February 24, 1998
To Shareholders of the following series of the Manning & Napier Fund:
Small Cap Series
International Series
World Opportunities Series
Global Fixed Income Series
New York Tax Exempt Series
Ohio Tax Exempt Series
Diversified Tax Exempt Series
Dear Shareholder:
Enclosed are copies of the Annual Reports for each of the above Series of the
Manning & Napier Fund in which you owned shares as of December 31, 1997. The
reports include information about the Series performance as well as portfolio
listings as of that date.
Please contact our Fund Services department at 1-800-4MN-FUND (1-800-466-3863)
or your Client Consultant if you have any questions about your holdings in the
Manning & Napier Fund.
Sincerely,
/s/ Amy J. Williams
Amy J. Williams
Fund Services Manager
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Global Fixed Income Series
Annual Report December 31, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
Most investors are familiar with Manning & Napier's long_term interest rate
overview; an overview that calls for a continuation of the saw_tooth decline
in interest rates that has defined the U.S. fixed income markets for the last
15 years. The decline in U.S. rates can be traced to the increased
globalization of the world's economy, the resulting increase in the
competitive environment, and disinflation that has resulted from consumers,
producers, and policy makers responding to the new environment. However that
is hardly a domestic phenomenon. The disinflationary pressures that have
pushed down U.S. rates are having the same impact around the world, and the
Global Fixed Income Series was introduced on October 31, 1997 to allow our
investors to take advantage of those global opportunities.
Traditionally, international fixed income securities are introduced into a
portfolio for diversification reasons. However, Manning & Napier only follows
tradition when it makes investment sense, and with interest rates converging
around the world, diversification as an investment rationale may be losing
some of its luster. Apart from diversification, there will always be
individual opportunities in the global fixed income marketplace.
A more fundamental reason for activating the Global Fixed Income Series is
that it increases the number of investment opportunities available to our
accounts. With long-term U.S. interest rates below 6%, it becomes difficult
for accounts to rely simply on the domestic fixed markets to meet their
investment objectives. Expanding the universe of investment options, and
doing it within the fixed income framework that has served Manning & Napier so
well, seems to us to be a prudent course of action.
The Series was activated with the objective of generating the same high
quality fixed income total returns to which our clients have become
accustomed. The catalyst behind the activation of the Global Fixed Income
Series was the sell_off of Latin American debt last fall. In our opinion, the
increase in Latin American yields occurred in sympathy with the problems in
the Pacific Rim. Manning & Napier considered Latin American debt to be a
quality investment opportunity because the economic fundamentals in Latin
America are quite different from those in the Pacific Rim and did not justify
the sell off.
The Series cannot invest more than 20% of its assets in securities rated below
investment grade. At the end of 1997, the Latin American bonds, spread
across Brazil, Mexico, and Argentina, fill that particular niche. The
remaining assets were spread across seven different countries. The Series
carries a rather heavy weighting in U.S. securities. The rationale for this
is our positive overview on the U.S. dollar, plus the opportunity to invest
in non_U.S. Treasury securities, for example, "putable" corporate bonds and
selected mortgage_backed securities. The Series also holds an unhedged
Canadian investment by which we intend to take advantage of an extremely
undervalued currency. We expect the Italian and Spanish bonds to allow the
Series to benefit from the relatively higher yielding government bonds of the
potential European Monetary Union (EMU) members. The currency exposures
1
<PAGE>
Management Discussion and Analysis
associated with these positions are partially hedged to mitigate the currency
risk. The bonds of Australia and New Zealand were purchased because both of
these countries are characterized by very high real interest rates and Manning
& Napier expects both countries will experience economic slowdowns associated
with the problems in the Pacific Rim. Those positions have also been
partially hedged.
From the time that the Series opened at the end of October through the end of
1997, it generated a total return of 2.00%. That compares favorably to the
return of the Merrill Global Government Bond Index which had a -1.59% return
over the same period. The 359 basis points (3.59%) of outperformance can be
traced to the heavy dollar exposure of the Global Fixed Income Series. The
declines in U.S. interest rates on top of an appreciating dollar made
dollar-denominated assets the best performing fixed income assets. Most of
all though, we should note that this initial performance, while encouraging,
covers an extremely short period of time. It is long-term strategies, not
short-term performance, on which successful investments are based.
We at Manning & Napier are excited by the activation of the Global Fixed
Income Series. It expands our universe of investment options and allows us to
employ the fixed income processes that have been so successful within the U.S.
markets to the fixed income markets around the world.
We wish you the best for a happy, healthy, and prosperous 1998.
Sincerely,
Manning & Napier Advisors, Inc.
2
<PAGE>
Performance Update as of December 31, 1997
The value of a $10,000 investment in the Manning & Napier Fund, Inc.
- Global Fixed Income Series from its inception (10/31/97) to present
(12/31/97) as compared to the Merill Lynch Global Government Bond Index.1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
Global Fixed Income Series
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
- --------------------------- ------------------ ------------- -------
Inception 2 $ 10,200 2.00% N/A
</TABLE>
<TABLE>
<CAPTION>
Merill Lynch Global
Government Bond Index
<S> <C> <C> <C>
Total Return
-------------
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
- --------------------- ------------------ ------------- -------
Inception 2 $ 9,841 -1.59% N/A
</TABLE>
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
Manning & Napier Merill Lynch Global
Date Global Fixed Income Series Government Bond Index
<S> <C> <C>
10/31/97 $ 10,000 $ 10,000
11/30/97 $ 10,050 $ 9,853
12/31/97 $ 10,200 $ 9,841
</TABLE>
1 The unmanaged Merrill Lynch Global Government Bond Index is a market value
weighted measure of approximately 544 global government bonds. The Indices'
returns assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
2 The Fund and Index performance numbers are calculated from October 31,1997,
the Fund's inception date. The Fund's performance is historical and may not
be indicative of future results.
3
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Currency Amount (Note 2)
<S> <C> <C> <C>
ARGENTINA - 4.31%
Republic of Agrentina, 11.375%, 1/30/2017
(Identified Cost $5,149,596) USD 5,000,000 $ 5,484,375
------------
AUSTRALIA - 6.27%
Australian Government, 8.75%, 1/15/2001 AUD 5,320,000 3,775,435
Australian Government, 6.75%, 11/15/2006 AUD 6,140,000 4,200,714
------------
TOTAL AUSTRALIAN SECURITIES
(Identified Cost $8,587,395) 7,976,149
------------
BRAZIL - 9.62 %
Federal Republic of Brazil, 10.125%, 5/15/2027
(Identified Cost $10,757,500) USD 13,000,000 12,236,250
------------
CANADA - 9.27%
Canadian Government, 4.75%, 9/15/1999 CAD 1,875,000 1,304,446
Canadian Government, 5.50%, 9/1/2002 CAD 1,845,000 1,297,504
Canadian Government, 7.25%, 6/1/2007 CAD 11,745,000 9,180,936
------------
TOTAL CANADIAN SECURITIES
(Identified Cost $12,074,543) 11,782,886
------------
SPAIN - 9.03%
Bonos Y Oblig Del Estado, 9.40%, 4/30/1999 SP 483,000,000 3,365,505
Bonos Y Oblig Del Estado, 7.90%, 2/28/2002 SP 468,000,000 3,413,240
Bonos Y Oblig Del Estado, 7.35%, 3/31/2007 SP 632,000,000 4,710,513
------------
TOTAL SPANISH SECURITIES
(Identified Cost $11,775,920) 11,489,258
ITALY - 9.44%
Buoni Poliennali del Tesoro, 7.50%, 10/1/1999 ITL 6,625,000,000 3,925,399
Buoni Poliennali del Tesoro, 6.25%, 3/1/2002 ITL 6,700,000,000 3,970,598
Buoni Poliennali del Tesoro, 6.75%, 7/1/2007 ITL 6,645,000,000 4,102,087
------------
TOTAL ITALIAN SECURITIES
(Identified Cost $12,207,673) 11,998,084
------------
MEXICO - 4.65%
United Mexican States, 11.50%, 5/15/2026
(Identified Cost $5,679,307) USD 5,000,000 5,915,625
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Currency Amount (Note 2)
<S> <C> <C> <C>
NEW ZEALAND - 2.61%
New Zealand Government, 6.50%, 2/15/2000 NZD 3,065,000 $ 1,742,916
New Zealand Government, 8.00%, 11/15/2006 NZD 2,550,000 1,573,723
------------
TOTAL NEW ZEALAND SECURITIES
(Identified Cost $3,667,031) 3,316,639
------------
UNITED KINGDOM - 2.29%
United Kingdom Bond, 9.50%, 1/15/1999
(Identified Cost $2,884,222) BP 1,726,500 2,906,123
------------
UNITED STATES - 29.74%
CORPORATE BONDS - 5.64%
Motorola. Inc., 6.50%, 9/1/2025 USD 3,000,000 3,122,379
Xerox Corp., 6.25%, 11/15/2026 USD 3,990,000 4,051,957
------------
TOTAL CORPORATE BONDS
(Identified Cost $7,125,620) 7,174,336
------------
U.S. GOVERNMENT AGENCY - 9.78%
GNMA, POOL #417346, 6.00%, 4/15/2026 USD 6,093,580 5,880,305
GNMA, POOL #441545, 9.00%, 3/15/2027 USD 6,134,761 6,560,361
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $12,417,789) 12,440,666
------------
U.S. TREASURY SECURITIES - 14.32%
U.S. TREASURY NOTES - 9.47%
U.S. Treasury Note, 5.75%, 9/30/1999 USD 6,000,000 6,007,500
U.S. Treasury Note, 5.875%, 9/30/2002 USD 6,000,000 6,035,628
------------
TOTAL U.S. TREASURY NOTES
(Identified Cost $12,013,522) 12,043,128
------------
U.S. TREASURY STRIPPED SECURITIES - 4.85%
Interest Stripped - Principal Payment. 11/15/2002 USD 4,000,000 3,042,680
Interest Stripped - Principal Payment. 11/15/2017 USD 10,300,000 3,121,621
------------
TOTAL U.S. TREASURY STRIPPED SECURITIES
(Identified Cost $6,063,342) 6,164,301
------------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $18,076,864) 18,207,429
------------
TOTAL UNITED STATES SECURITIES
(Identified Cost $37,620,273) 37,822,431
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount/Shares (Note 2)
<S> <C> <C>
SHORT-TERM INVESTMENTS - 10.14%
Federal Home Loan Bank Discount Note, 2/5/1998 $ 5,000,000 $ 4,972,972
Federal National Mortgage Corporation Discount
Note, 2/5/1998 4,000,000 3,978,417
Dreyfus U.S. Treasury Money Market 3,952,615 3,952,615
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $12,904,004) 12,904,004
-------------
TOTAL INVESTMENTS - 97.37%
(Identified Cost $123,307,464) $123,831,824
OTHER ASSETS, LESS LIABILITIES - 2.63% 3,339,817
-------------
NET ASSETS -100% $ 127,171,64
=============
</TABLE>
KEY:
AUD - Austrailian Dollar
BP - British Pound
CAD - Canadian Dollar
ITL - Italian Lira
NZD - New Zealand Dollar
SP - Spanish Pesetas
USD - United States Dollar
<TABLE>
<CAPTION>
<S> <C>
FEDERAL TAX INFORMATION:
At December 31, 1996, the net unrealized appreciation based on
identified cost for federal income tax purposes of $123,376,701
was as follows:
Aggregate gross unrealized appreciation for all investments in
which there was an excess of value over tax cost $ 2,204,668
Aggregate gross unrealized depreciation for all investments in
which there was an excess of tax cost over value (1,749,545)
------------
UNREALIZED APPRECIATION - NET $ 455,123
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31, 1997
ASSETS:
Investments, at value (Identified Cost $123,307,464)(Note 2) $123,831,824
Foreign currency, at value (cost $310,322) 308,600
Cash 59,930
Receivable for open forward foreign currency contracts (Note 2) 960,625
Interest receivable 2,148,567
Receivable for fund shares sold 35,180
------------
TOTAL ASSETS 127,344,726
------------
LIABILITIES:
Accrued management fees (Note 3) 107,033
Accrued Directors' fees (Note 3) 1,667
Payable for fund shares repurchased 46,648
Audit fee payable 8,500
Custodian fee payable 6,295
Other payables and accrued expenses 2,942
------------
TOTAL LIABILITIES 173,085
------------
NET ASSETS FOR 12,568,715 SHARES
OUTSTANDING $127,171,641
============
NET ASSETS CONSIST OF:
Capital stock $ 125,687
Additional paid-in-capital 125,563,298
Undistributed net investment income 21,366
Accumulated net realized gain on investments 19,667
Net unrealized appreciation on investments, foreign currency,
forward currency contracts, and other assets and liabilities 1,441,623
------------
TOTAL NET ASSETS $127,171,641
============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($127,171,641/12,568,715 shares) $ 10.12
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Operations
FOR THE PERIOD OCTOBER 31, 1997 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $1,244,662
-----------
EXPENSES:
Management fees (Note 3) 209,630
Directors' fees (Note 3) 1,667
Custodian fee 10,000
Audit fee 8,500
Miscellaneous 2,942
-----------
Total Expenses 232,739
-----------
NET INVESTMENT INCOME 1,011,923
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on-
Investments (identified cost basis) 19,667
Foreign currency and forward foreign currency
exchange contracts (8,185)
-----------
Net realized loss on investments 11,482
-----------
Net change in unrealized appreciation on -
Investments 524,360
Foreign currency and forward currency contracts and other
assets and liabilities 917,263
-----------
Net unrealized appreciation on investments 1,441,623
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 1,453,105
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $2,465,028
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
10/31/97 (commencement
of operations) to 12/31/97
----------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,011,923
Net realized gain on investments 11,482
Net change in unrealized appreciation on investments and
forward foreign currency contracts 1,441,623
----------------------------
Net increase in net assets from operations 2,465,028
----------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE2):
From net investment income (982,372)
----------------------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase in net assets from capital share
transactions (Note 5) 125,688,985
----------------------------
Net increase in net assets 127,171,641
NET ASSETS:
Beginning of period --
----------------------------
END OF PERIOD (including undistributed net investment
income of $21,366) $ 127,171,641
============================
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
FOR THE PERIOD
10/31/97 (COMMENCEMENT
OF OPERATIONS) TO 12/31/97
----------------------------
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT
THE PERIOD):
<S> <C>
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.00
----------------------------
Income from investment operations:
Net investment income 0.081
Net realized and unrealized gain (loss)
on investments 0.118
----------------------------
Total from investment operations 0.199
----------------------------
Less distributions to shareholders:
From net investment income (0.079)
----------------------------
NET ASSET VALUE - END OF PERIOD $ 10.12
============================
Total return 1 2.00%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 1.09%2
Net investment income 4.75%2
Portfolio turnover 3%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 127,172
============================
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
Global Fixed Income Series (the "Fund") is a no-load non-diversified
series of Manning & Napier Fund, Inc. (the "Corporation"). The Corporation
is organized in Maryland and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
Shares of the Fund are offered to clients and employees of Manning &
Napier Advisors, Inc. (the Advisor) and its affiliates. The total authorized
capital stock of the Corporation consists of one billion shares of common
stock each having a par value of $0.01. As of December 31, 1997, 940 million
shares have been designated in total among 19 series, of which 50 million
have been designated as Global Fixed Income Series Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including corporate bonds, listed on an exchange
are valued at the latest quoted sales price of the exchange on which the
security is traded most extensively. Securities not traded on valuation date
or securities not listed on an exchange are valued at the latest quoted bid
price.
Debt securities, including domestic and foreign government bonds and
mortgage backed securities, will normally be valued on the basis of evaluated
bid prices provided by the Funds pricing service.
Securities for which representative valuations or prices are not
available from the Fund's pricing service are valued at fair value as
determined in good faith by the Advisor under procedures approved by and
under the general supervision and responsibility of the the Fund's Board of
Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Interest income and expenses are recorded on an accrual
basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains
on investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
11
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result,
net investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund may
periodically make reclassifications among its capital accounts without
impacting the Fund's net asset value.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis: a) investment securities, other assets and liabilities are converted
to U.S. dollars based upon current exchange rates; and b) purchase and sales
of securities and income and expenses are converted into U.S. dollars based
upon the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are
recorded for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates
is not separately stated.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency contracts in
order to hedge a portfolio position or specific transaction. Risks may arise
if the counterparties to a contract are unable to meet the terms of the
contract or if the value of the foreign currency moves unfavorably.
All forward foreign currency contracts are adjusted daily by the
exchange rate of the underlying currency and, for financial statement
purposes, any gain or loss is recorded as unrealized gain or loss until a
contract has been closed. Realized and unrealized gain or loss arising from
a transaction is included in net realized and unrealized gain (loss) from
foreign currency and forward currency exchange contracts.
12
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (continued)
The Fund regularly trades forward foreign currency exchange contracts
with off-balance sheet risk in the normal course of its investing activities
to assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the
investment the Fund has in forward foreign currency exchange contracts and
does not necessarily represent the amounts potentially at risk. The
measurement of the risks associated with forward foreign currency exchange
contracts is meaningful only when all related and offsetting transactions are
considered. A summary of obligations for forward currency exchange contracts
outstanding as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Settlement Contracts In Exchange Contracts Net Unrealized
Date to Deliver For At Value Appreciation
- ---------- ----------------- ------------ ----------- ---------------
02/04/98 Australian Dollar $ 6,194,400 $ 5,798,840 $ 395,560
02/04/98 Deutsche Marks $ 12,540,099 $11,975,034 $ 565,065
</TABLE>
On December 31, 1997, the Fund had sufficient cash and/or securities to
cover any commitments under there contracts.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for
which the Fund pays a fee, computed daily and payable monthly, at an annual
rate of 1% of the Fund's average daily net assets. The fee amounted to
$209,630 for the period October 31, 1997 (commencement of operations) to
December 31, 1997.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
13
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (continued)
The compensation of the non-affiliated Directors totaled $1,667 for the
period October 31, 1997 (commencement of operations) to December 31, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the period October 31, 1997 (commencement of operations) to December
31, 1997, purchases and sales of securities, other than United States
Government securities and short-term securities, were $82,155,527 and
$2,184,000, respectively. Purchases and sales of United States Government
securities were $30,473,287 and $47,659, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Global Fixed Income Series were:
<TABLE>
<CAPTION>
<S> <C> <C>
For the Period
10/31/97 (commencement of
operations) to 12/31/97
--------------------------
Shares Amount
-------------------------- -------------
Sold 12,643,992 $126,446,410
Reinvested 96,809 967,123
Repurchased (172,086) (1,724,548)
-------------------------- -------------
Total 12,568,715 $125,688,985
========================== =============
</TABLE>
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in securities of U.S. companies and the United States Government.
These risks include revaluation of currencies and future adverse political
and economic developments. Moreover, securities of foreign companies and
foreign governments and their markets may be less liquid and their prices
more volatile than of those securities of comparable U.S. companies and the
United States Government.
14
<PAGE>
Independent Accountants Report
TO THE SHAREHOLDERS AND DIRECTORS OF
MANNING & NAPIER FUND, INC.- GLOBAL FIXED INCOME SERIES:
We have audited the accompanying statement of assets and liabilities of
Manning & Napier Fund, Inc.- Gloabl Fixed Income Series, including the
schedule of portfolio investments, as of December 31, 1997, and the related
statement of operations, the statement of changes in net assets, and the
financial highlights for the period October 31, 1997 (commencement of
operations) to December 31, 1997. These financial statements and financial
highlights are the responsibility of the Funds management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Manning & Napier Fund, Inc.- Global Fixed Income Series as of
December 31, 1997, the results of its operations, the changes in its net
assets, and the financial highlights for the period October 31, 1997
(commencement of operations) to December 31, 1997 in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 23, 1998
15
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
World Opportunities Series
Annual Report
December 31, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
Financial markets throughout the world were volatile in the last few
months of 1997, but the World Opportunities Series still ended the year with
a modest gain. Although the Series' holdings have been affected by the
market turmoil, we have identified many exciting investment opportunities
which we feel have excellent potential.
The World Opportunities Series invests in companies throughout the world
which fit our strategies and offer strong potential gains. One of our
strategies, the profile strategy, is to invest in companies that have
sustainable advantages in their markets that allow them high growth rates.
Our investments in telecommunications services companies fit this strategy.
These are companies which had been government-run monopolies and are now are
being privatized. Due to the government protection they formerly enjoyed,
they achieved significant size and strength but were limited in their
profitability. We expect that the move towards privatization will free up
their ability to grow earnings.
Another strategy, the hurdle rate strategy, involves looking for
industries in which we expect industry-wide difficulties to lead to the
elimination of some of the companies in that industry. In this case, we
invest in the companies which our analysis shows will be the winners after
the situation improves. Our holdings in pulp and paper companies illustrate
this strategy. In the past, capacity was added too quickly, resulting in
excess supply relative to the demand and lower profits for pulp and paper
companies. In a situation like this, supply will be adjusted until supply
and demand are in line. We invested in two paper companies in Singapore and
Brazil, whose production costs are much lower than many of their competitors.
Now, with global capacity growth slowing, these companies can be expected to
pick up market share. In addition, we also expect the companies in which we
invested to benefit from the Asian crisis and its aftermath as their
production costs are in devalued local currency, but their products are
priced in U.S. dollars. This means that their global competitiveness has
been significantly improved.
The World Opportunities Series closed the year with a gain of 7.81%,
compared to 15.76% for the Morgan Stanley Capital International World Index
and 33.32% for the S&P Total Return Index. The relative performance can be
explained by two factors: the Series' larger weighting in emerging markets
and its smaller weighting in U.S. stocks. Because the U.S. market performed
strongly again last year, the higher weights benefited the benchmarks.
A key point in Manning & Napier's overview has been that the U.S. stock
market, taken as a whole, is overvalued, and that it is therefore important
to look elsewhere for investment opportunities. We are finding many stocks
with strong potential throughout the world, and we believe that the World
Opportunities Series provides a way for shareholders to benefit from Manning
& Napier's investment approach with holdings from around the globe.
We wish you the best for a happy, healthy, and prosperous 1998.
Sincerely,
Manning & Napier Advisors, Inc.
1
<PAGE>
Performance Update as of December 31, 1997
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
World Opportunities Series
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
One Year $ 10,781 7.81% 7.81%
Inception 2 $ 11,301 13.01% 9.70%
</TABLE>
<TABLE>
<CAPTION>
S&P 500 Total Return Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
One Year $ 13,332 33.32% 33.32%
Inception 2 $ 15,165 51.65% 37.07%
</TABLE>
<TABLE>
<CAPTION>
Morgan Stanley Capital
International World Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
One Year $ 11,576 15.76% 15.76%
Inception 2 $ 12,578 25.78% 18.97%
</TABLE>
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
World Opportunities Series from its inception (9/6/96) to present (12/31/97)
as compared to the Standard & Poor's (S&P) 500 Total Return Index and the
Morgan Stanley Capital International World Index. 1
<graphic>
<line chart>
Data for chart to follow:
<TABLE>
<CAPTION>
Manning & Napier S&P 500 Morgan Stanley Capital
Date World Opportunities Series Total Return Index International World Index
<S> <C> <C> <C>
09/06/96 10,000 10,000 10,000
09/30/96 10,040 10,497 10,390
12/31/96 10,482 11,372 10,865
03/31/97 11,026 11,677 10,896
06/30/97 12,866 13,714 12,536
09/30/97 12,702 14,741 12,895
12/31/97 11,301 15,165 12,578
</TABLE>
1 The Standard & Poor (S&P) 500 Total Return Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed on
the New York Stock Exchange, American Stock Exchange, and Over-the-Counter
market. The Morgan Stanley Capital International World Index is an market
capitalization-weighted measure of the total return of 1,560 companies listed
on the stock exchanges of the United States, Europe, Canada, Australia, New
Zealand and the Far East. The Morgan Stanley Capital International Index is
denominated in U.S. Dollars. The Indices' returns assume reinvestment of
dividends and, unlike Fund returns, do not reflect any fees or expenses.
