AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 23, 1998
Registration Nos. 2-92633
811-04087
====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No.32 [X ]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 35 [X ]
EXETER FUND, INC.
_________________________________________________
(Exact name of registrant as specified in charter)
1100 Chase Square
Rochester, New York 14604
___________________________________________________
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (716) 325-6880
B. Reuben Auspitz
c/o Exeter Fund, Inc.
1100 Chase Square
Rochester, NY 14604
(Name and Address of Agent For Service)
Copies to:
Richard W. Grant, Esquire
Morgan, Lewis & Bockius, LLP
1701 Market Street
Philadelphia, PA 19103
=====================================================================
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/ / on DATE 1998 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ X / on May 1, 1999 pursuant to paragraph (a) of Rule 485
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Investment Company Shares
<PAGE>
[Logo]
Prospectus
Exeter Fund, Inc.
May 1, 1999
Small Cap Series
Class A Shares
The Securities and Exchange Commission has not approved or disapproved the
series' shares or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.
<PAGE>
[Intentionally left blank]
<PAGE>
Exeter Asset Management is a division of Manning and Napier Advisors, Inc.,
which was founded in 1970, and manages over $7 billion for individual and
institutional investors.
Contents Page
Goals, strategies, and risks 4
More about the series' investments 6
The advisor 7
How to buy shares 8
How to exchange and how to redeem shares 9
Investment and account information 10
Dividends, distributions and taxes 11
Financial Highlights 12
<PAGE>
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of small
companies.
Key investments
The series invests primarily in common stocks of small companies. The series
defines a small company generally as one with a market capitalization of less
than $1.7 billion. The series may also invest to a limited extent in American
Depository Receipts (ADRs) and common stocks of foreign companies. In addition,
the series may hold sizable investments in cash and short-term fixed income
securities when the advisor is unable to find appropriate investments.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection. The advisor analyzes factors such as the management, financial
condition, and market position of individual companies to select small companies
that it believes will make attractive long-term investments. The advisor looks
for one or more of the following characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value.
Who may want to invest
The series may be an appropriate investment if you are:
Seeking a long-term investment and are willing to accept the risk of
short-term stock market swings and the increased price volatility of small cap
stocks.
Seeking to diversify your portfolio by adding a small company stock
component.
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
Class A shares of the series for each full calendar year since its inception.
The total return table shows how the average annual total returns for the Class
A shares for different calendar periods compare to those of the Standard &
Poor's 500 Composite Stock Price Index, an unmanaged index of common stocks, and
the Russell 2000 Index, an unmanaged index of small company stocks.
<PAGE>
[Bar chart showing the percent total return for the Small Cap Series for 1993,
1994, 1995, 1996, 1997 and 1998, with calendar years ended December 31st. The
results are 14.59% for 1993, 8.01% for 1994, 14.70% for 1995, 10.06% for 1996,
12.29% for 1997, and -13.59% for 1998.]
<TABLE>
<CAPTION>
Average Annual Total Returns
(for periods ended 12/31/98)
Since
Current
Activation
1 Year 5 Years on 4/30/92
- ------------------ ------ ------ ------
<S> <C> <C> <C>
Small Cap Series . -13.59% 5.74% 8.84%
--------- ------ ------
S&P 500 Index. . . 28.58% 24.04% 20.48%
--------- ------ ------
Russell 2000 Index -2.55% 11.86% 13.87%
- ------------------ --------- ------ ------
Quarterly returns
- ------------------
Highest: . . . . . 21.54% in 2nd quarter 1997
- ------------------ ------------------------------------
Lowest:. . . . . . -27.96% in 3rd quarter 1998
- ------------------ ------------------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
The U.S. and/or foreign stock markets go down.
Small company stocks go down in value or underperform larger company
stocks.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a security or strategy prove to be incorrect.
In addition to the general risks of stock funds, the series has special risks
due to its concentration in small company stocks. These risks include the
following:
The stocks of small companies may be subject to more abrupt or erratic
market movements than the stocks of larger companies.
The stocks of small companies may be less marketable than the stocks of
larger companies.
Small companies may have limited product lines, markets, or financial
resources, and they may depend on a small management group. As a result, small
companies fail more often than larger companies.
At times the series may hold a sizable cash position, which may reduce the
series' performance during periods when small company stocks are increasing in
value.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 Small Cap Series
- ----------------------------------------------------- -----------------
<S> <C>
Shareholder fees (paid directly from your investment) None1
-----------------
Annual fund operating expenses (expenses that are
deducted from assets of the series)
Management fee. . . . . . . . . . . . . . 1.00%
-----------------
Distribution and service (Rule 12b-1) fees. . . . . . None
-----------------
Other expenses. . . . . . . . . . . . . . . 0.09%
-----------------
Total annual fund operating expenses. . . . . . 1.09%
- ---------------------------------------------------- -----------------
</TABLE>
A wire charge, currently $15, may be deducted by the transfer agent from the
amount of a wire redemption payment made at the request of a shareholder. A
shareholder may effect up to four exchanges in a twelve-month period without
charge; subsequent exchanges are subject to a fee of $15.
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$111 $347 $601 $1,329
- ---- ---- ---- ------
</TABLE>
<PAGE>
More about the series' investments
Principal investments
EQUITY SECURITIES Equity securities in which the series may invest include
exchange-traded and over-the-counter (OTC) common and preferred stocks,
warrants, rights, convertible debt securities, trust certificates, partnership
interests and equity participations.
FOREIGN SECURITIES The series may invest in ADRs and other U.S. dollar
denominated securities of foreign issuers as well as in common stocks of foreign
companies. ADRs are securities that are listed and traded in the United States
but represent an ownership interest in securities issued by a foreign issuer.
Prices of foreign securities may go down because of foreign government actions,
political instability or the more limited availability of accurate information
about foreign companies.
FIXED INCOME SECURITIES During periods when the advisor is unable to identify
appropriate small company investments, the series may invest in fixed income
securities. These securities will primarily consist of short-term obligations
of the U.S. government and its agencies and money market instruments.
Defensive investing
The series may depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. If the series takes a temporary defensive position, it
may be unable to achieve its investment goal.
The Series' investment goal
The series' board of directors may change its investment goal (described above
under "Goals and strategies") without obtaining the approval of the
shareholders. The series might not succeed in achieving its goal.
<PAGE>
The advisor
The advisor
The series' advisor is Exeter Asset Management, a division of Manning & Napier
Advisors, Inc., 1100 Chase Square, Rochester, New York 14604. The advisor is
responsible for the day-to-day operations of the series and generally is
responsible for supervision of the series' overall business affairs, service
providers and officers.
A team made up of investment professionals and analysts makes all of the series'
investment decisions.
Management fees
In return for the services it provides to the series, the advisor receives a
management fee, which is computed daily and payable monthly at an annual rate of
1.00% of the series' average daily net assets.
Clients for whom the Advisor provides advisory services pursuant to separate
investment advisory contracts will be separately credited by the advisor an
amount equal to the portion of their client advisory fee attributable to the
portion of their assets invested in the series.
The advisor may use its own resources to engage in activities that may promote
the sale of the series, including payments to third parties who provide
shareholder support servicing and distribution assistance. Investors may be
charged a fee if they effect transactions through a broker or agent.
The distributor
The distributor of the series' shares is Manning & Napier Investor Services,
Inc. Class A shares of the series are offered to investors who purchase shares
directly from the distributor or through certain registered investment advisors.
Class A shares of the series are not subject to any distribution or shareholder
servicing fees. The advisor may, from its own resources, defray or absorb costs
relating to distribution, including compensation of employees who are involved
in distribution.
Discretionary account management
Class A shares of the series are also offered to the advisor's clients and those
of its affiliates who have authorized investment in the series as part of the
discretionary account management services of the advisor or its affiliates.
Class A shares may also be used in connection with a discretionary account
management service provided by the advisor that uses shares of the series as the
principal underlying investment.
<PAGE>
How to Buy, Exchange, and Redeem Shares
For discretionary account management clients of the advisor or its affiliates,
investment decisions pertaining to purchases and sales of fund shares are made
at the advisor's discretion pursuant to authorization received from clients.
The instructions provided below apply to all other investors.
How to buy shares
The minimum initial investment in the series is $2,000, and the minimum for each
additional investment is $100. The minimum investment requirements are lower
for participants in the Automatic Investment Plan, which is described below.
These investment minimums may be waived at the advisor's discretion.
All orders to purchase shares received in good order by the distributor,
transfer agent or other agent before the close of trading on the New York Stock
Exchange (NYSE) will be executed at that day's share price. Orders received in
good order after that day's close will be executed at the next business day's
price. All orders must include the required documentation and be accompanied by
proper payment. The series reserves the right to reject purchase orders or to
stop offering its shares without notice to shareholders.
By mail
Opening an account
Send a check payable to the Exeter Fund, Inc. with the completed
original account application. The address is:
Exeter Fund, Inc.
P.O. Box 41118
Rochester, NY 14604
To request an account application, call the fund at 1-800-466-3863.
Adding to an account
Send a check payable to the Exeter Fund, Inc. and a letter of
instruction with the name of the series to be purchased and the account name and
number.
By wire
Opening an account
or
Adding to an account
After the fund has received your completed account application, you
may wire funds to open or add shares to your account. Before sending a wire,
call 1-800-466-3863 for wire instructions.
