EXETER FUND, INC.
Defensive Series
Blended Asset Series I
Blended Asset Series II
Maximum Horizon Series
Prospectus
February 27, 1998
as Supplemented
May 18, 1998
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EXETER FUND, INC.
P.O. Box 41118
Rochester, New York 14604
1-800-466-3863
Defensive Series
Blended Asset Series I
Blended Asset Series II
Maximum Horizon Series
Exeter Fund, Inc. (the "Fund"), is an open-end management investment
company that offers separate series, each a separate investment portfolio
having its own investment objective and policies. This Prospectus relates to
the Class A, B, C, D and E Shares (each a "Class" and collectively, the
"Classes") of the Defensive Series, Blended Asset Series I, Blended Asset
Series II, and the Maximum Horizon Series of the Fund (individually and
collectively, the "Series").
The primary objective of the Defensive Series is preservation of capital
(i.e., to minimize the risk of negative returns), with a secondary objective
of long-term growth. The Advisor will seek to achieve this objective by
using a conservative asset mix as well as conservative investment strategies
within those asset classes. This conservative investment approach which
attempts to protect capital while simultaneously seeking growth opportunities
is what is intended by use of the term defensive.
The investment objective of the Blended Asset Series I is to seek with
equal emphasis long-term growth and preservation of capital. The Advisor
seeks to reduce the risk of negative returns while seeking to obtain capital
growth when it believes valuations and market conditions are favorable.
The primary objective of the Blended Asset Series II is to provide
long-term growth of capital. The secondary objective is the preservation of
capital.
The primary objective of the Maximum Horizon Series is to achieve the
high level of long-term capital growth typically associated with the stock
market.
This Prospectus provides you with the basic information you should know
before investing in the Series. The Fund's other series are offered through
separate prospectuses. You should read this Prospectus and keep it for future
reference. A Statement of Additional Information dated February 27, 1998,
containing additional information about the Fund has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus in its entirety. You may obtain a copy of the Statement of
Additional Information without charge by contacting the Fund at the address or
telephone number listed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 27, 1998.
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EXETER FUND, INC.
Defensive Series
Blended Asset Series I
Blended Asset Series II
Maximum Horizon Series
No person has been authorized to give any information or to make
representations not contained in this Prospectus in connection with any
offering made by this Prospectus and, if given or made, such information must
not be relied upon as having been authorized by the Fund. This Prospectus
does not constitute an offering by the Fund in any jurisdiction in which such
offering may not lawfully be made.
PROSPECTUS
Table of Contents
Annual Operating Expenses 2
Financial Highlights 12
The Fund 16
Risk and Investment Objectives and Policies 16
Risk and Additional Information about Investment Policies 18
Principal Investment Restrictions 22
Management 23
Distribution of Fund Shares 23
Yield and Total Return 24
Purchases, Exchanges and Redemptions of Shares 24
Share Price 26
Dividends and Tax Status 27
General Information 28
Appendix 29
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EXPENSES
Shareholder Transaction Expenses
(as a percentage of offering price) ALL CLASSES
Maximum Sales Charge Imposed on Purchases None
Redemption Fees 1 None
Exchange Fees 2 None
1 A wire charge, currently $15, will be deducted by the Transfer Agent
from the amount of a wire redemption payment made at the request of a
shareholder. Such amount is not included in the "Annual Operating
Expenses of the Series."
2 A shareholder may effect up to four (4) exchanges in a twelve (12) month
period without change. Subsequent exchanges are subject to a fee of $15.
Annual Operating Expenses - Class A Shares
The following information provides (i) a tabular summary of expenses relating
to the annual operating expenses of the Class A Shares of the Series and (ii)
an example illustrating the dollar cost of such expenses on a $1,000
investment.
Annual Operating Expenses of the Class A Shares of Each Series
(as a percentage of average net assets):
Blended Blended Maximum
Defensive Asset Asset Horizon
Series 1 Series I 1 Series II 1 Series 1
Management Fees (After
Reduction of Fees) 0.00%2 0.96%2 1.00% 0.65%2
Rule 12b-1 Fees None None None None
Other Expenses(After
Expense Reimbursement) 1.00%2 0.24%2 0.15% 0.55%2
Total Operating Expenses
(After Fee Reductions
and Expense
Reimbursements) 1.00%2 1.20% 1.15%3 1.20%2
1 The Defensive Series, Blended Asset Series I, Blended Asset Series II,
and Maximum Horizon Series offered only Class A Shares during the year
ended October 31, 1997; therefore, actual management fees and other
expenses are used above.
2 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the total
annual operating expenses of the Class A Shares of the Series, as a
percentage of average daily net assets, to exceed the percentages set
forth in the table above. As a result of these reductions, the
Management Fees stated above are lower than contractual fees stated
under "Management." The Advisor reserves the right to terminate any of
its fee waivers at any time in its sole discretion. For further
information on expenses, see "Management." The following sets forth,
for Class A Shares of such Series, (i) management fees absent fee waivers,
(ii) other expenses absent expense reimbursements and (iii) expected
total operating expenses absent fee waivers and/or expense reimbursements.
Class A Shares Defensive Blended Asset Maximum
Series SeriesI Horizon Series
Management Fees...........0.80% 1.00% 1.00%
Other Expenses............1.79% 0.24% 0.55%
Total Operating Expenses..2.59% 1.24% 1.55%
3 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the
total annual operating expenses of the Class A Shares of the
Series, as a percentage of average daily net assets, to exceed 1.20%.
The purpose of the table above is to assist the investor in
understanding the various costs and expenses associated with investing
in the Class A Shares of the Series. For a more complete description
of the various costs and expenses illustrated above, please refer to the
Management section of this Prospectus.
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Example - Class A Shares
You would pay the following expenses on a $1,000 investment in Class A Shares,
assuming a) 5.0% annual return and b) redemptions at the end of each time
period:
1 year 3 years 5 years 10 years
Defensive Series $ 10 $ 32 $ 55 $ 122
Blended Asset Series I 12 38 66 145
Blended Asset Series II 12 37 63 140
Maximum Horizon Series 12 38 66 145
The example above should not be considered a representation of future
expenses. Actual expenses may be greater or lesser than those shown. The
Advisor in its discretion may terminate its voluntary fee waivers and/or
reimbursements at any time. Absent the waiver of fees or reimbursement of
expenses, the amounts in the examples above would be greater.
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Annual Operating Expenses - Class B Shares
The following information provides (i) a tabular summary of expenses relating
to the annual operating expenses of the Class B Shares of the Series and (ii)
an example illustrating the dollar cost of such expenses on a $1,000
investment.
Annual Operating Expenses of the Class B Shares of Each Series (as a
percentage of average net assets):
Defensive Blended Asset Blended Asset Maximum
Series 1 Series I 1 Series II 1 Horizon Series
1
Management Fees
(After Reduction
of Fees).... 0.00%2 0.96%2 1.00% 0.65%2
Rule 12b-1 Fees3 1.00% 1.00% 1.00% 1.00%
Other Expenses
(After Expense
Reimbursement) 1.00%2 0.24%2 0.15% 0.55%2
Total Operating
Expenses (After Fee
Reductions and
Expense
Reimbursements) 2.00%2 2.20%2 2.15%4 2.20%2
1 The Defensive Series, Blended Asset Series I , Blended Asset Series II,
and Maximum Horizon Series offered only Class A Shares during the year
ended October 31, 1997; therefore, the actual management fees and other
expenses of Class A Shares of the Series are used above.
2 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the total
annual operating expenses of the Class B Shares of the Series, as a
percentage of average daily net assets, to exceed the percentages set
forth in the table above. As a result of these reductions, the
Management Fees stated above are lower than contractual fees stated under
"Management." The Advisor reserves the right to terminate any of its
fee waivers at any time in its sole discretion. For further information
on expenses, see "Management." The following sets forth, for Class B
Shares of such Series, (i) management fees absent fee waivers, (ii) other
expenses absent expense reimbursements, (iii) Rule 12b-1 fees and (iv)
expected total operating expenses absent fee waivers and/or expense
reimbursements.
Class B Shares Defensive Blended Asset Maximum Horizon
Series Series I Series
Management Fees........... 0.80% 1.00% 1.00%
Rule 12b-1 Fees........... 1.00% 1.00% 1.00%
Other Expenses............ 1.79% 0.24% 0.55%
Total Operating Expenses.. 3.59% 2.24% 2.55%
3 Of the Rule 12b-1 fees for the Class B shares, 0.25% represents
shareholder service fees.
4 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the total
annual operating expenses of the Class B Shares of the Series, as a
percentage of average daily net assets, to exceed 2.20%.
The purpose of the table above is to assist the investor in understanding the
various costs and expenses associated with investing in the Class B Shares of
the Series. For a more complete description of the various costs and expenses
illustrated above, please refer to the Management section of this Prospectus.
Due to the continuous nature of Rule 12b-1 fees, long-term shareholders may
pay more than the equivalent of the maximum front-end sales charges otherwise
permitted by the Conduct Rules of the National Association of Securities
Dealers, Inc. (the "NASD").
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Example - Class B Shares
You would pay the following expenses on a $1,000 investment in Class B Shares,
assuming a) 5.0% annual return and b) redemptions at the end of each time
period:
1 year 3 years 5 years 10 years
Defensive Series $20 $63 $108 $233
Blended Asset Series I 22 69 118 253
Blended Asset Series II 22 67 115 248
Maximum Horizon Series 22 69 118 253
The example above should not be considered a representation of future
expenses. Actual expenses may be greater or lesser than those shown. The
Advisor in its discretion may terminate its voluntary fee waivers and/or
reimbursements at any time. Absent the waiver of fees or reimbursement of
expenses, the amounts in the examples above would be greater.
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Annual Operating Expenses - Class C Shares
The following information provides (i) a tabular summary of expenses relating
to the annual operating expenses of the Class C Shares of the Series and (ii)
an example illustrating the dollar cost of such expenses on a $1,000
investment.