2 Performance numbers for the Fund and Indices are calculated from
September 6, 1996, the Fund's inception date. The Fund's performance is
historical and may not be indicative of future results.
2
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
---------- ------------
COMMON STOCK - 94.5%
<S> <C> <C>
AMUSEMENT & RECREATIONAL SERVICES - 3.6%
Resorts World Bhd. (Malaysia) 2,050,000 $ 3,465,101
------------
APPLIANCES - 1.7%
Brasmotor S.A. (Brazil) 16,800,000 1,655,919
------------
BEVERAGES - 2.6%
Vitasoy International Holdings Ltd. 5,810,000 2,455,721
(Hong Kong) ------------
BROADCAST SERVICES - 6.1%
Groupe AB S.A.* - ADR (France) 545,500 3,511,656
Television Broadcasts Ltd. (Hong Kong) 800,000 2,281,781
------------
5,793,437
------------
CHEMICALS & ALLIED PRODUCTS - 13.3%
Celltech plc* (United Kingdom) 450,000 2,202,512
Novartis AG - ADR (Switzerland) 70,000 5,687,150
Orion-yhtyma OY - B Shares (Finland) 182,000 4,810,740
------------
12,700,402
------------
COMPUTER EQUIPMENT - 2.8%
Varitronix International Ltd. (Hong Kong) 1,551,000 2,662,288
------------
DIAMONDS - 2.1%
De Beers Centenary AG - ADR (South Africa) 100,000 2,043,750
------------
ELECTRONICS & ELECTRICAL EQUIPMENT - 6.5%
Coleman Company, Inc.* (United States) 134,000 2,152,375
Toshiba Corp. (Japan) 300,000 1,245,843
VTech Holdings Ltd. (Hong Kong) 930,000 2,742,590
------------
6,140,808
------------
FOOD - MISCELLANEOUS - 7.7%
Diageo plc (United Kingdom) 485,504 4,469,013
Nestle S.A. (Switzerland) 1,920 2,872,206
------------
7,341,219
------------
HOLDING COMPANIES - 1.0%
C.P. Pokphand Co. (Hong Kong) 5,899,000 928,816
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Investment Poerfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
INDUSTRIAL & COMMERCIAL MACHINERY - 4.9%
Creative Technology Ltd.* (Singapore) 183,000 $ 4,026,000
First Tractor Company Ltd.* (Hong Kong) 1,006,000 606,976
------------
4,632,976
------------
NONDEPOSITORY CREDIT INSTITUTIONS - 5.3%
Takefuji Corp. (Japan) 110,000 5,039,201
------------
PAPER & ALLIED PRODUCTS - 6.8%
Aracruz Celulose S.A. - ADR (Brazil) 200,000 2,875,000
Asia Pulp & Paper Company Ltd. - ADR
(Singapore) 355,000 3,572,188
------------
6,447,188
------------
PETROLEUM REFINING - 1.9%
YPF Sociedad Anonima - ADR (Argentina) 53,500 1,829,031
------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 2.6%
Eastman Kodak Co. (United States) 41,000 2,493,312
------------
TELECOMMUNICATIONS SERVICES - 24.7%
Compania Anonima Nacional Telefonica de
Venezuela (CANTV) - ADR (Venezuela) 95,000 3,954,375
France Telecom S.A.* - ADR (France) 144,000 5,184,000
Telecom Italia S.p.A. - ADR (Italy) 85,000 5,440,000
Telecommunicacoes Brasileiras S.A. (Telebras) -
ADR (Brazil) 40,000 4,657,500
Vimpel-Communications - ADR* (Russia) 120,000 4,275,000
------------
23,510,875
------------
TOBACCO - 0.9%
PT Hanjaya Mandala Sampoerna (Indonesia) 1,070,000 821,937
------------
TOTAL COMMON STOCK
(Identified Cost $94,475,675) 89,961,981
------------
SHORT-TERM INVESTMENTS - 1.8%
Dreyfus U.S. Treasury Money Market
(Identified Cost $1,692,945) 1,692,945 1,692,945
------------
TOTAL INVESTMENTS - 96.3%
(Identified Cost $96,168,620) 91,654,926
OTHER ASSETS, LESS LIABILITIES - 3.7% 3,560,025
------------
NET ASSETS -100% $95,214,951
============
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At December 31, 1997, the net unrealized depreciation based on
identified cost for federal income tax purposes of $96,677,851
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 12,225,310
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (17,248,235)
-------------
UNREALIZED DEPRECIATION - NET $ (5,022,925)
=============
</TABLE>
<TABLE>
<CAPTION>
COUNTRY ALLOCATION (AS A PERCENT OF NET ASSETS):
<S> <C>
Argentina 1.9%
Brazil 9.6%
Finland 5.0%
France 9.1%
Hong Kong 12.4%
Indonesia 0.9%
Italy 5.7%
Japan 6.6%
Malaysia 3.6%
Singapore 8.0%
South Africa 2.1%
Switzerland 9.0%
Russia 4.5%
United Kingdom 7.0%
United States 4.9%
Venezuela 4.2%
-----
Total Common Stock 94.5%
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
DECEMBER 31, 1997
<S> <C>
ASSETS:
Investments, at value (Identified Cost $96,168,620) (Note 2) $91,654,926
Foreign currency, at value (cost $3,113,927) 2,911,581
Cash 57,320
Receivable for open forward foreign currency
contracts (Note 2) 651,915
Receivable for fund shares sold 35,970
Dividends receivable 18,040
Foreign tax reclaims receivable 10,993
Prepaid Expense 3,726
------------
TOTAL ASSETS 95,344,471
------------
LIABILITIES:
Accrued management fees (Note 3) 78,592
Accrued Directors' fees (Note 3) 1,566
Payable for fund shares repurchased 24,711
Audit fee payable 12,387
Custodian fee payable 11,692
Other payables and accrued expenses 572
------------
TOTAL LIABILITIES 129,520
------------
NET ASSETS FOR 9,755,164 SHARES OUTSTANDING $95,214,951
============
NET ASSETS CONSIST OF:
Capital stock $ 97,552
Additional paid-in-capital 98,536,807
Undistributed net investment income 183,266
Accumulated net realized gain on investments 461,471
Net unrealized appreciation on investments, foreign currency,
forward foreign currency exchange contracts, and other
assets and liabilities (4,064,145)
------------
TOTAL NET ASSETS $95,214,951
============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($95,214,951/9,755,164 shares) $ 9.76
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends (net of withholding) $ 1,435,732
Interest 360,982
------------
Total Investment Income 1,796,714
------------
EXPENSES:
Management fees (Note 3) 923,011
Directors' fees (Note 3) 8,166
Custodian fee 78,000
Registration and filing fee 23,384
Audit fee 20,000
Miscellaneous 10,295
------------
Total Expenses 1,062,856
------------
NET INVESTMENT INCOME 733,858
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on -
Investments (identified cost basis) 10,089,322
Foreign currency and forward foreign currency
exchange contracts 1,547,654
------------
Net realized gain on investments 11,636,976
------------
Net change in unrealized appreciation (depreciation) on -
Investments (7,241,562)
Foreign currency, forward foreign currency exchange
contracts, and other assets and liabilities 64,613
------------
Net unrealized depreciation on investments (7,176,949)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 4,460,027
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 5,193,885
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Period
9/6/96
(commencement
For the Year of operations)
Ended 12/31/97 to 12/31/96
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
OPERATIONS:
Net investment income $ 733,858 $ 367,076
Net realized gain on investments 11,636,976 93,389
Net change in unrealized appreciation (depreciation)
on investments (7,176,949) 3,112,804
---------------- ----------------
Net increase in net assets from operations 5,193,885 3,573,269
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income (730,313) (370,123)
From net realized gain on investments (11,273,357) (68,711)
---------------- ----------------
Total distributions to shareholders (12,003,670) (438,834)
---------------- ----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase in net assets from capital share
transactions (Note 5) 24,686,416 74,203,885
---------------- ----------------
Net increase in net assets 17,876,631 77,338,320
NET ASSETS:
Beginning of period 77,338,320 --
---------------- ----------------
END OF PERIOD (including undistributed net investment
income of $3,545 and $0, respectively) $ 95,214,951 $ 77,338,320
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
For the Period 9/6/96
For the Year (commencement of operations)
Ended 12/31/97 to 12/31/96
---------------- -----------------------------
<S> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD):
NET ASSET VALUE - BEGINNING OF PERIOD $10.42 $10.00
---------------- -----------------------------
Income from investment operations:
Net investment income 0.086 0.051
Net realized and unrealized gain on investments 0.669 0.429
---------------- -----------------------------
Total from investment operations 0.755 0.480
---------------- -----------------------------
Less distributions to shareholders:
From net investment income (0.086) (0.051)
From net realized gain on investments (1.329) (0.009)
---------------- -----------------------------
Total distributions to shareholders (1.415) (0.060)
---------------- -----------------------------
NET ASSET VALUE - END OF PERIOD $9.76 $10.42
================ =============================
Total return1 7.81% 4.82%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 1.15% 1.17%2
Net investment income 0.79% 1.54%2
Portfolio turnover 62% 1%
Average commission rate paid $0.0101 $0.0065
NET ASSETS - END OF PERIOD (000'S OMITTED) $95,215 $77,338
================ =============================
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
World Opportunities Series (the "Fund") is a no-load non-diversified
series of Manning & Napier Fund, Inc. (the "Corporation"). The Corporation
is organized in Maryland and is registered under the Investment Company Act
of 1940, as amended, as an open-end management investment company.
The Fund is authorized to issue five classes of shares (Class, A, B,
C, D, and E). Currently, only Class A shares have been issued. Each
class of shares are substantially the same, except that class-specific
distribution and shareholder servicing expenses are borne by the specific
class of shares to which they relate.
Shares of the Fund are offered to clients and employees of Manning &
Napier Advisors, Inc. (The Advisor) and its affiliates. The total
authorized capital stock of the Corporation consists of one billion
shares of common stock each having a par value of $0.01. As of December
31, 1997, 940 million shares have been designated in total among 19
series, of which 37.5 million have been designated as World Opportunities
Series Class A Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including domestic equities, foreign equities,
options and corporate bonds, listed on an exchange are valued at the last
quoted sales price of the exchange on which the security is primarily traded.
Securities not traded on valuation date or securities not listed on an
exchange are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed
securities, will normally be valued on the basis of evaluated bid prices
provided by the Funds pricing service.
Securities for which representative valuations or prices are not
available from the Fund's pricing service are valued at fair value as
determined in good faith by Advisor under procedures approved by and under
the general supervision and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
10
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains
on investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result,
net investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund may
periodically make reclassifications among its capital accounts without
impacting the Fund's net asset value.
For the year ended December 31, 1997, the Fund distributed $2,011,720 of
long-term capital gains, all of which representes 28% rate gain.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis: a) investment securities, other assets and liabilities are converted
to U.S. dollars based upon current exchange rates; and b) purchase and sales
of securities and income and expenses are converted into U.S. dollars based
upon the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are
recorded for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates
is not separately stated.
11
<PAGE>
Notes to Financial Statemetns
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency contracts in order
to hedge a portfolio position or specific transaction. Risks may arise if
the counterparties to a contract are unable to meet the terms of the contract
or if the value of the foreign currency moves unfavorably.
All forward foreign currency contracts are adjusted daily by the exchange
rate of the underlying currency and, for financial statement purposes, any
gain or loss is recorded as unrealized gain or loss until a contract has been
closed. Realized and unrealized gain or loss arising from a transaction is
included in net realized and unrealized gain (loss) from foreign currency and
forward currency exchange contracts.
The Fund regularly trades forward foreign currency exchange contracts
with off-balance sheet risk in the normal course of its investing activities
to assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the
investment the Fund has in forward foreign currency exchange contracts and
does not necessarily represent the amounts potentially at risk. The
measurement of the risks associated with forward foreign currency exchange
contracts is meaningful only when all related and offsetting transactions are
considered. A summary of obligations for forward currency exchange contracts
outstanding as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Net unrealized
Settlement Contracts In Exchange Contracts Appreciation/
Date to Deliver For At Value (Depreciation)
- ---------- ------------ ------------ ---------- ----------------
<C> <S> <C> <C> <C>
01/09/98 French Franc $ 2,052,335 $2,004,000 $ 48,335
01/09/98 French Franc 2,468,085 2,421,500 46,585
01/09/98 Japanese Yen 3,145,695 2,910,124 235,571
01/09/98 Japanese Yen 3,218,501 2,971,389 247,112
01/09/98 Swiss Francs 2,797,203 2,736,644 60,559
01/09/98 Swiss Francs 1,382,075 1,368,322 13,753
</TABLE>
On December 31, 1997, the Fund had sufficient cash and/or securities to
cover any commitments under these contracts.
12
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OPTION CONTRACTS
The Fund may write (sell) or buy call or put options on securities and
other financial instruments. When the Fund writes a call, the Fund gives the
purchaser the right to buy the underlying security from the Fund at the price
specified in the option contract (the exercise price) at any time during the
option period. When the Fund writes a put option, the Fund gives the
purchaser the right to sell to the Fund the underlying security at the
exercise price at any time during the option period. The Fund will only
write options on a covered basis. This means that the Fund will own the
underlying security when the Fund writes a call or the Fund will put aside
cash, U.S. Government securities, or other liquid assets in the amount not
less than the exercise price at all times the put option is outstanding.
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Funds Statement of Assets and Liabilities as an
asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the
option. The current market value of the option is the closing price or, in
the absence of a closing price, the bid price.
If a written option expires on its stipulated expiration date or if the
Fund enters into a closing transaction, a gain or loss is realized on the
contract. When a gain or loss is realized, the liability related to such
option contract is extinguished. If a written call option is exercised, a
gain or loss is realized from the sale of the underlying security and the
premium received from the option is added to proceeds from the sale of the
underlying security thereby increasing the gain or decreasing the loss from
the sale of the underlying security. If a written put option is exercised,
the cost of the underlying security purchased by the Fund will be decreased
by the premium originally received.
The Fund may also purchase options in an attempt to hedge against
fluctuations in the value of its portfolio and to protect against declines in
the value of the securities. The premium paid by the Fund for the purchase
of a call or put option is included in the Funds Statement of Assets and
Liabilities as an investment and subsequently marked-to-market to reflect the
current market value of the option. The current market value of the option
is the closing price or, in the absence of a closing price, the bid price.
If an option the Fund has purchased expires on the stipulated expiration
date, the Fund realizes a loss in the amount of the cost of the option. If
the Fund exercises a call option, the cost of the securities acquired by
exercising the call is increased by the premium paid to buy the call. If the
Fund exercises a put option, it realizes a gain or loss from the sale of the
underlying security and the proceeds from such a sale are decreased by the
premium originally paid.
13
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
OPTION CONTRACTS (CONTINUED)
The measurement of the risks associated with option contracts is
meaningful only when all related and offsetting transactions are considered.
A summary of obligations for option contracts for the year ended December 31,
1997 is as follows:
WRITTEN PUT OPTIONS
Shares Amount
Options written 400 $318,789
Options expired (400) (318,789)
------ ---------
Balance, December 31, 1997 0 $ 0
====== =========
OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of the revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which
the Fund pays a fee, computed daily and payable monthly, at an annual rate
of 1% of the Fund's average daily net assets. The fee amounted to $923,011
for the year ended December 31, 1997.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
14
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $8,166 for the
year ended December 31, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1997, purchases and sales of securities,
other than United States Government securities and short-term securities,
were $67,264,949 and $50,858,656, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of World Opportunities Series Class A Shares were:
<TABLE>
<CAPTION>
For the Period 9/6/96
For the Year (commencement of
Ended 12/31/97 operations) to 12/31/96
--------------- ------------------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
--------------- ------------ ------------------------ ------------
Sold 1,618,889 $19,147,297 7,582,503 $75,856,659
Reinvested 1,260,495 11,848,761 43,147 433,194
Repurchased (543,078) (6,309,642) (206,792) (2,085,968)
--------------- ------------ ------------------------ ------------
Total 2,336,306 $24,686,416 7,418,858 $74,203,885
=============== ============ ======================== ============
</TABLE>
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in securities of domestic companies and the United States
Government. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of foreign
companies and foreign governments and their markets may be less liquid and
their prices more volatile than of those securities of comparable domestic
companies and the United States Government.
15
<PAGE>
Independent Accountants Report
TO THE SHAREHOLDERS AND DIRECTORS OF
MANNING & NAPIER FUND, INC.- WORLD OPPORTUNITIES SERIES:
We have audited the accompanying statement of assets and liabilities of
Manning & Napier Fund, Inc.- World Opportunities Series, including the
schedule of portfolio investments, as of December 31, 1997, and the related
statement of operations for the year then ended, the statement of changes in
net assets for the year then ended and the period September 6, 1996
(commencement of operations) to December 31, 1996, and the financial
highlights for each of the periods indicated in the financial highlights
table herein. These financial statements and financial highlights are the
responsibility of the Funds management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Manning & Napier Fund, Inc.- World Opportunities Series as of
December 31, 1997, the results of its operations for the year then ended, the
changes in its net assets for the year then ended and the period September 6,
1996 (commencement of operations) to December 31, 1996, and the financial
highlights for the each of the periods indicated in the financial highlights
table herein in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 23, 1998
16
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Small Cap Series
Annual Report
December 31, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
The end of 1997 was a difficult period in the markets with a great deal
of volatility, particularly in response to trouble in foreign markets. Often
during uncertain times like this, investors look for what they perceive to be
sure things, such as bonds or blue-chip stocks, and shy away from more
volatile investments. This flight to quality can punish investments in
relatively volatile sectors of the market, such as small company stocks.
After strong performance in the first three quarters of 1997, the Small Cap
Series suffered late in the year for this reason.
The silver lining is that setbacks in the small cap market have created
better bargains than are generally available in the overpriced large cap
market. An example is the ability to buy higher growth-rate stocks at
cheaper valuations when compared to the large cap market. By the end of
1997, the S&P 500 Index, with a projected earnings growth rate of 7%, was
trading at over 21 times 1998 forecasted earnings. In contrast, the small
cap Russell 2000 Index offered higher growth rates at a lower price, with
earnings growth projected to be 16%, while the index traded at 19 times
projected 1998 earnings. We believe the valuations are even more compelling
in the Small Cap Series, in which we project aggregate earnings growth of
over 17%, while the fund is trading at only less than 16 times projected 1998
earnings.
Markets can be driven by investor sentiment and momentum in the short
run, but ultimately prices must be reconciled to the fundamental value of
underlying assets and earnings. One benefit of this contrast is that if
sentiment and momentum were always in synch with long-term, fundamental
trends, there would never be any opportunities. Our ability to secure higher
growth rates at cheaper prices is a clear indication that we are continuing
to follow the disciplines of our equity selection strategies, and we are
confident that buying fundamental value will once again prove to be a winning
investment strategy in the long run, as it has always been in the past.
We wish you the best for a happy, healthy, and prosperous 1998.
Sincerely,
Manning & Napier Advisors, Inc.
1
<PAGE>
Management Discussion and Analysis
<graphic>
<pie chart>
Data for chart to follow:
<TABLE>
<CAPTION>
Portfolio Composition*- As of 12/31/97
<S> <C>
Chemical & Allied Products 3.3%
Computer Equipment 4.3%
Direct Mail Advertising Services 4.8%
Electronics & Electrical Equipment 8.9%
Glass Products 3.9%
Industrial & Commercial Machinery 5.3%
Paper Mills 3.8%
Primary Metal Industries 7.2%
Printing & Publishing 9.6%
Retail 7.7%
Software 10.3%
Technical Instruments 5.7%
Transportation Equipment 9.1%
Miscellaneous ** 16.1%
**Miscellaneous includes:
Agricultural Products
Amusement and Recreation Services
Cash, short-term investments and
liabilities less other assets
Holding Companies
Manufacturing - Miscellaneous
Motion Picture Production
Plastic Products-Miscellaneous
Telecommunications
Textile Mill Products
Training & Education
</TABLE>
*As a percentage of net assets
2
<PAGE>
Performance Update as of December 31, 1997
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc. -
Small Cap Series
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 11,229 12.29% 12.29%
Five Year $ 17,561 75.61% 11.91%
Inception 2 $ 20,388 103.88% 13.37%
</TABLE>
<TABLE>
<CAPTION>
S&P 500 Total Return Index
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 13,332 33.32% 33.32%
Five Year $ 25,112 151.12% 20.21%
Inception 2 $ 26,944 169.44% 19.08%
</TABLE>
The value of a $10,000 investment in the Manning & Napier Fund, Inc. -
Small Cap Series from its current activation (4/30/92) to present (12/31/97)
as compared to the Standard & Poor's (S&P) 500 Total Return Index. 1
<graphic>
<line chart>
Data for chart to follow:
<TABLE>
<CAPTION>
Date Manning & Napier Small Cap Series S&P 500 Total Return Index
<S> <C> <C>
04/30/92 10,000 10,000
12/31/92 11,610 10,725
12/31/93 13,317 11,799
12/31/94 14,383 11,959
12/31/95 16,497 16,437
12/31/96 18,156 20,206
12/31/97 20,388 26,944
</TABLE>
1 The Standard and Poor's (S&P) 500 Total Return Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed
on the New York Stock Exchange, American Stock Exchange, and Over-the-Counter
Market. The Index returns assume reinvestment of dividends and, unlike Fund
returns, do not reflect any fees or expenses.
2 The Fund and Index performance numbers are calculated from April 30,
1992, the Fund's current activation date. The Fund's performance is
historical and may not be indicative of future results.
