purchases and
sales of United States Government securities were $6,707,679 and $781,492,
respectively.
15
<PAGE>
Notes to Financial Statements (unaudited)
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Blended Asset Series II Class L Common Stock
were:
<TABLE>
<CAPTION>
For the Six For the Ten For the Year
Months Ended Months Ended Ended
4/30/97 10/31/96 12/31/95
<S> <C> <C> <C> <C> <C> <C>
Shares Amount Shares Amount Shares Amount
------------- ------------ ---------- ------------ ------------- ------------
Sold 696,021 $ 9,108,652 1,030,732 $12,602,396 891,550 $10,731,657
Reinvested 130,681 1,666,189 18,786 230,877 180,298 2,145,684
Repurchased (264,609) (3,453,819) (237,451) (2,952,712) (66,963) (799,924)
Total 562,093 $ 7,321,022 812,067 $ 9,880,561 1,004,885 $12,077,417
</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 April 30, 1997.
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 domestic companies and the United States
government. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of foreign
companies and foreign governments and their markets may be less liquid and
their prices more volatile than those of securities of comparable domestic
companies and the United States government.
8. CHANGE IN FISCAL YEAR END
Effective January 1, 1996, the Fund changed its fiscal year end from
December 31 to October 31.
16
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Maximum Horizon Series
Semi-Annual Report
April 30, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
In our last annual report, we discussed the late cycle volatility we had
been experiencing in the market. This report has a similar, but even more
dramatic story, to tell. By February, the Dow Jones Industrial average had
reached the 7000 mark, and by mid-March it reached an all time high. Less
than a month following this record, it had given up nearly half of the gains
seen for the year by plunging 9.8%. By the end of April, the Dow was back
above the 7000 mark again with valuations no better than they were at
mid-March highs. The bond market has displayed significant volatility as
well, generally following a downward trend. Yields ended this reporting
period 50 basis points higher than where they started, but at one point were
close to 80 basis points up from their low in the six month period (a basis
point is one-hundredth of a percentage point).
Much of the volatility was both in anticipation of and in response to the
Federal Reserves quarter point raise in the Fed Funds rate in March.
According to statements made by Federal Reserve Chairman Alan Greenspan, this
move was prompted by the high level of speculation apparent in the U.S. stock
market. While the gyrations in the stock market have not yet presented a
broad based buying opportunity, we have been able to take advantage of the
downward swings to increase certain stock positions at good values. In
addition, opportunities abroad have become especially attractive compared to
the generally overvalued domestic stock market. We have seized this
opportunity and increased the international exposure in the portfolio.
We are nearing the seventh year of an economic expansion and the tenth
year of a bull market run. It is reasonable to expect that this rapid growth
cannot continue forever. In terms of equity selection, it is especially
important to be a patient long-term investor. Of course, the U.S. stock
market may not see a significant correction, but rather a drawn out period of
flat-to-mediocre returns. Either possibility warrants a cautious and choosy
outlook for legitimate opportunities. In summary, at this late stage in the
economic and stock market cycles, we continue to focus on efforts to
cautiously identify opportunities as they arise.
We would once again like to thank you for the opportunity to help you
meet your investment goals. It is a service in which we take great pride.
Sincerely,
Manning & Napier Advisors, Inc.
1
<PAGE>
Asset Allocation (unaudited)
<graphic>
<pie chart>
Asset Allocation - As of 4/30/97
Data for chart to follow:
Stocks - 88%
Bonds - 11%
Cash & Equivalents - 1%
2
<PAGE>
Performance Update as of April 30, 1997 (unaudited)
<graphic>
<line chart>
Data for chart to follow:
<TABLE>
<CAPTION>
<C> <S> <C>
Manning & Napier
Maximum Horizon Series Standard & Poors 500 Total Return Index
11/01/95 10,000 10,000
01/31/96 10,492 11,001
04/30/96 10,753 11,376
07/31/96 10,640 11,196
10/31/96 11,521 12,408
01/31/97 12,569 13,898
04/30/97 12,589 14,233
</TABLE>
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. - Maximum Horizon Series
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 11,708 17.08% 17.08%
Inception 2 $ 12,589 25.89% 16.61%
</TABLE>
<TABLE>
<CAPTION>
Standard & Poor's 500 Total Return Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
04/30/97 Investment Cumulative Annual
One Year $ 12,513 25.13% 25.13%
Inception 2 $ 14,233 42.33% 26.56%
</TABLE>
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
Maximum Horizon Series from its inception (11/1/95) to present (4/30/97) as
compared to the Standard & Poor's (S&P) 500 Total Return Index. 1
1 The Standard & Poor's (S&P) 500 Total Return Index is an
unmanagedcapitalization-weighted measure of approximately 500 widely held
commonstocks listed on the New York Stock Exchange, American Stock Exchange,
and Over-the-Counter market. The Index returns assume reinvestment of income
and, unlike Fund returns, do not reflect any fees or expenses.