Annual Operating Expenses of the Class C Shares of Each Series (as a
percentage of average net assets):
Defensive Blended Asset Blended Asset Maximum
Series 1 Series I 1 Series II 1 Horizon
Series 1
Management Fees (After
Reduction of Fees)... 0.00%2 0.96%2 1.00% 0.65%2
Rule 12b-1 Fees 3.......0.75% 0.75% 0.75% 0.75%
Other Expenses( After
Expense Reimbursement)..1.00%2 0.24%2 0.15% 0.55%2
Total Operating Expenses
(After Fee Reductions
and Expense
Reimbursements).........1.75%2 1.95%2 1.90%4 1.95%2
1 The Defensive Series, Blended Asset Series I, Blended Asset Series II,
and Maximum Horizon Series offered only Class A Shares during the year
ended October 31, 1997; therefore, the actual management fees and other
expenses of Class A Shares of the Series are used above.
2 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the total
annual operating expenses of the Class C Shares of the Series, as a
percentage of average daily net assets, to exceed the percentages set
forth in the table above. As a result of these reductions, the
Management Fees stated above are lower than contractual fees stated under
"Management." The Advisor reserves the right to terminate any of its
fee waivers at any time in its sole discretion. For further information
on expenses, see "Management." The following sets forth, for Class C
Shares of such Series, (i) management fees absent fee waivers, (ii) other
expense absent expense reimbursements, (iii) Rule 12b-1 fees and (iv)
expected total operating expenses absent fee waivers and/or expense
reimbursements.
Class C Shares Defensive Blended Asset Maximum Horizon
Series Series I Series
Management Fees........... 0.80% 1.00% 1.00%
Rule 12b-1 Fees........... 0.75% 0.75% 1.00%
Other Expenses............ 1.79% 0.24% 0.55%
Total Operating Expenses.. 3.34% 1.99% 2.30%
3 Of the Rule 12b-1 fees for the Class C shares, up to 0.25% represents
shareholder service fees.
4 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the total
annual operating expenses of the Class C Shares of the Series, as a
percentage of average daily net assets, to exceed 1.95%.
The purpose of the table above is to assist the investor in understanding the
various costs and expenses associated with investing in the Class C Shares of
the Series. For a more complete description of the various costs and expenses
illustrated above, please refer to the Management section of this Prospectus.
Due to the continuous nature of Rule 12b-1 fees, long-term shareholders may
pay more than the equivalent of the maximum front-end sales charges otherwise
permitted by the Conduct Rules of the NASD.
<PAGE>
Example - Class C Shares
You would pay the following expenses on a $1,000 investment in Class C Shares,
assuming a) 5.0% annual return and b) redemptions at the end of each time
period:
1 year 3 years 5 years 10 years
Defensive Series $18 $55 $ 95 $206
Blended Asset Series I 20 61 105 227
Blended Asset Series II 19 60 103 222
Maximum Horizon Series 20 61 105 227
The example above should not be considered a representation of future
expenses. Actual expenses may be greater or lesser than those shown. The
Advisor in its discretion may terminate its voluntary fee waivers and/or
reimbursements at any time. Absent the waiver of fees or reimbursement of
expenses, the amounts in the examples above would be greater.
<PAGE>
Annual Operating Expenses - Class D Shares
The following information provides (i) a tabular summary of expenses relating
to the annual operating expenses of the Class D Shares of the Series and (ii)
an example illustrating the dollar cost of such expenses on a $1,000
investment.
Annual Operating Expenses of the Class D Shares of Each Series (as a
percentage of average net assets):
Defensive Blended Asset Blended Asset Maximum
Series 1 Series I 1 Series II 1 Horizon Series
1
Management Fees
(After Reduction
of Fees) 0.00%2 0.96%2 1.00% 0.65%2
Rule 12b-1 Fees 3 0.50% 0.50% 0.50% 0.50%
Other Expenses
(After Expense
Reimbursement) 1.00%2 0.24%2 0.15% 0.55%2
Total Operating
Expenses (After
Fee Reductions and
Expense
Reimbursements) 1.50%2 1.70%2 1.65%4 1.70%2
1 The Defensive Series, Blended Asset Series I, Blended Asset Series II,
and Maximum Horizon Series offered only Class A Shares during the year
ended October 31, 1997; therefore, the actual management fees and other
expenses of Class A Shares of the Series are used above.
2 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the total
annual operating expenses of the Class D Shares of the Series, as a
percentage of average daily net assets, to exceed the percentages set
forth in the table above. As a result of these reductions, the
Management Fees stated above are lower than contractual fees stated
under "Management." The Advisor reserves the right to terminate any
of its fee waivers at any time in its sole discretion. For further
information on expenses, see "Management." The following sets forth,
for Class D Shares of such Series, (i) management fees absent fee
waivers, (ii) other expenses absent expense reimbursements, (iii)
Rule 12b-1 fees and (iv) expected total operating expenses absent
fee waivers and/or expense reimbursements.
Class D Shares Defensive Blended Asset Maximum Horizon
Series Series I Series
Management Fees...........0.80% 1.00% 1.00%
Rule 12b-1 Fees...........0.50% 0.50% 0.50%
Other Expenses............1.79% 0.24% 0.55%
Total Operating Expenses..3.09% 1.74% 2.05%
3 Of the Rule 12b-1 fees for the Class D shares, up to 0.25% represents
shareholder service fees.
4 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the total
annual operating expenses of the Class D Shares of the Series, as a
percentage of average daily net assets, to exceed 1.70%.
The purpose of the table above is to assist the investor in understanding the
various costs and expenses associated with investing in the Class D Shares of
the Series. For a more complete description of the various costs and expenses
illustrated above, please refer to the Management section of this Prospectus.
Due to the continuous nature of Rule 12b-1 fees, long-term shareholders may
pay more than the equivalent of the maximum front-end sales charges otherwise
permitted by the Conduct Rules of the NASD.
<PAGE>
Example - Class D Shares
You would pay the following expenses on a $1,000 investment in Class D Shares,
assuming a) 5.0% annual return and b) redemptions at the end of each time
period:
1 year 3 years 5 years 10 years
Defensive Series $15 $47 $82 $179
Blended Asset Series I 17 54 92 201
Blended Asset Series II 17 52 90 195
Maximum Horizon Series 17 54 92 201
The example above should not be considered a representation of future
expenses. Actual expenses may be greater or lesser than those shown. The
Advisor in its discretion may terminate its voluntary fee waivers and/or
reimbursements at any time. Absent the waiver of fees or reimbursement of
expenses, the amounts in the examples above would be greater.
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Annual Operating Expenses - Class E Shares
The following information provides (i) a tabular summary of expenses relating
to the annual operating expenses of the Class E Shares of the Series and (ii)
an example illustrating the dollar cost of such expenses on a $1,000
investment.
Annual Operating Expenses of the Class E Shares of Each Series (as a
percentage of average net assets):
Defensive Blended Asset Blended Asset Maximum
Series 1 Series I 1 Series II 1 Horizon Series 1
Management Fees (After
Reduction of Fees) 0.00%2 0.96%2 1.00% 0.65%2
Rule 12b-1 Fees 3 0.25% 0.25% 0.25% 0.25%
Other Expenses (After
Expense Reimbursement) 1.00%2 0.24%2 0.15% 0.55%2
Total Operating
Expenses (After Fee
Reductions and Expense
Reimbursements) 1.25%2 1.45%2 1.40%4 1.45%2
1 The Defensive Series, Blended Asset Series I, Blended Asset Series II,
and Maximum Horizon Series offered only Class A Shares during the year
ended October 31, 1997; therefore, the actual management fees and other
expenses of Class A Shares of the Series are used above.
2 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the total
annual operating expenses of the Class E Shares of the Series, as a
percentage of average daily net assets, to exceed the percentages set
forth in the table above. As a result of these reductions, the
Management Fees stated above are lower than contractual fees stated
under "Management." The Advisor reserves the right to terminate any of
its fee waivers at any time in its sole discretion. For further
information on expenses, see "Management." The following sets forth,
for Class E Shares of such Series, (i) management fees absent fee
waivers, (ii) other expenses absent expense reimbursements, (iii) Rule
12b-1 fees and (iv) expected total operating expenses absent fee waivers
and/or expense reimbursements.
Class E Shares Defensive Blended Asset Maximum Horizon
Series Series I Series
Management Fees............0.80% 1.00% 1.00%
Rule 12b-1 Fees............0.25% 0.25% 0.25%
Other Expenses.............1.79% 0.24% 0.55%
Total Operating Expenses...2.84% 1.49% 1.80%
3 Of the Rule 12b-1 fees for the Class E Shares, up to 0.25% may represent
shareholder service fees.
4 The Advisor has agreed to waive its management fees and/or reimburse
expenses of the Series, if necessary, if such fees would cause the total
annual operating expenses of the Class E Shares of the Series, as a
percentage of average daily net assets, to exceed 1.45%.
The purpose of the table above is to assist the investor in understanding the
various costs and expenses associated with investing in the Class E Shares of
the Series. For a more complete description of the various costs and expenses
illustrated above, please refer to the Management section of this Prospectus.
Due to the continuous nature of Rule 12b-1 fees, long-term shareholders may
pay more than the equivalent of the maximum front-end sales charges otherwise
permitted by the Conduct Rules of the NASD.
Example - Class E Shares
You would pay the following expenses on a $1,000 investment in Class E Shares,
assuming a) 5.0% annual return and b) redemptions at the end of each time
period:
1 year 3 years 5 years 10 years
Defensive Series $13 $ 40 $69 $151
Blended Asset Series I 15 46 79 174
Blended Asset Series II 14 44 77 168
Maximum Horizon Series 15 46 79 174
The example above should not be considered a representation of future
expenses. Actual expenses may be greater or lesser than those shown. The
Advisor in its discretion may terminate its voluntary fee waivers and/or
reimbursements at any time. Absent the waiver of fees or reimbursement of
expenses, the amounts in the examples above would be greater.
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables provide selected per share data and ratios for the Class
A Shares of the Defensive Series, Blended Asset Series I, Blended Asset Series
II, and Maximum Horizon Series (for a share outstanding throughout the period
for the periods shown). The tables are part of the Series financial
statements, which are incorporated by reference into the Funds Statement of
Additional Information. Deloitte & Touche LLP, the Funds independent
accountants, audited the Funds financial highlights for each of the periods
shown. Additional performance information is contained in the Funds 1997
Annual Report to Shareholders and is available upon request and without charge
by calling 1-800-466-3863. Because the Funds Class B, C, D and E Shares had
not been introduced as of October 31, 1997 no financial highlights are
presented for the Class B, C, D or E Shares of the Series. These tables
should be read in conjunction with the Series financial statements and notes
thereto.