3
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
--------- ------------
COMMON STOCK - 99.0%
<S> <C> <C>
AGRICULTURAL PRODUCTION - 1.5%
Sylvan, Inc.* 134,075 $ 1,877,050
------------
AMUSEMENT & RECREATION SERVICES - 1.7%
Grand Casinos, Inc.* 155,000 2,111,875
------------
CHEMICAL & ALLIED PRODUCTS - 3.3%
Orion-yhtyma OY - B Shares (Finland) (Note 6) 154,000 4,070,627
------------
COMPUTER EQUIPMENT - 4.3%
Bell & Howell Co.* 218,000 5,272,875
------------
DIRECT MAIL ADVERTISING SERVICES - 4.8%
Harte-Hanks Communications, Inc. 159,000 5,902,875
------------
ELECTRONICS &ELECTRICAL EQUIPMENT - 8.9%
Coleman Company, Inc.* 314,800 5,056,475
Glenayre Technologies, Inc.* 235,000 2,320,625
Harman International Industries, Inc. 80,500 3,416,219
------------
10,793,319
------------
GLASS PRODUCTS - 3.9%
Libbey, Inc. 125,000 4,734,375
------------
HOLDING COMPANIES - 1.0%
C.P. Pokphand Co. (Hong Kong) (Note 6) 7,400,000 1,165,154
------------
INDUSTRIAL & COMMERCIAL MACHINERY - 5.3%
Comfort Systems USA, Inc.* 160,000 3,160,000
NN Ball & Roller, Inc. 360,000 3,195,000
------------
6,355,000
------------
MANUFACTURING - MISCELLANEOUS - 2.2%
Penn Engineering & Manufacturing Corp. 111,000 2,664,000
------------
MOTION PICTURE PRODUCTION - 1.8%
Groupe AB SA*- ADR (Note 6) 333,000 2,143,687
------------
PAPER MILLS - 3.8%
Schweitzer-Mauduit International, Inc. 122,850 4,576,162
------------
PLASTIC PRODUCTS - MISCELLANEOUS - 0.4%
Pt Tri Polyta Indonesia - ADR (Note 6) 746,950 513,528
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
------- ------------
<S> <C> <C>
PRIMARY METAL INDUSTRIES - 7.2%
American Superconductor Corp.* 186,000 $ 1,581,000
Gibraltar Steel Corp.* 183,000 3,614,250
Wolverine Tube, Inc.* 114,000 3,534,000
------------
8,729,250
------------
PRINTING & PUBLISHING - 9.6%
Big Flower Holdings, Inc.* 100,000 2,412,500
CMP Media, Inc. - Class A* 210,000 3,622,500
Scholastic Corp.* 150,000 5,625,000
------------
11,660,000
------------
RETAIL - 7.7%
RETAIL - RECREATIONAL GOODS - 1.5%
West Marine, Inc.* 82,175 1,838,666
------------
RETAIL - SPECIALTY STORES - 6.2%
Hancock Fabrics, Inc. 213,500 3,095,750
Loehmanns Holdings, Inc.* 275,000 1,581,250
Talbots, Inc. 155,000 2,809,375
------------
7,486,375
------------
9,325,041
------------
SOFTWARE - 10.3%
Apache Medical Systems, Inc.* 502,350 643,661
Broderbund Software, Inc.* 157,000 4,023,125
Electronic Arts, Inc.* 79,000 2,987,188
HCIA, Inc.* 280,000 3,325,000
Symantec Corp.* 70,000 1,535,625
------------
12,514,599
------------
TECHNICAL INSTRUMENTS & SUPPLIES - 5.7%
OPTICAL SUPPLIES - 2.9%
Sola International, Inc.* 108,000 3,510,000
------------
SURGICAL & MEDICAL INSTRUMENTS - 2.8%
CardioGenesis Corp.* 121,425 758,906
Eclipse Surgical Technologies, Inc.* 227,000 1,333,625
Physio-Control International Corp.* 85,000 1,349,375
------------
3,441,906
------------
6,951,906
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Amount/ Value
Shares (Note 2)
------------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS - 2.0%
Vimpel-Communications - ADR* (Note 6) 68,000 $ 2,422,500
-------------
TEXTILE MILL PRODUCTS - 2.9%
Albany International Corp. - Class A 155,000 3,565,000
-------------
TRAINING & EDUCATION - 1.6%
Firearms Training Systems, Inc.* 370,000 1,919,375
-------------
TRANSPORTATION EQUIPMENT - 9.1%
Arctic Cat, Inc. 340,000 3,293,750
Federal Signal Corp. 167,000 3,611,375
Miller Industries, Inc.* 389,500 4,187,125
-------------
11,092,250
-------------
TOTAL COMMON STOCK
(Identified Cost $122,115,059) 120,360,448
-------------
SHORT-TERM INVESTMENTS - 1.7%
Federal National Mortgage Association
Discount Note, 1/14/1998 $ 1,000,000 997,949
Dreyfus U.S. Treasury Money Market Reserves 1,025,605 1,025,605
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $2,023,554) 2,023,554
-------------
TOTAL INVESTMENTS - 100.7%
(Identified Cost $124,138,613) 122,384,002
LIABILITIES, LESS OTHER ASSETS - (0.7)% (783,976)
-------------
NET ASSETS - 100% $121,600,026
=============
</TABLE>
* Non-income producing security
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At December 31, 1997, the net unrealized depreciation
based on identified cost for federal
income tax purposes of $124,138,613 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 12,572,853
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (14,327,464)
-------------
UNREALIZED DEPRECIATION - NET ($1,754,611)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
DECEMBER 31, 1997
<S> <C>
ASSETS:
Investments, at value (Identified Cost $124,138,613)(Note 2) $122,384,002
Foreign currency, at value (cost $65,177) 64,936
Cash 73,935
Receivable for open forward foreign currency
contracts (Note 2) 29,404
Dividends receivable 49,322
Receivable for fund shares sold 31,380
Prepaid expense 4,637
-------------
TOTAL ASSETS 122,637,616
-------------
LIABILITIES:
Accrued management fees (Note 3) 104,186
Accrued Directors' fees (Note 3) 1,676
Payable for securities purchased 874,372
Payable for fund shares repurchased 24,654
Audit fee payable 16,165
Registration and filing fees payable 10,820
Other payables and accrued expenses 5,717
-------------
TOTAL LIABILITIES 1,037,590
-------------
NET ASSETS FOR 10,087,625 SHARES
OUTSTANDING $121,600,026
=============
NET ASSETS CONSIST OF:
Capital stock $ 100,876
Additional paid-in-capital 116,476,006
Accumulated net realized gain on investments 6,748,399
Net unrealized depreciation on investments, foreign currency,
forward foreign currency exchange contracts, and other
assets and liabilities (1,725,255)
-------------
TOTAL NET ASSETS $121,600,026
=============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($121,600,026/10,087,625 shares) $ 12.05
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
<S> <C>
INVESTMENT INCOME:
Interest $ 597,626
Dividends 519,431
------------
Total Investment Income 1,117,057
------------
EXPENSES:
Management fees (Note 3) 1,169,030
Directors' fees (Note 3) 8,249
Custodian fee 27,200
Audit fee 22,566
Printing and postage fees 10,870
Miscellaneous 20,640
------------
Total Expenses 1,258,555
------------
NET INVESTMENT INCOME (141,498)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on -
Investments (identified cost basis) 21,251,356
Foreign currency and forward foreign currency
exchange contracts 93,374
------------
Net realized gain on investments 21,344,730
------------
Net change in unrealized appreciation (depreciation) on -
Investments (8,887,628)
Foreign currency, forward foreign currency exchange
contracts, and other assets and liabilities 29,337
------------
Net change in unrealized depreciation on investments (8,858,291)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 12,486,439
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $12,344,941
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year For the Year
Ended 12/31/97 Ended 12/31/96
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (141,498) $ 353,895
Net realized gain on investments 21,344,730 5,120,431
Net change in unrealized appreciation (depreciation)
on investments (8,858,291) 9,285,634
---------------- ----------------
Net increase in net assets from operations 12,344,941 14,759,960
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income (83,196) (271,530)
From net realized gain on investments (13,639,201) (7,753,635)
In excess of net realized gain on investments -- (814,852)
---------------- ----------------
Total distributions to shareholders (13,722,397) (8,840,017)
---------------- ----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase (decrease) from capital share
transactions (Note 5) 22,289,055 (48,234,558)
---------------- ----------------
Net increase (decrease) in net assets 20,911,599 (42,314,615)
NET ASSETS:
Beginning of period 100,688,427 143,003,042
---------------- ----------------
END OF PERIOD (including undistributed net investment
income of $0 and $82,416, respectively) $ 121,600,026 $ 100,688,427
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
For the Years Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
Per share data (for a share outstanding
throughout each period ):
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD $ 12.09 $ 11.95 $ 12.92 $ 12.52 $ 11.24
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income (loss) (0.015) 0.045 (0.004) (0.066) (0.040)
Net realized and unrealized gain
on investments 1.502 1.112 1.934 1.051 1.700
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.487 1.157 1.930 0.985 1.660
---------- ---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income (0.009) (0.035) -- -- --
From net realized gain on investments (1.518) (0.889) (2.900) (0.585) (0.380)
In excess of net realized gain on investments -- (0.093) -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions to shareholders (1.527) (1.017) (2.900) (0.585) (0.380)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE - END OF PERIOD $ 12.05 $ 12.09 $ 11.95 $ 12.92 $ 12.52
========== ========== ========== ========== ==========
Total return1 12.29% 10.06% 14.70% 8.01% 14.64%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 1.07% 1.08% 1.07% 1.10% 1.13%
Net investment income (loss) (0.12)% 0.29% (0.03)% (0.58)% (0.43)%
Portfolio turnover 94% 31% 77% 31% 12%
Average commission rate paid2 $ 0.0224 $ 0.0291 $ 0.0500 - -
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 121,600 $ 100,688 $ 143,003 $ 105,522 $ 70,734
========== ========== ========== ========== ==========
</TABLE>
1Represents aggregate total return for the period indicated.
2Average commission rate is calculated for Funds with fiscal years
beginning on or after January 1, 1995.
The accompanying notes are an intrgral part of the financial statements.
10
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
Small Cap Series (the "Fund") is a no-load diversified series of Manning
& Napier Fund, Inc. (the "Corporation"). The Corporation is organized in
Maryland and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
On April 30, 1992, the Fund resumed sales of shares to advisory clients
and employees of Manning & Napier Advisors, Inc. (The Advisor) and its
affiliates. On July 8, 1993, the Fund began offering shares directly to
investors. Previously, the Fund was available from time to time to Manning &
Napier employees and advisory clients of Manning & Napier Advisors, Inc.
The Fund is authorized to issue five classes of shares (Class A, B, C, D,
and E). Currently, only Class A shares have been issued. Each class of
shares are substantially the same, except that class-specific distribution
and shareholder servicing expenses are borne by the specific class of shares
to which they relate.
The total authorized capital stock of the Corporation consists of one
billion shares of common stock each having a par value of $0.01. As of
December 31, 1997, 940 million shares have been designated in total among 19
series, of which 37.5 million have been designated as Small Cap Series Class
A Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including domestic equities, foreign equities,
options and corporate bonds, listed on an exchange are valued at the latest
quoted sales price of the exchange on which the security is primarily traded.
Securities not traded on valuation date or securities not listed on an
exchange are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed
securities, will normally be valued on the basis of evaluated bid prices
provided by the Funds pricing service.
Securities for which representative valuations or prices are not
available from the Fund's pricing service are valued at fair value as
determined in good faith by the Advisor under procedures approved by and
under the general supervision and responsibility of the Fund's Board of
Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
11
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains
on investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result,
net investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund may
periodically make reclassifications among its capital accounts without
impacting the Fund's net asset value.
For the year ended December 31, 1997 the Fund distributed $7,434,221 of
long-term capital gains of which $4,663,245 represents 20% rate gain.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis: a) investment securities, other assets and liabilities are converted
to U.S. dollars based upon current exchange rates; and b) purchase and sales
of securities and income and expenses are converted into U.S. dollars based
upon the currency exchange rates prevailing on the respective dates of such
transactions.
12
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FOREIGN CURRENCY TRANSLATION (continued)
Gains and losses attributable to foreign currency exchange rates are
recorded for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates
is not separately stated.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency contracts in order
to hedge a portfolio position or specific transaction. Risks may arise if
the counterparties to a contract are unable to meet the terms of the contract
or if the value of the foreign currency moves unfavorably.
All forward foreign currency contracts are adjusted daily by the exchange
rate of the underlying currency and, for financial statement purposes, any
gain or loss is recorded as unrealized gain or loss until a contract has been
closed. Realized and unrealized gain or loss arising from a transaction is
included in net realized and unrealized gain (loss) from foreign currency and
forward currency exchange contracts.
The Fund regularly trades forward foreign currency exchange contracts
with off-balance sheet risk in the normal course of its investing activities
to assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the
investment the Fund has in forward foreign currency exchange contracts and
does not necessarily represent the amounts potentially at risk. The
measurement of the risks associated with forward foreign currency exchange
contracts is meaningful only when all related and offsetting transactions are
considered. A summary of obligations for forward currency exchange contracts
outstanding as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Net Unrealized
Settlement Contracts In Exchange Contracts Appreciation/
Date to Deliver For At Value (Depreciation)
- ---------- -------------- ------------ ----------- ----------------
<C> <S> <C> <C> <C>
1/9/98 French Francs $ 1,248,504 $1,219,100 $ 29,404
</TABLE>
On December 31, 1997, the Fund had sufficient cash and/or securities to
cover any commitments under these contracts.
OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of the revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
13
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which
the Fund pays a fee, computed daily and payable monthly, at an annual rate of
1% of the Fund's average daily net assets. The fee amounted to $1,169,030
for the year ended December 31, 1997.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $8,249 for the
year ended December 31, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1997, purchases and sales of securities,
other than United States Government securities and short-term securities,
were $126,570,514 and $99,370,697, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Small Cap Series Class A Shares were:
<TABLE>
<CAPTION>
For the Year For the Year
Ended Ended
12/31/97 12/31/96
------------- -------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
------------- ----------- ------------ -------------
Sold 1,150,766 $15,559,488 1,521,782 $ 18,457,745
Reinvested 1,119,486 13,610,375 745,911 8,765,039
Repurchased (509,007) (6,880,808) (5,907,361) (75,457,342)
------------- ----------- ------------ -------------
Total 1,761,245 $22,289,055 (3,639,668) $(48,234,558)
============= =========== ============ =============
</TABLE>
14
<PAGE>
Notes to Financial Statements
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in securities of domestic companies and the United States
Government. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of foreign
companies and foreign governments and their markets may be less liquid and
their prices more volatile than those of securities of comparable domestic
companies and the United States Government.
15
<PAGE>
Independent Accountants Report
TO THE SHAREHOLDERS AND DIRECTORS OF
MANNING & NAPIER FUND, INC.- SMALL CAP SERIES:
We have audited the accompanying statement of assets and liabilities of
Manning & Napier Fund, Inc.- Small Cap Series, including the schedule of
portfolio investments, as of December 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Funds management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Manning & Napier Fund, Inc.- Small Cap Series as of December
31, 1997, the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended and the
financial highlights for each of the five years in the period then ended in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 23, 1998
16
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
International Series
Annual Report
December 31, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
The International Series performed well in what was a difficult year in
the international markets, turning in a return of 27.70%, compared to a
return of 15.76% for the Morgan Stanley Capital International World Index.
This strong return was due both to the investments we made for the Series,
and to the investments we avoided.
While the Asian crisis caused serious problems for most global investors
in the latter part of 1997, this crisis was actually the primary source of
our strong outperformance for the year, as we had substantially underweighted
Asia investments. This demonstrates an important principle of investing: the
investments you choose to avoid can be every bit as important as the
investments you choose to make. Certainly, Asia with an increasingly
market-driven China was (and still is) the world's most compelling growth
story, but it was a story that had been hyped until prices were at levels
which allowed no room for disappointments. Only as the crisis brought prices
lower did we begin to increase our Asian investments, but still on a
selective and cautious basis.
European stocks continue to comprise the majority of the portfolio. As
of December 31, 1997, the Series was invested in Germany (31% of the
portfolio), France (26%), Italy (16%), Spain (10%), and the United Kingdom
(2%). The European countries are less tied to the Asian markets than other
regions, including the U.S., so the turmoil in the Asian markets has had a
smaller effect on Europe. The European markets were among the
best-performing markets in 1997. In Germany and France, the markets rose as
the economies exhibited steady growth and stable interest rates. An
additional factor in the strong performance has been restructuring which is
taking place at both the government and corporate levels which have made the
economies more efficient, improving interest rates and corporate earnings.
These traits are also present in Italy and Spain. In addition, the
markets there have also benefited from work that is being done to prepare for
European Monetary Union in 1999. In order to meet the goals necessary for
monetary union, the governments have cut expenditures drastically and made
other changes in their pursuit of fiscal discipline. The lower interest
rates that have resulted have provided support to corporate earnings, and
thus benefited stock prices.
The final area in which the Series has investments is Mexico. We
originally purchased these shares in 1995 when a devaluation of the peso
drove down the prices of many Mexican stocks. As with Southeast Asia and
Japan, we purchased stocks of companies which met a set of clearly defined
criteria, giving us confidence that the companies would perform strongly
going forward. The Mexican economy has improved substantially, and the
increased growth has benefited our holdings. In addition, we originally
chose companies with significant U.S. exports, so they have also benefited
from the robust U.S. economy. Mexican companies represented approximately 3%
of the portfolio at the end of the year.
1
<PAGE>
Management Discussion and Analysis
In summary, the Series' return was due both to investments in strongly
performing regions, such as Europe, and to our avoidance of Japan and
Southeast Asia until after the turmoil had created significant values in that
region. Going forward, we will continue to use our top-down analysis to seek
opportunities for growth abroad.
We wish you the best for a happy, healthy, and prosperous 1998.
Sincerely,
Manning & Napier Advisors, Inc.
<graphic>
<pie chart>
Data for chart to follow:
Portfolio Allocation by Country*
France - 26.30%
Germany - 31.08%
Hong Kong - 5.17%
Indonesia - 0.92%
Italy - 16.17%
Japan - 3.10%
Malaysia - 2.24%
Mexico - 2.82%
Spain - 9.93%
Thailand - 0.03%
United Kingdom - 2.24%
*As a percentage of common stocks
2
<PAGE>
Performance Update as of December 31, 1997
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
International Series
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 12,770 27.70% 27.70%
Five Year $ 17,540 75.40% 11.89%
Inception 2 $ 18,590 85.90% 12.29%
</TABLE>
<TABLE>
<CAPTION>
S&P 500 Total Return Index
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 13,332 33.32% 33.32%
Five Year $ 25,112 151.12% 20.21%
Inception 2 $ 26,959 169.59% 20.36%
</TABLE>
<TABLE>
<CAPTION>
Morgan Stanley Capital
International World Index
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 11,576 15.76% 15.76%
Five Year $ 20,412 104.12% 15.33%
Inception 2 $ 20,167 101.67% 14.01%
</TABLE>
The value of a $10,000 investment in the Manning & Napier Fund, Inc.
- -International Series from its inception (8/27/92) to present (12/31/97) as
compared to the Standard & Poor's (S&P) 500 Total Return Index and the Morgan
Stanley Capital International World Index. 1
<graphic>
<line chart>
Data for chart to follow:
<TABLE>
<CAPTION>
Manning & Napier S&P 500 Morgan Stanley Capital
Date International Series Total Return Index International World Index
<S> <C> <C> <C>
08/27/92 10,000 10,000 10,000
12/31/92 10,598 10,643 9,880
12/31/93 13,359 11,709 12,103
12/31/94 11,425 11,868 12,717
12/31/95 11,898 16,312 15,351
12/31/96 14,557 20,052 17,421
12/31/97 18,590 26,959 20,167
</TABLE>
1 The Standard & Poor (S&P) 500 Total Return Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed on
the New York Stock Exchange, American Stock Exchange, and Over-the-Counter
market. The Morgan Stanley Capital International World Index is an market
capitalization-weighted measure of the total return of 1,560 companies listed
on the stock exchanges of the United States, Europe, Canada, Australia, New
Zealand and the Far East. The Morgan Stanley Capital International Index is
denominated in U.S. Dollars. The Indices' returns assume reinvestment of
dividends and, unlike Fund returns, do not reflect any fees or expenses.
2 Performance numbers for the Fund and Indices are calculated from August
27, 1992, the Fund's inception date. The Fund's performance is historical
and may not be indicative of future results.