Automatic Investment Plan
You may participate in the automatic investment plan by completing the
applicable section of the account application or contacting the fund. Through
the plan, you can authorize transfers of a specified amount from your bank
account into the series on a regular basis. The minimum amount of each
investment is $25. If you have insufficient funds in your account to complete a
transfer, your bank may charge you a fee.
<PAGE>
How to exchange and how to redeem shares
How to exchange shares
You may exchange shares of a series for shares of any other series of the Exeter
Fund, if the registration of both accounts is identical. If received with
proper documentation before the close of trading on the NYSE, exchange requests
will be executed at that day's share prices. Otherwise, they will be executed
at the prices determined on the next business day after receipt with proper
documentation.
The minimum exchange amount is $1,000 (or all the shares in your account, if
less than $1,000). You may exchange up to 4 times during any 12-month period
without paying a sales charge or any other fee. For any additional exchanges,
you may be charged $15 per exchange. A series may refuse any exchange order and
may alter, limit or suspend its exchange privilege on 60 days' notice. An
exchange involves a taxable redemption of shares surrendered in the exchange.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page, signed by each registered account owner, exactly as your
names appear on the account registration.
Provide the name of the current series, class of shares, series to exchange
into and dollar amount to be exchanged.
Provide both account numbers.
By telephone
Unless you have declined telephone privileges, call the fund at
1-800-466-3863.
Provide the name of the current series, class of shares, series to exchange
into and dollar amount to be exchanged.
Provide both account numbers.
The fund may ask for identification, and all telephone transactions are
recorded.
How to redeem shares
All orders to redeem shares received in good order by the distributor, transfer
agent or other agent before the close of trading on the NYSE will be executed at
that day's share price. Orders received in good order after the close of
trading will be executed at the next business day's price. All redemption orders
must include the required documentation and signatures. The series may postpone
payment of redemption proceeds for up to seven days, or suspend redemptions to
the extent permitted by law. If you recently purchased your shares by check,
your redemption proceeds will not be sent to you for 15 days.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page signed by each registered account owner.
State the name of the series, the class and number of shares or dollar
amount to be sold.
Provide the account number.
Signature guarantees may be required.
Additional documentation may be required (call the fund for details).
<PAGE>
Investment and account information
Accounts with low balances
If your account falls below $1,000 due to the redemption of shares, the fund may
ask you to bring your account up to the minimum requirement. If your account is
still below $1,000 after 60 days, the fund may close your account and send you
the redemption proceeds.
In-kind purchases and redemptions
Securities you own may be used to purchase shares of the series. The advisor
will determine if acquiring the securities is consistent with the series' goals
and policies. If accepted, the securities will be valued the same way the
series values securities it already owns.
The series may make payment for shares in part by giving you portfolio
securities. As a redeeming shareholder, you will pay transaction costs to
dispose of these securities.
Signature guarantees
A signature guarantee may be required for any written request to sell shares, or
to change the account registration.
The transfer agent will accept signature guarantees from:
A member of the STAMP program or the NYSE's Medallion Signature Program.
A broker or securities dealer.
A federal savings, cooperative or other type of bank.
A savings and loan or other thrift institution.
A credit union.
A securities exchange or clearing agency.
A notary public cannot provide a signature guarantee.
Valuation of shares
The series offers its shares at the net asset value (NAV) per share of the
series. NAV is calculated separately for each class of shares. The series
calculates its NAV once daily as of the close of regular trading on the NYSE
(generally at 4:00 p.m., New York time) on each day the exchange is open. If
the exchange closes early, the series will accelerate the calculation of NAV and
transaction deadlines to that time.
The series values the securities in its portfolio on the basis of market
quotations and valuations provided by independent pricing services. If
quotations are not readily available, or the value of a security has been
materially affected by events occurring after the closing of a foreign exchange,
the series values its assets by a method that the directors believe accurately
reflects fair value. If the series uses fair value to price securities, it may
value those securities higher or lower than another series that uses market
quotations to price the same securities.
Year 2000 issue
Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
series. The cost of addressing the Year 2000 issue, if substantial, could
adversely affect companies and governments that issue securities held by the
series. The advisor, the transfer agent and the distributor are addressing the
Year 2000 issue for their systems. Its other service providers have informed
the series that they are taking similar measures. Although the series does not
expect the Year 2000 issue to adversely affect it, the series cannot guarantee
that the efforts of the series or its service providers to correct the problem
will be successful.
<PAGE>
Dividends, distributions and taxes
Dividends and distributions
The series generally:
Pays dividends once a year, in December.
Makes capital gains distributions, if any, once a year, typically in
December.
The series also may pay additional distributions and dividends at other times if
necessary for the series to avoid a federal tax.
Capital gain distributions and dividends are reinvested in additional shares of
the same class that you hold. Alternatively, you can instruct the transfer
agent in writing or by telephone to have your capital gains and/or dividends
paid in cash. You can change your choice at any time to be effective as of the
next distribution or dividend, except that any change given to the transfer
agent after the record date will not be effective until the next distribution or
dividend is made. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Taxes
<TABLE>
<CAPTION>
Transaction Federal Tax Status
- ------------------------------------- ---------------------------------
<S> <C>
Redemption or exchange of shares. . Usually taxable as capital gain or loss;
long-term only if shares owned more
than one year
----------------------------------------
Long-term capital gain distributions Taxable as long-term capital gain
----------------------------------
Short-term capital gain distributions Taxable as ordinary income
-----------------------------
Dividends . . . . . . . . . . . . . Taxable as ordinary income
- ------------------------------------- -----------------------------
</TABLE>
If you are a taxable investor, you may want to avoid buying shares when the
series is about to declare a capital gain distribution or a dividend, because it
will be taxable to you even though it may actually be a return of a portion of
your investment.
After the end of each year, the series will provide you with information about
the distributions and dividends that you received and any redemptions of shares
during the previous year. In calculating your gain or loss on any sale of
shares, note that your tax basis in your shares is increased by the amounts of
dividends and distributions that you have reinvested in the series. Dividends
and distributions are taxable as described above whether received in cash or
reinvested.
If you do not provide the series with your correct taxpayer identification
number and any required certifications, you may be subject to back-up
withholding of 31% of your distributions, dividends, and redemption proceeds.
Because each shareholder's circumstances are different and special tax rules may
apply, you should consult with your tax adviser about your investment in the
series and your receipt of dividends, distributions or redemption proceeds.
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the series'
financial performance for the past five years. Certain information reflects
financial results for a single share. The total returns in the table represent
the rate that an investor would have earned on an investment in the series
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
series' financial statements, are included in the annual report, which is
available upon request.
<PAGE>
Small Cap Series
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
--------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT EACH
PERIOD):
NET ASSET VALUE - BEGINNING
OF PERIOD. . . . . . . $12.05 $12.09 $11.95 $12.92 $12.52
- ----------------- -------- -------- ------- ------ -------
Income from investment
operations:
Net investment income
(loss) . . . . . . . . . 0.049 (0.015) 0.045 (0.004) (0.066)
---------- ------- ------- ------- -------
Net realized and
unrealized gain (loss)
on investments. . . (1.774) 1.502 1.112 1.934 1.051
- --------------------------- --------- ------ ------ ----- ------
Total from investment
operations. . . . . . . . . (1.725) 1.487 1.157 1.930 0.985
- ---------------------------- ---------- ------ ------- ------ -------
Less distributions to
shareholders:
From net investment
income . . . . . . . . -- (0.009) (0.035) -- --
--------------------- ------- ------- ------- ------- ------
From net realized gain
on investments. . . . . (0.685) (1.518) (0.889) (2.900) (0.585)
------------------- ------- ------- ------- -------- ------
In excess of net realized
gain on investments. -- -- (0.093) -- --
- ---------------------------- ------- -------- -------- -------- -------
Total distributions to
shareholders . . . . . . . (0.685) (1.527) (1.017) (2.900) (0.585)
- --------------------------- ------- ------- -------- -------- ---------
NET ASSET VALUE - END OF
PERIOD . . . . . . . . . . $9.64 $12.05 $12.09 $11.95 $12.92
===================== ======= ====== ======= ======= ======
Total return1 . . . . . . (13.59)% 12.29% 10.06% 14.70% 8.01%
- -------------------------- ------- ------ ------- ------ ------
Ratios average net assets/
Supplemental Data:
Expenses. . . . . . . . 1.09% 1.07% 1.08% 1.07% 1.10%
--------------------- ---------- ---------- ------ ------- -----
Net investment income
(loss). . . . . . . . . 0.44% (0.12)% 0.29% (0.03)% (0.58)%
--------------------- ---------- -------- ------ ------ -------
Portfolio turnover. . . 81% 94% 31% 77% 31%
--------------------- ---------- ---------- ------ ------- -------
NET ASSETS - END OF PERIOD
(000'S OMITTED). . . .. $99,666 $121,600 $100,688 $143,003 $105,522
===================== ========== ========== ========= ======== ========
</TABLE>
1Represents aggregate total return for the period indicated.
<PAGE>
Exeter Fund, Inc. [Back Cover Page]
Small Cap Series
Shareholder Reports and the Statement of Additional Information (SAI). Annual
and semiannual reports to shareholders provide additional information about the
series' investments. These reports discuss the market conditions and investment
strategies that significantly affected the series' performance during its last
fiscal year. The SAI provides more detailed information about the series. It
is incorporated by reference into this prospectus.