DEFENSIVE SERIES - CLASS A SHARES
For the Year For the Year
Ended Ended
10/31/97 10/31/96 1
Per share data (for a share outstanding
throughout the period):
Net asset value - Beginning of period $10.29 $10.00
Income from investment operations:
Net investment income 0.42 0.35
Net realized and unrealized gain
on investments 0.45 0.14
Total from investment operations 0.87 0.49
Less distributions to shareholders:
From net investment income (0.38) (0.20)
From net realized gain on investments (0.07) ----
Total distribution to shareholders (0.45) (0.20)
Net asset value - End of period $10.71 $10.29
Total return2 8.74% 4.94%
Ratios (to average net assets)
/ Supplemental Data:
Expenses* 1.00% 1.00%
Net investment income* 4.45% 4.26%
Portfolio turnover 60% 30%
Average commission rate paid $0.0590 $0.0691
Net assets - End of period
(000's omitted) $1,764 $ 745
*The investment advisor did not impose its management fee and paid a
portion of the Series' expenses. If these expenses had been incurred
by the Series, and had 1996 expenses been limited to that allowed by
state securities law, the net investment income per share and the
ratios would have been as follows:
Net investment income $ 0.27 $ 0.23
Ratios (to average net assets):
Expenses 2.59% 2.50%
Net investment income 2.86% 2.76%
1 The Series commenced operations on November 1, 1995.
2 Represents aggregate total return for the period indicated.
<PAGE>
BLENDED ASSET SERIES I - CLASS A SHARES
For the Year
Ended
10/31/97
Per share data (for a share outstanding
throughout each period):
Net asset value - Beginning of period $11.20
Income from investment operations:
Net investment income 0.39
Net realized and unrealized gain
(loss) on investments 1.01
Total from investment operations 1.40
Less distributions to shareholders:
From net investment income (0.44)
In excess of net investment income --
From net realized gain on
investments (0.19)
In excess of net realized gain --
Total distributions to shareholders (0.63)
Net asset value - End of period $11.97
Total return1: 13.01%
Ratios (to average net assets)
/ Supplemental Data:
Expenses* 1.20%
Net investment income* 3.39%
Portfolio turnover 50%
Average commission rate paid 3 $0.0418
Net assets - End of period (000's omitted) $21,930
*The investment advisor did not impose all or a portion of
its management fee and in some periods paid a portion of
the Series' expenses. If these expenses had been incurred
by the Series, and had 1994 and 1993 expenses been limited
to that allowed by states securities law, the net investment
income per share and ratios would have been as follows:
Net investment income $ 0.39
Ratios (to average net assets):
Expenses 1.24%
Net investment income 3.35%
1 Represents aggregate total return for the period indicated.
2 Annualized
3 Average commission rate is calculated for Series with fiscal years
beginning on or after January 1, 1995.
For the Ten For the Year
Months Ended Ended
10/31/96 1 12/31/95
Per share data (for a share
outstanding throughout each period):
Net asset value - Beginning of period $10.72 $ 9.72
Income from investment operations:
Net investment income 0.29 0.34
Net realized and unrealized gain
(loss) on investments 0.31 1.70
Total from investment operations 0.60 2.04
Less distributions to shareholders:
From net investment income (0.09) (0.34)
In excess of net investment income -- (0.01)
From net realized gain on
investments (0.03) (0.69)
In excess of net realized gain -- --
Total distributions to shareholders (0.12) (1.04)
Net asset value - End of period $11.20 $10.72
Total return1: 5.64% 21.08%
Ratios (to average net assets)
/ Supplemental Data:
Expenses* 1.20%2 1.20%
Net investment income* 3.69%2 3.64%
Portfolio turnover 85% 72%
Average commission rate paid 3 $0.0515 $0.0689
Net assets - End of period
(000's omitted) $17,794 $ 9,518
*The investment advisor did not impose all or a portion of its management
fee and in some periods paid a portion of the Series' expenses. If
these expenses had been incurred by the Series, and had 1994 and 1993
expenses been limited to that allowed by states securities law, the net
investment income per share and ratios would have been as follows:
Net investment income $ 0.28 $ 0.31
Ratios (to average net assets):
Expenses 1.31%2 1.53%
Net investment income 3.58%2 3.31%
1 Represents aggregate total return for the period indicated.
2 Annualized
3 Average commission rate is calculated for Series with fiscal years
beginning on or after January 1, 1995.
<PAGE>
For the Year
Ended
12/31/94
Per share data (for a share outstanding
throughout each period):
Net asset value - Beginning of period $10.05
Income from investment operations:
Net investment income 0.20
Net realized and unrealized gain
(loss) on investments (0.28)
Total from investment operations (0.08)
Less distributions to shareholders:
From net investment income (0.20)
In excess of net investment income --
From net realized gain on
investments (0.04)
In excess of net realized gain (0.01)
Total distributions to shareholders (0.25)
Net asset value - End of period $ 9.72
Total return1: (0.80%)
Ratios (to average net assets)
/ Supplemental Data:
Expenses* 1.20%
Net investment income* 3.40%
Portfolio turnover 45%
Average commission rate paid 3 --
Net assets - End of period (000's omitted) $4,519
*The investment advisor did not impose all or a portion of its
management fee and in some periods paid a portion of the Series'
expenses. If these expenses had been incurred by the Series,
and had 1994 and 1993 expenses been limited to that allowed by
states securities law, the net investment income per share and
ratios would have been as follows:
Net investment income $ 0.12
Ratios (to average net assets):
Expenses 2.50%
Net investment income 2.10%
1 Represents aggregate total return for the period indicated.
2 Annualized
3 Average commission rate is calculated for Series with fiscal
years beginning on or after January 1, 1995.
For the Period
9/15/93
(commencement
of operations)to
12/31/93
Per share data (for a share outstanding
throughout each period):
Net asset value - Beginning of period $10.00
Income from investment operations:
Net investment income 0.05
Net realized and unrealized gain
(loss) on investments 0.04
Total from investment operations 0.09
Less distributions to shareholders:
From net investment income (0.04)
In excess of net investment income --
From net realized gain on
investments --
In excess of net realized gain --
Total distributions to shareholders (0.04)
Net asset value - End of period $10.05
Total return1: 0.93%
Ratios (to average net assets)
/ Supplemental Data:
Expenses* 1.20%2
Net investment income* 2.47%2
Portfolio turnover 1%
Average commission rate paid 3 --
Net assets - End of period (000's omitted) $475
*The investment advisor did not impose all or a portion of its
management fee and in some periods paid a portion of the Series'
expenses. If these expenses had been incurred by the Series,
and had 1994 and 1993 expenses been limited to that allowed by
states securities law, the net investment income per share and
ratios would have been as follows:
Net investment income $ 0.02
Ratios (to average net assets):
Expenses 2.50%2
Net investment income 1.17%2
1 Represents aggregate total return for the period indicated.
2 Annualized
3 Average commission rate is calculated for Series with fiscal years
beginning on or after January 1, 1995.
<PAGE>
BLENDED ASSET SERIES II - CLASS A SHARES
For the Year
Ended
10/31/97
Per share data (for a share outstanding
throughout each period):
Net asset value - Beginning of period $13.04
Income from investment operations:
Net investment income 0.33
Net realized and unrealized gain (loss)
on investments 2.13
Total from investment operations 2.46
Less distributions to shareholders:
From net investment income (0.40)
From net realized gain on investments (0.41)
Total distributions to shareholders (0.81)
Net asset value - End of period $14.69
Total return2 19.69%
Ratios (to average net assets)
/ Supplemental Data:
Expenses 1.15%
Net investment income 2.45%
Portfolio turnover 63%
Average commission rate paid 4 $0.0436
Net assets - End of period (000's omitted) $50,922
* The investment advisor did not impose all or a portion of its
management fee and in some periods paid a portion of the Series
expenses. If these expenses had been incurred by the Series, and
had 1993 expenses been limited to that allowed by state securities
law, the net investment income per share and the ratios would have
been as follows:
Net investment income N/A
Ratios (to average net assets):
Expenses N/A
Net investment income N/A
1 Distribution from net investment income amounted to $0.0017 per share.
2 Represents aggregate total return for the period indicated.
3 Annualized.
4 Average commission rate is calculated for Series with fiscal years
beginning on or after January 1, 1995.
For the Ten
Months Ended
12/31/96
Per share data (for a share outstanding throughout
each period):
Net asset value - Beginning of period $11.95
Income from investment operations:
Net investment income 0.23
Net realized and unrealized gain (loss)
on investments 0.96
Total from investment operations 1.19
Less distributions to shareholders:
From net investment income (0.04)
From net realized gain on investments (0.06)
Total distributions to shareholders (0.10)
Net asset value - End of period $13.04
Total return2 10.01%
Ratios (to average net assets)
/ Supplemental Data:
Expenses 1.20%3*
Net investment income 2.51%3*
Portfolio turnover 57%
Average commission rate paid 4 $0.0524
Net assets - End of period (000's omitted) $32,999
* The investment advisor did not impose all or a portion of its
management fee and in some periods paid a portion of the Series
expenses. If these expenses had been incurred by the Series, and
had 1993 expenses been limited to that allowed by state securities
law, the net investment income per share and the ratios would have
been as follows:
Net investment income $ 0.23
Ratios (to average net assets):
Expenses 1.22%2
Net investment income 2.49%2
1 Distribution from net investment income amounted to $0.0017 per share.
2 Represents aggregate total return for the period indicated.
3 Annualized.
4 Average commission rate is calculated for Series with fiscal years
beginning on or after January 1, 1995.