3
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
COMMON STOCK - 93.22%
FRANCE - 24.51%
AEROSPACE & MILITARY TECHNOLOGY - 0.23%
Thomson CSF 14,389 $ 455,596
-----------
AUTOMOBILES - 0.48%
PSA Peugeot Citroen 7,545 955,836
-----------
BANKING - 2.25%
Banque Nationale de Paris 18,100 966,441
Compagnie Financiere de Paribas - A 19,733 1,722,571
Societe Generale 13,155 1,800,475
-----------
4,489,487
-----------
BEVERAGE & TOBACCO - 0.99%
LVMH (Moet Hennessy Louis Vuitton) 11,764 1,961,566
-----------
BUILDING MATERIALS & COMPONENTS - 0.44%
Lafarge SA 13,327 878,419
-----------
BUSINESS & PUBLIC SERVICES - 1.22%
Compagnie Generale des Eaux 17,249 2,418,386
Compagnie Generale des Eaux 5/2/2001 warrants 16,992 11,600
-----------
2,429,986
-----------
CHEMICALS - 1.71%
L'Air Liquide 14,380 2,260,956
Rhone-Poulenc - A 25,300 1,138,473
-----------
3,399,429
-----------
CONSTRUCTION & HOUSING - 0.21%
Bouygues SA 3,721 423,571
-----------
ELECTRICAL & ELECTRONICS - 1.37%
Alcatel Alsthom 21,353 2,726,482
-----------
ENERGY SOURCES - 3.58%
Elf Aquitaine SA 37,335 4,362,109
Total SA - B 25,288 2,764,637
-----------
7,126,746
-----------
FINANCIAL SERVICES - 0.15%
Societe Eurafrance SA 743 303,835
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
FRANCE (continued)
FOOD & HOUSEHOLD PRODUCTS - 0.93%
Groupe Danone 10,381 $ 1,862,645
------------
HEALTH & PERSONAL CARE - 2.63%
Sanofi SA 11,667 1,304,717
L'Oreal 10,013 3,935,841
------------
5,240,558
------------
INDUSTRIAL COMPONENTS - 0.38%
Michelin-B 15,166 767,001
------------
LEISURE & TOURISM - 0.45%
Accor SA 4,809 898,188
------------
MACHINERY & ENGINEERING - 1.48%
Schneider SA 13,595 741,555
Sidel SA 33,200 2,211,023
------------
2,952,578
------------
MATERIALS & COMMODITIES - 1.14%
Compagnie de Saint-Gobain 15,911 2,270,628
------------
MERCHANDISING - 2.67%
Carrefour Supermarche SA 6,048 3,169,741
Casino Guichard-Perrachon SA 10,600 592,697
Pinault-Printemps-Redoute SA 1,500 803,922
Promodes 1,800 750,194
------------
5,316,554
------------
MULTI-INDUSTRY - 2.20%
AXA-UAP 27,573 2,143,249
Chargeurs SA 1,235 74,208
Suez Lyonnaise des Eaux 17,368 1,930,663
Pathe SA 1,235 240,764
------------
4,388,884
------------
TOTAL FRENCH SECURITIES
(Identified Cost $33,246,917) 48,847,989
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
GERMANY - 28.97%
AIRLINES - 0.22%
Deutsche Lufthansa AG 23,700 $ 445,229
------------
AUTOMOBILES - 2.11%
Daimler-Benz AG 59,540 4,202,726
------------
BANKING - 5.43%
Bayerische Vereinsbank AG 49,730 3,206,232
Deutsche Bank AG 44,350 3,100,936
Dresdner Bank AG 99,090 4,505,071
------------
10,812,239
------------
BUSINESS & PUBLIC SERVICES - 1.04%
SAP AG 6,850 2,076,844
------------
CHEMICALS - 1.56%
Bayer AG 83,750 3,107,096
------------
CONSTRUCTION & HOUSING - 0.47%
Hochtief AG 22,770 936,512
------------
ELECTRICAL & ELECTRONICS - 3.63%
Siemens AG 120,000 7,236,516
------------
INSURANCE - 3.94%
Allianz AG 23,070 5,949,550
Muenchener Rueckversicherungs -
Gersellschaft AG 5,000 1,900,836
------------
7,850,386
------------
MACHINERY & ENGINEERING - 1.86%
Mannesmann AG 5,725 2,873,305
MAN AG 2,902 837,918
------------
3,711,223
------------
MATERIALS & COMMODITIES - 0.45%
Degussa AG 17,900 885,445
------------
MULTI-INDUSTRY - 1.83%
Viag AG 6,656 3,643,914
------------
TELECOMMUNICATIONS - 1.86%
Deutsche Telekom AG 200,250 3,706,255
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
GERMANY (continued)
<S> <C> <C>
UTILITIES - GAS & ELECTRIC - 4.57%
RWE AG 75,810 $ 4,066,047
VEBA AG 74,150 5,048,540
------------
9,114,587
------------
TOTAL GERMAN SECURITIES
(Identified Cost $36,805,315) 57,728,972
------------
HONG KONG - 4.82%
BROADCAST SERVICES - 0.72%
Television Broadcasts Ltd. 500,000 1,426,113
------------
ENERGY SOURCES - OIL/GAS - 0.61%
Shanghai Petrochemical Co. Ltd. 7,750,000 1,210,260
------------
INVESTMENT HOLDING COMPANIES - 0.83%
Hutchison Whampoa Ltd. 265,000 1,662,164
------------
MULTI-INDUSTRY - 1.00%
Citic Pacific Ltd. 500,000 1,987,524
------------
RETAIL - APPAREL - 0.29%
Giordano International Ltd. 1,650,000 569,638
------------
TELECOMMUNICATIONS - 0.26%
Champion Technology Holdings 4,398,729 471,191
Champion Technology Holdings 6/30/1998
warrants 879,745 16,463
Kantone Holdings Ltd. 424,025 29,004
------------
516,658
------------
TEXTILES & APPAREL - 1.08%
Yizheng Chemical Fibre Co. Ltd. 11,944,000 2,158,090
------------
WHOLESALE - SPECIAL LINES - 0.03%
Goldlion Holdings Ltd. 200,000 66,466
------------
TOTAL HONG KONG SECURITIES
(Identified Cost $12,569,347) 9,596,913
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
INDONESIA - 0.86%
BUILDING MATERIAL & COMPONENTS - 0.50%
PT Barito Pacific Timber 3,425,000 $ 998,499
-----------
TEXTILES & APPAREL - 0.36%
Great River International 8,600,000 716,337
-----------
TOTAL INDONESIAN SECURITIES
(Identified Cost $3,765,253) 1,714,836
-----------
ITALY - 15.08%
AUTOMOBILES - 0.82%
Fiat S.p.A. 559,900 1,635,221
-----------
BUILDING MATERIAL & COMPONENTS - 0.29%
Italcementi S.p.A. 83,600 585,127
-----------
CONSTRUCTION & HOUSING - 0.26%
Sirti S.p.A. 86,500 525,388
-----------
ENERGY SOURCES - OIL/GAS - 2.95%
Edison S.p.A. 104,000 631,681
ENI S.p.A 921,940 5,249,093
-----------
5,880,774
-----------
FINANCIAL SERVICES - 2.22%
Banca Commerciale Italiana 352,000 1,228,849
Banca Intesa S.p.A. 120,100 461,543
Credito Italiano S.p.A. 489,000 1,514,204
Istituto Bancario San Paolo di Torina 126,800 1,216,429
-----------
4,421,025
-----------
FOOD & HOUSEHOLD PRODUCTS - 0.20%
Parmalat Finanziaria S.p.A. 280,080 402,238
-----------
INSURANCE - 2.24%
Assicurazioni Generali 143,104 3,529,573
RAS S.p.A. 47,575 468,553
SAI S.p.A. 40,400 451,781
-----------
4,449,907
-----------
MULTI-INDUSTRY - 0.94%
Montedison S.p.A. 1,033,140 931,888
Pirelli S.p.A. 348,000 934,375
-----------
1,866,263
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
ITALY (continued)
RETAIL - SPECIATLY STORES - 0.21%
La Rinascente S.p.A. 55,000 $ 412,114
La Rinascente S.p.A. 11/30/1999 warrants 2,250 2,733
------------
414,847
------------
TELECOMMUNICATIONS - 4.36%
Telecom Italia S.p.A. 588,890 3,777,403
Telecom Italia Mobile S.p.A. 1,060,000 4,912,954
------------
8,690,357
------------
TEXTILES & APPAREL - 0.28%
Benetton Group S.p.A. 33,252 546,446
------------
UTILITIES - GAS & ELECTRIC - 0.31%
Italgas S.p.A. 150,000 621,577
------------
TOTAL ITALIAN SECURITIES
(Identified Cost $22,959,512) 30,039,170
------------
JAPAN - 2.89%
TEXTILES & APPAREL - 1.23%
Naigai Co., Ltd. 728,000 1,158,076
Tokyo Style Co., Ltd. 143,000 1,290,507
------------
2,448,583
------------
MACHINERY - 1.03%
Aida Engineering, Ltd. 342,000 1,127,315
Amada Sonoike Co., Ltd. 515,000 925,587
------------
2,052,902
------------
RUBBER & PLASTICS - 0.63%
Tenma 120,000 1,257,315
------------
TOTAL JAPANESE SECURITIES
(Identified Cost $7,315,000) 5,758,800
------------
MALAYSIA - 2.09%
BUILDING MATERIALS & COMPONENTS - 0.79%
Jaya Tiasa Holdings Bhd 850,000 1,568,360
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
MALYSIA (continued)
MULTI-INDUSTRY - 1.30%
Kumpulan Guthrie Bhd 2,277,000 $1,469,007
Sime Darby Bhd 1,160,000 1,119,567
-----------
2,588,574
-----------
TOTAL MALAYSIAN SECURITIES
(Identified Cost $5,708,601) 4,156,934
-----------
MEXICO - 2.63%
BEVERAGE & TOBACCO - 1.16%
Coca-Cola Femsa S.A. 400,000 2,314,156
-----------
FOOD - PROCESSING - 0.54%
Grupo Industrial Maseca S.A. - Series B 1,075,000 1,078,367
-----------
REAL ESTATE - 0.03%
Grupo Situr S.A. - Series B* 1,575,000 48,884
-----------
RETAIL - DEPARTMENT STORES - 0.90%
Cifra SA - Series V 729,500 1,793,235
-----------
TOTAL MEXICAN SECURITIES
(Identified Cost $2,843,934) 5,234,642
-----------
SPAIN - 9.26%
BEVERAGE & TOBACCO - 0.17%
Tabacalera SA - A 4,266 347,105
-----------
CONSTRUCTION & HOUSING - 0.30%
Dragados & Construcciones SA 11,988 256,292
Fomento de Construcciones y Contratas SA 9,108 348,036
-----------
604,328
-----------
ENERGY SOURCES - OIL/GAS - 0.84%
Repsol SA 38,365 1,642,941
-----------
FINANCIAL SERVICES - 3.27%
Banco Bilbao Vizcaya SA 84,870 2,756,605
Banco Central Hispanoamericano SA 37,776 923,343
Banco Santander SA 56,184 1,884,099
Corporacion Bancaria de Espana SA (Argentaria) 15,512 947,373
-----------
6,511,420
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2)
<S> <C> <C>
SPAIN (continued)
INSURANCE - 0.07%
Corporacion Mapfre 5,646 $ 150,278
-------------
METAL - STEEL - 0.17%
Acerinox SA 2,343 348,399
-------------
MULTI-INDUSTRY - 0.20%
Autopistas Concesionaria Espanola SA 29,865 402,373
-------------
REAL ESTATE - 0.03%
Inmobiliaria Metropolitana Vasco Central SA 1,184 53,590
-------------
TELECOMMUNICATIONS - 1.58%
Telefonica de Espana 110,009 3,152,759
-------------
UTILITIES - GAS & ELECTRIC - 2.63%
Endesa SA 116,840 2,082,247
Gas Natural SDG - E SA 19,972 1,039,494
Iberdrola SA 122,474 1,617,825
Union Electrica Fenosa SA 52,126 501,396
-------------
5,240,962
-------------
TOTAL SPANISH SECURITIES
(Identified Cost $9,471,265) 18,454,155
-------------
THAILAND - 0.03%
FOOD & HOUSEHOLD PRODUCTS - 0.03%
Songkla Canning Public Co. Ltd. (Identified
Cost $40,185) 38,100 56,746
-------------
UNITED KINGDOM - 2.08%
MERCHANDISING - 2.08%
Tesco plc (Identified Cost $2,273,322) 510,006 4,153,356
-------------
TOTAL COMMON STOCK
(Identified Cost $136,998,651) 185,742,513
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount/Shares (Note 2)
<S> <C> <C>
SHORT-TERM INVESTMENTS - 4.75%
Federal National Mortgage Corporation Discount
Note, 1/14/1998 $ 8,000,000 $ 7,983,591
Dreyfus U.S. Treasury Money Market Fund 1,492,123 1,492,123
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $9,475,714) 9,475,714
-------------
TOTAL INVESTMENTS - 97.87%
(Identified Cost $146,474,365) 195,218,227
OTHER ASSETS, LESS LIABILITIES - 2.03% 4,037,642
-------------
NET ASSETS -100% $199,255,869
=============
</TABLE>
*Non-income producing security.
<TABLE>
<CAPTION>
FEDERAL TAX INFORMATION:
<S> <C>
At December 31, 1997, the net unrealized appreciation based
on identified cost for federal income tax purposes of $146,615,387
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $ 60,242,611
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (11,639,771)
-------------
UNREALIZED APPRECIATION - NET $ 48,602,840
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Industry Concentration (as a percent of net assets)
<TABLE>
<CAPTION>
Percent
of Net Assets
INDUSTRY CONCENTRATION
<S> <C>
Aerospace & Military Technology 0.23%
Airlines 0.22%
Automobiles 3.41%
Banking 7.68%
Beverage & Tobacco 2.32%
Broadcast Services 0.72%
Building Materials & Components 2.02%
Business & Public Services 2.26%
Chemicals 3.27%
Construction & Housing 1.24%
Electrical & Electronics 5.00%
Energy Sources 7.98%
Financial Services 5.64%
Food & Household Products 1.16%
Food Processing 0.54%
Health & Personal Care 2.63%
Industrial Components 0.38%
Insurance 6.25%
Investment Holding Companies 0.83%
Leisure & Tourism 0.45%
Machinery & Engineering 4.37%
Materials & Commodities 1.59%
Merchandising 4.75%
Metals-Steel 0.17%
Multi-Industry 7.47%
Real Estate 0.06%
Retail 1.40%
Rubber & Plastics 0.63%
Telecommunications 8.06%
Textiles & Apparel 2.95%
Utilities - Gas & Electric 7.51%
Wholesale - Special Lines 0.03%
--------------
TOTAL COMMON STOCK 93.22%
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
DECEMBER 31, 1997
ASSETS:
<S> <C>
Investments, at value (Identified Cost $146,474,365)(Note 2) $195,218,227
Foreign currency, at value (cost $2,423,253) 2,324,819
Cash 621,553
Receivable for open forward foreign currency contracts
(Note 2) 860,692
Foreign tax reclaims receivable 436,855
Dividends receivable 64,604
Receivable for fund shares sold 46,370
Prepaid expense 6,820
-------------
TOTAL ASSETS 199,579,940
-------------
LIABILITIES:
Accrued management fees (Note 3) 165,491
Accrued Directors' fees (Note 3) 1,676
Payable for fund shares repurchased 73,904
Payable for securities purchased 46,061
Audit fee payable 21,466
Custodian fee payable 13,114
Other payables and accrued expenses 2,359
-------------
TOTAL LIABILITIES 324,071
-------------
NET ASSETS FOR 15,235,031 SHARES
OUTSTANDING $199,255,869
=============
NET ASSETS CONSIST OF:
Capital stock $ 152,350
Additional paid-in-capital 147,542,927
Undistributed net investment loss (51,917)
Accumulated net realized gain on investments 2,126,327
Net unrealized appreciation on investments, foreign currency,
forward foreign currency exchange contracts, and other
assets and liabilities 49,486,182
-------------
TOTAL NET ASSETS $199,255,869
=============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($199,255,869/15,235,031 shares) $ 13.08
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
<S> <C>
INVESTMENT INCOME:
Dividends (net of withholding) $ 2,808,217
Interest 1,274,181
-----------
Total Investment Income 4,082,398
-----------
EXPENSES:
Management fees (Note 3) 1,804,670
Directors' fees (Note 3) 8,250
Custodian fee 84,000
Audit fee 28,966
Printing and Postage fees 9,969
Miscellaneous 15,026
-----------
Total Expenses 1,950,881
-----------
NET INVESTMENT INCOME 2,131,517
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on -
Investments (identified cost basis) 7,825,276
Foreign currency and forward foreign currency
exchange contracts 11,127,770
-----------
Net realized gain on investments 18,953,046
-----------
Net change in unrealized appreciation on -
Investments 18,892,691
Foreign currency and forward foreign currency exchange
contracts and other assets and liabilities 1,761,163
-----------
Net unrealized appreciation on investments 20,653,854
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 39,606,900
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $41,738,417
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year For the Year
Ended 12/31/97 Ended 12/31/96
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,131,517 $ 1,991,419
Net realized gain on investments 18,953,046 6,984,916
Net change in unrealized appreciation on
investments 20,653,854 18,859,565
---------------- ----------------
Net increase in net assets from operations 41,738,417 27,835,900
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 2):
From net investment income (2,052,925) (1,821,116)
From net realized gain on investments (19,879,106) (241,966)
---------------- ----------------
Total distributions to shareholders (21,932,031) (2,063,082)
---------------- ----------------
CAPITAL STOCK ISSUED AND
REPURCHASED:
Net increase (decrease) from capital share
transactions (Note 5) 30,118,134 (4,735,326)
---------------- ----------------
Net increase in net assets 49,924,520 21,037,492
NET ASSETS:
Beginning of period 149,331,349 128,293,857
---------------- ----------------
END OF PERIOD (including undistributed net
investment loss of $(51,917) and
$110,482, respectively) $ 199,255,869 $ 149,331,349
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
For the Years Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
NET ASSET VALUE - BEGINNING OF PERIOD $ 11.54 $ 9.57 $ 9.54 $ 11.33 $ 9.19
---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income 0.154 0.156 0.123 0.143 0.150
Net realized and unrealized gain
(loss) on investments 2.992 1.976 0.262 (1.784) 2.240
---------- ---------- ---------- ---------- ----------
Total from investment operations 3.146 2.132 0.385 (1.641) 2.390
---------- ---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income (0.150) (0.143) (0.118) -- (0.250)
From paid-in-capital -- -- (0.160) -- --
From net realized gain on
investments (1.456) (0.019) (0.077) (0.149) --
---------- ---------- ---------- ---------- ----------
Total distributions to shareholders (1.606) (0.162) (0.355) (0.149) (0.250)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE - END OF PERIOD $ 13.08 $ 11.54 $ 9.57 $ 9.54 $ 11.33
========== ========== ========== ========== ==========
Total return1 27.70% 22.35% 4.14% (14.48)% 26.00%
Ratios of expenses (to average net assets) /Supplemental Data:
Expenses 1.08% 1.12% 1.20% 1.18% 1.16%
Net investment income 1.18% 1.46% 1.42% 1.38% 1.39%
Portfolio turnover 10% 2% 14% 31% 20%
Average commission rate paid2 $ 0.0005 $ 0.0013 $ 0.0021 - -
NET ASSETS - END OF PERIOD
(000'S OMITTED) $ 199,256 $ 149,331 $ 128,294 $ 85,964 $ 92,012
========== ========== ========== ========== ==========
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Average commission rate is calculated for Funds with fiscal years
beginning on or after January 1, 1995.
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
International Series (the "Fund") is a no-load non-diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is
organized in Maryland and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company.
Shares of the Fund are offered to clients and employees of Manning &
Napier Advisors, Inc. (the Advisor) and its affiliates. The total authorized
capital stock of the Corporation consists of one billion shares of common
stock each having a par value of $0.01. As of December 31, 1997, 940 million
shares have been designated in total among 19 series, of which 50 million
have been designated as International Series Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including domestic equities, foreign equities,
options and corporate bonds, listed on an exchange are valued at the latest
quoted sales price of the exchange on which the security is primarily traded.
Securities not traded on valuation date or securities not listed on an
exchange are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed
securities, will normally be valued on the basis of evaluated bid prices
provided by the Funds pricing service.
Securities for which representative valuations or prices are not
available from the Fund's pricing service are valued at fair value as
determined in good faith by the Advisor under procedures approved by and
under the general supervision of the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
18
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains
on investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result,
net investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund may
periodically make reclassifications among its capital accounts without
impacting the Fund's net asset value.
For the year ended December 31, 1997, the Fund distributed $14,030,081 of
long-term capital gains of which $5,944,686 represents 20% rate gain.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis: a) investment securities, other assets and liabilities are converted
to U.S. dollars based upon current exchange rates; and b) purchase and sales
of securities and income and expenses are converted into U.S. dollars based
upon the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are
recorded for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates
is not separately stated.
19
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency contracts in order
to hedge a portfolio position or specific transaction. Risks may arise if
the counter parties to a contract are unable to meet the terms of the
contract or if the value of the foreign currency moves unfavorably.
All forward foreign currency contracts are adjusted daily by the exchange
rate of the underlying currency and, for financial statement purposes, any
gain or loss is recorded as unrealized gain or loss until a contract has been
closed. Realized and unrealized gain or loss arising from a transaction is
included in net realized and unrealized gain (loss) from foreign currency and
forward currency exchange contracts.
The Fund regularly trades forward foreign currency exchange contracts
with off-balance sheet risk in the normal course of its investing activities
to assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the
investment the Fund has in forward foreign currency exchange contracts and
does not necessarily represent the amounts potentially at risk. The
measurement of the risks associated with forward foreign currency exchange
contracts is meaningful only when all related and offsetting transactions are
considered. A summary of obligations for forward currency exchange contracts
outstanding as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
Net Unrealized
Settlement Contracts In Exchange Contracts Appreciation/
Date to Deliver For At Value (Depreciation)
- ---------- ---------- ---------- ---------- --------------
<C> <S> <C> <C> <C>
01/29/98 Deutsche Marks $ 28,248,588 $27,839,300 $ 409,288
01/29/98 French Francs $ 23,469,818 $23,240,800 $ 229,018
01/09/98 Japanese Yen $ 3,221,649 $ 3,063,288 $ 158,361
01/09/98 Japanese Yen $ 1,581,528 $ 1,531,644 $ 49,884
01/09/98 Japanese Yen $ 1,009,709 $ 995,568 $ 14,141
</TABLE>
On December 31, 1997, the Fund had sufficient cash and/or securities to
cover any commitments under these contracts.
OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of the revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
20
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which
the Fund pays a fee, computed daily and payable monthly, at an annual rate of
1% of the Fund's average daily net assets. The fee amounted to $1,804,670
for the year ended December 31, 1997.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $8,250 for the
year ended December 31, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1997, purchases and sales of securities,
other than United States Government securities and short-term securities,
were $46,114,467 and $14,819,798, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of International Series were:
<TABLE>
<CAPTION>
For the Year For the Year
Ended 12/31/97 Ended 12/31/96
-------------- --------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
-------------- ------------- -------------- --------------
Sold 1,557,079 $ 21,366,816 1,645,694 $ 17,300,172
Reinvested 1,695,615 21,716,296 184,488 2,044,126
Repurchased (956,763) (12,964,978) (2,297,367) (24,079,624)
--------------- ------------- --------------- -------------
Total 2,295,931 $ 30,118,134 (467,185) $ (4,735,326)
=============== ============= =============== =============
</TABLE>
21
<PAGE>
Notes to Financial Statements
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in securities of domestic companies and the United States
Government. These risks include revaluation of currencies and future adverse
political and economic developments. Moreover, securities of foreign
companies and foreign governments and their markets may be less liquid and
their prices more volatile than those of securities of comparable domestic
companies and the United States Government.
22
<PAGE>
Independent Accountants Report
TO THE SHAREHOLDERS AND DIRECTORS OF
MANNING & NAPIER FUND, INC.- INTERNATIONAL SERIES:
We have audited the accompanying statement of assets and liabilities of
Manning & Napier Fund, Inc.- International Series, including the schedule of
portfolio investments, as of December 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Funds management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 1997 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Manning & Napier Fund, Inc.- International Series as of
December 31, 1997, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the five years in the period ended
in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 23, 1998
23
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Diversified Tax Exempt Series
Annual Report
December 31, 1997
<PAGE>
Management Discussion and Analysis
DEAR SHAREHOLDERS:
Lets face it, fixed income management is not a high risk profession. Aside
from stress, the biggest physical risk fixed income managers face is the
continued deterioration of their eyesight. Of course the same can probably be
said of any profession which entails reading, writing, or staring at a
computer screen for 8 to 10 hours a day. The clinical term for this condition
is myopia, a visual defect where distant objects are blurred because their
image is focused in front of the retina rather than on the retina itself.
While it is likely that many fixed income professionals suffer from this
malady, there is a secondary definition of myopia that is far more endemic in
the fixed income investment community today. That definition defines myopia
as a shortsightedness in thinking or planning.
For example, when the Labor Department released their employment report at
8:30 A.M. on the first Friday of October, the market responded by driving
long-term interest rates down from 6.30% to 6.15%. Later in the morning when
a story came across the newswire that a U.S. aircraft carrier was heading
toward the Persian Gulf, concerns about oil prices drove long rates back to
6.40%. When it was revealed that the carrier had been scheduled to head to
the gulf, the market recovered and long bonds ended the day where they had
started at 6.30%. The market for municipal bonds is also subject to such
gyrations and those gyrations are symptomatic of the short-term focus of the
fixed income markets. Some managers try to act on those gyrations, but that
is a tough game to play, and an even tougher game to win.
Rest assured, that is not how Manning & Napier approaches the management of
its municipal bond funds. We invest based upon our long-term overview. We do
monitor the short- term factors that impact the market, but we do so to see if
they strengthen, weaken or have no effect on our long-term overview.
For those of you who are new shareholders, our overview calls for a
continuation of the saw-tooth decline in interest rates that has characterized
the domestic fixed income market for the last 15 years. That decline can be
traced to the globalization of the worlds economy, the resulting increase in
the competitive environment, and disinflationary pressure that has resulted
from consumers, producers, and policy makers responding to that new
environment.a competitive global environment, governments have no choice but
to enact sound fiscal and monetary policies. Nowhere is that more evident
than in the United States. In the early 1990s, the U.S. federal government
was running budget deficits in excess of $300 billion. At the time, some of
the more negative predictions were calling for deficits exceeding $500
billion. History proved them wrong. Through September, which is the end of
the federal governments fiscal year, the trailing 12 month budget deficit had
shrunk to an amazingly low $22.3 billion. At the start of the fiscal year,
deficit projections had called for a deficit in the neighborhood of $125
billion for fiscal year 1997.
There are two reasons for the dramatic improvement. First, receipts continue
to exceed expectations. Some of that can be traced to the fact that this is
the seventh year of the economic expansion. It can also be traced to a stock
market that is about to post its third consecutive year of double digit
returns. That has generated above-average capital gains and associated
capital gains taxes. Second, and more interestingly, expenditure growth has
been very much restrained. On a year-over-year basis it has been in the
neighborhood of 3%. Policy makers do not have direct control over the level
of receipts that come in; however, they do control expenditures.
1
<PAGE>
Management Discussion and Analysis
An improved fiscal environment was not limited to the federal government.
State and local governments have also seen their situations improve. The same
dynamics are at work -- growing receipts and restraint over expenditures.
Many municipalities are now running surpluses, and as a result the issuance of
new municipal bonds has slowed.
Restraint is not a term often applied to politicians, but that restraint has
been driven by the financial markets' ability to enforce fiscal discipline.
How so? With the growth of international financial markets, capital flows
from one country to another almost seamlessly. Those countries with
well-defined property rights, established legal systems, and attractive
relative returns will be the most successful when it comes to keeping capital,
as well as attracting foreign capital. Sound policies are a key contributor
to whether a country offers attractive relative returns. The situation is
compounded by the fact that the U.S. is running a rather sizable current
account deficit. Because of that, it is even more important that the U.S.
attract foreign capital. Otherwise our investment needs cannot be met.
Another investment opinion that has grown out of our long-term overview is the
lack of pricing power and the need for producers to strive for productivity
gains if they are to remain competitive in the global economy. That is one of
the few ways that they can achieve earnings growth, and from an inflation
standpoint, it contributes to the disinflationary environment. Manufacturing
productivity has been strong throughout the 1990s; it has been the measures of
service sector productivity that have appeared lacking. However, over the
last year there has been a growing consensus that service sector productivity
has been mismeasured. Not only is service sector productivity hard to
measure, but the low numbers being reported seem to contradict the incredible
investments that firms have made in computers and information processing.
That does not even address the high level of merger activity that has
permeated all sectors of the economy.
Solid productivity gains help to explain what has occurred in the U.S. economy
in 1997, specifically strong growth and declining inflation. During the first
quarter of this year, the economy grew at close to a 5% real rate (i.e., 5%
over the inflation rate). In the second quarter, real growth was just under
4%, and during the third quarter, growth came in at 3.5%. Those are all solid
readings, and intuitively one would expect inflation pressures to build, but
over the same period, the Consumer Price Index slowed from a year-over-year
rate of 3.3% to 2.2%. The Producer Price Indexs year-over-year growth rate
fell from 3% to 0%. Strong growth and declining inflation are typically
thought to be mutually exclusive. But that was not the case in 1997,
and that was not the case during the 1950s and early 1960s when strong
productivity gains allowed growth and low inflation to coexist peacefully.