2 The Fund and Index performance are calculated from November 1, 1995,
the Fund's inception date. The Fund's performance is historical and may not
be indicative of future results.
3
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
<S> <C> <C>
COMMON STOCK - 87.84%
AIR TRANSPORTATION- 1.54%
Federal Express Corp.* 1,475 $ 79,466
APPAREL - 1.96%
VF Corp. 1,400 100,975
CHEMICAL & ALLIED PRODUCTS - 3.01%
International Specialty Products, Inc.* 600 7,800
Procter & Gamble Co. 1,175 147,756
155,556
COMMUNICATIONS - 0.99%
Groupe AB SA - ADR (Note 7) 825 5,981
Stet Societa' Finanziaria Telefonica S.P.A. - ADR
(Note 7) 950 45,006
50,987
COMPUTERS - 0.31%
Bell & Howell Co.* 550 12,994
Varitronix International Ltd. (Note 7) 2,000 2,788
15,782
CONSUMER PRODUCTS - MISCELLANEOUS - 2.70%
Unilever Plc - ADR (Note 7) 1,300 139,425
CRUDE PETROLEUM & NATURAL GAS - 2.30%
YPF Sociedad Anonima - ADR (Note 7) 4,300 118,788
DIAMONDS - 2.51%
De Beers Centenary AG - ADR (Note 7) 3,600 129,544
DISTRIBUTION - OFFICE EQUIPMENT - 2.84%
Unisource Worldwide, Inc. 9,950 146,762
ELECTRONIC EQUIPMENT - 0.06%
Harman International Industries, Inc. 75 2,869
ENGINEERING SERVICES - 1.01%
Jacobs Engineering Group, Inc.* 2,050 52,275
FABRICATED METAL PRODUCTS - 0.20%
Keystone International, Inc. 525 10,369
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
FOOD & BEVERAGES - 0.09%
Canandaigua Wine Co., Inc. - Class A* 175 $ 4,484
GLASS PRODUCTS - 0.18%
Libbey, Inc. 300 9,300
HEALTH SERVICES - 4.16%
MedPartners, Inc.* 11,700 213,525
U.S. Physical Therapy, Inc.* 150 1,444
214,969
HOLDING COMPANIES - 0.03%
Ek Chor China Motorcycle Co. Ltd. - ADR
(Note 7) 325 1,625
INDUSTRIAL & COMMERCIAL MACHINERY - 2.78%
York International Corp. 3,200 143,600
PAPER MILLS - 4.22%
Fort Howard Corp.* 4,475 154,108
Kimberly-Clark Corp. 1,250 64,063
218,171
PRIMARY METAL INDUSTRIES - 0.53%
American Superconductor Corp.* 475 4,453
Gibraltar Steel Corp.* 475 11,637
Special Metals Corp.* 300 4,238
Wolverine Tube Inc.* 275 7,150
27,478
PRINTING & PUBLISHING - 0.44%
Harte-Hanks Communications 150 4,087
Houghton Mifflin Co. 75 4,209
Playboy Enterprises, Inc. - Class B* 350 4,856
Scholastic Corp.* 375 9,375
22,527
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
RESTAURANTS - 3.53%
McDonald's Corp. 3,225 $ 172,941
Morton's Restaurant Group, Inc.* 625 9,453
182,394
RETAIL - 25.78%
RETAIL - APPAREL - 5.20%
Nordstrom, Inc. 6,850 268,863
RETAIL - CATALOG & MAIL ORDER - 2.16%
Comcast Corp. - Class A 7,100 111,825
RETAIL - NONDURABLE GOODS - 0.01%
Mikasa, Inc. 50 569
RETAIL - SPECIALTY STORES - 14.08%
Fabri-Centers of America - Class A* 1,625 32,703
Fabri-Centers of America - Class B* 2,400 45,900
Fingerhut Companies, Inc. 5,775 85,903
Hancock Fabrics, Inc. 1,625 19,500
Home Depot, Inc. 2,475 143,550
Ikon Office Solutions, Inc. 7,000 188,125
Tandy Corp. 4,050 212,119
727,800
RETAIL - WHOLESALE - 4.33%
Coleman Company, Inc.* 14,450 223,975
1,333,032
SOFTWARE - 3.22%
Activision, Inc.* 175 2,056
Broderbund Software, Inc.* 475 8,906
Electronic Arts, Inc.* 200 4,825
Founder Hong Kong Ltd. (Note 7) 2,500 1,597
Maxis, Inc.* 450 3,094
Oracle Corp.* 3,325 132,169
Spectrum Holobyte, Inc.* 500 3,063
Symantec Corp.* 750 10,781
166,491
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Shares/Principal Value
Amount (Note 2)
<S> <C> <C>
TECHNICAL INSTRUMENTS & SUPPLIES - 12.42%
OPTICAL SUPPLIES - 0.13 %
Sola International, Inc.* 275 $ 6,875
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 5.70%
Eastman Kodak Co. 3,525 294,338
SCIENTIFIC INSTRUMENTS - 2.32%
Millpore Corp. 3,175 119,856
SURGICAL & MEDICAL INSTRUMENTS - 4.27%
Allied Healthcare Products, Inc.* 675 4,641
Lunar Corp.* 350 6,125
Nellcor Puritan Bennett, Inc.* 12,350 209,950
220,716
641,785
TELECOMMUNICATIONS - 9.13%
EQUIPMENT - 3.57%
Motorola, Inc. 3,225 184,631
SERVICES - 5.56%
Compania Anonima Nacional Telefonos de
Venezuela - ADR (Note 7) 4,225 126,750
Telecomunicacoes Brasileiras - ADR (Note 7) 1,400 160,650
287,400
472,031
TRANSPORTATION EQUIPMENT - 0.09%
Federal Signal Corp. 200 4,875
UTILITIES-ELECTRIC - 1.81%
Enersis S.A.- ADR (Note 7) 2,975 93,712
TOTAL COMMON STOCK
(Identified Cost $4,422,317) 4,539,272
U.S. TREASURY SECURITIES - 11.58%
U.S. TREASURY BONDS
U.S. Treasury Bond, 6.875%, 8/15/2025
(Identified Cost $624,310) $ 610,000 598,373
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Investment Portfolio - April 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS - 0.18%