For the Year
Ended
12/31/95
Per share data (for a share outstanding throughout
each period):
Net asset value - Beginning of period $10.12
Income from investment operations:
Net investment income 0.24
Net realized and unrealized gain (loss)
on investments 3.05
Total from investment operations 3.29
Less distributions to shareholders:
From net investment income (0.24)
From net realized gain on investments (1.22)
Total distributions to shareholders (1.46)
Net asset value - End of period $11.95
Total return2 32.64%
Ratios (to average net assets) /
Supplemental Data:
Expenses 1.20%*
Net investment income 2.53%*
Portfolio turnover 63%
Average commission rate paid 4 $0.0635
Net assets - End of period (000's omitted) $20,519
* The investment advisor did not impose all or a portion of its
management fee and in some periods paid a portion of the Series
expenses. If these expenses had been incurred by the Series,
and had 1993 expenses been limited to that allowed by state
securities law, the net investment income per share and the ratios
would have been as follows:
Net investment income $ 0.23
Ratios (to average net assets):
Expenses 1.33%
Net investment income 2.40%
1 Distribution from net investment income amounted to 0.0017 per share.
2 Represents aggregate total return for the period indicated.
3 Annualized.
4 Average commission rate is calculated for Series with fiscal years
beginning on or after January 1, 1995.
<PAGE>
For the
Period
10/12/93
For the Year (commencement
Ended of operations) to
12/31/94 12/31/93
Per share data (for a share outstanding
throughout each period):
Net asset value - Beginning of period $ 9.98 $10.00
Income from investment operations:
Net investment income 0.11 0.01
Net realized and unrealized gain
(loss) on investments 0.24 (0.03)
Total from investment operations 0.35 (0.02)
Less distributions to shareholders:
From net investment income (0.12) (0.00)1
From net realized gain on investments (0.09) --
Total distributions to shareholders (0.21) (0.00)
Net asset value - End of period $10.12 $9.98
Total return2 3.52% (0.18%)
Ratios (to average net assets) /
Supplemental Data:
Expenses 1.20%* 1.20%3*
Net investment income 2.12%* 1.94%3*
Portfolio turnover 19% 0%
Average commission rate paid 4 -- --
Net assets - End of period (000's omitted) $7,214 $ 475
* The investment advisor did not impose all or a portion of its management
fee and in some periods paid a portion of the Series expenses. If these
expenses had been incurred by the Series, and had 1993 expenses been
limited to that allowed by state securities law, the net investment income
per share and the ratios would have been as follows:
Net investment income $ 0.05 $ 0.01
Ratios (to average net assets):
Expenses 2.31% 2.50%3
Net investment income 1.01% 0.64%3
1 Distribution from net investment income amounted to $0.0017 per share.
2 Represents aggregate total return for the period indicated.
3 Annualized.
4 Average commission rate is calculated for Series with fiscal years
beginning on or after January 1, 1995.
<PAGE>
MAXIMUM HORIZON SERIES - CLASS A SHARES
For the Year For the Year
Ended Ended
10/31/97 10/31/96 1
Per share data (for a share outstanding
throughout the period):
Net asset value - Beginning of period $11.38 $10.00
Income from investment operations:
Net investment income 0.10 0.15
Net realized and unrealized gain
on investments 2.92 1.36
Total from investment operations 3.02 1.51
Less distributions to shareholders:
From net investment income (0.08) (0.13)
From net realized gains (0.08) --
Total distributions to shareholders (0.16) (0.13)
Net asset value - End of period $14.24 $11.38
Total return2 26.77% 15.21%
Ratios (to average net assets) /
Supplemental Data:
Expenses* 1.20% 1.20%
Net investment income* 0.94% 1.71%
Portfolio turnover 115% 95%
Average commission rate paid $0.0486 $0.0655
Net assets - End of period (000's omitted)$ 9,852 $ 1,574
*The investment advisor did not impose all or a portion of its
management fee and paid a portion of the Series' expenses. If
these expenses had been incurred by the Series, and had 1996
expenses been limited to that allowed by state securities law,
the net investment income per share and the ratios would have
been as follows:
Net investment income $ 0.06 $ 0.04
Ratios (to average net assets):
Expenses 1.55% 2.50%
Net investment income 0.59% 0.41%
1 The Series commenced operations on November 1, 1995.
2 Represents aggregate total return for the period indicated.
<PAGE>
The Fund
The Fund is an open-end management investment company incorporated under
the laws of the State of Maryland on July 26, 1984. The Fund offers separate
series of units of beneficial interest ("shares"). This Prospectus relates
to the Defensive Series, Blended Asset Series I, Blended Asset Series II, and
the Maximum Horizon Series, each of which is offered through five separate
classes of shares, Class A, B, C, D and E Shares, respectively. Class A
Shares of each Series are offered to investors who purchase their shares
directly from Manning & Napier Investor Services, Inc. (the "Distributor").
Class B, C, D and E Shares are offered only through financial
intermediaries which provide to the Fund and its shareholders
varying levels of distribution and shareholder services as described
under "Distribution of Fund Shares" below. Information regarding the Funds
other series is contained in separate prospectuses that may be obtained
from Exeter Fund, Inc., P.O. Box 41118, Rochester, New York 14604 or by
calling 1-800-466-3863. The Defensive Series, Blended Asset Series I,
Blended Asset Series II, and Maximum Horizon Series are diversified funds.
Risk and Investment Objectives and Policies
Defensive Series
The primary objective of the Defensive Series is preservation of capital
(i.e., to minimize the risk of negative returns), with a secondary objective
of long-term growth. Exeter Asset Management (the "Advisor") will seek to
achieve this objective by using a conservative asset mix as well as
conservative investment strategies within those asset classes. This
conservative investment approach which attempts to protect capital while
simultaneously seeking growth opportunities is what is intended by use of the
term "defensive". From time to time, the Advisor will vary the proportions
invested in common stocks, income-producing securities (e.g., debt securities
and preferred stock) or cash (including foreign currency) and cash equivalents
depending on its view of their relative attractiveness in light of market and
economic conditions. Because the Defensive Series' investments fluctuate in
value, the Series' shares will fluctuate in value. In pursuit of its primary
objective, the Defensive Series will, under normal circumstances, invest a
substantial portion of its assets in certain debt securities, preferred stocks
or common stocks whose principal characteristic is income production rather
than growth. Such securities afford less opportunity for growth than
traditional common stocks but they entail less risk of loss and may also offer
some opportunity for growth of capital as well as for income and relative
stability. There is no assurance that the Defensive Series will attain its
objective.
The Series' investment objective is not fundamental and may be changed by
the Board of Directors without shareholder approval; however, it is the Board
of Directors' policy to notify shareholders prior to any material change in a
Series' objective.
Blended Asset Series I
The investment objective of the Blended Asset Series I is to seek with
equal emphasis long-term growth and preservation of capital. From time to
time, the Advisor will vary the proportions invested in common stocks,
income-producing securities (e.g., debt securities and preferred stock) or
cash (including foreign currency) and cash equivalents depending on its view
of their relative attractiveness in light of market and economic conditions.
Because the Blended Asset Series Is investments fluctuate in value, the
Blended Assets Series I shares will fluctuate in value. The Advisor seeks to
reduce the risk of negative returns while seeking to obtain capital growth
when it believes valuations and market conditions are favorable. In this
process the Advisor will work to try to dampen the year-to-year swings in the
market value in order to generate a more stable rate of growth for this
portfolio relative to an investment in the general stock market. There is no
assurance that the Blended Asset Series I will attain its objective.
The Series' investment objective is not fundamental and may be changed
by the Board of Directors without shareholder approval; however, it is the
Board of Directors' policy to notify shareholders prior to any material change
in a Series' objective.
<PAGE>
Blended Asset Series II
The primary objective of the Blended Asset Series II is to provide
long-term growth of capital. The secondary objective of the Blended Asset
Series II is the preservation of capital. From time to time, the Advisor will
vary the proportions invested in common stocks, income-producing securities
(e.g., debt securities and preferred stock) or cash (including foreign
currency) and cash equivalents depending on its view of their relative
attractiveness in light of market and economic conditions. Because the
Blended Asset Series IIs investments fluctuate in value, the Blended Asset
Series II shares will fluctuate in value. In pursuit of its primary
objective, the Blended Asset Series II will often invest more than 50% in
common stocks, and securities convertible into common stocks, of companies the
Advisor believes have long-term growth potential. However, in light of the
secondary objective of the Blended Asset Series II, it may, even under normal
circumstances, invest a substantial portion of its assets in certain debt
securities, preferred stocks or common stocks whose principal characteristic
is income production rather than growth. Such securities afford less
opportunity for growth than common stocks but they entail less risk of loss
and may also offer some opportunity for growth of capital as well as for
income and relative stability. There is no assurance that the Blended Asset
Series II will attain its objective.
The Series' investment objective is not fundamental and may be changed by
the Board of Directors without shareholder approval; however, it is the Board
of Directors' policy to notify shareholders prior to any material change in a
Series' objective.
Maximum Horizon Series
The primary objective of Maximum Horizon Series is to achieve the high
level of long-term capital growth typically associated with the stock market.
The Advisor will normally concentrate the investments of the Series in common
stocks, but may also utilize income-producing securities (e.g., debt
securities and preferred stock) or cash (including foreign currency) and cash
equivalents depending on its view of their relative attractiveness in light of
market and economic conditions. Because the Maximum Horizon Series
investments fluctuate in value, the shares of the Series will also fluctuate
in value. There is no assurance that the Maximum Horizon Series will attain
its objective.
The Series' investment objective is not fundamental and may be changed by
the Board of Directors without shareholder approval; however, it is the Board
of Directors' policy to notify shareholders prior to any material change in a
Series' objective.
General
In pursuit of their investment objectives, the Series may invest in a
wide variety of equity and debt securities. Equity securities consist of
common stocks, securities convertible thereto, and warrants. None of the
Series intends to invest more than 5% of the value of its total net assets in
warrants. The principal factor in selecting convertible bonds will be the
potential to benefit from movement in the stock price. There will be no
minimum rating standards for the debt aspects of such securities. Convertible
bonds purchased by a Series may be subject to the risk of being called by the
issuer.
The debt securities in which each Series may invest consist of corporate
debt securities, mortgage-backed securities and obligations issued or
guaranteed as to payment of principal and interest by the U.S. Government or
its agencies or instrumentalities. Each Series may invest in such securities
without regard to term or rating and may, from time to time, invest up to 20%
of its assets in corporate debt securities rated below investment grade, i.e.,
rated lower than BBB by Standard & Poor's Corporation ("S&P") or Baa by
Moody's Investor Service, Inc.("Moody's"), or unrated securities of comparable
quality as determined by the Advisor. These securities are commonly known as
junk bonds. Ratings of corporate bonds including lower rated bonds are
included in the Appendix. See "Risk and Additional Information about
Investment Policies-High Yield Debt Securities."