Both of these big picture items -- declining budget deficits and solid
productivity gains -- help to explain why interest rates have fallen over the
last 12 months. On the short end of the AAA municipal bond yield curve,
specifically one-year paper, rates are actually a touch higher. However,
two-year note rates are down 5 to 10 basis points (0.05% to 0.10%) over the
last year, and long bond rates have fallen by 40 basis points (0.40%). In
fixed income parlance, the yield curve has flattened. From a performance
standpoint, falling interest rates mean higher returns; the further out on the
yield curve an investor ventured, the better his or her performance.
2
<PAGE>
Management Discussion and Analysis
As of the end of the year, we had positioned the Series in longer-term bonds
than its benchmark, the Merrill Lynch Intermediate Municipal Index, in
keeping with our overview. For the year ending in December, the Diversified
Tax Exempt Series returned 7.92%. By comparison, the benchmark returned
7.69%. This outperformance was achieved despite the fact that the benchmark
does not reflect the fees and expenses that real-world investors incur and
with a higher quality (i.e., lower credit risk ) portfolio than the benchmark.
What we hope you noticed while you were reading this letter is that none of
our conclusions depended upon our opinion of the most recent economic release,
they did not depend on a forecast of the economy over the next 6 to 12 months,
and they did not depend upon our opinion of what the Federal Reserve is going
to do at the next Federal Open Market Committee meeting. As we have stated on
more than one occasion, the key to success is to focus on the long-term
trends. Manning & Napier has done that. The proof as they say is in the
pudding, and the performance of the Series, given its extremely high quality,
has been quite good.
We wish you the best for a happy, healthy, and prosperous 1998.
MANNING & NAPIER ADVISORS, INC.
<graphic>
<pie chart>
Data for pie chart to follow:
Portfolio Composition 1 - As of 12/31/97
General Obligation Bonds - 78%
Revenue Bonds - 20%
Pre-Refunded Bonds - 2%
1 As a percentage of municipal securities.
<graphic>
<pie chart>
Data for pie chart to follow:
Quality Ratings 2 - As of 12/31/97
Aaa - 81%
Aa - 17%
A - 2%
2 Using Moody's Ratings, as a percentage of municipal securities.
3
<PAGE>
Performance Update as of December 31, 1997
The value of a $10,000 investment in the
Manning & Napier Fund, Inc. - Diversified
Tax Exempt Series from its inception
(2/14/94) to present (12/31/97) as compared
to the Merrill Lynch Intermediate Municipal
Index.1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
Diversified Tax Exempt Series
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
One Year $ 10,792 7.92% 7.92%
Inception 2 $ 12,270 22.70% 5.41%
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch
Intermediate Municipal Index
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 10,769 7.69% 7.69%
Inception 2 $ 12,406 24.06% 5.71%
</TABLE>
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
Manning & Napier Merrill Lynch
Date Diversified Tax Exempt Series Intermediate Municipal Index
<S> <C> <C>
02/14/94 $ 10,000 $ 10,000
12/31/94 9,461 9,709
12/31/95 11,003 11,009
12/31/96 11,370 11,520
12/31/97 12,270 12,406
</TABLE>
1 The unmanaged Merrill Lynch Intermediate Municipal Index is a market value
weighted measure of approximately 184 municipal bonds issued across the United
States. The Index is comprised of investment grade securities. Index returns
assume reinvestment of coupons and, unlike Fund returns, do not reflect any
fees or expenses.
2 The Fund and Index performance numbers are calculated from February 14,
1994, the Fund's inception date. The Fund's performance is historical and may
not be indicative of future results.
4
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Value
MUNICIPAL SECURITIES - 95.3% Amount (Note 2)
ALASKA - 1.4%
Anchorage, G.O. Bond, 6.10%, 8/1/2004 $ 300,000 $323,631
---------
ARIZONA - 2.0 %
Central Arizona Water Conservation District,
Revenue Bond, 4.70%, 5/1/2004 200,000 205,534
Maricopa County School District No. 097 Deer
Valley, G.O. Bond, Series A, 5.20%, 7/1/2007 250,000 264,600
---------
470,134
---------
CALIFORNIA - 1.4%
Wiseburn School District Series A, G.O. Bond,
5.25%, 8/1/2016 330,000 335,372
---------
COLORADO - 0 .8%
El Paso County School District No. 020, G.O.
Bond, Series A, 6.20%, 12/15/2007 160,000 183,150
---------
DELAWARE - 0.9%
Wilmington, G.O. Bond, Series B, 5.90%,
4/1/2000 200,000 208,392
---------
DISTRICT OF COLUMBIA - 0.9%
District of Columbia, G.O. Bond, Series A,
7.65%, 12/1/2003 200,000 210,808
---------
FLORIDA - 3.8%
Dade County School District, G.O. Bond,
6.125%, 8/1/2008 150,000 160,227
Florida State Board of Education Capital Outlay
Public Ed., G.O. Bond Series C, 5.60%,
6/1/2025 135,000 139,659
Florida State Dept. of Environmental Preservation
2000, Revenue Bond, Series A, 4.50%,
7/1/2003 200,000 203,214
Hillsborough County Capital Improvement
Program, Revenue Bond, 5.125%, 7/1/2022 400,000 395,324
---------
898,424
---------
GEORGIA - 3.4%
Atlanta, G. O. Bond, 5.60%, 12/1/2018 350,000 364,021
Georgia, G.O. Bond, Series B, 5.65%, 3/1/2012 200,000 218,392
Glynn County Board of Education, G.O. Bond,
5.00%, 7/1/2006 200,000 209,444
---------
791,857
---------
HAWAII - 1.2%
Hawaii, G.O. Bond, Series CH, 6.00%, 11/1/2007 260,000 290,917
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Value
Amount (Note 2)
IDAHO - .4%
Ada & Canyon Counties Joint School District
No. 2 Meridian, G.O. Bond, 5.10%, 7/30/2005 $ 100,000 $105,351
---------
ILLINOIS - 3.3%
Aurora, G.O. Bond, 5.80%, 1/1/2012 190,000 202,764
Chicago Schools Financial Authority, G.O. 200,000 206,606
Bond, Series A 5.00% 6/1/2007
Chicago, G.O. Bond, Series A, 5.875%,
1/1/2022 100,000 104,910
Illinois, Certificate Participation, Series
1995A, 5.60%, 7/1/2010 100,000 106,960
Tazwell County Community High School District
No. 303 Pekin, G.O. Bond, 5.50%, 1/1/2011 150,000 157,266
---------
778,506
---------
INDIANA - 1.3%
Bloomington Sewer Works, Revenue Bond,
5.80%, 1/1/2011 150,000 162,343
Lafayette Waterworks, Revenue Bond, 4.90%,
7/1/2006 140,000 143,801
---------
306,144
---------
IOWA - 2.7%
Cedar Rapids, G. O. Bond, 6.45%, 6/1/2014 350,000 380,541
Iowa City Sewer, Revenue Bond, 5.75%,
7/1/2021 250,000 261,622
---------
642,163
---------
KENTUCKY - 2.5%
Jefferson County School District Finance Corp.
School Building, Revenue Bond, Series A,
5.00%, 2/1/2011 300,000 304,956
Kentucky State Turnpike Authority Revitalization
Projects, Revenue Bond, 6.50%, 7/1/2008 250,000 292,847
---------
597,803
---------
LOUISIANA - 1.3%
New Orleans Sewer Service, Revenue Bond,
5.25%, 6/1/2012 300,000 309,510
---------
MAINE - 1.3%
Hermon, G.O. Bond, 5.60%, 11/1/2013 75,000 79,082
Portland, G.O. Bond, 6.20%, 4/1/2006 200,000 222,168
---------
301,250
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Value
Amount (Note 2)
MASSACHUSETTS - 4.4%
Martha's Vineyard Regional High School District No. 100,
G.O. Bond, 6.70%, 12/15/2014 $ 200,000 $ 227,412
Massachusetts Municipal Electric Supply System,
Revenue Bond, Series A, 5.00%, 7/1/2017 200,000 195,614
Massachusetts State, G.O. Bond, Series C,
5.75%, 8/1/2010 400,000 443,152
Massachusetts Water Authority General Ref.,
Revenue Bond, Series B, 5.25%, 3/1/2013 155,000 157,841
-----------
1,024,019
-----------
MARYLAND - 2.9%
Baltimore Water Project, Revenue Bond, Series A, 5.55%,
7/1/2009 260,000 279,685
Prince Georges County Public Improvement,
G.O. Bond, 5.00%, 3/15/2014 200,000 200,894
Washington County Public Improvement, G.O.
Bond, 4.875%, 1/1/2010 200,000 202,710
-----------
683,289
-----------
MICHIGAN - 4.6%
Comstock Park Public Schools, G.O. Bond,
5.50%, 5/1/2011 150,000 157,521
Dearborn School District, G.O. Bond, 5.10%,
5/1/2006 200,000 207,710
Farmington Hills, G.O. Bond, 5.70%, 10/1/2005 65,000 70,067
Farmington Hills, G.O. Bond, 5.80%, 10/1/2006 50,000 53,974
Farmington Hills, G.O. Bond, 5.90%, 10/1/2007 75,000 81,153
Hudsonville Public Schools, G.O. Bond, 5.15%,
5/01/2027 225,000 221,967
Pinckney Community Schools, G.O. Bond,
5.00%, 5/1/2014 200,000 199,920
St. Joseph County Sewer Disposal Systems-
Constantine, G.O. Bond, 5.00%, 4/1/2012 100,000 100,775
-----------
1,093,087
-----------
MINNESOTA - 3.0%
Minneapolis, G.O. Bond, Series B, 5.20%,
3/1/2013 300,000 306,021
Minnesota Various Purpose, G.O. Bond, 6.60%,
8/1/1999 200,000 208,308
Western Minnesota Municipal Power Agency,
Revenue Bond, 6.625%, 1/1/2016 175,000 203,562
-----------
717,891
-----------
MISSISSIPPI - 0.9%
Mississippi, G.O. Bond, 6.30%, 12/1/2006 200,000 223,210
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Value
Amount (Note 2)
MISSOURI - 1.1%
Missouri State Ref.- Third Street Building, G.O.
Bond, Series A, 5.125%, 8/1/2009 $ 250,000 $ 256,345
-----------
MONTANA - 0.9%
Montana Long Range Building Project, G.O. Bond, Series A,
4.875%, 8/1/2010 200,000 202,924
-----------
NEBRASKA - 2.3%
Douglas County School District No. 17,
G.O. Bond, 5.00%, 10/1/2012 545,000 548,123
-----------
NEVADA - 2.7%
Clark County School District, G.O. Bond,
6.00%, 6/15/2002 100,000 107,293
Henderson Water, G.O. Bond, Series A, 5.65%,
12/1/2003 300,000 321,576
Nevada State Project No. 42, G.O. Bond, 5.70%,
9/1/2008 200,000 214,996
-----------
643,865
-----------
NEW HAMPSHIRE - 1.0%
New Hampshire, G.O. Bond, 6.60%, 9/1/2014 200,000 227,448
-----------
NEW JERSEY - 4.1 %
Jersey City Water, G.O. Bond, 5.50%, 3/15/2011 225,000 238,871
New Jersey State Highway Authority, Garden
State Parkway, Revenue Bond, 5.50%,
1/1/2000 200,000 205,828
North Hudson Sewer Authority, Revenue Bond,
5.25%, 8/1/2016 250,000 253,803
West Windsor Plainsboro, G.O. Bond, 5.25%,
12/1/2004 250,000 265,023
-----------
963,525
-----------
NEW MEXICO - 0.9%
Albuquerque, G.O. Bond, Series A & B, 4.70%,
7/1/2000 200,000 203,490
-----------
NEW YORK - 5.2%
Monroe County Community School
Corporation First Meeting, Revenue Bond,
5.25%, 7/1/2016 125,000 125,623
New York State Thruway Authority, Revenue
Bond, Series A, 5.50%, 1/1/2023 200,000 202,646
Sands Point, G.O. Bond, 6.70%, 11/15/2013 350,000 393,943
Spencerport Central School District, G.O. Bond,
5.00%, 11/15/2012 350,000 354,998
Westchester County, G.O. Bond, 4.75%,
11/15/2016 150,000 148,389
-----------
1,225,599
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Value
Amount (Note 2)
NORTH CAROLINA - 1.8%
Charlotte Public Improvement, G.O. Bond,
5.70%, 2/1/2002 $200,000 $212,452
North Carolina State Prison Facilities, G.O.
Bond, 4.80%, 3/1/2009 200,000 205,174
----------
417,626
----------
OHIO - 5.8%
Cleveland Water & Sewer, G.O. Bond,
5.35%, 9/1/2023 450,000 454,702
Oak Hills Local School District,
G.O. Bond, 5.125%, 12/1/2025 490,000 486,737
Ohio Public Facilities, Community Higher
Education, Revenue Bond, Series II-A,
4.25%, 12/1/2002 200,000 201,230
Summit County Various Purpose, G.O. Bond,
6.625%, 12/1/2012 200,000 219,594
----------
1,362,263
----------
OREGON - 1.1%
Salem Pedestrian Safety Impts, G.O. Bond,
5.50%, 5/1/2010 255,000 270,667
----------
PENNSYLVANIA - 4.4%
Beaver County, G.O. Bond, 5.15%, 10/01/2017 300,000 300,660
Cambria County, G.O. Bond, Series A, 6.10%,
8/15/2016 350,000 380,849
Pennsylvania State, G.O. Bond, First Series,
5.30%, 5/1/2005 100,000 106,117
Pennsylvania State, G.O. Bond, Second Series,
6.00%, 7/1/2005 90,000 99,660
Philadelphia Water & Waste, Revenue
Bond, 5.60%, 8/1/2018 150,000 154,704
----------
1,041,990
----------
RHODE ISLAND - 1.4%
Rhode Island State Pre-refunded Balance, G.O.
Bond, Series A, 6.20%, 6/15/2004 115,000 126,250
Rhode Island State Unrefunded Balance, G.O.
Bond, Series A, 6.20%, 6/15/2004 185,000 201,454
----------
327,704
----------
SOUTH CAROLINA - 2.5%
South Carolina State Capital Improvement, G.O.
Bond, 4.10%, 4/1/2001 200,000 200,958
South Carolina State Highway, G.O. Bond,
Series B, 5.625%, 7/1/2010 350,000 382,225
----------
583,183
----------
TENNESSEE - 2.2%
Johnson City School Sales Tax, G.O. Bond,
6.70%, 5/1/2021 350,000 405,811
Lawrence County, G.O. Bond, 6.60%, 3/1/2013 100,000 109,551
----------
515,362
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Value
Amount (Note 2)
TEXAS - 2.4%
Dallas Waterworks & Sewer, Revenue Bond,
5.625%, 4/1/2009 $ 200,000 $ 208,868
Southlake Waterwork & Sewer System, G.O.
Bond, 5.30%, 2/15/2011 350,000 361,897
------------
570,765
------------
UTAH - 3.2%
Alpine School District, G.O. Bond, 5.375%,
3/15/2009 250,000 263,900
Nebo School District, G.O. Bond, 6.00%,
6/15/2018 450,000 484,240
------------
748,140
------------
VIRGINIA - 1.7%
Franklin County Capital Improvement , G.O. Bond,
6.60%, 7/15/2013 250,000 272,122
Spotsylvania County Water & Sewer Systems,
Revenue Bond, 5.25%, 6/1/2016 130,000 132,252
------------
404,374
------------
WASHINGTON - 3.1%
Kitsap County School District, G.O. Bond,
6.625%, 12/1/2008 350,000 387,069
Seattle, G.O. Bond, Series A, 5.75%, 1/15/2020 230,000 239,752
Seattle Met. Municipality, G.O. Bond, 5.65%,
1/1/2020 100,000 102,789
------------
729,610
------------
WISCONSIN - 3.1%
Merrill Public School District, G.O. Bond,
5.30%, 4/1/2013 400,000 408,648
Wisconsin State, G.O. Bond, Series A, 5.75%, 300,000 316,185
------------
5/1/2001 724,833
------------
TOTAL MUNICIPAL SECURITIES
(Identified Cost $21,286,612) 22,462,744
------------
SHORT-TERM INVESTMENTS - 2.6%
Dreyfus Municipal Reserves
(Identified Cost $630,674) 630,674 630,674
------------
TOTAL INVESTMENTS - 97.9%
(Identified Cost $21,917,286) 23,093,418
OTHER ASSETS, LESS LIABILITIES - 2.1% 557,788
------------
NET ASSETS - 100% $23,651,206
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Investment Portfolio - December 31, 1997
Key -
Dist. - District Met. - Metropolitan
Ed. - Education Dept. - Department
G.O. Bond - General Obligation Bond Impt. - Improvement
Ref. - Referendum
<TABLE>
<CAPTION>
<S> <C>
FEDERAL TAX INFORMATION:
At December 31, 1997, the net unrealized appreciation based
on identified cost for federal income tax purposes of $21,917,286
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $1,178,929
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (2,797)
-----------
UNREALIZED APPRECIATION - NET $1,176,132
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Statement of Assets and Liabilities
December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (Identified Cost $21,917,286)(Note 2) $23,093,418
Cash 89,950
Interest receivable 356,401
Receivable for fund shares sold 134,230
Prepaid expense 762
------------
TOTAL ASSETS 23,674,761
------------
LIABILITIES:
Accrued management fees (Note 3) 9,816
Accrued Directors' fees (Note 3) 1,643
Other payables and accrued expenses 12,096
------------
TOTAL LIABILITIES 23,555
------------
NET ASSETS FOR 2,233,499 SHARES
OUTSTANDING $23,651,206
============
NET ASSETS CONSIST OF:
Capital stock $ 22,334
Additional paid-in-capital 22,416,302
Undistributed net investment income 44,809
Accumulated net realized loss on investments (8,371)
Net unrealized appreciation on investments 1,176,132
------------
TOTAL NET ASSETS $23,651,206
============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($23,651,206/2,233,499 shares) $ 10.59
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Statement of Operations
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $ 987,519
----------
EXPENSES:
Management fees (Note 3) 96,872
Directors' fees (Note 3) 8,250
Transfer agent fees (Note 3) 4,650
Audit fee 13,666
Registration and filing fees 4,653
Custodian fee 3,006
Miscellaneous 2,916
----------
Total Expenses 134,013
----------
NET INVESTMENT INCOME 853,506
----------
NET CHANGE IN UNREALIZED APPRECIATION
ON INVESTMENTS 670,358
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,523,864
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
For the Year For the Year
Ended 12/31/97 Ended 12/31/96
----------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 853,506 $ 661,923
Net realized loss on investments --- (92)
Net change in unrealized appreciation on investments 670,358 (77,279)
----------------- ----------------
Net increase in net assets from operations 1,523,864 584,552
----------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income (843,987) (634,484)
----------------- ----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase from capital share transactions (Note 5) 6,022,646 4,546,467
----------------- ----------------
Net increase in net assets 6,702,523 4,496,535
NET ASSETS:
Beginning of period 16,948,683 12,452,148
----------------- ----------------
END OF PERIOD (including undistributed net investment
income of $44,809 and $35,290, respectively) $ 23,651,206 $ 16,948,683
================= ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Period
2/14/94
(commencement of
For The Years Ended operations)
12/31/97 12/31/96 12/31/95 to 12/31/94
---------- ---------- ---------- ------------------
Per share data (for a share outstanding
throughout each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.23 $ 10.32 $ 9.26 $ 10.00
---------- ---------- ---------- ------------------
Income from investment operations:
Net investment income 0.434 0.434 0.428 0.210
Net realized and unrealized gain (loss)
on investments 0.361 (0.104) 1.062 (0.749)
---------- ---------- ---------- ------------------
Total from investment operations 0.795 0.330 1.490 (0.539)
---------- ---------- ---------- ------------------
Less distributions to shareholders:
From net investment income (0.435) (0.420) (0.430) (0.201)
---------- ---------- ---------- ------------------
NET ASSET VALUE - END OF PERIOD $ 10.59 $ 10.23 $ 10.32 $ 9.26
========== ========== ========== ==================
Total return1 7.92 % 3.33% 16.29% (5.39)%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 0.69% 0.70% 0.79% 0.85%2,3
Net investment income 4.41% 4.44% 4.52% 3.71%2,3
Portfolio turnover 1% 2% 5% 4%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 23,651 $ 16,949 $ 12,452 $ 8,481
========== ========== ========== ==================
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
3 The investment advisor waived a portion of its management fee. If the full
fee had been incurred by the fund, the net investment income per share would
have been $0.186, and the annualized ratios would have been as follows:
Expenses, 1.29%; Net investment income 3.27%.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
Diversified Tax Exempt Series (the "Fund") is a no-load diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is organized
in Maryland and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
Shares of the Fund are offered to investors, employees and clients of Manning
& Napier Advisors, Inc. (the "Advisor") and its affiliates. The total
authorized capital stock of the Corporation consists of one billion shares of
common stock each having a par value of $0.01. As of December 31, 1997, 940
million shares have been designated in total among 19 series, of which 50
million have been designated as Diversified Tax Exempt Series Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Municipal securities will normally be valued on the basis of market valuations
provided by an independent pricing service (the Service). The Service
utilizes the last price quotations and a matrix system (which considers such
factors as security prices of similar securities, yields, maturities, and
ratings). The Service has been approved by the Funds Board of Directors.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by the Advisor under procedures approved by and under the general
supervision of the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies. The Fund is not subject to
federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains on
investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
16
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAX (continued)
At December 31, 1997, the Fund, for federal income tax purposes, had a capital
loss carryforward of $8,371. Of this amount, $889 will expire on December 31,
2002, $7,390 will expire on December 31, 2003 and $92 will expire on December
31, 2004.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made quarterly.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses or character reclassification between net
income and net gains. As a result, net investment income (loss) and net
investment gain (loss) on investment transactions for a reporting period may
differ significantly from distributions to shareholders during such period.
As a result, the Fund may periodically make reclassifications among its
capital accounts without impacting the Fund's net asset value.
The fund hereby designates 100% of its ordinary distributions as tax-exempt
dividends for the year ended December 31, 1997.
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of the revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which the
Fund pays a fee, computed daily and payable monthly, at an annual rate of
0.50% of the Fund's average daily net assets. The fee amounted to $96,872 for
the year ended December 31, 1997.
17
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (continued)
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Fund with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise
maintain the Fund's organization. The Advisor also provides the Fund with
necessary office space and portfolio accounting and bookkeeping services. The
salaries of all officers of the Fund and of all Directors who are "affiliated
persons" of the Fund or of the Advisor, and all personnel of the Fund or of
the Advisor performing services relating to research, statistical and
investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Fund pays a fee which
is calculated as a percentage of the average daily net assets at an annual
rate of 0.024%; this fee amounted to $4,650 for the year ended December 31,
1997.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate
of the Advisor, acts as distributor for the Fund's shares. The services of
Manning & Napier Investor Services, Inc. are provided at no additional cost to
the Fund.
The compensation of the non-affiliated Directors totaled $8,250 for the year
ended December 31, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1997, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$5,863,883 and $200,000, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Diversified Tax Exempt Series were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Year For the Year
Ended 12/31/97 Ended 12/31/96
-------------- --------------
Shares Amount Shares Amount
-------------- ----------- -------------- ------------
Sold 643,012 $ 6,698,681 535,294 $ 5,427,100
Reinvested 78,730 818,991 60,908 612,628
Repurchased (144,215) (1,495,026) (147,335) (1,493,261)
--------------- ------------ --------------- ------------
Total 577,527 $ 6,022,646 448,867 $ 4,546,467
=============== ============ =============== ============
</TABLE>
18
<PAGE>
Notes to Financial Statements
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options and
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. No such
investments were held by the Fund on December 31, 1997.