Dreyfus U.S. Treasury Money Market Reserves
(Identified Cost $9,257) 9,257 $ 9,257
TOTAL INVESTMENTS - 99.60%
(Identified Cost $5,055,884 ) 5,146,902
OTHER ASSETS, LESS LIABILITIES - 0.40% 20,858
NET ASSETS - 100% $5,167,760
</TABLE>
*Non-income producing security
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At April 30, 1997, the net unrealized appreciation based on identified cost for federal
income tax purposes of $5,055,884 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value over
tax cost $ 300,623
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax cost
over value (209,606)
UNREALIZED APPRECIATION - NET $ 91,017
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Assets and Liabilities (unaudied)
<TABLE>
<CAPTION>
APRIL 30, 1997
<S> <C>
ASSETS:
Investments, at value (Identified Cost $5,055,884)
(Note 2) $5,146,902
Cash 18,476
Interest receivable 8,689
Dividends receivable 7,939
TOTAL ASSETS 5,182,006
LIABILITIES:
Management fees (Note 3) 5,760
Accrued Directors' fees (Note 3) 3,392
Transfer agent fees payable (Note 3) 369
Audit fee payable 4,016
Other payables and accrued expenses 709
TOTAL LIABILITIES 14,246
NET ASSETS FOR 419,726 SHARES OUTSTANDING $5,167,760
NET ASSETS CONSIST OF:
Capital stock $ 4,199
Additional paid-in-capital 4,982,460
Undistributed net investment income 21,198
Accumulated net realized gain on investments 68,886
Net unrealized appreciation on investments 91,017
TOTAL NET ASSETS $5,167,760
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($5,167,760/419,726 shares) $ 12.31
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Statement of Operations (unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 30, 1997
<S> <C>
INVESTMENT INCOME:
Interest $ 24,214
Dividends 18,497
Total Investment Income 42,711
EXPENSES:
Management fees (Note 3) 15,354
Directors' fees (Note 3) 3,392
Transfer agent fees (Note 3) 369
Audit fee 3,834
Registration and filing fees 2,249
Custodian fee 1,980
Miscellaneous 841
Total Expenses 28,019
Less Waiver of Expenses (Note 3) (9,594)
Net Expenses 18,425
NET INVESTMENT INCOME 24,286
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments
(identified cost basis) 70,392
Net change in unrealized appreciation on investments 51,931
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 122,323
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $146,609
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Statement of Changes in Net Assets (unaudited)
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended 4/30/97 Ended 10/31/96
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 24,286 $ 7,550
Net realized gain on investments 70,392 10,435
Net change in unrealized appreciation on investments 51,931 39,086
Net increase in net assets from operations 146,609 57,071
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (6,430) (4,208)
From net realized gain on investments (11,941) --
Total distributions to shareholders (18,371) (4,208)
CAPITAL STOCK ISSUED AND REDEEMED:
Net increase in net assets from capital share transactions
(Note 5) 3,465,531 1,521,128
Net increase in net assets 3,593,769 1,573,991
NET ASSETS:
Beginning of period 1,573,991 --
END OF PERIOD (including undistributed net investment
income of $21,198 and $3,342 repectively) $ 5,167,760 $ 1,573,991
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Financial Highlights (unaudited)
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended 4/30/97 Ended 10/31/96
<S> <C> <C>
Per share data (for a share outstanding throughout
each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 11.38 $ 10.00
Income from investment operations:
Net investment income 0.068 0.155
Net realized and unrealized gain on investments 0.982 1.356
Total from investment operations 1.050 1.511
Less distributions to shareholders:
From net investment income (0.042) (0.131)
From net realized gains (0.078) --
Total distributions to shareholders (0.120) (0.131)
NET ASSET VALUE - END OF PERIOD $ 12.31 $ 11.38
Total return 1: 9.28% 15.21%
Ratios (to average net assets) / Supplemental Data:
Expenses 1.20%2** 1.20%*
Net investment income 1.58%2** 1.71%*
Portfolio turnover 41% 95%
Average commission rate paid $ 0.0502 $ 0.0655
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 5,168 $ 1,574
</TABLE>
* The investment advisor did not impose its management fee and paid a