For temporary defensive purposes during periods when the Advisor
determines that market conditions warrant, each Series may invest up to 100%
of its assets in money market instruments (including securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
certificates of deposit, time deposits and bankers acceptances issued by banks
or savings and loan associations deemed creditworthy by the Advisor,
commercial paper rated A-1 by S&P or Prime-1 by Moody's, repurchase agreements
involving such securities and shares of other investment companies as
permitted by applicable law) and may hold a portion of its assets in cash.
For a description of the above ratings, see the Appendix and the Statement of
Additional Information.
In addition, each of the Series may, to varying degrees, use certain
techniques and strategies discussed below under Risk and Additional
Information about Investment Policies.
<PAGE>
It is anticipated that the long-term average annual portfolio turnover
rate for each Series will not exceed 100%; however, there may be times that
the Advisor will sell securities depending on market conditions and
opportunities, and the portfolio turnover rate for each Series may reach
higher levels. Higher portfolio turnover may increase the distributions which
a Series is required to make to shareholders, and therefore lead to higher tax
liability for shareholders with taxable accounts (see "Dividends and Tax
Status"). Higher levels of portfolio turnover will also lead to higher
trading costs, which are reflected in each Series operating expenses (see
"Financial Highlights" and "Management").
Risk and Additional Information about Investment Policies
Set forth below is further information about certain types of securities
in which the Series may invest, as well as information about additional types
of investments and certain strategies the Series may pursue. Unless otherwise
noted, these policies have been voluntarily adopted by the Board of Directors
based upon current circumstances and may be changed or amended by action of
the Board of Directors without prior approval of the Series' shareholders.
Additional information concerning these strategies and their related risks is
contained in the Statement of Additional Information.
Foreign Securities
Each Series may invest up to 25% of its assets in foreign securities
which are not publicly traded in the United States. Each Series will invest
no more than 25% of its assets in securities issued by any one foreign
government. Each Series may invest without limit in equity securities of
foreign issuers that are listed on a domestic securities exchange or are
represented by American Depository Receipts that are listed on a domestic
securities exchange or are traded in the United States on the over-the-counter
market. Each Series' restrictions on investment in foreign securities are
fundamental policies that cannot be changed without the approval of a
majority, as defined in the Investment Company Act of 1940 (the "1940 Act"),
of the outstanding voting securities of the Series.
With respect to the bond investments within each portfolio, each Series
generally emphasizes investments in U.S. Government securities and companies
domiciled in the United States; however, it may invest up to 25% of its assets
in foreign securities of the same types and quality as the domestic securities
in which the Series may invest when the anticipated performance of foreign
securities is believed by the Advisor to offer more potential than domestic
alternatives in keeping with the investment objective of the Series. Foreign
securities may be denominated either in U.S. dollars or foreign currencies.
There are risks in investing in foreign securities not typically involved
in domestic investing. An investment in foreign securities may be affected by
changes in currency rates and in exchange control regulations. Foreign
companies are frequently not subject to the accounting and financial reporting
standards applicable to domestic companies, and there may be less information
available about foreign issuers. There is frequently less government
regulation of foreign issuers than in the United States. In addition,
investments in foreign countries are subject to the possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect the value of those
investments. There may also be imposition of withholding taxes. Foreign
financial markets may have less volume and longer settlement periods than U.S.
markets which may cause liquidity problems for a Series. In addition, costs
associated with transactions on foreign markets are generally higher than for
transactions in the U.S.
Obligations of foreign governmental entities are subject to various types
of governmental support and may or may not be supported by the full faith and
credit of a foreign government.
Repurchase Agreements
Each Series may enter into repurchase agreements with respect to
portfolio securities. Under the terms of a repurchase agreement, the Series
purchases securities ("collateral") from various financial institutions such
as banks and broker-dealers (the "seller") which the Advisor deems to be
creditworthy, subject to the sellers agreement to repurchase them at a
mutually agreed-upon date and price. The repurchase price generally equals
the price paid by the Series plus interest negotiated on the basis of current
short-term rates (which may be more or less than the rate on the underlying
portfolio securities).
<PAGE>
The seller under a repurchase agreement is required to maintain the value
of the collateral held pursuant to the agreement at not less than 100% of the
repurchase price, and securities subject to repurchase agreements are held by
the Series' custodian either directly or through a securities depository.
Default by the seller would, however, expose the Series to possible loss
because of adverse market action or delay in connection with the disposition
of the underlying securities. Repurchase agreements are considered to be
loans by the Series under the 1940 Act.
Securities Lending
Each Series may seek to increase its income by lending portfolio
securities. Such loans will usually be made to member firms (and subsidiaries
thereof) of the New York Stock Exchange and to member banks of the Federal
Reserve System, and would be required to be secured continuously by collateral
in liquid securities maintained on a current basis at an amount at least equal
to the market value of the securities loaned. If the Advisor determines to
make securities loans, the value of the securities loaned would not exceed 30%
of the value of the total assets of the Series.
U.S. Government Securities
Each Series may purchase securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities. Direct obligations of the U.S.
Government include bills, notes and bonds issued by the U.S. Treasury and
obligations issued or guaranteed by U.S. agencies or instrumentalities. The
obligations of certain U.S. agencies (e.g., the Government National Mortgage
Association) are backed by the full faith and credit of the U.S. Government or
are supported by the agencies right to borrow from the U.S. Treasury. The
issues of other agencies (e.g., Fannie Mae) are supported only by the credit
of the agency.
Short Sales
Each Series may within limits engage in short sales "against the box."
A short sale is the sale of borrowed securities; a short sale against the
box means that a Series owns securities equivalent to those sold short. No
more than 25% of the net assets (taken at current value) of a Series may be
held as collateral for such sales at any one time. Such short sales can be
used as a hedge.
Forward Commitments or Purchases on a When-Issued Basis
Each Series may enter into forward commitments or purchase securities on
a when-issued basis. These securities normally are subject to settlement
within 45 days of the purchase date. The interest rate realized on these
securities is fixed as of the purchase date and no interest accrues to the
Series before settlement. These securities are subject to market fluctuation
due to changes in market interest rates. Each Series will enter into these
arrangements with the intention of acquiring the securities in question and
not for speculative purposes and will maintain a segregated account with its
custodian consisting of liquid assets in an amount at least equal to the
purchase price.
Interest Rate Risk
The value of the fixed income securities held by the Series will vary
inversely to changes in prevailing interest rates. Thus, if interest rates
have increased from the time a security was purchased, such security, if sold,
might be sold at a price less than its cost. Similarly, if interest rates
have declined from the time a security was purchased, such security, if sold,
might be sold at a price greater than its purchase cost. In either instance,
if the security was purchased at face value and held to maturity, no gain or
loss would be realized.
<PAGE>
Mortgage-Backed Securities
Each Series may purchase mortgage-backed securities which represent an
interest in a pool of mortgage loans. The primary government issuers or
guarantors of mortgage-backed securities are the Government National Mortgage
Association ("GNMA"), Fannie Mae, and the Federal Home Loan Mortgage
Corporation. Mortgage-backed securities may also be issued by other U.S. and
foreign government agencies and non-governmental entities which consist of
collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs"). Each Series may purchase CMOs that are rated
in one of the top two rating categories by S&P or Moody's. The mortgages
backing these securities include conventional thirty-year fixed rate
mortgages, graduated payment mortgages, and adjustable rate mortgages.
CMOs and REMICs backed solely by GNMA certificates or other mortgage
pass-throughs issued or guaranteed by the U.S. Government or its agencies and
instrumentalities may be supported by various types of insurance. However,
the guarantees or insurance do not extend to the mortgage-backed securities
value, which is likely to vary inversely with fluctuations in interest rates.
Mortgage-backed securities are in most cases pass-through instruments,
through which the holder receives a share of all interest and principal
payments from the mortgages underlying the certificate. Because the
prepayment characteristics of the underlying mortgages vary, it is not
possible to predict accurately the average life or realized yield of a
particular issue of pass-through certificates. During periods of declining
interest rates, prepayment of mortgages underlying mortgage-backed securities
can be expected to accelerate. When the mortgage obligations are prepaid, the
Series reinvests the prepaid amounts in securities, the yield of which
reflects interest rates prevailing at the time. Moreover, prepayment of
mortgages which underlie securities purchased at a premium could result in
capital losses.
High Yield Debt Securities
High risk, high yield securities rated below BBB or lower by S&P or Baa
or lower by Moody's are considered to have speculative characteristics and
involve greater risk of default or price changes due to changes in the issuers
credit-worthiness. Market prices of these securities may fluctuate more than
high-rated securities and they are difficult to price at times because they
are more thinly traded and less liquid securities. Market prices may decline
significantly in periods of general economic difficulty which may follow
periods of rising interest rates. Securities in the lowest rating category
may be in default. For these reasons, it is the Series policy not to rely
primarily on ratings issued by established credit rating agencies, but to
utilize such ratings in conjunction with the Advisors own independent and
ongoing review of credit quality. In the event a security is downgraded below
these ratings after purchase, the Advisor will review and take appropriate
action with regard to the security. Each Series will also seek to minimize
risk by diversifying its holdings.
Zero-Coupon Bonds
Some of the securities in which the Series invest may include so-called
"zero-coupon" bonds. Zero-coupon bonds are issued at a significant discount
from face value and generally pay interest only at maturity rather than at
intervals during the life of the security. Each Series is required to accrue
and distribute income from zero-coupon bonds on a current basis, even though
it does not receive that income currently in cash. Thus, the Series may have
to sell investments to obtain cash needed to make income distributions. The
discount in the absence of financial difficulties of the issuer decreases as
the final maturity of the security approaches. Zero-coupon bonds can be sold
prior to their maturity date in the secondary market at the then prevailing
market value, which depends primarily on the time remaining to maturity,
prevailing level of interest rates and the perceived credit quality of the
issues. The market prices of zero-coupon securities are subject to greater
fluctuations in response to changes in market interest rates than bonds which
pay interest currently.