19
<PAGE>
Independent Accountants Report
TO THE SHAREHOLDERS AND DIRECTORS OF
MANNING & NAPIER FUND, INC.- DIVERSIFIED TAX EXEMPT SERIES:
We have audited the accompanying statement of assets and liabilities of
Manning & Napier Fund, Inc.- Diversified Tax Exempt Series, including the
schedule of portfolio investments, as of December 31, 1997, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended and the
financial highlights for each of the periods indicated in the financial
highlights table herein. These financial statements and financial highlights
are the responsibility of the Funds management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Manning & Napier Fund, Inc.- Diversified Tax Exempt Series as of December 31,
1997, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the periods indicated in the financial
highlights table herein in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 23, 1998
20
<PAGE>
<PAGE>
Manning and Napier Fund, Inc.
New York
Tax Exempt Series
Annual Report
December 31, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
Lets face it, fixed income management is not a high risk profession. Aside
from stress, the biggest physical risk fixed income managers face is the
continued deterioration of their eyesight. Of course the same can probably be
said of any profession which entails reading, writing, or staring at a
computer screen for 8 to 10 hours a day. The clinical term for this condition
is myopia, a visual defect where distant objects are blurred because their
image is focused in front of the retina rather than on the retina itself.
While it is likely that many fixed income professionals suffer from this
malady, there is a secondary definition of myopia that is far more endemic in
the fixed income investment community today. That definition defines myopia
as a shortsightedness in thinking or planning.
For example, when the Labor Department released their employment report at
8:30 A.M. on the first Friday of October, the market responded by driving
long-term interest rates down from 6.30% to 6.15%. Later in the morning when
a story came across the newswire that a U.S. aircraft carrier was heading
toward the Persian Gulf, concerns about oil prices drove long rates back to
6.40%. When it was revealed that the carrier had been scheduled to head to
the gulf, the market recovered and long bonds ended the day where they had
started at 6.30%. The market for municipal bonds is also subject to such
gyrations and those gyrations are symptomatic of the short-term focus of the
fixed income markets. Some managers try to act on those gyrations, but that
is a tough game to play, and an even tougher game to win.
Rest assured, that is not how Manning & Napier approaches the management of
its municipal bond funds. We invest based upon our long-term overview. We do
monitor the short- term factors that impact the market, but we do so to see if
they strengthen, weaken or have no effect on our long-term overview.
For those of you who are new shareholders, our overview calls for a
continuation of the saw-tooth decline in interest rates that has characterized
the domestic fixed income market for the last 15 years. That decline can be
traced to the globalization of the worlds economy, the resulting increase in
the competitive environment, and disinflationary pressure that has resulted
from consumers, producers, and policy makers responding to that new
environment.
In a competitive global environment, governments have no choice but to enact
sound fiscal and monetary policies. Nowhere is that more evident than in the
United States. In the early 1990s, the U.S. federal government was running
budget deficits in excess of $300 billion. At the time, some of the more
negative predictions were calling for deficits exceeding $500 billion.
History proved them wrong. Through September, which is the end of the federal
governments fiscal year, the trailing 12 month budget deficit had shrunk to an
amazingly low $22.3 billion. At the start of the fiscal year, deficit
projections had called for a deficit in the neighborhood of $125 billion for
fiscal year 1997.
There are two reasons for the dramatic improvement. First, receipts continue
to exceed expectations. Some of that can be traced to the fact that this is
the seventh year of the economic expansion. It can also be traced to a stock
market that is about to post its third consecutive year of double digit
returns. That has generated above-average capital gains and associated
capital gains taxes. Second, and more interestingly, expenditure growth has
been very much restrained. On a year-over-year basis it has been in the
neighborhood of 3%. Policy makers do not have direct control over the level
of receipts that come in; however, they do control expenditures.
1
<PAGE>
Management Discussion and Analysis
An improved fiscal environment was not limited to the federal government.
State and local governments have also seen their situations improve. The same
dynamics are at work -- growing receipts and restraint over expenditures.
Many municipalities are now running surpluses, and as a result the issuance of
new municipal bonds has slowed.
Restraint is not a term often applied to politicians, but that restraint has
been driven by the financial markets' ability to enforce fiscal discipline.
How so? With the growth of international financial markets, capital flows
from one country to another almost seamlessly. Those countries with
well-defined property rights, established legal systems, and attractive
relative returns will be the most successful when it comes to keeping capital,
as well as attracting foreign capital. Sound policies are a key contributor
to whether a country offers attractive relative returns. The situation is
compounded by the fact that the U.S. is running a rather sizable current
account deficit. Because of that, it is even more important that the U.S.
attract foreign capital. Otherwise our investment needs cannot be met.
Another investment opinion that has grown out of our long-term overview is the
lack of pricing power and the need for producers to strive for productivity
gains if they are to remain competitive in the global economy. That is one of
the few ways that they can achieve earnings growth, and from an inflation
standpoint, it contributes to the disinflationary environment. Manufacturing
productivity has been strong throughout the 1990s; it has been the measures of
service sector productivity that have appeared lacking. However, over the
last year there has been a growing consensus that service sector productivity
has been mismeasured. Not only is service sector productivity hard to
measure, but the low numbers being reported seem to contradict the incredible
investments that firms have made in computers and information processing.
That does not even address the high level of merger activity that has
permeated all sectors of the economy.
Solid productivity gains help to explain what has occurred in the U.S. economy
in 1997, specifically strong growth and declining inflation. During the first
quarter of this year, the economy grew at close to a 5% real rate (i.e., 5%
over the inflation rate). In the second quarter, real growth was just under
4%, and during the third quarter, growth came in at 3.5%. Those are all solid
readings, and intuitively one would expect inflation pressures to build, but
over the same period, the Consumer Price Index slowed from a year-over-year
rate of 3.3% to 2.2%. The Producer Price Indexs year-over-year growth rate
fell from 3% to 0%. Strong growth and declining inflation are typically
thought to be mutually exclusive. But that was not the case in 1997,
and that was not the case during the 1950s and early 1960s when strong
productivity gains allowed growth and low inflation to coexist peacefully.
Both of these big picture items -- declining budget deficits and solid
productivity gains -- help to explain why interest rates have fallen over the
last 12 months. On the short end of the AAA municipal bond yield curve,
specifically one-year paper, rates are actually a touch higher. However,
two-year note rates are down 5 to 10 basis points (0.05% to 0.10%) over the
last year, and long bond rates have fallen by 40 basis points (0.40%). In
fixed income parlance, the yield curve has flattened. From a performance
standpoint, falling interest rates mean higher returns; the further out on the
yield curve an investor ventured, the better his or her performance.
2
<PAGE>
Management Discussion and Analysis
As of the end of the year, we had positioned the Series in longer-term bonds
than its benchmark, the Merrill Lynch Intermediate Municipal Index, in
keeping with our overview. For the year ending in December, the New York Tax
Exempt Series returned 8.33%. By comparison, the benchmark returned 7.69%.
This outperformance was achieved despite the fact that the benchmark does not
reflect the fees and expenses that real-world investors incur and with a
higher quality (i.e., lower credit risk ) portfolio than the benchmark.
What we hope you noticed while you were reading this letter is that none of
our conclusions depended upon our opinion of the most recent economic release,
they did not depend on a forecast of the economy over the next 6 to 12 months,
and they did not depend upon our opinion of what the Federal Reserve is going
to do at the next Federal Open Market Committee meeting. As we have stated on
more than one occasion, the key to success is to focus on the long-term
trends. Manning & Napier has done that. The proof as they say is in the
pudding, and the performance of the Series, given its extremely high quality,
has been quite good.
We wish you the best for a happy, healthy, and prosperous 1998.
Sincerely,
Manning & Napier Advisors, Inc.
<graphic>
<pie chart>
Data for pie chart to follow:
Portfolio Composition * - As of 12/31/97
General Obligation Bonds - 70%
Revenue Bonds - 25%
Pre-Refunded Bonds - 5%
* As a percentage of municipal securities.
<graphic>
<pie chart>
Data for pie chart to follow:
Quality Ratings2 - As of 12/31/97
Aaa - 86%
Aa - 13%
A - 1%
2 Using Moody's Ratings, as a percentage of municipal securities.
3
<PAGE>
Performance Update as of December 31, 1997
The value of a $10,000 investment in the
Manning & Napier Fund, Inc. - New York
Tax Exempt Series from its inception
(1/17/94) to present (12/31/97) as
compared to the Merrill Lynch Intermediate
Municipal Index.1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
New York Tax Exempt Series
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
One Year $ 10,833 8.33% 8.33%
Inception 2 $ 12,180 21.80% 5.11%
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Intermediate
Municipal Index
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
One Year $ 10,769 7.69% 7.69%
Inception 2 $ 12,419 24.19% 5.62%
</TABLE>
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
Manning & Napier Merrill Lynch Intermediate
Date New York Tax Exempt Series Municipal Index
<S> <C> <C>
01/17/94 $ 10,000 $ 10,000
12/31/94 9,318 9,719
12/31/95 10,882 11,020
12/31/96 11,243 11,532
12/31/97 12,180 12,419
</TABLE>
1 The unmanaged Merrill Lynch Intermediate Municipal Index is a
market value weighted measure of approximately 184 municipal
bonds issued across the United States. The Index is comprised of
investment grade securities. Index returns assume reinvestment of
coupons and, unlike Fund returns, do not reflect any fees or
expenses.
2 The Fund and Index performance numbers are calculated from
January 17, 1994, the Fund's inception date. The Fund's
performance is historical and may not be indicative of future results.
4
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES - 96.5%
Albany City School District, G.O. Bond, 4.35%, 2/1/2001 $ 475,000 $479,626
Albany City School District, G.O. Bond, 4.35%, 2/1/2002 150,000 151,336
Albany City School District, G.O. Bond, 4.55%, 2/1/2006 385,000 390,971
Albany County, G.O. Bond, 5.75%, 6/1/2010 200,000 215,820
Amherst Public Improvement, G.O. Bond, 4.625%, 3/1/2004 250,000 255,393
Amherst Public Improvement, G.O. Bond, 4.625%, 3/1/2007 200,000 203,354
Battery Park City Authority, Revenue Bond, 7.70%, 5/1/2015 500,000 534,550
Bayport-Blue Point Union Free School District, G.O. Bond,
5.60%, 6/15/2012 250,000 269,977
Brighton Central School District, G.O. Bond, 5.40%,6/1/2012 250,000 261,922
Brockport Central School District, G.O. Bond, 5.50%,
6/15/2015 300,000 312,015
Broome County Public Safety, Certificate Participation, 5.00%,
4/1/2006 250,000 261,060
Buffalo General Improvement, G.O. Bond, Series A, 4.75%, 2/1/2004
2/1/2004 500,000 513,205
Buffalo Schools, G.O. Bond, Series B, 5.05%, 2/1/2009 250,000 256,988
Buffalo, G.O. Bond, 5.00%, 12/1/2009 150,000 154,741
Buffalo, G.O. Bond, Series A, 5.20%, 2/1/2010 250,000 260,495
Cattaraugus County Public Improvement, G.O. Bond, 5.00%,
8/1/2007 300,000 313,941
Chittenango Central School District, G.O. Bond, 5.375%,
6/15/2016 200,000 204,630
Colonie, G.O. Bond, 5.20%, 8/15/2008 100,000 106,055
Cortlandville, G.O. Bond, 5.40%, 6/15/2013 155,000 161,518
Dryden Central School District, G.O. Bond, 5.50%, 6/15/2011 200,000 209,374
East Aurora Union Free School District, G.O. Bond, 5.20%,
6/15/2011 300,000 311,199
East Hampton, G.O. Bond, 4.625%, 1/15/2007 175,000 177,158
East Hampton, G.O. Bond, 4.625%, 1/15/2008 175,000 176,419
Eastchester Public Improvement, G.O. Bond, Series B,
4.90%, 10/15/2011 385,000 388,611
Ellenville Central School District, G.O. Bond, 5.375%, 5/1/2009 210,000 226,607
Ellenville Central School District, G.O. Bond, Series B, 5.70%,
5/1/2011 700,000 764,708
Erie County Public Improvement, G.O. Bond, 5.80%, 1/15/2003 230,000 246,875
Erie County, G.O. Bond, Series B, 5.50%, 6/15/2009 100,000 107,053
Erie County, G.O. Bond, Series B, 5.50%, 6/15/2025 400,000 410,968
Fillmore Central School District, G.O. Bond, 5.25%, 6/15/2015 300,000 305,754
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES (continued)
Gloversville City School District, G.O. Bond, 5.00%, 6/15/2005 $ 350,000 $365,956
Greene Central School District, G.O. Bond, 5.25%, 6/15/2012 195,000 201,651
Guilderland School District, G.O. Bond, 4.75%, 6/15/1998 130,000 130,608
Guilderland School District, G.O. Bond, 4.90%, 6/15/2008 370,000 377,374
Guilderland School District, G.O. Bond, 5.00%, 6/15/2014 505,000 505,944
Guilderland School District, G.O. Bond, 5.00%, 6/15/2016 400,000 397,744
Hamburg Central School District, G.O. Bond, 5.375%, 6/1/2014 600,000 622,326
Hempstead Town, G.O. Bond, Series B, 5.625%, 2/1/2010 200,000 216,702
Holland Central School District, G.O. Bond, 6.125%, 6/15/2010 245,000 274,736
Huntington, G.O. Bond, 5.875%, 9/1/2009 250,000 272,900
Huntington, G.O. Bond, 5.90%, 1/15/2007 300,000 331,398
Indian River Central School District, G.O. Bond, Second Series,
4.30%, 12/15/2003 475,000 478,966
Irvington Union Free School District, G.O. Bond, Series B,
5.10%, 7/15/2005 275,000 288,835
Jamesville-Dewitt Central School District, G.O., Bond, 5.75%,
6/15/2009 420,000 466,582
Jordan-El Bridge Central School District, G.O. Bond, 5.875%,
6/15/2008 500,000 551,980
Le Roy Central School District, G.O. Bond, 0.10%, 6/15/2008 350,000 219,426
Middletown City School District, G.O. Bond, Series A, 5.50%,
11/15/2005 175,000 189,047
Monroe County Public Improvement - Pre-refunded, G.O. Bond
6.00%, 3/1/2002 95,000 101,756
Monroe County Public Improvement - Pre-refunded, G.O. Bond
6.10%, 6/1/2015 20,000 22,347
Monroe County Public Improvement - Unrefunded Balance,
G.O. Bond, 6.00%, 3/1/2002 405,000 434,334
Monroe County Public Improvement - Unrefunded Balance,
G.O. Bond, 6.10%, 6/1/2015 180,000 201,121
Monroe County Public Improvement, G.O. Bond, 4.90%,
6/1/2005 250,000 259,785
Monroe County Water Authority, Revenue Bond, Series B,
5.25% 8/1/2011 500,000 513,950
Monroe County Water Improvement, G.O. Bond, 5.25%, 2/1/2017
2/1/2017 320,000 328,650
Nassau County, G.O. Bond, Series A, 4.00%, 5/1/1999 100,000 100,155
Nassau County, G.O. Bond, Series S, 5.00%, 3/1/2005 300,000 312,198
Nassau County General Improvement, G.O. Bond, Series U,
5.25%, 11/1/2014 335,000 341,412
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES (continued)
Nassau County General Improvement, G.O. Bond, Series V,
5.25%, 3/1/2015 $ 385,000 $ 391,418
New Castle, G.O. Bond, 4.75%, 6/1/2010 450,000 452,106
New Rochelle City School District, G.O. Bond, Series A, 4.30%,
2/1/2003 500,000 502,935
New Rochelle, G.O. Bond, Series C, 6.20%, 3/15/2007 175,000 194,318
New York City Municipal Water Authority, Revenue Bond,
Series B, 5.00%, 6/15/2003 400,000 412,928
New York City Municipal Water Authority, Revenue Bond,
Series B, 5.375%, 6/15/2019 250,000 251,748
New York City Municipal Water Finance Authority, Revenue
Bond, Series B, 5.50%, 6/15/2019 1,000,000 1.023,900
New York City, G.O. Bond, Series K, 5.50%, 4/1/2007 500,000 536,595
New York Government Assistance Corp., Revenue Bond,
Series A, 5.90%, 4/1/2013 500,000 544,440
New York Government Assistance Corp., Revenue Bond,
Series A, 6.00%, 4/1/2024 250,000 268,888
New York State Environmental Facilities Corp. Pollution Control,
Revenue Bond, Series A, 4.65%, 6/15/2007 250,000 254,593
New York State Environmental Facilities Corp. Pollution Control,
Revenue Bond, Series A, 5.20%, 6/15/2015 250,000 253,458
New York State Environmental Pollution Control, Revenue Bond
Pooled LN-B, 6.65%, 9/15/2013 500,000 558,855
New York State Environmental Facilities Corp. Pollution Control
Revenue Bond, Series E, 5.00%, 6/15/2012 200,000 202,024
New York State Housing Finance Agency, State University
Construction, Revenue Bond, Series A, 8.00%, 5/1/2011 250,000 319,915
New York State Local Government Assistance Corp.,
Revenue Bond, Series C, 5.00%, 4/1/2021 750,000 729,840
New York State Medical Care Facility, Financial Agency,
Revenue Bond, 7.75%, 2/15/2020 380,000 415,720
New York State Mortgage Agency, Homeowners Mortgage,
Revenue Bond, Series 31A, 5.375%, 10/1/2017 500,000 505,800
New York State Power Authority, Revenue Bond, Series CC,
5.00%, 1/1/2014 500,000 500,880
New York State Power Authority, Revenue Bond, Series CC,
5.25%, 1/1/2018 250,000 250,725
New York State Power Authority Revenue & General Purpose,
Revenue Bond, Ref-Series CC, 4.80%, 1/1/2005 35,000 36,572
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES (continued)
New York State Power Authority Revenue & General Purpose,
Revenue Bond, Ref-Series CC, 4.80%, 1/1/2005 $ 215,000 $ 221,439
New York State Thruway Authority, Highway & Bridge, Revenue
Bond, Series B, 5.75%, 4/1/2006 100,000 109,357
New York State Thruway Authority, Revenue Bond, Series A,
5.50%, 1/1/2023 1,020,000 1,033,495
New York State Thruway Authority Highway & Bridge Trust
Fund, Revenue Bond, Series A, 4.90%, 1/1/2007 555,000 560,123
New York State Thruway Authority, Revenue Bond, Series B,
4.90%, 1/1/2007 450,000 464,117
New York State Urban Development Correctional Capital Facilities,
Facilities, Revenue Bond, Series A, 5.25%, 1/1/2014 500,000 522,080
New York State Urban Development, Corp. Correctional Facility,
Revenue Bond, Series G, 7.00%, 1/1/2017 50,000 53,840
New York State Urban Development, Revenue Bond, 5.375%,
7/1/2022 400,000 403,352
New York, G.O. Bond, 8.00%, 3/15/2016 500,000 549,050
Niagara County, G.O. Bond, Series B, 5.20%, 1/15/2011 400,000 411,148
Niagara County, G.O. Bond, 5.90%, 7/15/2014 350,000 377,192
North Hempstead, G.O. Bond, Series B, 5.90%, 4/1/2004 300,000 327,327
North Hempstead, G.O. Bond, Series C, 4.90%, 8/1/2006 300,000 309,660
North Syracuse Central School District, G.O. Bond, 5.50%
6/15/2011 295,000 311,198
Onondaga County, G.O. Bond, 5.85%, 2/15/2002 300,000 319,593
Penfield Central School District, G.O. Bond, 5.20%, 6/15/2010 560,000 584,265
Queensbury, G O. Bond, Series A, 5.50%, 4/15/2011 150,000 159,720
Queensbury, G.O. Bond, Series A, 5.50%, 4/15/2012 350,000 371,560
Rochester, G.O. Bond, Series A, 4.70%, 8/15/2006 250,000 256,550
Rochester, G.O. Bond, Series A, 5.00%, 8/15/2020 250,000 252,015
Rochester, G.O. Bond, Series A, 5.00%, 8/15/2022 95,000 95,491
Rome, G.O. Bond, 5.20%, 12/1/2010 390,000 404,430
Sands Point, G.O. Bond, 6.70%, 11/15/2014 700,000 785,953
Schenectady, G.O. Bond, 4.55%, 10/1/2002 200,000 203,838
Schenectady, G.O. Bond, 5.30%, 2/1/2011 250,000 260,658
South County Central School District Brookhaven, G.O. Bond,
5.50%, 9/15/2007 380,000 406,790
South Huntington Union Free School District, G.O. Bond, 5.00%
9/15/2016 325,000 323,531
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES(continued)
South Huntington Union Free School District, G.O. Bond, 5.10%,
9/15/2017 $ 100,000 $100,159
Steuben County Public Improvement, G.O. Bond, 5.60%,
5/1/2006 500,000 528,200
Suffolk County Water Authority, Revenue Bond, 5.10%,
6/1/2009 250,000 263,267
Suffolk County Water Authority, Revenue Bond, 7.325%,
6/1/2012 500,000 522,365
Suffolk County, G.O. Bond, Series G, 5.40%, 4/1/2013 400,000 410,060
Sullivan County Public Improvement, G.O. Bond, 4.375%,
3/15/2001 300,000 302,889
Sullivan County Public Improvement, G.O. Bond, 5.125%,
3/15/2013 330,000 333,798
Three Village Central School District, G.O. Bond, 5.375%,
6/15/2007 230,000 247,188
Tioga County Public Improvement, G.O. Bond, 5.25%,
3/15/2005 250,000 262,743
Tompkins County, G.O. Bond, Series B, 5.625%, 9/15/2011 135,000 143,459
Tompkins County, G.O. Bond, Series B, 5.625%, 9/15/2013 300,000 316,809
Tompkins County, G.O. Bond, Series B, 5.625%, 9/15/2014 300,000 315,624
Triborough Bridge & Tunnel Authority, Revenue Bond, Series A,
5.00%, 1/1/2012 500,000 501,755
Triborough Bridge & Tunnel Authority, Revenue Bond, Series A,
6.50%, 1/1/2004 200,000 216,962
Triborough Bridge & Tunnel Authority - General Purpose,
Revenue Bond, 5.00%, 1/1/2017 250,000 245,447
Triborough Bridge & Tunnel Authority - General Purpose,
Revenue Bond, Series A, 4.75%, 1/1/2019 300,000 285,490
Tri-Valley Central School District, G.O. Bond, 5.60%,
6/15/2008 120,000 129,509
Westchester County, G.O. Bond, Series A, 4.75%, 12/15/2008 250,000 256,988
Westchester County, G.O. Bond, Series A, 4.75%, 12/15/2009 250,000 254,965
Westchester County, G.O. Bond, Series B, 4.30%, 12/15/2010 215,000 207,124
Westchester County, G.O. Bond, Series B, 4.30%, 12/15/2011 100,000 95,150
White Plains, G.O. Bond, 4.50%, 9/1/2005 180,000 183,062
White Plains, G.O. Bond, 4.50%, 9/1/2007 315,000 318,241
William Floyd Union Free School District, G.O. Bond, 5.70%
6/15/2008 405,000 445,383
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount/Shares (Note 2)
<S> <C> <C>
NEW YORK MUNICIPAL SECURITIES(continued)
Williamsville Central School District, G.O. Bond, 5.375%,
5/1/2004 $ 800,000 $ 850,512
Wyandanch Union Free School District, G.O. Bond, 5.60%,
4/1/2017 500,000 525,885
------------
TOTAL MUNICIPAL SECURITIES
(Identified Cost $42,096,802) 44,088,670
------------
SHORT-TERM INVESTMENTS - 2.3%
Dreyfus Basic New York Tax Free Money Market
Fund (Identified Cost $1,044,367) 1,044,367 1,044,367
------------
TOTAL INVESTMENTS - 98.8%
(Identified Cost $43,416,761) 45,133,037
OTHER ASSETS, LESS LIABILITIES - 1.2% 548,280
------------
NET ASSETS - 100% $45,681,317
============
KEY-
G.O. Bond - General Obligation Bond
Ref. - Referendum
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
FEDERAL TAX INFORMATION:
At December 31, 1997, the net unrealized appreciation based on
identified cost for federal income tax purposes of $43,141,169
was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost $2,007,269
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value (15,401)
-----------
UNREALIZED APPRECIATION - NET $1,991,868
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31, 1997
ASSETS:
Investments, at value (Identified Cost $43,141,169)(Note 2) $45,133,037
Interest receivable 578,312
Prepaid expense 1,663
------------
TOTAL ASSETS 45,713,012
------------
LIABILITIES:
Accrued management fees (Note 3) 19,208
Accrued Directors' fees (Note 3) 1,644
Audit fee payable 10,450
Other payables and accrued expenses 393
------------
TOTAL LIABILITIES 31,695
------------
NET ASSETS FOR 4,403,651 SHARES
OUTSTANDING $45,681,317
============
NET ASSETS CONSIST OF:
Capital stock $ 44,037
Additional paid-in-capital 43,567,178
Undistributed net investment income 98,046
Accumulated net realized loss on investments (19,812)
Net unrealized appreciation on investments 1,991,868
------------
TOTAL NET ASSETS $45,681,317
============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($45,681,317 / 4,403,651 shares) $ 10.37
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
<S> <C>
FOR THE YEAR ENDED DECEMBER 31, 1997
INVESTMENT INCOME:
Interest $2,059,931
----------
EXPENSES:
Management fees (Note 3) 207,477
Directors' fees (Note 3) 8,250
Transfer agent fees (Note 3) 9,959
Audit fee 13,666
Custodian fee 6,600
Miscellaneous 6,813
----------
Total Expenses 252,765
----------
NET INVESTMENT INCOME 1,807,166
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments (identified cost basis) 632
Net change in unrealized appreciation on investments 1,603,090
----------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS 1,603,722
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $3,410,888
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
For the Year For the Year
Ended 12/31/97 Ended 12/31/96
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,807,166 $ 1,417,569
Net realized gain (loss) on investments 632 (335)
Net change in unrealized appreciation (depreciation)
on investments 1,603,090 (217,088)
---------------- ----------------
Net increase in net assets from operations 3,410,888 1,200,146
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 2):
From net investment income (1,768,897) (1,370,523)
---------------- ----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase from capital share transactions (Note 5) 6,714,448 8,678,432
---------------- ----------------
Net increase in net assets 8,356,439 8,508,055
NET ASSETS:
Beginning of period 37,324,878 28,816,823
---------------- ----------------
END OF PERIOD (including undistributed net
investment income of $98,046 and $59,777
respectively) $ 45,681,317 $ 37,324,878
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
For the Period
1/17/94
(commencement
For the Years Ended of operations)
12/31/97 12/31/96 12/31/95 to 12/31/94
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughtout each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 9.98 $ 10.07 $ 8.98 $ 10.00
--------------------- ---------- ---------- ----------------
Income from investment operations:
Net investment income 0.431 0.422 0.404 0.338
Net realized and unrealized gain (loss)
on investments 0.384 (0.102) 1.086 (1.020)
--------------------- ---------- ---------- ----------------
Total from investment operations 0.815 0.320 1.490 (0.682)
--------------------- ---------- ---------- ----------------
Less distributions to shareholders:
From net investment income (0.425) (0.410) (0.400) (0.338)
--------------------- ---------- ---------- ----------------
NET ASSET VALUE - END OF PERIOD $ 10.37 $ 9.98 $ 10.07 $ 8.98
===================== ========== ========== ================
Total return1 8.33% 3.32% 16.78% (6.82)%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses 0.61% 0.61% 0.65% 0.79%2
Net investment income 4.36% 4.41% 4.36% 3.82%2
Portfolio turnover 2% 6% 0% 6%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 45,681 $ 37,325 $ 28,817 $ 17,301
===================== ========== ========== ================
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
New York Tax Exempt Series (the "Fund") is a no-load diversified series of
Manning & Napier Fund, Inc. (the "Corporation"). The Corporation is organized
in Maryland and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
Shares of the Fund are offered to investors, employees and clients of Manning
& Napier Advisors, Inc. (the "Advisor") and its affiliates. The total
authorized capital stock of the Corporation consists of one billion shares of
common stock each having a par value of $0.01. As of December 31, 1997, 940
million shares have been designated in total among 19 series, of which 50
million have been designated as New York Tax Exempt Series Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Municipal securities will normally be valued on the basis of market valuations
provided by an independent pricing service (the Service). The Service
utilizes the latest price quotations and a matrix system (which considers such
factors as security prices of similar securities, yields, maturities, and
ratings). The Service has been approved by the Funds Board of Directors.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by the Advisor under procedures approved by and under the general
supervision of the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
15
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies. The Fund is not subject to
federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains on
investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
At December 31, 1997, the Fund, for federal income tax purposes, had a capital
loss carryforward of $19,812. Of this amount, $1,918 will expire on December
31, 2002, $17,559 will expire on December 31, 2003, and $335 will expire on
December 31, 2004.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made quarterly.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses or character reclassification between net
income and net gains. As a result, net investment income (loss) and net
investment gain (loss) on investment transactions for a reporting period may
differ significantly from distributions to shareholders during such period.