How to Obtain These Reports and Additional Information.
You may obtain shareholder reports and the SAI or other information about
the series without charge, by calling 1-800-466-3863 or sending written requests
to Exeter Fund, P.O. Box 41118, Rochester, New York 14604.
You may review shareholder reports, the prospectus and SAI at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get a copy of these materials by writing to the Public Reference Section
of the Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the SEC's Internet web site
(http://www.sec.gov).
If someone makes a statement about the series that is not in this prospectus,
you should not rely upon that information. Neither the series nor its
distributor is offering to sell shares to any person to whom it may not lawfully
sell shares.
Investment Company Act file no. 811-04087
<PAGE>
[LOGO]
Prospectus
Exeter Fund, Inc.
May 1, 1999
Small Cap Series
Class B, C, D, and E Shares
The Securities and Exchange Commission has not approved or disapproved the
series' shares or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.
<PAGE>
[Intentionally left blank]
<PAGE>
Exeter Asset Management is a division of Manning and Napier Advisors, Inc.,
which was founded in 1970, and manages over $7 billion for individual and
institutional investors.
Contents Page
Goals, strategies, and risks 4
More about the series' investments 6
The advisor 7
How to buy and how to redeem shares 8
How to exchange shares 9
Investment and account information 10
Dividends, distributions and taxes 11
<PAGE>
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of small
companies.
Key investments
The series invests primarily in common stocks of small companies. The series
defines a small company generally as one with a market capitalization of less
than $1.7 billion. The series may also invest to a limited extent in American
Depository Receipts (ADRs) and common stocks of foreign companies. In addition,
the series may hold sizable investments in cash and short-term fixed income
securities when the advisor is unable to find appropriate investments.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection. The advisor analyzes factors such as the management, financial
condition, and market position of individual companies to select small companies
that it believes will make attractive long-term investments. The advisor looks
for one or more of the following characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value.
Who may want to invest
The series may be an appropriate investment if you are:
Seeking a long-term investment and are willing to accept the risk of
short-term stock market swings and the increased price volatility of small cap
stocks.
Seeking to diversify your portfolio by adding a small company stock
component.
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in Class A shares of the series. No Class B, C, D, or E shares were
outstanding as of December 31, 1998. Class A shares are offered in a separate
prospectus which may be obtained by contacting the fund. Class B, C, D, and E
shares would have different performance due to their different expenses. The
bar chart shows changes in the performance of the Class A shares of the series
for each full calendar year since its inception. The total return table shows
how the average annual total returns for the Class A shares for different
calendar periods compare to those of the Standard & Poor's 500 Composite Stock
Price Index, an unmanaged index of common stocks, and the Russell 2000 Index, an
unmanaged index of small company stocks.
[Bar chart showing the percent total return for the Small Cap Series for 1993,
1994, 1995, 1996, 1997 and 1998, with calendar years ended December 31st. The
results are 14.59% for 1993, 8.01% for 1994, 14.70% for 1995, 10.06% for 1996,
12.29% for 1997, and -13.59% for 1998.]
<TABLE>
<CAPTION>
Average Annual Total Returns
(for periods ended 12/31/98)
Since
Current
Activation
1 Year 5 Years on 4/30/92
-------- ------- ------------
<S> <C> <C> <C>
Small Cap Series Class A Shares -13.59% 5.74% 8.84%
-------- ------ ------
S&P 500 Index . . . . . . . . . 28.58% 24.04% 20.48%
-------- ------ ------
Russell 2000 Index. . . . . . . -2.55% 11.86% 13.87%
- ------------------------------- -------- ------ ------
Quarterly returns
- -------------------------------
Highest:. . . . . . . . . . . . 21.54% in 2nd quarter 1997
- ------------------------------- ----------------------------
Lowest: . . . . . . . . . . . . -27.96% in 3rd quarter 1998
- ------------------------------- ----------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
The U.S. and/or foreign stock markets go down.
Small company stocks go down in value or underperform larger company
stocks.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a security or strategy prove to be incorrect.
In addition to the general risks of stock funds, the series has special risks
due to its concentration in small company stocks. These risks include the
following:
The stocks of small companies may be subject to more abrupt or erratic
market movements than the stocks of larger companies.
The stocks of small companies may be less marketable than the stocks of
larger companies.
Small companies may have limited product lines, markets, or financial
resources, and they may depend on a small management group. As a result, small
companies fail more often than larger companies.
At times the series may hold a sizable cash position, which may reduce the
series' performance during periods when small company stocks are increasing in
value.
Fees and expenses of the series
<TABLE>
<CAPTION>
This table describes the fees and expenses you may pay if you
invest in shares of the series.
For the year ended 12/31/98 Class B Class C Class D Class E
- ------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Shareholder fees (paid
directly from your investment)
None1 None1 None1 None1
-------- -------- -------- --------
Annual fund operating expenses
(expenses that are deducted from
assets of the series)
Management fee. . . . . . . . . . 1.00% 1.00% 1.00% 1.00%
-------- -------- -------- --------
Distribution and service
(Rule 12b-1) fees 1.00% .75% .50% .25%
-------- -------- -------- --------
Other expenses. . . . . . . . . . . . 0.09% 0.09% 0.09% 0.09%
-------- -------- -------- --------
Total annual fund operating expenses. 2.09% 1.84% 1.59% 1.34%
- ------------------------------------ -------- -------- -------- --------
</TABLE>
A wire charge, currently $15, may be deducted by the transfer agent from the
amount of a wire redemption payment made at the request of a shareholder. A
shareholder may effect up to four exchanges in a twelve-month period without
charge; subsequent exchanges are subject to a fee of $15.
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be after:
<TABLE>
<CAPTION>
Class B Class C Class D Class E
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1 Year . $ 212 $ 187 $ 162 $ 136
-------- -------- -------- --------
3 Years. $ 655 $ 579 $ 502 $ 425
-------- -------- -------- --------
5 Years. $ 1,124 $ 995 $ 866 $ 734
-------- -------- -------- --------
10 Years $ 2,421 $ 2,159 $ 1,889 $ 1,613
- -------- -------- -------- -------- --------
</TABLE>
<PAGE>
More about the series' investments
Principal investments
EQUITY SECURITIES Equity securities in which the series may invest include
exchange-traded and over-the-counter (OTC) common and preferred stocks,
warrants, rights, convertible debt securities, trust certificates, partnership
interests and equity participations.
FOREIGN SECURITIES The series may invest in ADRs and other U.S. dollar
denominated securities of foreign issuers as well as in common stocks of foreign
companies. ADRs are securities that are listed and traded in the United States
but represent an ownership interest in securities issued by foreign issuers.
Prices of foreign securities may go down because of foreign government actions,
political instability or the more limited availability of accurate information
about foreign companies.
FIXED INCOME SECURITIES During periods when the advisor is unable to identify
appropriate small company investments, the series may invest in fixed income
securities. These securities will primarily consist of short-term obligations
of the U.S. government and its agencies and money market instruments.
Defensive investing
The series may depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. If the series takes a temporary defensive position, it
may be unable to achieve its investment goal.
The Series' investment goal
The series' board of directors may change its investment goal (described above
under "Goals and strategies") without obtaining the approval of the
shareholders. The series might not succeed in achieving its goal.
<PAGE>
The advisor
The advisor
The series' advisor is Exeter Asset Management, a division of Manning & Napier
Advisors, Inc., 1100 Chase Square, Rochester, New York 14604. The advisor is
responsible for the day-to-day operations of the series and generally is
responsible for supervision of the series' overall business affairs, service
providers and officers.
A team made up of investment professionals and analysts makes all of the series'
investment decisions.
Management fees
In return for the services it provides to the series, the advisor receives a
management fee, which is computed daily and payable monthly at an annual rate of
1.00% of the series' average daily net assets.
The advisor may use its own resources to engage in activities that may promote
the sale of the series, including payments to third parties who provide
shareholder support servicing and distribution assistance. Investors may be
charged a fee if they effect transactions through a broker or agent.
The distributor
The distributor of the series' shares is Manning & Napier Investor Services,
Inc. Class A shares of the series are offered to investors who purchase shares
directly from the distributor or through certain registered investment advisors.
Class B, C, D, and E shares are offered only through a financial intermediary.
Financial intermediaries include financial planners, investment advisers,
broker-dealers, or other financial institutions with an agreement with the
distributor. You may only purchase that class of shares that your financial
intermediary sells or services.
Class B shares are only available through broker-dealers who maintain an omnibus
account with the distributor on behalf of investors. Class C shares are
available only through financial intermediaries who establish individual
shareholder accounts with the fund in the name of investors or maintain certain
types of omnibus accounts with the distributor. Class E shares are only
available through financial intermediaries who provide certain shareholder
services to the fund. Class D shares are not currently available. Your
financial intermediary can tell you which class of shares is available through
the intermediary.
Distribution plans
The fund has adopted Rule 12b-1 distribution plans for the Class B, C, D, and E
shares of the series. Under the plans, the Class B, C, D, and E shares pay
distribution and/or service fees (as a percentage of average daily net assets)
equal to: 1.00%, 0.75%, 0.50%, and 0.25%, respectively. These fees are an
ongoing expense and over time may cost you more than other types of sales
changes.
<PAGE>
How to buy and how to redeem shares
How to buy shares
Class B, C, D or E shares are offered only through your financial intermediary.