Variable and Floating Rate Instruments
Certain of the obligations purchased by a Series may carry variable or
floating rates of interest, may involve a conditional or unconditional demand
feature and may include variable amount master demand notes. Such instruments
bear interest at rates which are not fixed, but which vary with changes in
specified market rates or indices, such as a Federal Reserve composite index.
The interest rate on these securities may be reset daily, weekly, quarterly,
or at some other interval, and it may have a floor or ceiling rate. There is
a risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates.
<PAGE>
Hedging Techniques
Each Series has reserved the right, subject to authorization by the Board
of Directors prior to implementation, to engage in certain strategies in an
attempt to hedge the Series portfolios, i.e., to reduce the overall level of
risk that normally would be expected to be associated with their investments.
Each Series may write covered call options on common stocks; may purchase and
sell (on a secured basis) put options; and may engage in closing transactions
with respect to put and call options. Each Series also may purchase forward
foreign currency exchange contracts to hedge currency exchange rate risk. In
addition, each Series is authorized to purchase and sell stock index futures
contracts and options on stock index futures contracts. Each Series is also
authorized to conduct spot (i.e., cash basis) currency transactions or to use
currency futures contracts and options on futures contracts and foreign
currencies in order to protect against uncertainty in the future levels of
foreign currency exchange rates. These strategies are primarily used for
hedging purposes; nevertheless, there are risks associated with these
strategies as described below.
Options on Securities
A call option is a short-term contract pursuant to which the purchaser of
the option, in return for a premium, has the right to buy the security
underlying the option at a specified price at any time during the term of the
option. The writer of a call option, who receives the premium, has the
obligation, upon exercise during the option term, to deliver the underlying
security against payment of the exercise price. Conversely, a put option
gives its purchaser, in return for a premium, the right to sell the underlying
equity security at a specified price during the option term to the writer of
the put option, who receives the premium. Each Series will sell call options
only on a "covered basis", i.e., it will own the underlying security at all
times, and will write put options only on a secured basis, i.e., it will
maintain an amount equal to the exercise price in a segregated account at all
times. Each Series may engage in option transactions for hedging purposes and
to realize a greater current return, through the receipt of premiums, than
would be earned on the underlying securities alone. Options traded in the
over-the-counter market will be considered illiquid unless the Fund has
entered into arrangements with U.S. Government securities dealers to dispose
of such options at a formula price based on a multiple of the original premium
plus the amount for which the option is "in the money."
Stock Index Futures Contracts and Options on Stock Index Futures Contracts
A stock index futures contract is a bilateral agreement pursuant to which
one party agrees to accept, and the other party agrees to make, delivery of an
amount of cash equal to a specified dollar amount times the difference between
the stock index value at the close of trading of the contract and the price at
which the futures contract is originally struck. No physical delivery of the
stocks comprising the index is made. Options on stock index futures contracts
give the purchaser the right, in return for the premium paid, to assume a long
or short position in a futures contract.
Futures Contracts
Each Series may purchase and sell financial futures contracts on debt
securities on a commodities exchange or board of trade for certain hedging,
return enhancement and risk management purposes in accordance with applicable
regulations. A financial futures contract is an agreement to purchase or sell
an agreed amount of securities at a set price for delivery in the future.
None of the Series may purchase or sell futures contracts if immediately
thereafter the sum of the amount of initial margin deposits on any such
futures (plus deposits on any other futures contracts and premiums paid in
connection with any options or futures contracts) that do not constitute bona
fide hedging under the Commodity Futures Trading Commission (CFTC) rules would
exceed 5% of the liquidation value of a Series' total assets after taking into
account unrealized profits and losses on such contracts. In addition, the
value of all futures contracts sold will not exceed the total market value of
the Series portfolio. The Fund will comply with guidelines established by the
Securities and Exchange Commission with respect to covering of obligations
under futures contracts and will set aside cash and/or liquid securities in a
segregated account with its custodian in the amount prescribed.
<PAGE>
A Series' successful use of futures contracts depends on the Advisor's
ability to accurately predict the direction of the market and is subject to
various additional risks. The correlation between movements in the price of a
futures contract and the price of the security being hedged is imperfect and
there is a risk that the value of the security being hedged may increase or
decrease at a greater rate than the related futures contract, resulting in a
loss to the Series. Certain futures exchanges or boards of trade have
established daily price limits based on the amount of the previous days
settlement price. These daily limits may restrict the Series ability to
repurchase or sell certain futures contracts on any particular day.
Forward Foreign Currency Exchange Contracts
A Series' use of forward foreign currency contracts is limited to hedging
against movements in the value of foreign currencies relative to the U.S.
dollar in connection with specific portfolio transactions or with respect to
existing portfolio positions denominated in such currencies. A transaction
hedge involves the purchase or sale of a forward contract with respect to a
specific receivable or payable of the Series while a position hedge relates to
a specific portfolio holding. A forward foreign currency exchange contract
involves an obligation to purchase or sell a specified currency at a future
date at a price set at the time of the contract. Foreign currency exchange
contracts do not eliminate fluctuations in the values of portfolio securities
but rather allow the Series to establish a rate of exchange for a future point
in time. With respect to any such forward foreign currency contract, it will
not generally be possible to match precisely the amount covered by that
contract and the value of the securities involved due to the changes in the
values of such securities resulting from market movements between the date the
forward contract is entered into and the date it matures. In addition, while
forward contracts may offer protection from losses resulting from declines in
the value of a particular foreign currency, they also limit potential gains
which might result from increases in the value of such currency. Based on
current legal interpretation, the Series do not consider forward foreign
currency exchange contracts to be commodities or commodity contracts for
purposes of the Series fundamental restrictions concerning investment in
commodities or commodity contracts, as set forth in the Statement of
Additional Information.
Currency Futures Contracts and Options on Futures Contracts
A currency futures contract is an agreement for the purchase or sale for
future delivery of foreign currencies. A "sale" of a currency futures
contract creates an obligation to deliver the foreign currencies called for by
the contract at a specified price on a specified date while a "purchase" of a
currency futures contract creates an obligation to acquire the foreign
currencies called for by the contract at a specified price on a specified
date. Each Series will only enter into futures contracts which are traded on
national or foreign futures exchanges and which are standardized as to
maturity date and the underlying financial instrument. Options on currency
futures contracts give the purchaser the right, in return for the premium
paid, to assume a long or short position in the futures contract. None of the
Series may purchase or sell future contracts if immediately thereafter the sum
of the amount of initial margin deposits on any such futures (plus deposits on
any other futures contracts and premiums paid in connection with any options
or futures contracts) that do not constitute "bona fide hedging" under CFTC
rules would exceed 5% of the liquidation value of a Series' total assets after
taking into account unrealized profits and losses on such contracts. In
addition, the value of all futures contracts sold will not exceed the total
market value of the Series portfolio.
Foreign Currency Options
A call option on a foreign currency is a short-term contract pursuant to
which the purchaser of the option, in return for a premium, has the right to
buy the currency underlying the option at a specified price at any time during
the term of the option. The writer of a call option, who receives the
premium, has the obligation, upon exercise of the option during the option
term, to deliver the underlying currency against payment of the exercise
price. Conversely, a put option on a foreign currency gives its purchaser, in
return for a premium, the right to sell the underlying currency at a specified
price during the option term to the writer of the put option, who receives the
premium.
Risks Associated with Hedging Strategies
There are risks associated with the hedging strategies described above,
including the following: (1) the success of a hedging strategy may depend on
the ability of the Advisor to accurately predict movements in the prices of
individual securities, fluctuations in domestic and foreign markets and
currency exchange rates, and movements in interest rates; (2) there may be an
imperfect correlation between the changes in market value of the securities
held by the Series and the prices of currency contracts, options, futures and
options on futures; (3) there may not be a liquid secondary market for a
currency contract, option, futures contract or futures option; (4) trading
restrictions or limitations may be imposed by an exchange; and (5) government
regulations, particularly requirements for qualification as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), may restrict trading in forward currency contracts, options, futures
contracts and futures options.
<PAGE>
Principal Investment Restrictions
Each Series is subject to certain investment restrictions which are
fundamental policies that cannot be changed without the approval of the
holders of a majority, as defined in the 1940 Act, of the Series outstanding
shares.
Each Series may borrow money, but only from a bank for temporary or
emergency purposes in amounts not exceeding 10% of the Series' total assets,
and the Series will not make additional investments while borrowings greater
than 5% of its total assets are outstanding.
None of the Series may, with respect to 75% of its total assets, invest
more than 5% of the value of its total assets at the time of investment in
securities of any one issuer (other than obligations issued or guaranteed by
the United States Government, its agencies or its instrumentalities). None of
the Series may purchase more than 10% of the outstanding voting securities of
any one issuer.
None of the Series may invest 25% or more of the value of its total
assets in securities of issuers in any one industry (other than U.S.
Government Securities).
None of the Series will invest more than 10% of its total net assets in
securities of issuers that are restricted from being sold to the public
without registration under the Securities Act of 1933 and illiquid securities,
including repurchase agreements with maturities of greater than seven days.
Each of the Series may purchase shares of closed-end investment companies
that are traded on national exchanges to the extent permitted by applicable
law.
The Defensive Series and the Maximum Horizon Series may both invest
assets in securities of any other open-end investment company (1) by purchase
in the open market involving only customary brokers' commissions, (2) in
connection with mergers, acquisitions of assets, or consolidation, or (3) as
otherwise permitted by law, including the 1940 Act.
None of the Series may make loans, but each may invest in debt securities
and repurchase agreements and may engage in securities lending.
Additional information about the Series' investment restrictions is
contained in the Statement of Additional Information.
Management
The overall business and affairs of the Fund are managed by the Fund's
Board of Directors. The Board approves all significant agreements between the
Fund and persons or companies furnishing services to the Fund, including the
Fund's agreements with its investment advisor, custodian and distributor. The
day-to-day operations of the Fund are delegated to the Fund's officers and to
Exeter Asset Management (the "Advisor") a division of Manning & Napier
Advisors, Inc. ("MNA"), 1100 Chase Square, Rochester, New York 14604. A
committee made up of investment professionals and analysts makes all the
investment decisions for the Fund.
The Advisor acts as investment advisor to the Fund. Mr. William Manning
controls the Advisor by virtue of his ownership of the securities of MNA.