portion of the Fund's expenses. If these expenses had been incurred by the
Fund, expenses would have been limited to that allowed by state securities
law.
** The investment advisor waived a portion of its management fee. If the
full expenses had been incurred in either instance above, the net investment
income per share and the ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Net investment income $ 0.041 $0.037
Ratios (to average net assets):
Expenses 1.82%2 2.50%
Net investment income 0.96%2 0.41%
1 Represents aggregate total return for the period indicated.
2 Annualized.
</TABLE>
The accompanying notea are an integral part of the financial statements.
12
<PAGE>
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Maximum Horizon Series (the "Fund") is a no-load diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized in Maryland and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company.
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 April
30, 1997, 940 million shares have been designated in total among 19 series,
of which 100 million have been designated as Maximum Horizon Series Class B
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 Advisor under procedures established by and under the general
supervision and responsibility of the Funds 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.
13
<PAGE>
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
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
semi-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, character reclassification between net
income and net gains, or other tax adjustments. 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) purchases 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
investments that result from fluctuations in foreign currency exchange rates
is not separately stated.
OTHER
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
14
<PAGE>
Notes to Financial Statements (unaudited)
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 1.0% of the Fund's
average daily net assets. The fee amounted to $15,354 for the six months
ended April 30, 1997.
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 1.20% of average daily net assets each year.
Accordingly, the Advisor waived fees of $9,594 for the six months ended April
30, 1997, 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 $369 for the six months ended April 30,
1997.
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 $3,392 for the
six months ended April 30, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended April 30, 1997, purchases and sales of
securities, other than United States Government securities and short-term
securities, were $3,805,710 and $572,796, respectively. Purchases and sales
of United States Government securities were $1,016,408 and $689,776,
respectively.
15
<PAGE>
Notes to Financial Statements (unaudited)
<TABLE>
<CAPTION>
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Maximum Horizon Series Class B Common Stock were:
For the Six Months For the Year
Ending 4/30/97 Ending 10/31/96
<S> <C> <C> <C> <C>
Shares Amount Shares
------------------- ----------------
Sold 301,022 $3,704,532 148,143 $1,624,294
Reinvested 1,563 18,371 390 4,209
Repurchased (21,141) (257,372) (10,251) (107,375)
Total 281,444 $3,465,531 138,282 $1,521,128
</TABLE>
The Advisor owned 12,784 shares on April 30, 1997, and 12,654 shares on
October 31, 1996.
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 April 30, 1997.
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 domestic companies and the United States
government. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of foreign
companies and foreign governments may be less liquid and their prices more
volatile than those of securities of comparable domestic companies and the
United States government.
16
<PAGE>
<PAGE>
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<EXPENSES-NET> 111,546
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<APPREC-INCREASE-CURRENT> (23,758)
<NET-CHANGE-FROM-OPS> 639,810
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<NUMBER-OF-SHARES-REDEEMED> 264,609
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<GROSS-EXPENSE> 209,906
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<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> TAX MANAGED SERIES
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</TABLE>