You may be subject to initial and subsequent minimums established by your
financial intermediary for the purchase of shares. The series reserves the
right to reject purchase orders or to stop offering its shares without notice to
shareholders.
The series' distributor imposes no sales charge on purchases and redemptions of
shares of the series. However, your financial intermediary may charge you a
transaction fee on purchases and redemptions.
Through the fund
By mail
If your financial intermediary does not provide account maintenance services,
contact the fund to purchase shares.
Opening an account
Send a check payable to the Exeter Fund, Inc., with the completed original
account application. The address is:
Exeter Fund, Inc.
P.O. Box 41118
Rochester, NY 14604
To request an account application, call the fund at 1-800-466-3863.
Adding to an account
By wire
Send a check payable to the Exeter Fund, Inc. and a letter of instruction
with the name of the series to be purchased and the account name and number.
Opening or adding to an account
After the fund has received your completed account application, you may
wire funds to open or add shares to your account. Before sending a wire, call
1-800-466-3863 for wire instructions.
Through the Automatic Investment Plan
You may participate in the automatic investment plan by completing the
applicable section of the account application or contacting your financial
intermediary or the fund. Through the plan, you can authorize transfers of a
specified amount from your bank account into the series on a regular basis. The
minimum amount of each investment is $25. If you have insufficient funds in
your account to complete a transfer, your bank may charge you a fee.
How to redeem shares
Through the fund
By mail
If your financial intermediary provides account maintenance services, contact
your financial intermediary to redeem shares. If not:
Send a letter of instruction to the Exeter Fund, Inc., at the address
above, signed by each registered account owner.
State the name of the series, the class and number of shares or dollar
amount to be sold.
Provide the account number.
Signature guarantees may be required.
Additional documentation may be required (call the fund for details).
The series may postpone payment of redemption proceeds for up to seven days, or
suspend redemptions to the extent permitted by law. If you recently purchased
your shares by check, your redemption proceeds will not be sent to you for 15
days.
<PAGE>
How to exchange shares
More about purchases and redemptions
All orders to purchase or redeem shares received in good order by the
distributor, transfer agent or other agent before the close of trading on the
New York Stock Exchange (NYSE) will be executed at that day's share price.
Orders received in good order after that day's close will be executed at the
next business day's price. All orders must include the required documentation
and signatures, and all purchase orders must be accompanied by proper payment.
The fund has authorized several financial intermediaries to accept purchase and
redemption orders on its behalf, and these intermediaries are authorized to
designate other intermediaries to accept purchase and redemption orders on the
fund's behalf. The fund will be deemed to have received an order when an
authorized financial intermediary or its authorized designee accepts the order,
and orders placed with an authorized financial intermediary will be processed at
the share price of the series next computed after they are received in good
order by the financial intermediary or its designee.
How to exchange shares
You may exchange shares of the series for the same class of shares of any other
series of the Exeter Fund, if the registration of both accounts is identical.
If received with proper documentation before the close of trading on the NYSE,
exchange requests will be executed at that day's share prices. Otherwise, they
will be executed at the prices determined on the next business day after receipt
with proper documentation.
The minimum exchange amount is $1,000 (or all the shares in your account, if
less than $1,000). You may exchange up to 4 times during any 12-month period
without paying a sales charge or any other fee. For any additional exchanges,
you may be charged $15 per exchange. The series may refuse any exchange order
and may alter, limit or suspend its exchange privilege on 60 days' notice. An
exchange involves a taxable redemption of shares surrendered in the exchange.
Through the fund
If your financial intermediary does not provide account maintenance services,
contact the fund to exchange shares.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at P.O. Box 41118,
Rochester, NY 14604, signed by each registered account owner, exactly as your
names appear on the account registration.
Provide the name of the current series, class of shares, series to exchange
into and dollar amount to be exchanged.
Provide both account numbers.
By telephone
Unless you have declined telephone privileges, call the fund at
1-800-466-3863.
Provide the name of the current series, class of shares, series to exchange
into and dollar amount to be exchanged.
Provide both account numbers.
The fund may ask for identification, and all telephone transactions are
recorded.
<PAGE>
Investment and account information
Accounts with low balances
If your account falls below $1,000 due to the redemption of shares, the fund may
ask you to bring your account up to the minimum requirement. If your account is
still below $1,000 after 60 days, the fund may close your account and send you
the redemption proceeds.
In-kind purchases and redemptions
Securities you own may be used to purchase shares of the series. The advisor
will determine if acquiring the securities is consistent with the series' goals
and policies. If accepted, the securities will be valued the same way the
series values securities it already owns.
The series may make payment for shares in part by giving you portfolio
securities. As a redeeming shareholder, you will pay transaction costs to
dispose of these securities.
Signature guarantees
A signature guarantee may be required for any written request to sell shares, or
to change the account registration.
The transfer agent will accept signature guarantees from:
A member of the STAMP program or the NYSE's Medallion Signature Program.
A broker or securities dealer.
A federal savings, cooperative or other type of bank.
A savings and loan or other thrift institution.
A credit union.
A securities exchange or clearing agency.
A notary public cannot provide a signature guarantee.
Valuation of shares
The series offers its shares at the net asset value (NAV) per share of the
series. NAV is calculated separately for each class of shares. The series
calculates its NAV once daily as of the close of regular trading on the NYSE
(generally at 4:00 p.m., New York time) on each day the exchange is open. If
the exchange closes early, the series will accelerate the calculation of NAV and
transaction deadlines to that time.
The series values the securities in its portfolio on the basis of market
quotations and valuations provided by independent pricing services. If
quotations are not readily available, or the value of a security has been
materially affected by events occurring after the closing of a foreign exchange,
the series values its assets by a method that the directors believe accurately
reflects fair value. If the series uses fair value to price securities, it may
value those securities higher or lower than another series that uses market
quotations to price the same securities.
Year 2000 issue
Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
series. The cost of addressing the Year 2000 issue, if substantial, could
adversely affect companies and governments that issue securities held by the
series. The advisor, the transfer agent and the distributor are addressing the
Year 2000 issue for their systems. Its other service providers have informed
the series that they are taking similar measures. Although the series does not
expect the Year 2000 issue to adversely affect it, the series cannot guarantee
that the efforts of the series or its service providers to correct the problem
will be successful.
<PAGE>
Dividends, distributions and taxes
Dividends and distributions
The series generally:
Pays dividends once a year, in December.
Makes capital gains distributions, if any, once a year, typically in
December.
The series also may pay additional distributions and dividends at other times if
necessary for the series to avoid a federal tax.
Capital gain distributions and dividends are reinvested in additional shares of
the same class that you hold. Alternatively, you can instruct the transfer
agent in writing or by telephone to have your capital gains and/or dividends
paid in cash. You can change your choice at any time to be effective as of the
next distribution or dividend, except that any change given to the transfer
agent after the record date will not be effective until the next distribution or
dividend is made. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Taxes
<TABLE>
<CAPTION>
Transaction Federal Tax Status
- ------------------------------------- ------------------------------------
<S> <C>
Redemption or exchange of shares. . . Usually taxable as capital gain or loss;
long-term only if shares owned more
than one year
----------------------------------------
Long-term capital gain distributions. Taxable as long-term capital gain
----------------------------------------
Short-term capital gain distributions Taxable as ordinary income
----------------------------------------
Dividends . . . . . . . . . . . . . . Taxable as ordinary income
- ------------------------------------- ----------------------------------------
</TABLE>
If you are a taxable investor, you may want to avoid buying shares when the
series is about to declare a capital gain distribution or a dividend, because it
will be taxable to you even though it may actually be a return of a portion of
your investment.
After the end of each year, the series will provide you with information about
the distributions and dividends that you received and any redemptions of shares
during the previous year. In calculating your gain or loss on any sale of
shares, note that your tax basis in your shares is increased by the amounts of
dividends and distributions that you have reinvested in the series. Dividends
and distributions are taxable as described above whether received in cash or
reinvested.
If you do not provide the series with your correct taxpayer identification
number and any required certifications, you may be subject to back-up
withholding of 31% of your distributions, dividends, and redemption proceeds.
Because each shareholder's circumstances are different and special tax rules may
apply, you should consult with your tax adviser about your investment in the
series and your receipt of dividends, distributions or redemption proceeds.
<PAGE>
[Back Cover Page]
Exeter Fund, Inc.
Small Cap Series
Shareholder Reports and the Statement of Additional Information (SAI). Annual
and semiannual reports to shareholders provide additional information about the
series' investments. These reports discuss the market conditions and investment
strategies that significantly affected the series' performance during its last
fiscal year. The SAI provides more detailed information about the series. It
is incorporated by reference into this prospectus.
How to Obtain These Reports and Additional Information.
You may obtain shareholder reports and the SAI or other information about
the series without charge, by calling 1-800-466-3863 or sending written requests
to Exeter Fund, P.O. Box 41118, Rochester, New York 14604.
You may review shareholder reports, the prospectus and SAI at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get a copy of these materials by writing to the Public Reference Section
of the Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the SEC's Internet web site
(http://www.sec.gov).
If someone makes a statement about the series that is not in this prospectus,
you should not rely upon that information. Neither the series nor its
distributor is offering to sell shares to any person to whom it may not lawfully
sell shares.
Investment Company Act file no. 811-04087
<PAGE>
[Logo]
Prospectus
Exeter Fund, Inc.