The Advisor also is generally responsible for supervision of the overall
business affairs of the Fund including supervision of service providers to the
Fund and direction of the Advisor's directors, officers or employees who may
be
elected as officers of the Fund to serve as such.
<PAGE>
As of the date of this Prospectus, the Advisor and MNA supervised over
$7.5 billion in assets of clients, including both individuals and
institutions. For its services to the Series under its investment advisory
agreement, the Fund pays the Advisor a fee, computed daily and payable
monthly, at an annual rate of .80% for the Defensive Series and 1.00% for the
Blended Asset Series I, Blended Asset Series II, and the Maximum Horizon
Series of the Series' daily net assets. In addition, the Advisor is separately
compensated for acting as transfer agent (the "Transfer Agent") for the
Series. The Fund is responsible for its operating expenses, including: (i)
interest and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of its Directors other than those affiliated with
the Advisor; (v) legal and audit expenses; (vi) fees and expenses of the
Fund's custodian, and accounting services agent, if obtained for the Fund
from an entity other than the Advisor; (vii) expenses incidental to the
issuance of its shares, including issuance on the payment of, or reinvestment
of, dividends and capital gain distributions; (viii) fees and expenses
incidental to the registration under federal or state securities laws of the
Fund or its shares; (ix) expenses of preparing, printing and mailing reports
and notices and proxy material to shareholders of the Fund; (x) all other
expenses incidental to holding meetings of the Fund's shareholders; (xi) dues
or assessments of or contributions to the Investment Company Institute or any
successor; and (xii) such non-recurring expenses as may arise, including
litigation affecting the Fund and the legal obligations with respect to which
the Fund may have to indemnify its officers and directors.
Distribution of Fund Shares
Manning & Napier Investor Services, Inc. (the "Distributor") acts
as distributor of Fund shares and is located at the same address as the
Advisor
and the Fund. The Fund has adopted a distribution agreement with respect to
each Class of shares and related plans of distribution with respect to Class
B, C, D and E Shares (the "Plans") pursuant to Rule 12b-1 under the 1940 Act.
Class A Shares are offered to investors who purchase their shares directly
from the Distributor and are not subject to distribution or shareholder
servicing fees. Class B, C, D and E Shares are offered only by or through
investment dealers, banks or financial service firms that provide
distribution, administrative and/or shareholder services ("Financial
Intermediaries").
The Distributor receives distribution and services fees, at the rates set
forth below, for providing distribution and/or shareholder services to the
Class B, C, D and E Shares. The Distributor expects to allocate most of its
distribution fees and shareholder service fees to Financial Intermediaries
that enter into shareholder servicing agreements ("Servicing Agreements") with
the Distributor. The different Classes permit the Fund to allocate an
appropriate amount of fees to a Financial Intermediary in accordance with the
level of services it agrees to provide under its Servicing Agreement.
As compensation for providing distribution and shareholders services for
the Class B Shares, the Distributor receives a distribution fee equal to .75%
of the Class B Shares' average daily net assets and a shareholder servicing
fee equal to .25% of the Class B Shares' average daily net assets. As
compensation for providing distribution and shareholder services for the Class
C Shares, the Distributor receives an aggregate distribution and shareholder
servicing fee equal to .75% of the Class C Shares' average daily net assets.
As compensation for providing distribution and shareholders service for the
Class D Shares, the Distributor receives an aggregate distribution and
shareholder servicing fee equal to .50% of the Class D Shares'average daily net
assets. The shareholder services component of the foregoing fees for Classes
C and D is limited to .25% of the average daily net assets of the respective
class. As compensation for providing distribution services for the Class E
Shares, the Distributor receives an aggregate distribution and shareholder
servicing fee equal to .25% of the average daily net assets of the Class E
Shares. The Distributor may, in its discretion, voluntarily waive from time
to time all or any portion of its distribution fee.
Payments under the Plans are made as described above regardless of the
Distributor's actual cost of providing distribution services and may be used
to pay the Distributor's overhead expenses. If the cost of providing
distribution services to the Fund is less than the payments received,
the unexpended portion of the distribution fees may be retained as profit by
the Distributor.
The Distributor may from time to time and from its own resources pay or
allow additional discounts or promotional incentives in the form of cash or
other compensation (including merchandise or travel) to Financial
Intermediaries and it is free to make additional payments out of its own
assets to promote the sale of Fund shares. Similarly, the Advisor may, from
its own resources, defray or absorb costs related to distribution, including
compensation of employees who are involved in distribution.
<PAGE>
Yield and Total Return
From time-to-time each Series may advertise its yield and total return.
Both yield and total return figures are based on historical earnings and are
not intended to indicate future performance. The "total return" of a Series
refers to the average annual compounded rates of return over one-, five-, and
ten-year periods or for the life of the Series (as stated in the
advertisement) that would equate an initial amount invested at the beginning
of a stated period to the ending redeemable value of the investment, assuming
the reinvestment of all dividend and capital gains distributions. The
respective performance figures for the Classes will differ because of the
different distribution and/or shareholder services fees charged to Class B, C,
D and E Shares.
The "30-day yield" of a Series is calculated by dividing the net
investment income per share earned during a 30-day period by the net asset
value per share on the last day of the period. Net investment income includes
interest and all recurring and nonrecurring charges that have been applied
to all shareholder accounts. The yield calculation assumes that net
investment income earned over 30 days is compounded monthly for six months and
then annualized. Methods used to calculate advertised yields are standardized
for all stock and bond mutual funds. However, these methods differ from the
accounting methods used by a Series to maintain its books and records, and so
the advertised 30-day yield may not fully reflect the income paid to your own
account or the yield reported in a Series' reports to shareholders.
Purchases, Exchanges and Redemptions of Shares
Purchases and redemptions of shares of the Series may be made on any day
the New York Stock Exchange is open for trading.
Purchases
The minimum initial investment in each class of the Series is $2,000 and
subsequent purchases must be at least $100. The minimum initial investment is
waived for participants in the Automatic Investment Plan (see "Automatic
Investment Plan" below) and for shareholders who purchase shares through
Financial Intermediaries that provide sub-accounting services to the Fund.
The Distributor reserves the right to waive these minimum initial or
subsequent investment requirements in its sole discretion. The Distributor
has the right to refuse any order.
A purchase order will be effective as of the day received by the
Distributor, Transfer Agent, or its agents, if the order is received before
the time that the Fund calculates net asset values (normally, 4:00 p.m.
Eastern time) by the Distributor, Transfer Agent, or its agents. Payment may
be made by check or readily available funds. The purchase price of shares of
each Class of the Series is the net asset value next determined after a
purchase order is effective.
The shares of the Series may be purchased in exchange for securities to
be included in the Series, subject to the Advisor's determination that
these securities are acceptable. Securities accepted in an exchange will be
valued at market value. All accrued interest and purchase or other rights
which are reflected in the market price of accepted securities at the time of
valuation become the property of the Series and must be delivered by the
shareholder to the Series upon receipt from the issuer.
The Advisor will not accept securities in exchange for shares of a Series
unless (1) such securities are appropriate in the Series at the time of the
exchange; (2) the shareholder represents and agrees that all securities
offered to the Series are not subject to any restrictions upon their sale by
the Series under the Securities Act of 1933, or otherwise; and (3) prices are
available from an independent pricing service approved by the Funds Board of
Directors.
Automatic Investment Plan
Shareholders may purchase shares regularly through the Automatic
Investment Plan with a pre-authorized draft drawn on a checking account.
Under this plan, the shareholder may elect to have a specified amount invested
on a regular schedule. The minimum amount of each automatic investment is
$25. The amount specified by the shareholder will be withdrawn from the
shareholder's bank account using the pre-authorized draft. This amount will
be invested at the applicable share price determined on the date the amount is
available for investment. Participation in the Automatic Investment Plan may
be discontinued either by the Fund or the shareholder upon 30 days' prior
written notice to the other party. A shareholder who wishes to enroll in the
Automatic Investment Plan may do so by completing the applicable section of
the Account Application Form or contacting the Fund for an Automatic
Investment Plan Form.
<PAGE>
Exchanges between Series
As permitted pursuant to any rule, regulation or order promulgated by the
Securities and Exchange Commission, some or all of the shares of a Class in an
account for which payment has been received by the Fund may be exchanged for
shares of the same Class of any of the other Series of the Exeter Fund, Inc.
that offer that Class at the net asset value next determined after an exchange
order is effective. Shareholders may effect up to 4 exchanges in a 12-month
period without charge. Subsequent exchanges are subject to a fee of $15.
Exchanges will be made after instructions in writing or by telephone are
received by the Transfer Agent in proper form (i.e., if in writing - signed by
the record owner(s) exactly as the shares are registered; if by telephone -
proper account identification is given by the shareholder) and each exchange
must involve either shares having an aggregate value of at least $1,000 or all
the shares in the account. A shareholder must have received, and should read
carefully, the prospectus of the other Series and consider the differences in
objectives and policies before making any exchange. The exchange privilege
may not be available in all states. For federal and state income tax
purposes, an exchange is treated as a sale of the shares exchanged, and
therefore an exchange could result in a gain or loss to the shareholder making
the exchange. The Series may modify or terminate this exchange offer upon 60
days' notice to shareholders subject to applicable law.
Redemptions
If a shareholder desires to redeem his shares at their net asset value,
the shareholder must send a written request for redemption in "good order" to
the Transfer Agent. "Good order" generally means that the written request for
redemption must be endorsed by the record owner(s) exactly as the shares are
registered and the signature(s) must be guaranteed by an "eligible guarantor
institution" as that term is defined under Rule 17Ad-15(a)(2) under the
Securities Exchange Act of 1934. Currently, such procedures generally permit
guarantees by a commercial bank or trust company, a member bank of the Federal
Reserve System, or a member firm of a national securities exchange.
Redemption requirements for corporations, other organizations, trusts,
fiduciaries, and retirement plans may require additional documentation.
Please contact the Transfer Agent at 1-800-466-3863 for more information. The
Transfer Agent may make certain de minimis exceptions to the above
requirements for redemption.