As a result, the Fund may periodically make reclassifications among its
capital accounts without impacting the Fund's net asset value.
The Fund hereby designates 100% of its ordinary distributions as tax-exempt
dividends for the year ended December 31, 1997.
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of the revenues and expenses during the reporting
period. Actual results could differ from those estimates.
16
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which the
Fund pays a fee, computed daily and payable monthly, at an annual rate of
0.50% of the Fund's average daily net assets. The fee amounted to $207,477
for the year ended December 31, 1997.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Fund with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise
maintain the Fund's organization. The Advisor also provides the Fund with
necessary office space and portfolio accounting and bookkeeping services. The
salaries of all officers of the Fund and of all Directors who are "affiliated
persons" of the Fund or of the Advisor, and all personnel of the Fund or of
the Advisor performing services relating to research, statistical and
investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Fund pays a fee which
is calculated as a percentage of the average daily net assets at an annual
rate of 0.024%; this fee amounted to $9,959 for the year ended December 31,
1997.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate
of the Advisor, acts as distributor for the Fund's shares. The services of
Manning & Napier Investor Services, Inc. are provided at no additional cost to
the Fund.
The compensation of the non-affiliated Directors totaled $8,250 for the year
ended December 31, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1997, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$7,651,687 and $728,750, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of New York Tax Exempt Series were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Year For the Year
Ended 12/31/97 Ended 12/31/96
------------------ ---------------
Shares Amount Shares Amount
------------------ ------------ -------------- -----------
Sold 880,742 $ 8,945,358 1,002,977 $ 9,923,094
Reinvested 171,409 1,740,404 137,887 1,351,346
Repurchased (389,781) (3,971,314) (260,462) (2,596,008)
------------------ ------------ --------------- ------------
Total 662,370 $ 6,714,448 880,402 $ 8,678,432
================== ============ =============== ============
</TABLE>
17
<PAGE>
Notes to Financial Statements
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options and
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. No such
investments were held by the Fund on December 31, 1997.
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of New York
and its political subdivisions, agencies, and public authorities to obtain
funds for various public purposes. The Fund is more susceptible to factors
adversely affecting issues of New York municipal securities than is a
municipal bond fund that is not concentrated in these issues to the same
extent.
18
<PAGE>
Independent Accountants Report
TO THE SHAREHOLDERS AND DIRECTORS OF
MANNING & NAPIER FUND, INC.- NEW YORK TAX EXEMPT SERIES:
We have audited the accompanying statement of assets and liabilities of
Manning & Napier Fund, Inc.- New York Tax Exempt Series, including the
schedule of portfolio investments, as of December 31, 1997, and the related
statement of operations for the year then ended, the statement of changes in
net assets for each of the two years in the period then ended and the
financial highlights for each of the periods indicated in the financial
highlights table herein. These financial statements and financial highlights
are the responsibility of the Funds management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Manning & Napier Fund, Inc.- New York Tax Exempt Series as of December 31,
1997, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the periods indicated in the financial
highlights table herein in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 23, 1998
19
<PAGE>
<PAGE>
Manning & Napier Fund, Inc.
Ohio Tax Exempt Series
Annual Report
December 31, 1997
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
Lets face it, fixed income management is not a high risk profession. Aside
from stress, the biggest physical risk fixed income managers face is the
continued deterioration of their eyesight. Of course the same can probably be
said of any profession which entails reading, writing, or staring at a
computer screen for 8 to 10 hours a day. The clinical term for this condition
is myopia, a visual defect where distant objects are blurred because their
image is focused in front of the retina rather than on the retina itself.
While it is likely that many fixed income professionals suffer from this
malady, there is a secondary definition of myopia that is far more endemic in
the fixed income investment community today. That definition defines myopia
as a shortsightedness in thinking or planning.
For example, when the Labor Department released their employment report at
8:30 A.M. on the first Friday of October, the market responded by driving
long-term interest rates down from 6.30% to 6.15%. Later in the morning when
a story came across the newswire that a U.S. aircraft carrier was heading
toward the Persian Gulf, concerns about oil prices drove long rates back to
6.40%. When it was revealed that the carrier had been scheduled to head to
the gulf, the market recovered and long bonds ended the day where they had
started at 6.30%. The market for municipal bonds is also subject to such
gyrations and those gyrations are symptomatic of the short-term focus of the
fixed income markets. Some managers try to act on those gyrations, but that
is a tough game to play, and an even tougher game to win.
Rest assured, that is not how Manning & Napier approaches the management of
its municipal bond funds. We invest based upon our long-term overview. We do
monitor the short- term factors that impact the market, but we do so to see if
they strengthen, weaken or have no effect on our long-term overview.
For those of you who are new shareholders, our overview calls for a
continuation of the saw-tooth decline in interest rates that has characterized
the domestic fixed income market for the last 15 years. That decline can be
traced to the globalization of the worlds economy, the resulting increase in
the competitive environment, and disinflationary pressure that has resulted
from consumers, producers, and policy makers responding to that new
environment.
In a competitive global environment, governments have no choice but to enact
sound fiscal and monetary policies. Nowhere is that more evident than in the
United States. In the early 1990s, the U.S. federal government was running
budget deficits in excess of $300 billion. At the time, some of the more
negative predictions were calling for deficits exceeding $500 billion.
History proved them wrong. Through September, which is the end of the federal
governments fiscal year, the trailing 12 month budget deficit had shrunk to an
amazingly low $22.3 billion. At the start of the fiscal year, deficit
projections had called for a deficit in the neighborhood of $125 billion for
fiscal year 1997.
There are two reasons for the dramatic improvement. First, receipts continue
to exceed expectations. Some of that can be traced to the fact that this is
the seventh year of the economic expansion. It can also be traced to a stock
market that is about to post its third consecutive year of double digit
returns. That has generated above-average capital gains and associated
capital gains taxes. Second, and more interestingly, expenditure growth has
been very much restrained. On a year-over-year basis it has been in the
neighborhood of 3%. Policy makers do not have direct control over the level
of receipts that come in; however, they do control expenditures.
1
<PAGE>
Management Discussion and Analysis
An improved fiscal environment was not limited to the federal government.
State and local governments have also seen their situations improve. The same
dynamics are at work -- growing receipts and restraint over expenditures.
Many municipalities are now running surpluses, and as a result the issuance of
new municipal bonds has slowed.
Restraint is not a term often applied to politicians, but that restraint has
been driven by the financial markets' ability to enforce fiscal discipline.
How so? With the growth of international financial markets, capital flows
from one country to another almost seamlessly. Those countries with
well-defined property rights, established legal systems, and attractive
relative returns will be the most successful when it comes to keeping capital,
as well as attracting foreign capital. Sound policies are a key contributor
to whether a country offers attractive relative returns. The situation is
compounded by the fact that the U.S. is running a rather sizable current
account deficit. Because of that, it is even more important that the U.S.
attract foreign capital. Otherwise our investment needs cannot be met.
Another investment opinion that has grown out of our long-term overview is the
lack of pricing power and the need for producers to strive for productivity
gains if they are to remain competitive in the global economy. That is one of
the few ways that they can achieve earnings growth, and from an inflation
standpoint, it contributes to the disinflationary environment. Manufacturing
productivity has been strong throughout the 1990s; it has been the measures of
service sector productivity that have appeared lacking. However, over the
last year there has been a growing consensus that service sector productivity
has been mismeasured. Not only is service sector productivity hard to
measure, but the low numbers being reported seem to contradict the incredible
investments that firms have made in computers and information processing.
That does not even address the high level of merger activity that has
permeated all sectors of the economy.
Solid productivity gains help to explain what has occurred in the U.S. economy
in 1997, specifically strong growth and declining inflation. During the first
quarter of this year, the economy grew at close to a 5% real rate (i.e., 5%
over the inflation rate). In the second quarter, real growth was just under
4%, and during the third quarter, growth came in at 3.5%. Those are all solid
readings, and intuitively one would expect inflation pressures to build, but
over the same period, the Consumer Price Index slowed from a year-over-year
rate of 3.3% to 2.2%. The Producer Price Indexs year-over-year growth rate
fell from 3% to 0%. Strong growth and declining inflation are typically
thought to be mutually exclusive. But that was not the case in 1997,
and that was not the case during the 1950s and early 1960s when strong
productivity gains allowed growth and low inflation to coexist peacefully.
Both of these big picture items -- declining budget deficits and solid
productivity gains -- help to explain why interest rates have fallen over the
last 12 months. On the short end of the AAA municipal bond yield curve,
specifically one-year paper, rates are actually a touch higher. However,
two-year note rates are down 5 to 10 basis points (0.05% to 0.10%) over the
last year, and long bond rates have fallen by 40 basis points (0.40%). In
fixed income parlance, the yield curve has flattened. From a performance
standpoint, falling interest rates mean higher returns; the further out on the
yield curve an investor ventured, the better his or her performance.
2
<PAGE>
Management Discussion and Analysis
As of the end of the year, we had positioned the Series in longer-term bonds
than its benchmark, the Merrill Lynch Intermediate Municipal Index, in
keeping with our overview. For the year ending in December, the Ohio Tax
Exempt Series returned 7.92%. By comparison, the benchmark returned 7.69%.
This outperformance was achieved despite the fact that the benchmark does not
reflect the fees and expenses that real-world investors incur and with a
higher quality (i.e., lower credit risk ) portfolio than the benchmark.
What we hope you noticed while you were reading this letter is that none of
our conclusions depended upon our opinion of the most recent economic release,
they did not depend on a forecast of the economy over the next 6 to 12 months,
and they did not depend upon our opinion of what the Federal Reserve is going
to do at the next Federal Open Market Committee meeting. As we have stated on
more than one occasion, the key to success is to focus on the long-term
trends. Manning & Napier has done that. The proof as they say is in the
pudding, and the performance of the Series, given its extremely high quality,
has been quite good.
We wish you the best for a happy, healthy, and prosperous 1998.
Sincerely,
Manning & Napier Advisors, Inc.
<graphic>
<pie chart>
Data for pie chart to follow:
Portfolio Composition1 - As of 12/31/97
General Obligation Bonds - 72%
Revenue Bonds - 26%
Pre-Refunded Bonds - 2%
1 As a percentage of municipal securities.
<graphic>
<pie chart>
Data for pie chart to follow:
Quality Ratings 2 - As of 12/31/97
Aaa - 83%
Aa - 13%
A - 3%
Not Rated - 1%
2 Using Moody's Ratings, as a percentage of municipal securities.
3
<PAGE>
Performance Update as of December 31, 1997
The value of a $10,000 investment in the
Manning & Napier Fund, Inc. - Ohio
Tax Exempt Series from its inception
(2/14/94) to present (12/31/97) as
compared to the Merrill Lynch Intermediate
Municipal Index.1
<TABLE>
<CAPTION>
Manning & Napier Fund, Inc.
Ohio Tax Exempt Series
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 10,792 7.92% 7.92%
Inception 2 $ 12,228 22.28% 5.32%
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Intermediate
Municipal Index
Total Return
Through Growth of $10,000 Average
12/31/97 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $ 10,769 7.69% 7.69%
Inception 2 $ 12,406 24.06% 5.71%
</TABLE>
<graphic>
<line chart>
Data for the line chart to follow:
<TABLE>
<CAPTION>
Manning & Napier Merrill Lynch Intermediate
Date Ohio Tax Exempt Series Municipal Index
<S> <C> <C>
02/14/94 10,000 10,000
12/31/94 9,377 9,709
12/31/95 10,985 11,009
12/31/96 11,331 11,520
12/31/97 12,228 12,406
</TABLE>
The unmanaged Merrill Lynch Intermediate Municipal Index is a
market value weighted measure of approximately 184 municipal
bonds issued across the United States. The Index is comprised of
investment grade securities. Index returns assume reinvestment of
coupons and, unlike Fund returns, do not reflect any fees or
expenses.
2 The Fund and Index performance numbers are calculated from
February 14, 1994, the Fund's inception date. The Fund's
performance is historical and may not be indicative of future results.
4
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
<S> <C> <C>
OHIO MUNICIPAL SECURITIES - 96.0%
Akron Bath Copley Joint Twnshp. Childrens Hos.
Med. Ctr., Revenue Bond, 7.45%, 11/15/2020 $ 50,000 $ 55,422
Akron Limited Tax, G.O. Bond, 4.10%, 12/1/2001 65,000 65,255
Akron Waterworks, Revenue Management Bond,
5.70%, 3/1/2007 100,000 108,307
Allen County, G.O. Bond, 5.30%, 12/1/2007 100,000 105,131
Amherst Police & Jail Facility, G.O. Bond, 5.375%,
12/1/2012 50,000 52,077
Avon Lake, G.O. Bond, 5.70%, 12/1/2006 60,000 64,391
Avon Lake, G.O. Bond, 6.00%,12/1/2009 40,000 43,336
Bedford Heights, G.O. Bond, Series A, 5.65%,
12/1/2014 60,000 65,349
Belmont County, G.O. Bond, 5.15%, 12/1/2010 100,000 102,793
Bexley City School District, G.O. Bond, 6.50%,
12/1/2016 20,000 22,069
Brecksville-Broadview Heights City School
District, G.O. Bond, 5.25%, 12/1/2021 115,000 115,090
Chagrin Falls Exempt Village School District,
G.O. Bond, 5.55%, 12/01/2022 100,000 102,799
Cincinnati, G.O. Bond, 4.60%,12/1/2003 50,000 51,116
Clermont County Hospital Facilities Mercy Health
Care System, Revenue Bond, Series A, 7.625%,
1/1/2015 25,000 25,500
Cleveland City School District, G.O. Bond, 5.875%,
12/1/2011 125,000 133,456
Cleveland Waterworks Revenue Ref. & Impt. - First
Meeting, Revenue Bond, Series H, 5.50%,
1/1/2010 170,000 181,451
Cleveland Waterworks, Revenue Bond, 1st Mtg.,
Series G, 5.50%, 1/1/2013 100,000 106,981
Columbus, G.O. Bond, Series 1, 5.25%, 9/15/2018 195,000 197,449
Columbus Limited Tax, G.O. Bond, Series A, 4.85%,
7/1/2004 50,000 51,817
Columbus Sewer Improvement Number 28, G.O.
Bond, 6.00%, 5/1/2011 155,000 169,511
Columbus, G.O. Bond, Series D, 5.50%, 9/15/2008 50,000 53,481
Crawford County, G.O. Bond, 6.75%, 12/1/2019 175,000 199,958
Cuyahoga County, G.O. Bond, Series A, 4.30%,
10/1/1999 50,000 50,333
Cuyahoga Falls, G.O. Bond, 7.20%, 12/1/2010 75,000 80,889
Delaware City School District, Construction & Impt.,
G.O. Bond, Series B, 5.20%, 12/1/2016 100,000 100,796
Dublin City School District, G.O. Bond, 5.00%,
12/1/2019 300,000 295,395
Fairfield County Hospital Impt., Lancaster-Fairfield
Community Hospital, Revenue Bond, 7.00%, 6/15/2012 50,000 55,453
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
<S> <C> <C>
OHIO MUNICIPAL SECURITIES (continued)
Findlay Water, Revenue Bond, 5.45%, 11/1/2008 $ 100,000 $105,505
Franklin County, G.O. Bond, 4.95%, 12/1/2004 50,000 52,141
Franklin County, G.O. Bond, 5.50%, 12/1/2013 100,000 104,501
Gahanna-Jefferson City School District, G.O. Bond,
4.75%, 12/1/1999 50,000 50,737
Green Local School District - Summit, G.O. Bond,
5.20%, 12/1/2003 75,000 78,890
Greene County Sewer System, Revenue Bond, 5.50%,
12/1/2018 30,000 30,792
Hamilton County Building Impt. - Museum Center,
G.O. Bond, 5.85%, 12/1/2001 50,000 51,090
Hamilton County Sewer System Ref. & Impt. - Metro
Sewer District, Revenue Bond, Series A, 4.75%,
12/1/2000 50,000 53,340
Hamilton County Sewer System Ref. & Impt. - Metro
Sewer District, Revenue Bond, Series A, 5.00%,
12/1/2014 125,000 125,127
Hilliard School District, G.O. Bond, 6.35%,
12/1/2003 60,000 66,694
Hilliard School District, G.O. Bond, Series A, 5.00%,
12/1/2020 225,000 220,777
Indian Lake Local School District Construction &
Improvement, G.O. Bond, 5.375%, 12/1/2023 220,000 222,602
Kettering City School District School Impt., G.O.
Bond, 5.30%, 12/1/2014 125,000 128,019
Kettering City School District, G.O. Bond, 4.85%,
12/1/2006 40,000 41,530
Kettering City School District, G.O. Bond, 5.25%,
12/1/2022 60,000 60,040
Kings Local School District, G.O. Bond, 5.50%,
12/1/2021 115,000 117,809
Lakewood City School District, G.O. Bond, 5.55%,
12/1/2013 100,000 104,019
Lakota Local School District, G.O. Bond, 5.75%,
12/1/2006 50,000 54,546
Lakota Local School District, G.O. Bond, 7.00%,
12/1/2008 100,000 121,876
Lakota Local School District, G.O. Bond, 7.90%,
12/1/2011 45,000 46,691
Mahoning County Limited Tax, G.O. Bond, 5.65%,
12/1/1998 20,000 20,343
Mahoning County, G.O. Bond, 5.70%, 12/1/2009 150,000 161,536
Mason City School District, G.O. Bond, 5.00%,
12/1/2007 120,000 124,521
Mentor, G.O. Bond, 5.25%, 12/01/2017 100,000 100,906
Montgomery County, G.O. Bond, 5.30%, 9/1/2007 65,000 68,383
Montgomery County, Moraine-Beaver Creek Sewers,
Revenue Bond, 5.60%, 9/1/2011 100,000 105,110
North Canton City School District, G.O. Bond,
5.85%, 12/1/2007 40,000 43,941
North Olmstead, G.O. Bond, 6.20%, 12/1/2011 200,000 230,160
Northwood Local School District, G.O. Bond, 5.55%, 12/1/2006 65,000 70,867
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
<S> <C> <C>
OHIO MUNICIPAL SECURITIES (continued)
Northwood Local School District, G.O. Bond, 6.20%,
12/1/2013 $ 40,000 $ 44,214
Ohio, G.O. Bond, 6.50%, 8/1/2011 50,000 54,339
Ohio Building Authority, Local Jail Grant, Revenue
Bond, Series A, 4.65%, 10/1/2005 50,000 51,124
Ohio Building Authority, State Facilities -
Administration Building, Revenue Bond, 5.50%,
10/1/2005 50,000 53.899
Ohio Higher Education Facility, University of Dayton
Project, Revenue Bond, 5.80%, 12/1/2019 100,000 106,211
Ohio Public Facilities, Higher Education, Revenue
Bond, Series II-A, 4.25%, 12/1/2002 50,000 50,308
Ohio State Infrastructure Improvement, G.O. Bond,
5.20%, 8/1/2010 250,000 261,232
Ohio State Turnpike, Revenue Bond, Series A,
5.70%, 2/15/2017 125,000 132,090
Ohio State Turnpike, Revenue Bond, Series A,
5.40%, 2/15/2009 250,000 266,090
Ohio State Water Development Authority Ref. &
Impt. - Pure Water, Revenue Bond, 5.75%,
12/1/2005 60,000 64,712
Ohio State Water Development Authority Pure Water,
Revenue Bond, Series I, 6.00%, 12/1/2016 40,000 43,801
Ohio State Water Development Authority, Pollution
Control Facility, Revenue Bond, 5.25%, 12/1/2014 100,000 100,985
Ottawa County, G.O. Bond, 5.45%, 9/1/2006 30,000 32,364
Pickerington Local School District Construction &
Impt., G.O. Bond, 5.375%, 12/1/2019 150,000 151,207
Pickerington Water Systems Improvements, G.O.