May 1, 1999
World Opportunities Series
Class A Shares
The Securities and Exchange Commission has not approved or disapproved the
series' shares or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.
<PAGE>
[Intentionally left blank]
<PAGE>
Exeter Asset Management is a division of Manning and Napier Advisors, Inc.,
which was founded in 1970, and manages over $7 billion for individual and
institutional investors.
Contents Page
Goals, strategies, and risks 4
More about the series' investments 6
The advisor 7
How to buy shares 8
How to exchange and how to redeem shares 9
Investment and account information 10
Dividends, distributions and taxes 11
Financial Highlights 12
<PAGE>
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of
companies located around the world.
Key investments
The series invests primarily in common stocks of companies from around the
world. The series may also invest in American Depository Receipts (ADRs) and
other U.S. dollar denominated securities of foreign issuers, including those in
emerging markets.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection to choose stocks from companies around the world. The advisor
analyzes factors such as the management, financial condition, and market
position of individual companies to select companies that it believes will make
attractive long-term investments. The advisor looks for one or more of the
following characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value.
Who may want to invest
The series may be an appropriate investment if you are:
Seeking a long-term investment and are willing to accept the risk of
significant price volatility in exchange for the added diversification of
foreign stocks.
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year since its inception. The total return table
shows how the average annual total returns for different calendar periods
compare to those of the Morgan Stanley Capital International World Index and the
Morgan Stanley Capital International All Country World ex US Index. The MSCI
World Index is a market-capitalization-weighted measure of the total return of
2,440 companies listed on the stock exchanges of 22 countries, including the
United States. It has a very small weighting in emerging markets. The MSCI All
Country World ex US Index is a market-capitalization-weighted measure of the
total return of 2,068 companies listed on the stock exchanges of 47 countries,
including emerging markets and excluding the United States.
[Bar chart showing the percent total return for the World Opportunities Series
for 1997 and 1998, with calendar years ended December 31st. The results are
7.81% for 1997, and -4.38% for 1998.]
<TABLE>
<CAPTION>
Average Annual Total Returns
(for periods ended 12/31/98)
Since Inception
1 Year on 9/6/96
<S> <C> <C>
World Opportunities Series . . . . -4.38% 3.40%
------- ------
MSCI World Index . . . . . . . . . 24.34% 21.25%
------- ------
MSCI All Country World Index ex US 14.09% 8.43%
- ---------------------------------- ------- ------
Quarterly returns
- ----------------------------------
Highest: . . . . . . . . . . . . . 17.21% in 4th quarter 1998
- ---------------------------------- ----------------------------
Lowest:. . . . . . . . . . . . . . -19.49% in 3rd quarter 1998
- ---------------------------------- ----------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
Stock markets go down.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a strategy or security prove to be incorrect.
Because the series is "non-diversified", the performance of a particular
investment or small group of investments may affect the series more than if it
were diversified.
In addition to the general risks of stock funds, the series has special risks
due to its focus on foreign stocks. These risks include:
The prices of foreign common stocks may, at times, move in a different
direction than the prices of U.S. common stocks.
Because the series' investments are usually denominated in the currencies
of the countries in which they are located, the value of the series may be
affected by changes in exchange rates between those foreign currencies and the
U.S. dollar.
Investments in emerging market countries may be more volatile than
investments in more developed markets.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 World
Opportunities Series
- -----------------------------------------------------------------------
<S> <C>
Shareholder fees (paid directly from your investment)None1
-------
Annual fund operating expenses (expenses that are
deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . . . 1.00%
------
Distribution and service (Rule 12b-1) fees. . . . . None
------
Other expenses. . . . . . . . . . . . . . . . . . . 0.13%
------
Total annual fund operating expenses. . . . . . . . 1.13%
- ---------------------------------------------------- ------
</TABLE>
A wire charge, currently $15, may be deducted by the transfer agent from the
amount of a wire redemption payment made at the request of a shareholder. A
shareholder may effect up to four exchanges in a twelve-month period without
charge; subsequent exchanges are subject to a fee of $15.
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be after:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$115 $359 $622 $1,375
- ---- ---- ---- ------
</TABLE>
<PAGE>
More about the series' investments
Principal investments
EQUITY SECURITIES Equity securities in which the series may invest include
exchange-traded and over-the-counter (OTC) common and preferred stocks,
warrants, rights, convertible debt securities, trust certificates, partnership
interests and equity participations.
FOREIGN SECURITIES The series invests principally in the common stocks of
foreign companies; however, the series may also invest in ADRs and other U.S.
dollar denominated securities of foreign issuers. ADRs are securities that are
listed and traded in the United States but represent an ownership interest in
securities issued by a foreign issuer.
CURRENCY HEDGING In order to attempt to manage the currency risk associated
with owning and trading foreign securities, the series may, but is not required
to, hedge against changes in the value of foreign currencies relative to the
U.S. dollar. The series primarily uses forward foreign currency exchange
contracts for hedging purposes.
Additional Risks
EMERGING MARKET RISK Emerging market countries are foreign countries that are
generally considered to be less developed than the United States, Canada, Japan,
Australia, New Zealand, and most of the nations in Western Europe. As a result,
they may be more likely to experience political, social, or economic turmoil.
In addition, the financial conditions of issuers in these countries may be more
precarious than those in developed countries. These characteristics may result
in greater price volatility for investments in emerging markets. This price
volatility may be heightened by currency fluctuations relative to the U.S.
dollar.
RISKS RELATED TO CURRENCY HEDGING The value of the series' portfolio may
decline if a currency is not hedged and that currency later declines with
respect to the U.S. dollar. There are also additional risks because a hedging
strategy relies upon the ability of the advisor to accurately predict movements
in currency exchange rates. In addition, there may not be an exact relationship
between changes in the prices of a forward foreign currency exchange contract
and the underlying currency.
Defensive investing
The series may depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. If the series takes a temporary defensive position, it
may be unable to achieve its investment goal.
The Series' investment goal
The series' board of directors may change its investment goal (described above
under "Goals and strategies") without obtaining the approval of the
shareholders. The series might not succeed in achieving its goal.
<PAGE>
The advisor
The advisor
The series' advisor is Exeter Asset Management, a division of Manning & Napier
Advisors, Inc., 1100 Chase Square, Rochester, New York 14604. The advisor is
responsible for the day-to-day operations of the series and generally is
responsible for supervision of the series' overall business affairs, service
providers and officers.
A team made up of investment professionals and analysts makes all of the series'
investment decisions.
Management fees
In return for the services it provides to the series, the advisor receives a
management fee, which is computed daily and payable monthly at an annual rate of
1.00% of the series' average daily net assets.
Clients for whom the Advisor provides advisory services pursuant to separate
investment advisory contracts will be separately credited by the advisor an
amount equal to the portion of their client advisory fee attributable to the
portion of their assets invested in the series.
The advisor may use its own resources to engage in activities that may promote
the sale of the series, including payments to third parties who provide
shareholder support servicing and distribution assistance. Investors may be
charged a fee if they effect transactions through a broker or agent.
The distributor
The distributor of the series' shares is Manning & Napier Investor Services,
Inc. Class A shares of the series are offered to investors who purchase shares
directly from the distributor or through certain registered investment advisors.
Class A shares of the series are not subject to any distribution or shareholder
servicing fees. The advisor may, from its own resources, defray or absorb costs
relating to distribution, including compensation of employees who are involved
in distribution.
Discretionary account management
Class A shares of the series are also offered to the advisor's clients and those
of its affiliates who have authorized investment in the series as part of the
discretionary account management services of the advisor or its affiliates.
Class A shares may also be used in connection with a discretionary account
management service provided by the advisor that uses shares of the series as the
principal underlying investment.
<PAGE>
How to Buy, Exchange, and Redeem Shares
How to buy shares
The minimum initial investment in the series is $2,000, and the minimum for each
additional investment is $100. The minimum investment requirements are lower
for participants in the Automatic Investment Plan, which is described below.
These investment minimums may be waived at the advisor's discretion.
All orders to purchase shares received in good order by the distributor,
transfer agent or other agent before the close of trading on the New York Stock
Exchange (NYSE) will be executed at that day's share price. Orders received in
good order after that day's close will be executed at the next business day's
price. All orders must include the required documentation and be accompanied by
proper payment. The series reserves the right to reject purchase orders or to
stop offering its shares without notice to shareholders.
By mail
Opening an account
Send a check payable to the Exeter Fund, Inc. with the completed
original account application. The address is:
Exeter Fund, Inc.
P.O. Box 41118
Rochester, NY 14604
To request an account application, call the fund at 1-800-466-3863.
Adding to an account
Send a check payable to the Exeter Fund, Inc. and a letter of
instruction with the name of the series to be purchased and the account name and
number.
By wire
Opening an account
or
Adding to an account
After the fund has received your completed account application, you
may wire funds to open or add shares to your account. Before sending a wire,
call 1-800-466-3863 for wire instructions.
Automatic Investment Plan
You may participate in the automatic investment plan by completing the
applicable section of the account application or contacting the fund. Through
the plan, you can authorize transfers of a specified amount from your bank
account into the series on a regular basis. The minimum amount of each
investment is $25. If you have insufficient funds in your account to complete a
transfer, your bank may charge you a fee.