Within three days after receipt of a redemption request by the Transfer
Agent in "good order", the Series will make payment in cash, except as
described below, of the net asset value of the shares next determined after
such redemption request was received, except during any period in which the
right of redemption is suspended or date of payment is postponed because the
New York Stock Exchange is closed or trading on such Exchange is restricted or
to the extent otherwise permitted by the 1940 Act if an emergency exists. For
shares purchased, or received in exchange for shares purchased, by check
(including certified checks or cashiers checks) or through the Automatic
Investment Plan, payment of redemption proceeds may be delayed up to 15 days
from the purchase date in an effort to assure that such check or draft has
cleared.
Subject to the Series' compliance with applicable regulations, each
Series has reserved the right to pay the redemption price either totally or
partially by a distribution in-kind of securities (instead of cash) from the
Series portfolio. The securities distributed in such a distribution would be
valued at the same amount as that assigned to them in calculating the net asset
value for the shares being sold. If a shareholder received a distribution
in-kind, he could incur brokerage or transaction charges when converting the
securities to cash. The Fund has elected, however, to be governed by Rule 18f-1
under the 1940 Act as a result of which the Fund is obligated to redeem shares,
with respect to any one shareholder during any 90-day period, solely in cash
up to the lesser of $250,000 or 1% of the net asset value of the Fund at
the beginning of the period.
Other Information about Purchases and Redemptions
The Fund has authorized several brokers to accept purchase and redemption
orders on its behalf, and these brokers are authorized to designate other
intermediaries to accept purchase and redemption order on the Fund's behalf.
The Fund will be deemed to have received a purchase or redemption order when
an authorized broker or its authorized designee accepts the order, and orders
placed with an authorized broker will be processed at the share price of the
appropriate Series next computed after they are accepted by the authorized
broker or its designee.
Due to the relatively high cost of maintaining small accounts, the Series
reserve the right to redeem shares in any account for their then-current value
(which will be promptly paid to the shareholder) if at any time the total
investment in such account drops below $1,000 because of redemptions (but not
due to changes in net asset value). Shareholders will be notified that the
value of their account is less than the minimum investment requirement and
allowed 60 days to make an additional investment before the redemption is
processed.
<PAGE>
Share Price
The share price or "net asset value" per share of each class of each
Series is determined as of the closing time of the New York Stock Exchange or,
in the absence of a closing time, 4:00 p.m. Eastern time on each day that the
New York Stock Exchange is open for trading. The exchange annually announces
the days on which it will not be open for trading; the most recent
announcement indicates that it will not be open when the following holidays
are observed: New Year's Day, Martin Luther King, Jr. Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The net asset value per share of each Class of a Series is determined by
dividing the total value of its investments and other assets that are
allocated to that Class, less any liabilities that are allocated to that
Class, by the Class's total outstanding shares. The value of the Serie's
portfolio securities will be the market value of such securities as determined
based on quotes provided by a pricing service (which uses the methodology
outlined in the "Net Asset Value" section of the Statement of Additional
Information) approved by the Board of Directors, or, in the absence of market
quotations, fair value as determined in good faith by or under the direction
and control of the Board of Directors. Short-term investments which mature in
less than 60 days are normally valued at amortized cost. Assets initially
expressed in foreign currencies will be converted into U.S. dollars as of the
exchange rates quoted by any major bank. If such quotes are not available,
the exchange rates will be determined in accordance with policies established
in good faith by the Board of Directors. See the Statement of Additional
Information for further information.
Dividends and Tax Status
Taxes
The following summary of federal income tax consequences is based on the
current tax laws and regulations, which may be changed by legislative,
judicial or administrative action.
No attempt has been made to present a detailed explanation of the
federal, state, or local income tax treatment of the Series or its
shareholders, and these Series are not managed with respect to tax outcomes
for their shareholders. In addition, state and local tax consequences of an
investment in the Series may differ from the federal income tax consequences
described below. Accordingly, shareholders are urged to consult with their
tax advisers regarding specific questions as to federal, state and local
income taxes. Additional information concerning taxes is set forth in the
Statement of Additional Information.
Tax Status
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
Series is treated as a separate entity for federal income tax purposes. The
Series intends to qualify for the special tax treatment afforded regulated
investment companies as defined under Subchapter M of the Code, so as to be
relieved of federal income tax on that part of its net investment company
taxable income, and net capital gain (the excess of net long-term capital
gains over net short-term capital losses) distributed to shareholders.
Tax Status of Distributions
Dividends and distributions will be paid in full and fractional shares of
the Series, based on the net asset value per share at the close of business on
the record date, although a shareholder may, prior to the record date,
request, by writing or by telephone call to the Fund, that payments of either
ordinary income dividends or capital gain distributions, or both, be made in
cash. If a shareholder has chosen to receive dividends and/or capital gain
distributions in cash, and the postal service is unable to deliver checks to
the shareholder's address of record, or the shareholder does not respond to
mailing from the Fund concerning outstanding checks, that shareholders account
will be updated so that all future distributions will be reinvested in the
account. No interest will accrue on amounts represented by uncashed
distribution or redemptions checks.
The Series will distribute all of its net investment income (including
net short-term capital gains) to shareholders. Dividends from net investment
company taxable income are taxable to shareholders as ordinary income (whether
received in cash or in additional shares) to the extent of the Serie's
earnings and profits. Net capital gains will be distributed at least annually
and will be taxed to shareholders as a 20% rate gain distribution (generally
taxed at a rate of 20%) or a 28% rate gain distribution (generally taxed at a
rate of 28%), depending upon the designation by the Series (such designation
being dependent upon the holding period of the Series in the underlying asset
generating the net capital gain), regardless of how long the shareholders have
held their shares and regardless of whether the distributions are received in
cash or in additional shares. If no designation is made regarding a capital
gain dividend, it will be classified as a 28% rate gain distribution, and,
thus, taxed at a rate of 28%. Dividends and distributions of capital gains
paid by the Series do not qualify for the dividends received deduction for
corporate shareholders. The Series will provide annual reports to
shareholders of the federal income tax status of all distributions.
<PAGE>
Dividends declared by the Series in October, November or December of any
year and payable to shareholders of record on a date in one of those months
will be deemed to have been paid by the Series and received by the
shareholders on December 31 of the year declared, if paid by the Series at any
time during the following January.
Investment income received directly by the Series on direct U.S.
Government obligations is exempt from income tax at the state level and may be
exempt, depending on the state, when received by a shareholder as income
dividends from the Series provided certain state-specific conditions are
satisfied. The Series will inform shareholders annually of the percentage of
income and distributions derived from direct U.S. Government obligations.
Shareholders should consult their tax advisers to determine whether any
portion of the income dividends received from the Series is considered tax
exempt in their particular states.
The Series intends to make sufficient distributions prior to the end of
each calendar year to avoid liability for federal excise tax applicable to
regulated investment companies.
A sale, exchange or redemption of a Series's shares generally is a
taxable transaction to the shareholder.
General Information
The Fund was incorporated on July 26, 1984 as a Maryland corporation.
The Board of Directors may, at its own discretion, create additional series of
shares, each of which would have separate assets and liabilities. As of
February 2, 1998, National Financial Services Corporation, FBO Customers, 200
Liberty Street, New York, NY 10281-1003 owned 40.27% of the Defensive Series
and 63.53% of the Maximum Horizon Series, and would be deemed under the 1940
Act to be a controlling person of each such Series.
Each share of a Series represents an identical interest in the investment
portfolio of that Series and has the same rights, except that (i) each class
of shares bears those distribution fees, service fees and administrative
expenses applicable to the respective class of shares as a result of its sales
arrangements, which will cause the different classes of shares to have
different expense ratios and to pay different rates of dividends, (ii) each
class has exclusive voting rights with respect to those provisions of the
Series' Rule 12b-1 distribution plan which relate only to such class and (iii)
the classes have different exchange privileges. As a result of each class'
differing Rule 12b-1 distribution and shareholder services plan, shares of
different classes of the same Series may have different net asset values per
share.
The Fund does not expect to hold annual meetings of shareholders but
special meetings of shareholders may be held under certain circumstances.
Shareholders of the Fund retain the right, under certain circumstances, to
request that a meeting of shareholders be held for the purpose of considering
the removal of a Director from office, and if such a request is made, the Fund
will assist with shareholder communications in connection with the meeting.
The shares of the Fund have equal rights with regard to voting, redemption and
liquidations. The Funds shareholders will vote in the aggregate and not by
Series or Class except as otherwise expressly required by law or when the
Board of Directors determines that the matter to be voted upon affects only
the interests of the shareholders of a Series or a Class. Income, direct
liabilities and direct operating expenses of a Series will be allocated
directly to the Series, and general liabilities and expenses of the Fund will
be allocated among the Series in proportion to the total net assets of the
Series by the Board of Directors. The holders of shares have no preemptive or
conversion rights. Shares when issued are fully paid and non-assessable and
do not have cumulative voting rights.
All securities and cash are held by the custodian, Boston Safe Deposit
and Trust Company. Deloitte & Touche, LLP serves as independent accountants
for the Series and will audit their financial statements annually.
Manning & Napier Advisors, Inc. serves as the Fund's transfer and
dividend disbursing agent. Shareholder inquiries should be directed to
Exeter Fund, Inc., P.O. Box 41118, Rochester, New York 14604.
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APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
Moody's Investors Services, Inc.'s corporate bond ratings:
Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt-edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates a rating in the
lower end of that generic rating category.
Standard & Poor's Corporation's corporate bond ratings:
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only to a small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
may be outweighed by large uncertainties or major risk exposures to adverse
conditions.
The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on this
obligation are being continued.
Debt rated D is in payment default. The D rating category is used when
payments on an obligation are not made on the date due even if the applicable
grace period has not expired, unless S&P believes that such payments will be
made during such grace period. The D rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if payments on a
obligation are jeopardized.
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APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's Investor Services, Inc.'s commercial paper ratings:
PRIME-1 - Issues rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:
- Leading market positions in well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with moderate reliance on
debt and ample asset protection.
- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- Well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2 - Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
PRIME-3 - Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level
of debt protection measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
Standard & Poor's Corporation's commercial paper ratings:
A-1 - This is the highest category and indicates that the degree of
safety regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 - Capacity for timely payment on issues with this designation is
satisfactory and the obligation is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
in higher rating categories.
A-3 - Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B - Issues rated B are regarded as having significant speculative
characteristics for timely payment.
C - This rating is assigned to short-term debt obligations that are
currently vulnerable to nonpayment.
D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
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