Bond, 5.85%, 12/1/2013 50,000 54,063
Reynoldsburg City School District, G.O. Bond, 6.55%,
12/1/2017 175,000 196,042
Rocky River City School District, G.O. Bond, Series A,
6.375%, 12/1/1998 25,000 25,590
Rocky River City School District, G.O. Bond, Series A,
6.90%, 12/1/2011 50,000 54,734
Rural Lorain Water Authority Ref. & Impt., Revenue
Bond, 5.30%, 10/1/2012 110,000 113,042
South-Western City School District, Franklin &
Pickway Counties, G.O. Bond, 4.80%, 12/1/2006 100,000 102,794
Stark County Hospital, Doctors Hospital, Inc.,
Revenue Bond, 8.625%, 4/1/2018 30,000 30,950
Stark County, G.O. Bond, 5.70%, 11/15/2017 100,000 104,755
Summit County, G.O. Bond, 5.75%, 12/1/2008 175,000 189,030
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Investment Portfolio - December 31, 1997
<TABLE>
<CAPTION>
Principal Value
Amount (Note 2)
<S> <C> <C>
OHIO MUNICIAPL SECURITIES (continued)
Toledo Sewer System, Revenue Bond, 6.35%,
11/15/2017 $ 185,000 $ 207,518
Toledo, G.O. Bond, 5.95%, 12/1/2015 175,000 190,703
Trumbull County, G.O. Bond, 6.20%, 12/1/2014 100,000 111,348
Warren, G.O. Bond, 5.20%, 11/15/2013 50,000 53,027
Warren County Waterworks, Revenue Bond, 6.00%,
12/1/2014 100,000 108,205
Warren County Waterworks, Revenue Bond, 5.45%,
12/1/2015 140,000 144,338
Westlake Ref. & Impt., G.O. Bond, 5.50%, 12/1/2020 295,000 306,900
Wood County, G.O. Bond, 5.40%, 12/1/2013 50,000 51,921
Youngstown, G.O. Bond, 6.125%, 12/1/2014 50,000 54,829
-----------
TOTAL MUNICIPAL SECURITIES
(Identified Cost $8,395,709) 8,930,463
-----------
SHORT-TERM INVESTMENTS - 3.4%
Dreyfus Municipal Reserves
(Identified Cost $319,128) 319,128 319,128
-----------
TOTAL INVESTMENTS - 99.4%
(Identified Cost $8,714,837) 9,249,591
OTHER ASSETS, LESS LIABILITIES - 0.6% 56,387
-----------
NET ASSETS - 100% $9,305,978
===========
</TABLE>
Key -
G.O. Bond - General Obligation Bond
Hos. - Hospital
Med. Ctr. - Medical Center
Rev. Bond - Revenue Bond
Impt. - Improvement
Ref. - Refunding
<TABLE>
<CAPTION>
<S> <C>
FEDERAL TAX INFORMATION:
At December 31, 1997, the net unrealized appreciation based
on identified cost for federal income tax purposes of
$8,714,837 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost $540,222
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value (5,468)
---------
UNREALIZED APPRECIATION - NET $534,754
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31, 1997
ASSETS:
Investments, at value (Identified Cost $8,714,837)(Note 2) $9,249,591
Interest receivable 73,787
Prepaid expense 348
-----------
TOTAL ASSETS 9,323,726
-----------
LIABILITIES:
Accrued Management fees (Note 3) 3,924
Accrued Directors' fees (Note 3) 1,645
Transfer Agent fees (Note 3) 188
Audit fee payable fees (Note 3) 10,842
Other payables and accrued expenses 1,149
-----------
TOTAL LIABILITIES 17,748
-----------
NET ASSETS FOR 883,723 SHARES OUTSTANDING $9,305,978
===========
NET ASSETS CONSIST OF:
Capital stock $ 8,837
Additional paid-in-capital 8,755,613
Undistributed net investment income 7,553
Accumulated net realized loss on investments (779)
Net unrealized appreciation on investments 534,754
-----------
TOTAL NET ASSETS $9,305,978
===========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($9,305,978/883,723 shares) $ 10.53
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
<S> <C>
For the Year Ended December 31, 1997
INVESTMENT INCOME:
Interest $449,703
---------
EXPENSES:
Management fees (Note 3) 43,617
Directors' fees (Note 3) 8,250
Transfer agent fees (Note 3) 2,094
Audit fee 8,666
Custodian fee 3,000
Miscellaneous 3,290
---------
Total Expenses 68,917
---------
NET INVESTMENT INCOME 380,786
---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments (identified cost basis) (779)
Net change in unrealized appreciation on investments 296,013
---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 295,234
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $676,020
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
For the Year For the Year
Ended 12/31/97 Ended 12/31/96
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 380,786 $ 304,727
Net realized gain (loss) on investments (779) 3,259
Net change in unrealized appreciation on investments 296,013 (51,282)
---------------- ----------------
Net increase in net assets from operations 676,020 256,704
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income (375,341) (303,669)
From net realized gain on investments -- (1,397)
---------------- ----------------
Total distributions to shareholders (375,341) (305,066)
---------------- ----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase in net assets from capital share
transactions (Note 5) 1,307,744 1,602,341
---------------- ----------------
Net increase in net assets 1,608,423 1,553,979
NET ASSETS:
Beginning of period 7,697,555 6,143,576
---------------- ----------------
END OF PERIOD (including undistributed net investment
income of $7,553 and $2,108, respectively) $ 9,305,978 $ 7,697,555
================ ================
</TABLE>
The accomanying notes are an integral part of the financial statements.
11
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Period
2/14/94
(commencement
For the Years Ended of operations)
12/31/97 12/31/96 12/31/95 to 12/31/94
PER SHARE DATA (FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.18 $ 10.31 $ 9.18 $ 10.00
---------- ---------- ---------- ----------------
Income from investment operations:
Net investment income 0.446 0.439 0.419 0.205
Net realized and unrealized gain (loss)
on investments 0.344 (0.129) 1.136 (0.828)
---------- ---------- ---------- ----------------
Total from investment operations 0.790 0.310 1.555 (0.623)
---------- ---------- ---------- ----------------
Less distributions to shareholders:
From net investment income (0.440) (0.438) (0.425) (0.197)
From net realized gain on investments -- (0.002) -- --
---------- ---------- ---------- ----------------
Total distributions to shareholders (0.440) (0.440) (0.425) (0.197)
---------- ---------- ---------- ----------------
NET ASSET VALUE - END OF PERIOD $ 10.53 $ 10.18 $ 10.31 $ 9.18
========== ========== ========== ================
Total return 1 7.92% 3.16% 17.14% (6.23)%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses* 0.79% 0.85% 0.85% 0.85%2
Net investment income* 4.37% 4.40% 4.50% 4.03%2
Portfolio turnover 12% 2% 1% 2%
NET ASSETS - END OF PERIOD (000's omitted) $ 9,306 $ 7,698 $ 6,144 $ 3,901
========== ========== ========== ================
</TABLE>
* The investment advisor did not impose all or a portion of its
management fee and in some periods paid a portion of the Fund's
expenses. If these expenses had been incurred by the Fund, the
net investment income per share and the ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net investment income N/A $0.437 $0.411 $ 0.141
Ratios (to average net assets):
Expenses N/A 0.87% 0.94% 2.07%2
Net investment income N/A 4.38% 4.41% 2.81%2
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
Ohio Tax Exempt Series (the "Fund") is a no-load diversified series of Manning
& Napier Fund, Inc. (the "Corporation"). The Corporation is organized in
Maryland and is registered under the Investment Company Act of 1940, as
amended, as an open-end management investment company.
Shares of the Fund are offered to investors, employees and clients of Manning
& Napier Advisors, Inc. (the "Advisor") and its affiliates. The total
authorized capital stock of the Corporation consists of one billion shares of
common stock each having a par value of $0.01. As of December 31, 1997, 940
million shares have been designated in total among 19 series, of which 50
million have been designated as Ohio Tax Exempt Series Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Municipal securities will normally be valued on the basis of market valuations
provided by an independent pricing service (the Service). The Service
utilizes the latest price quotations and a matrix system (which considers such
factors as security prices of similar securities, yields, maturities, and
ratings). The Service has been approved by the Funds Board of Directors.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by the Advisor under procedures approved by and under the general
supervision of the Funds Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies.The Fund is not subject to federal
income or excise tax to the extent the Fund distributes to shareholders
each year its taxable income, including any net realized gains on investments
in accordance with requirements of the Internal Revenue Code. Accordingly, no
provision for federal income tax or excise tax has been made in the financial
statements.
13
<PAGE>
Notes to financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
At December 31, 1997, the Fund, for federal income tax purposes, had a
capital loss carry forward of $779 that will expire December 31, 2005.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of tax exempt income are made quarterly.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses or character reclassification between net
income and net gains. As a result, net investment income (loss) and net
investment gain (loss) on investment transactions for a reporting period may
differ significantly from distributions to shareholders during such period.
As a result, the Fund may periodically make reclassifications among its
capital accounts without impacting the Fund's net asset value.
The Fund hereby designates 100% of its ordinary distributions as
tax-exempt dividends for the year ended December 31, 1997.
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of the revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which the
Fund pays a fee, computed daily and payable monthly, at an annual rate of
0.50% of the Fund's average daily net assets. The fee amounted to $43,617 for
the year ended December 31, 1997.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Fund with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise
maintain the Fund's organization. The Advisor also provides the Fund with
necessary office space and portfolio accounting and bookkeeping services. The
salaries of all officers of the Fund and of all
14
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (continued)
Directors who are "affiliated persons" of the Fund or of the Advisor, and
all personnel of the Fund or of the Advisor performing services relating to
research, statistical and investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Fund pays a fee which
is calculated as a percentage of the average daily net assets at an annual
rate of 0.024%; this fee amounted to $2,094 for the year ended December 31,
1997.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate
of the Advisor, acts as distributor for the Fund's shares. The services of
Manning & Napier Investor Services, Inc. are provided at no additional cost to
the Fund.
The compensation of the non-affiliated Directors totaled $8,250 for the year
ended December 31, 1997.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1997, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$2,177,474 and $1,032,369, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Ohio Tax Exempt Series were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Year For the Year
Ended 12/31/97 Ended 12/31/96
-------------- --------------
Shares Amount Shares Amount
-------------- ----------- -------------- ----------
Sold 312,374 $ 3,225,466 187,378 $1,880,010
Reinvested 34,046 351,939 30,485 305,066
Repurchased (219,088) (2,269,661) (57,415) (582,735)
--------------- ------------ --------------- -----------
Total 127,332 $ 1,307,744 160,448 $1,602,341
=============== ============ =============== ===========
</TABLE>
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options and
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. No such
investments were held by the Fund on December 31, 1997.
15
<PAGE>
Notes to Financial Statements
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of Ohio and
its political subdivisions, agencies, and public authorities to obtain funds
for various public purposes. The Fund is more susceptible to factors
adversely affecting issues of Ohio municipal securities than is a municipal
bond fund that is not concentrated in these issues to the same extent.
16
<PAGE>
Independent Accountants Report
TO THE SHAREHOLDERS AND DIRECTORS OF
MANNING & NAPIER FUND, INC.- OHIO TAX EXEMPT SERIES:
We have audited the accompanying statement of assets and liabilities of
Manning & Napier Fund, Inc.- Ohio Tax Exempt Series, including the schedule of
portfolio investments, as of December 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the financial highlights
for each of the periods indicated in the financial highlights table herein.
These financial statements and financial highlights are the responsibility of
the Funds management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997 by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Manning & Napier Fund, Inc.- Ohio Tax Exempt Series as of December 31, 1997,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated in the financial highlights table
herein in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 23, 1998
17
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<RESTATED>
<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> DIVERSIFIED TAX EXEMPT SERIES
<NUMBER> 18
<MULTIPLIER> 1
<CURRENCY> 1
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 21917286
<INVESTMENTS-AT-VALUE> 23093418
<RECEIVABLES> 491393
<ASSETS-OTHER> 89950
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23674761
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23555
<TOTAL-LIABILITIES> 23555
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22438636
<SHARES-COMMON-STOCK> 2233499
<SHARES-COMMON-PRIOR> 1655972
<ACCUMULATED-NII-CURRENT> 44809
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (8371)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1176132
<NET-ASSETS> 23651206
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 987519
<OTHER-INCOME> 0
<EXPENSES-NET> 134013
<NET-INVESTMENT-INCOME> 853506
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 670358
<NET-CHANGE-FROM-OPS> 1523864
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 843987
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 643012
<NUMBER-OF-SHARES-REDEEMED> 144215
<SHARES-REINVESTED> 78730
<NET-CHANGE-IN-ASSETS> 6702523
<ACCUMULATED-NII-PRIOR> 35290
<ACCUMULATED-GAINS-PRIOR> (8371)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 96872
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 134013
<AVERAGE-NET-ASSETS> 19467197
<PER-SHARE-NAV-BEGIN> 10.23
<PER-SHARE-NII> 0.434
<PER-SHARE-GAIN-APPREC> 0.361
<PER-SHARE-DIVIDEND> 0.435
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.59
<EXPENSE-RATIO> 0.69
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<RESTATED>
<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> GLOBAL FIXED INCOME SERIES
<NUMBER> 10
<MULTIPLIER> 1
<CURRENCY> 1
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> NOV-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 2-MOS
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 123307464
<INVESTMENTS-AT-VALUE> 123831824
<RECEIVABLES> 3144372
<ASSETS-OTHER> 368530
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 127344726
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 173085
<TOTAL-LIABILITIES> 173085
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 125688985
<SHARES-COMMON-STOCK> 12568715
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 21366
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 19667
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1441623
<NET-ASSETS> 127171641
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1244662
<OTHER-INCOME> 0
<EXPENSES-NET> 232739
<NET-INVESTMENT-INCOME> 1011923
<REALIZED-GAINS-CURRENT> 11482
<APPREC-INCREASE-CURRENT> 1441623
<NET-CHANGE-FROM-OPS> 2465028
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 982372
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12643992
<NUMBER-OF-SHARES-REDEEMED> 172086
<SHARES-REINVESTED> 96809
<NET-CHANGE-IN-ASSETS> 127171641
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 209630
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 232739
<AVERAGE-NET-ASSETS> 125739628
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.081
<PER-SHARE-GAIN-APPREC> 0.118
<PER-SHARE-DIVIDEND> 0.079
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.12
<EXPENSE-RATIO> 1.09
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<RESTATED>
<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> INTERNATIONAL SERIES
<NUMBER> 7
<MULTIPLIER> 1
<CURRENCY> 1
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 146474365
<INVESTMENTS-AT-VALUE> 195218227
<RECEIVABLES> 1415341
<ASSETS-OTHER> 2946372
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 199579940
<PAYABLE-FOR-SECURITIES> 46061
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 278010
<TOTAL-LIABILITIES> 324071
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 147695277
<SHARES-COMMON-STOCK> 15235031
<SHARES-COMMON-PRIOR> 12939100
<ACCUMULATED-NII-CURRENT> (51917)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2126327
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49486182
<NET-ASSETS> 199255869
<DIVIDEND-INCOME> 2808217
<INTEREST-INCOME> 1274181
<OTHER-INCOME> 0
<EXPENSES-NET> 1950881
<NET-INVESTMENT-INCOME> 2131517
<REALIZED-GAINS-CURRENT> 18953046
<APPREC-INCREASE-CURRENT> 20653854
<NET-CHANGE-FROM-OPS> 41738417
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2124831
<DISTRIBUTIONS-OF-GAINS> 19807200
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1557079
<NUMBER-OF-SHARES-REDEEMED> 956763
<SHARES-REINVESTED> 1695615
<NET-CHANGE-IN-ASSETS> 49924520
<ACCUMULATED-NII-PRIOR> 110482
<ACCUMULATED-GAINS-PRIOR> 2811395
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1804670
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1950881
<AVERAGE-NET-ASSETS> 179300575
<PER-SHARE-NAV-BEGIN> 11.54
<PER-SHARE-NII> 0.154
<PER-SHARE-GAIN-APPREC> 2.992
<PER-SHARE-DIVIDEND> 0.150
<PER-SHARE-DISTRIBUTIONS> 1.456
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.08
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<RESTATED>
<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> NEW YORK TAX EXEMPT
<NUMBER> 16
<MULTIPLIER> 1
<CURRENCY> 1
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 43141169
<INVESTMENTS-AT-VALUE> 45133037
<RECEIVABLES> 579975
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45713012
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31695
<TOTAL-LIABILITIES> 31695
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43611215
<SHARES-COMMON-STOCK> 4403651
<SHARES-COMMON-PRIOR> 3741281
<ACCUMULATED-NII-CURRENT> 98046
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (19812)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1991868
<NET-ASSETS> 45681317
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2059931
<OTHER-INCOME> 0
<EXPENSES-NET> 252765
<NET-INVESTMENT-INCOME> 1807166
<REALIZED-GAINS-CURRENT> 632
<APPREC-INCREASE-CURRENT> 1603090
<NET-CHANGE-FROM-OPS> 3410888
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1768897
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 880742
<NUMBER-OF-SHARES-REDEEMED> 389781
<SHARES-REINVESTED> 171409
<NET-CHANGE-IN-ASSETS> 8356439
<ACCUMULATED-NII-PRIOR> 59777
<ACCUMULATED-GAINS-PRIOR> (20444)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 207477
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 252765
<AVERAGE-NET-ASSETS> 41504281
<PER-SHARE-NAV-BEGIN> 9.98
<PER-SHARE-NII> 0.431
<PER-SHARE-GAIN-APPREC> 0.384
<PER-SHARE-DIVIDEND> 0.425
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.37
<EXPENSE-RATIO> 0.61
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<RESTATED>
<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> OHIO EXEMPT SERIES
<NUMBER> 17
<MULTIPLIER> 1
<CURRENCY> 1
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 8714837
<INVESTMENTS-AT-VALUE> 9249591
<RECEIVABLES> 74135
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9323726
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17748
<TOTAL-LIABILITIES> 17748
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8764450
<SHARES-COMMON-STOCK> 883723
<SHARES-COMMON-PRIOR> 756391
<ACCUMULATED-NII-CURRENT> 7553
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (779)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 534754
<NET-ASSETS> 9305978
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 449703
<OTHER-INCOME> 0
<EXPENSES-NET> 68917
<NET-INVESTMENT-INCOME> 380786
<REALIZED-GAINS-CURRENT> (779)
<APPREC-INCREASE-CURRENT> 296013
<NET-CHANGE-FROM-OPS> 676020
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 375341
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 312374
<NUMBER-OF-SHARES-REDEEMED> 219088
<SHARES-REINVESTED> 34046
<NET-CHANGE-IN-ASSETS> 1608423
<ACCUMULATED-NII-PRIOR> 2108
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 43617
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 68917
<AVERAGE-NET-ASSETS> 8699682
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> 0.446
<PER-SHARE-GAIN-APPREC> 0.344
<PER-SHARE-DIVIDEND> 0.440
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.53
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<RESTATED>
<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> SMALL CAP SERIES
<NUMBER> 1
<MULTIPLIER> 1
<CURRENCY> 1
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 124138613
<INVESTMENTS-AT-VALUE> 122384002
<RECEIVABLES> 114743
<ASSETS-OTHER> 138871
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 122637616
<PAYABLE-FOR-SECURITIES> 874372
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 163218
<TOTAL-LIABILITIES> 1037590
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 116576882
<SHARES-COMMON-STOCK> 10087625
<SHARES-COMMON-PRIOR> 8326380
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 6748399
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1725255)
<NET-ASSETS> 121600026
<DIVIDEND-INCOME> 519431
<INTEREST-INCOME> 597626
<OTHER-INCOME> 0
<EXPENSES-NET> 1258555
<NET-INVESTMENT-INCOME> (141498)
<REALIZED-GAINS-CURRENT> 21344730
<APPREC-INCREASE-CURRENT> (8858291)
<NET-CHANGE-FROM-OPS> 12344941
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 105557
<DISTRIBUTIONS-OF-GAINS> 13616840
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1150766
<NUMBER-OF-SHARES-REDEEMED> 509007
<SHARES-REINVESTED> 1119486
<NET-CHANGE-IN-ASSETS> 20911599
<ACCUMULATED-NII-PRIOR> 82416
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 814852
<GROSS-ADVISORY-FEES> 1169030
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1258555
<AVERAGE-NET-ASSETS> 116173298
<PER-SHARE-NAV-BEGIN> 12.09
<PER-SHARE-NII> (0.015)
<PER-SHARE-GAIN-APPREC> 1.502
<PER-SHARE-DIVIDEND> (0.009)
<PER-SHARE-DISTRIBUTIONS> 1.518
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.05
<EXPENSE-RATIO> 1.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
<RESTATED>
<CIK> 0000751173
<NAME> MANNING & NAPIER FUND, INC.
<SERIES>
<NAME> WORLD OPPORTUNITIES SERIES
<NUMBER> 19
<MULTIPLIER> 1
<CURRENCY> 1
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 96168620
<INVESTMENTS-AT-VALUE> 91654926
<RECEIVABLES> 720644
<ASSETS-OTHER> 2968901
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 95344471
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 129520
<TOTAL-LIABILITIES> 129520
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 98634359
<SHARES-COMMON-STOCK> 9755164
<SHARES-COMMON-PRIOR> 7418858
<ACCUMULATED-NII-CURRENT> 183266
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 461471
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4064145)
<NET-ASSETS> 95214951
<DIVIDEND-INCOME> 1435732
<INTEREST-INCOME> 360982
<OTHER-INCOME> 0
<EXPENSES-NET> 1062856
<NET-INVESTMENT-INCOME> 733858
<REALIZED-GAINS-CURRENT> 11636976
<APPREC-INCREASE-CURRENT> (7176949)
<NET-CHANGE-FROM-OPS> 5193885
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 730313
<DISTRIBUTIONS-OF-GAINS> 11273357
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1618889
<NUMBER-OF-SHARES-REDEEMED> 543078
<SHARES-REINVESTED> 1260495
<NET-CHANGE-IN-ASSETS> 17876631
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 21631
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 923011
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1062856
<AVERAGE-NET-ASSETS> 91501822
<PER-SHARE-NAV-BEGIN> 10.42
<PER-SHARE-NII> 0.086
<PER-SHARE-GAIN-APPREC> 0.669
<PER-SHARE-DIVIDEND> 0.086
<PER-SHARE-DISTRIBUTIONS> 1.329
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.76
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
February 25, 1998
Securities & Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
VIA: EDGAR
Gentlemen:
In accordance with the provisions of Rule 270.30b-21 of the Investment
Company Act of 1940, submitted are copies of the shareholder reports
together with the cover letter that were distributed to the
shareholders of the Manning & Napier Fund, Inc. World Opportunities
Series, International Series, Small Cap Series, Global Fixed Income Series,
New York Tax Exempt Series, Ohio Tax Exempt Series and Diversified
Tax Exempt Series.
Sincerely,
MANNING & NAPIER FUND, INC.
/s/ Beth Galusha
Beth Galusha
Treasurer & Chief Financial Officer