<PAGE>
How to exchange and how to redeem shares
How to exchange shares
You may exchange shares of a series for shares of any other series of the Exeter
Fund, if the registration of both accounts is identical. If received with
proper documentation before the close of trading on the NYSE, exchange requests
will be executed at that day's share prices. Otherwise, they will be executed
at the prices determined on the next business day after receipt with proper
documentation.
The minimum exchange amount is $1,000 (or all the shares in your account, if
less than $1,000). You may exchange up to 4 times during any 12-month period
without paying a sales charge or any other fee. For any additional exchanges,
you may be charged $15 per exchange. A series may refuse any exchange order and
may alter, limit or suspend its exchange privilege on 60 days' notice. An
exchange involves a taxable redemption of shares surrendered in the exchange.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page, signed by each registered account owner, exactly as your
names appear on the account registration.
Provide the name of the current series, class of shares, series to exchange
into and dollar amount to be exchanged.
Provide both account numbers.
By telephone
Unless you have declined telephone privileges, call the fund at
1-800-466-3863.
Provide the name of the current series, class of shares, series to exchange
into and dollar amount to be exchanged.
Provide both account numbers.
The fund may ask for identification, and all telephone transactions are
recorded.
How to redeem shares
All orders to redeem shares received in good order by the distributor, transfer
agent or other agent before the close of trading on the NYSE will be executed at
that day's share price. Orders received in good order after the close of
trading will be executed at the next business day's price. All redemption
orders must include the required documentation and signatures. The series may
postpone payment of redemption proceeds for up to seven days, or suspend
redemptions to the extent permitted by law. If you recently purchased your
shares by check, your redemption proceeds will not be sent to you for 15 days.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page signed by each registered account owner.
State the name of the series, the class and number of shares or dollar
amount to be sold.
Provide the account number.
Signature guarantees may be required.
Additional documentation may be required (call the fund for details).
<PAGE>
Investment and account information
Accounts with low balances
If your account falls below $1,000 due to the redemption of shares, the fund may
ask you to bring your account up to the minimum requirement. If your account is
still below $1,000 after 60 days, the fund may close your account and send you
the redemption proceeds.
In-kind purchases and redemptions
Securities you own may be used to purchase shares of the series. The advisor
will determine if acquiring the securities is consistent with the series' goals
and policies. If accepted, the securities will be valued the same way the
series values securities it already owns.
The series may make payment for shares in part by giving you portfolio
securities. As a redeeming shareholder, you will pay transaction costs to
dispose of these securities.
Signature guarantees
A signature guarantee may be required for any written request to sell shares, or
to change the account registration.
The transfer agent will accept signature guarantees from:
Members of the STAMP program or the NYSE's Medallion Signature Program.
A broker or securities dealer.
A federal savings, cooperative or other type of bank.
A savings and loan or other thrift institution.
A credit union.
A securities exchange or clearing agency.
A notary public cannot provide a signature guarantee.
Valuation of shares
The series offers its shares at the net asset value (NAV) per share of the
series. NAV is calculated separately for each class of shares. The series
calculates its NAV once daily as of the close of regular trading on the NYSE
(generally at 4:00 p.m., New York time) on each day the exchange is open. If
the exchange closes early, the series will accelerate the calculation of NAV and
transaction deadlines to that time.
The series values the securities in its portfolio on the basis of market
quotations and valuations provided by independent pricing services. If
quotations are not readily available, or the value of a security has been
materially affected by events occurring after the closing of a foreign exchange,
the series values its assets by a method that the directors believe accurately
reflects fair value. If the series uses fair value to price securities, it may
value those securities higher or lower than another series that uses market
quotations to price the same securities.
The foreign securities held by the series may be listed on foreign exchanges
that trade on days when the NYSE is not open and the portfolios do not price
their shares. As a result, the net asset value of a portfolio may change at a
time when shareholders are not able to purchase or redeem shares.
Year 2000 issue
Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
series. The cost of addressing the Year 2000 issue, if substantial, could
adversely affect companies and governments that issue securities held by the
series. The advisor, the transfer agent and the distributor are addressing the
Year 2000 issue for their systems. Its other service providers have informed
the series that they are taking similar measures. Although the series does not
expect the Year 2000 issue to adversely affect it, the series cannot guarantee
that the efforts of the series or its service providers to correct the problem
will be successful.
<PAGE>
Dividends, distributions and taxes
Dividends and distributions
The series generally:
Pays dividends once a year, in December.
Makes capital gains distributions, if any, once a year, typically in
December.
The series also may pay additional distributions and dividends at other times if
necessary for the series to avoid a federal tax.
Capital gain distributions and dividends are reinvested in additional shares of
the same class that you hold. Alternatively, you can instruct the transfer
agent in writing or by telephone to have your capital gains and/or dividends
paid in cash. You can change your choice at any time to be effective as of the
next distribution or dividend, except that any change given to the transfer
agent after the record date will not be effective until the next distribution or
dividend is made. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Taxes
<TABLE>
<CAPTION>
Transaction Federal Tax Status
- ------------------------------------- --------------------------------------
<S> <C>
Redemption or exchange of shares. . . Usually taxable as capital gain or loss;
long-term only if shares owned more than
one year
-----------------------------------------
Long-term capital gain distributions. Taxable as long-term capital gain
-----------------------------------------
Short-term capital gain distributions Taxable as ordinary income
-----------------------------------------
Dividends . . . . . . . . . . . . . . Taxable as ordinary income
- ------------------------------------- -----------------------------------------
</TABLE>
If you are a taxable investor, you may want to avoid buying shares when the
series is about to declare a capital gain distribution or a dividend, because it
will be taxable to you even though it may actually be a return of a portion of
your investment.
After the end of each year, the series will provide you with information about
the distributions and dividends that you received and any redemptions of shares
during the previous year. Shareholders may be able to claim a credit or
deduction on their income tax returns for their pro rata portion of qualified
taxes paid by the series to foreign countries. In calculating your gain or loss
on any sale of shares, note that your tax basis in your shares is increased by
the amounts of dividends and distributions that you have reinvested in the
series. Dividends and distributions are taxable as described above whether
received in cash or reinvested.
If you do not provide the series with your correct taxpayer identification
number and any required certifications, you may be subject to back-up
withholding of 31% of your distributions, dividends, and redemption proceeds.
Because each shareholder's circumstances are different and special tax rules may
apply, you should consult with your tax adviser about your investment in the
series and your receipt of dividends, distributions or redemption proceeds.
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the series'
financial performance for the past five years. Certain information reflects
financial results for a single share. The total returns in the table represent
the rate that an investor would have earned on an investment in the series
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
series' financial statements, are included in the annual report, which is
available upon request.
<PAGE>
World Opportunities
<TABLE>
<CAPTION>
FOR THE FOR THE (COMMENCEMENT OF
---------------- ---------------- --------------
YEAR ENDED YEAR ENDED OPERATIONS)
---------------- ---------------- -------------
ENDED 12/31/98 ENDED 12/31/97 TO 12/31/96
---------------- ---------------- -------------
<S> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT
EACH PERIOD)
NET ASSET VALUE - BEGINNING
OF PERIOD . . $9.76 $10.42 $10.00
- -------------------------- ---------------- ---------------- ------------
Income from investment
operations:
Net investment income . 0.121 0.086 0.051
--------------- ---------------- -------------
Net realized and
unrealized gain on
investments . . . . . (0.593)1 0.669 0.429
- -------------------------- ---------------- ---------------- ------------
Total from investment
operations . . . . . (0.472) 0.755 0.480
- ----------------------- ---------------- ---------------- -------------
Less distributions to
shareholders:
From net investment
income. . . . . . . (0.135) (0.086) (0.051)
---------------- ---------------- --------------
From net realized
gain on investments (0.603) (1.329) (0.009)
---------------------- ---------------- ---------------- --------------
Total distributions to
shareholders. . . . (0.738) (1.415) (0.060)
- ------------------------ ---------------- ---------------- --------------
NET ASSET VALUE -
END OF PERIOD. . . . . . $ 8.55 $9.76 $10.42
- --------------------- ================ ================ ================
Total return2. . . . . (4.38)% 7.81% 4.82%
---------------- ---------------- ----------------
Ratios to average net
assets/
Supplemental Data:
Expenses. . . . 1.13% 1.15% 1.17%3
---------------- ---------------- ------------------
Net investment
income . . . . . 2.30% 0.79% 1.54%3
---------------- ---------------- ------------------
Portfolio turnover 52% 62% 1%
---------------- ---------------- ------------------
NET ASSETS -
END OF PERIOD
(000'S OMITTED) $215,778 $95,215 $77,338
- -------------------- ================ ================ ================
<FN>
1 The amount shown for a share outstanding does not correspond with
the aggregate net gain on investments for the period due to the
timing of sales and repurchases of fund shares in relation to
fluctuating market values of the investments of the Fund.
2 Represents aggregate total return for the period indicated.
- --------------------------------------------------------------------
3 Annualized.
- -------------
</TABLE>
<PAGE>
[Back Cover Page]
Exeter Fund, Inc.
World Opportunities Series
Shareholder Reports and the Statement of Additional Information (SAI). Annual
and semiannual reports to shareholders provide additional information about the
series' investments. These reports discuss the market conditions and investment
strategies that significantly affected the series' performance during its last
fiscal year. The SAI provides more detailed information about the series. It
is incorporated by reference into this prospectus.
How to Obtain These Reports and Additional Information.
You may obtain shareholder reports and the SAI or other information about
the series without charge, by calling 1-800-466-3863 or sending written requests
to Exeter Fund, P.O. Box 41118, Rochester, New York 14604.
You may review shareholder reports, the prospectus and SAI at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get a copy of these materials by writing to the Public Reference Section
of the Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the SEC's Internet web site
(http://www.sec.gov).
If someone makes a statement about the series that is not in this prospectus,
you should not rely upon that information. Neither the series nor its
distributor is offering to sell shares to any person to whom it may not lawfully
sell shares.
Investment Company Act file no. 811-04087
<PAGE>
[Logo]
Prospectus
Exeter Fund, Inc.
May 1, 1999
World Opportunities Series
Class B, C, D, and E Shares
The Securities and Exchange Commission has not approved or disapproved the
series' shares or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.
<PAGE>
[Intentionally left blank]
<PAGE>
Exeter Asset Management is a division of Manning and Napier Advisors, Inc.,
which was founded in 1970, and manages over $7 billion for individual and
institutional investors.
Contents Page
Goals, strategies, and risks 4
More about the series' investments 6
The advisor 7
How to buy and how to redeem shares 8
How to exchange shares 9
Investment and account information 10
Dividends, distributions and taxes 11
<PAGE>
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of
companies located around the world.
Key investments
The series invests primarily in common stocks of companies from around the
world. The series may also invest in American Depository Receipts (ADRs) and
other U.S. dollar denominated securities of foreign issuers, including those in
emerging markets.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection to choose stocks from companies around the world. The advisor
analyzes factors such as the management, financial condition, and market
position of individual companies to select companies that it believes will make
attractive long-term investments. The advisor looks for one or more of the
following characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value.
Who may want to invest
The series may be an appropriate investment if you are:
Seeking a long-term investment and are willing to accept the risk of
significant price volatility in exchange for the added diversification of
foreign stocks.
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in Class A shares of the series. No Class B, C, D, or E shares were
outstanding as of December 31, 1998. Class A shares are offered in a separate
prospectus which may be obtained by contacting the fund. Class B, C, D, and E
shares would have different performance due to their different expenses. The
bar chart shows changes in the performance of the Class A shares of the series
for each full calendar year since its inception. The total return table shows
how the average annual total returns for the Class A shares for different
calendar periods compare to those of the Morgan Stanley Capital International
World Index and the Morgan Stanley Capital International All Country World ex US
Index. The MSCI World Index is a market-capitalization-weighted measure of the
total return of 2,440 companies listed on the stock exchanges of 22 countries,
including the United States. It has a very small weighting in emerging markets.
The MSCI All Country World ex US Index is a market-capitalization-weighted
measure of the total return of 2,068 companies listed on the stock exchanges of
47 countries, including emerging markets and excluding the United States.
[Bar chart showing the percent total return for the World Opportunities Series
for 1997 and 1998, with calendar years ended December 31st. The results are
7.81% for 1997, and -4.38% for 1998.]
<TABLE>
<CAPTION>
Average Annual Total Returns
(for periods ended 12/31/98)
1 Year Since Inception on 9/6/96
- ----------------------------------
<S> <C> <C>
World Opportunities Series . . . . -4.38% 3.40%
------- ------
MSCI World Index . . . . . . . . . 24.34% 21.25%
------- ------
MSCI All Country World Index ex US 14.09% 8.43%
- ---------------------------------- ------- ------
Quarterly returns
- ----------------------------------
Highest: . . . . . . . . . . . . . 17.21% in 4th quarter 1998
- ---------------------------------- ----------------------------
Lowest:. . . . . . . . . . . . . . -19.49% in 3rd quarter 1998
- ---------------------------------- ----------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
Stock markets go down.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a strategy or security prove to be incorrect.
Because the series is "non-diversified", the performance of a particular
investment or small group of investments may affect the series more than if it
were diversified.
In addition to the general risks of stock funds, the series has special risks
due to its focus on foreign stocks. These risks include:
The prices of foreign common stocks may, at times, move in a different
direction than the prices of U.S. common stocks.
Because the series' investments are usually denominated in the currencies
of the countries in which they are located, the value of the series may be
affected by changes in exchange rates between those foreign currencies and the
U.S. dollar.
Investments in emerging market countries may be more volatile than
investments in more developed markets.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 Class B Class C Class D Class E
- ------------------------------ ------- -------- -------- --------
<S> <C> <C> <C> <C>
Shareholder fees (paid directly
from your investment) None1 None1 None1 None1
-------- -------- -------- --------
Annual fund operating expenses
(expenses that are deducted from
assets of the series)
Management fee. . . . . . . . . 1.00% 1.00% 1.00% 1.00%
-------- -------- -------- --------
Distribution and service
(Rule 12b-1) fees 1.00% .75% .50% .25%
-------- -------- -------- --------
Other expenses. . . . . . . . . . 0.13% 0.13% 0.13% 0.13%
- ---------------------------------- -------- -------- -------- --------
Total annual fund operating
expenses. . . . . . . . . . . . . 2.13% 1.88% 1.63% 1.38%
- --------------------------------- ------- -------- -------- --------
</TABLE>
A wire charge, currently $15, may be deducted by the transfer agent from the
amount of a wire redemption payment made at the request of a shareholder. A
shareholder may effect up to four exchanges in a twelve-month period without
charge; subsequent exchanges are subject to a fee of $15.
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be after:
<TABLE>
<CAPTION>
Class B Class C Class D Class E
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1 Year . $ 216 $ 191 $ 166 $ 140
-------- -------- -------- --------
3 Years. $ 667 $ 591 $ 514 $ 437
-------- -------- -------- --------
5 Years. $ 1,144 $ 1,016 $ 887 $ 755
-------- -------- -------- --------
10 Years $ 2,462 $ 2,201 $ 1,933 $ 1,657
- -------- -------- -------- -------- --------
</TABLE>
<PAGE>
More about the series' investments
Principal investments
EQUITY SECURITIES Equity securities in which the series may invest include
exchange-traded and over-the-counter (OTC) common and preferred stocks,
warrants, rights, convertible debt securities, trust certificates, partnership
interests and equity participations.
FOREIGN SECURITIES The series invests principally in the common stocks of
foreign companies; however, the series may also invest in ADRs and other U.S.
dollar denominated securities of foreign issuers. ADRs are securities that are
listed and traded in the United States but represent an ownership interest in
securities issued by a foreign issuer.
CURRENCY HEDGING In order to attempt to manage the currency risk associated
with owning and trading foreign securities, the series may, but is not required
to, hedge against changes in the value of foreign currencies relative to the
U.S. dollar. The series primarily uses forward foreign currency exchange
contracts for hedging purposes.
Additional Risks
EMERGING MARKET RISK Emerging market countries are foreign countries that are
generally considered to be less developed than the United States, Canada, Japan,
Australia, New Zealand, and most of the nations in Western Europe. As a result,
they may be more likely to experience political, social, or economic turmoil.
In addition, the financial conditions of issuers in these countries may be more
precarious than those in developed countries. These characteristics may result
in greater price volatility for investments in emerging markets. This price
volatility may be heightened by currency fluctuations relative to the U.S.
dollar.
RISKS RELATED TO CURRENCY HEDGING The value of the series' portfolio may
decline if a currency is not hedged and that currency later declines with
respect to the U.S. dollar. There are also additional risks because a hedging
strategy relies upon the ability of the advisor to accurately predict movements
in currency exchange rates. In addition, there may not be an exact relationship
between changes in the prices of a forward foreign currency exchange contract
and the underlying currency.
Defensive investing
The series may depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. If the series takes a temporary defensive position, it
may be unable to achieve its investment goal.
The Series' investment goal
The series' board of directors may change its investment goal (described above
under "Goals and strategies") without obtaining the approval of the
shareholders. The series might not succeed in achieving its goal.
<PAGE>
The advisor
The series' advisor is Exeter Asset Management, a division of Manning & Napier
Advisors, Inc., 1100 Chase Square, Rochester, New York 14604. The advisor is
responsible for the day-to-day operations of the series and generally is
responsible for supervision of the series' overall business affairs, service
providers and officers.
A team made up of investment professionals and analysts makes all of the series'
investment decisions.
Management fees
In return for the services it provides to the series, the advisor receives a
management fee, which is computed daily and payable monthly at an annual rate of
1.00% of the series' average daily net assets.
The advisor may use its own resources to engage in activities that may promote
the sale of the series, including payments to third parties who provide
shareholder support servicing and distribution assistance. Investors may be
charged a fee if they effect transactions through a broker or agent.
The distributor
The distributor of the series' shares is Manning & Napier Investor Services,
Inc. Class A shares of the series are offered to investors who purchase shares
directly from the distributor or through certain registered investment advisors.
Class B, C, D, and E shares are offered only through a financial intermediary.
Financial intermediaries include financial planners, investment advisers,
broker-dealers, or other financial institutions with an agreement with the
distributor. You may only purchase that class of shares that your financial
intermediary sells or services.
Class B shares are only available through broker-dealers who maintain an omnibus
account with the distributor on behalf of investors. Class C shares are
available only through financial intermediaries who establish individual
shareholder accounts with the fund in the name of investors or maintain certain
types of omnibus accounts with the distributor. Class E shares are only
available through financial intermediaries who provide certain shareholder
services to the fund. Class D shares are not currently available. Your
financial intermediary can tell you which class of shares is available through
the intermediary.
Distribution plans
The fund has adopted Rule 12b-1 distribution plans for the Class B, C, D, and E
shares of the series. Under the plans, the Class B, C, D, and E shares pay
distribution and/or service fees (as a percentage of average daily net assets)
equal to: 1.00%, 0.75%, 0.50%, and 0.25%, respectively. These fees are an
ongoing expense and over time may cost you more than other types of sales
changes.
<PAGE>
How to buy and how to redeem shares
How to buy shares
Class B, C, D or E shares are offered only through your financial intermediary.
You may be subject to initial and subsequent minimums established by your
financial intermediary for the purchase of shares. The series reserves the
right to reject purchase orders or to stop offering its shares without notice to
shareholders.
The series' distributor imposes no sales charge on purchases and redemptions of
shares of the series. However, your financial intermediary may charge you a
transaction fee on purchases and redemptions.
Through the fund
By mail
If your financial intermediary does not provide account maintenance services,
contact the fund to purchase shares.
Opening an account
Send a check payable to the Exeter Fund, Inc., with the completed original
account application. The address is:
Exeter Fund, Inc.
P.O. Box 41118
Rochester, NY 14604
To request an account application, call the fund at 1-800-466-3863.
Adding to an account
By wire
Send a check payable to the Exeter Fund, Inc. and a letter of instruction
with the name of the series to be purchased and the account name and number.
Opening or adding to an account
After the fund has received your completed account application, you may
wire funds to open or add shares to your account. Before sending a wire, call
1-800-466-3863 for wire instructions.
Through the Automatic Investment Plan
You may participate in the automatic investment plan by completing the
applicable section of the account application or contacting your financial
intermediary or the fund. Through the plan, you can authorize transfers of a
specified amount from your bank account into the series on a regular basis. The
minimum amount of each investment is $25. If you have insufficient funds in
your account to complete a transfer, your bank may charge you a fee.
How to redeem shares
Through the fund
By mail
If your financial intermediary provides account maintenance services, contact
your financial intermediary to redeem shares. If not:
Send a letter of instruction to the Exeter Fund, Inc., at the address
above, signed by each registered account owner.
State the name of the series, the class and number of shares or dollar
amount to be sold.
Provide the account number.
Signature guarantees may be required.
Additional documentation may be required (call the fund for details).
The series may postpone payment of redemption proceeds for up to seven days, or
suspend redemptions to the extent permitted by law. If you recently purchased
your shares by check, your redemption proceeds will not be sent to you for 15
days.
More about purchases and redemptions
All orders to purchase or redeem shares received in good order by the
distributor, transfer agent or other agent before the close of trading on the
New York Stock Exchange (NYSE) will be executed at that day's share price.
Orders received in good order after that day's close will be executed at the
next business day's price. All orders must include the required documentation
and signatures, and all purchase orders must be accompanied by proper payment.
The fund has authorized several financial intermediaries to accept purchase and
redemption orders on its behalf, and these intermediaries are authorized to
designate other intermediaries to accept purchase and redemption orders on the
fund's behalf. The fund will be deemed to have received an order when an
authorized financial intermediary or its authorized designee accepts the order,
and orders placed with an authorized financial intermediary will be processed at
the share price of the series next computed after they are received in good
order by the financial intermediary or its designee.
<PAGE>
How to exchange shares
You may exchange shares of the series for the same class of shares of any other
series of the Exeter Fund, if the registration of both accounts is identical.
If received with proper documentation before the close of trading on the NYSE,
exchange requests will be executed at that day's share prices. Otherwise, they
will be executed at the prices determined on the next business day after receipt
with proper documentation.
The minimum exchange amount is $1,000 (or all the shares in your account, if
less than $1,000). You may exchange up to 4 times during any 12-month period
without paying a sales charge or any other fee. For any additional exchanges,
you may be charged $15 per exchange. The series may refuse any exchange order
and may alter, limit or suspend its exchange privilege on 60 days' notice. An
exchange involves a taxable redemption of shares surrendered in the exchange.
Through the fund
If your financial intermediary does not provide account maintenance services,
contact the fund to exchange shares.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at P.O. Box 41118,
Rochester, NY 14604, signed by each registered account owner, exactly as your
names appear on the account registration.
Provide the name of the current series, class of shares, series to exchange
into and dollar amount to be exchanged.
Provide both account numbers.
By telephone
Unless you have declined telephone privileges, call the fund at
1-800-466-3863.
Provide the name of the current series, class of shares, series to exchange
into and dollar amount to be exchanged.
Provide both account numbers.
The fund may ask for identification, and all telephone transactions are
recorded.
<PAGE>
Investment and account information
Accounts with low balances
If your account falls below $1,000 due to the redemption of shares, the fund may
ask you to bring your account up to the minimum requirement. If your account is
still below $1,000 after 60 days, the fund may close your account and send you
the redemption proceeds.
In-kind purchases and redemptions
Securities you own may be used to purchase shares of the series. The advisor
will determine if acquiring the securities is consistent with the series' goals
and policies. If accepted, the securities will be valued the same way the
series values securities it already owns.
The series may make payment for shares in part by giving you portfolio
securities. As a redeeming shareholder, you will pay transaction costs to
dispose of these securities.
Signature guarantees
A signature guarantee may be required for any written request to sell shares, or
to change the account registration.
The transfer agent will accept signature guarantees from:
Members of the STAMP program or the NYSE's Medallion Signature Program.
A broker or securities dealer.
A federal savings, cooperative or other type of bank.
A savings and loan or other thrift institution.
A credit union.
A securities exchange or clearing agency.
A notary public cannot provide a signature guarantee.
Valuation of shares
The series offers its shares at the net asset value (NAV) per share of the
series. NAV is calculated separately for each class of shares. The series
calculates its NAV once daily as of the close of regular trading on the NYSE
(generally at 4:00 p.m., New York time) on each day the exchange is open. If
the exchange closes early, the series will accelerate the calculation of NAV and
transaction deadlines to that time.
The series values the securities in its portfolio on the basis of market
quotations and valuations provided by independent pricing services. If
quotations are not readily available, or the value of a security has been
materially affected by events occurring after the closing of a foreign exchange,
the series values its assets by a method that the directors believe accurately
reflects fair value. If the series uses fair value to price securities, it may
value those securities higher or lower than another series that uses market
quotations to price the same securities.
The foreign securities held by the series may be listed on foreign exchanges
that trade on days when the NYSE is not open and the portfolios do not price
their shares. As a result, the net asset value of a portfolio may change at a
time when shareholders are not able to purchase or redeem shares.
Year 2000 issue
Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
series. The cost of addressing the Year 2000 issue, if substantial, could
adversely affect companies and governments that issue securities held by the
series. The advisor, the transfer agent and the distributor are addressing the
Year 2000 issue for their systems. Its other service providers have informed
the series that they are taking similar measures. Although the series does not
expect the Year 2000 issue to adversely affect it, the series cannot guarantee
that the efforts of the series or its service providers to correct the problem
will be successful.
<PAGE>
Dividends, distributions and taxes
Dividends and distributions
The series generally:
Pays dividends once a year, in December.
Makes capital gains distributions, if any, once a year, typically in
December.
The series also may pay additional distributions and dividends at other times if
necessary for the series to avoid a federal tax.
Capital gain distributions and dividends are reinvested in additional shares of
the same class that you hold. Alternatively, you can instruct the transfer
agent in writing or by telephone to have your capital gains and/or dividends
paid in cash. You can change your choice at any time to be effective as of the
next distribution or dividend, except that any change given to the transfer
agent after the record date will not be effective until the next distribution or
dividend is made. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Taxes
<TABLE>
<CAPTION>
Transaction Federal Tax Status
- ------------------------------------- ----------------------------------------
<S> <C>
Redemption or exchange of shares. . . Usually taxable as capital gain or loss;
long-term only if shares owned more
than one year
----------------------------------------
Long-term capital gain distributions. Taxable as long-term capital gain
----------------------------------------
Short-term capital gain distributions Taxable as ordinary income
----------------------------------------
Dividends . . . . . . . . . . . . . . Taxable as ordinary income
- ------------------------------------- ----------------------------------------
</TABLE>
If you are a taxable investor, you may want to avoid buying shares when the
series is about to declare a capital gain distribution or a dividend, because it
will be taxable to you even though it may actually be a return of a portion of
your investment.
After the end of each year, the series will provide you with information about
the distributions and dividends that you received and any redemptions of shares
during the previous year. Shareholders may be able to claim a credit or
deduction on their income tax returns for their pro rata portion of qualified
taxes paid by the series to foreign countries. In calculating your gain or loss
on any sale of shares, note that your tax basis in your shares is increased by
the amounts of dividends and distributions that you have reinvested in the
series. Dividends and distributions are taxable as described above whether
received in cash or reinvested.
If you do not provide the series with your correct taxpayer identification
number and any required certifications, you may be subject to back-up
withholding of 31% of your distributions, dividends, and redemption proceeds.
Because each shareholder's circumstances are different and special tax rules may
apply, you should consult with your tax adviser about your investment in the
series and your receipt of dividends, distributions or redemption proceeds.
<PAGE>
Exeter Fund, Inc. [Back Cover Page]
World Opportunities Series
Shareholder Reports and the Statement of Additional Information (SAI). Annual
and semiannual reports to shareholders provide additional information about the
series' investments. These reports discuss the market conditions and investment
strategies that significantly affected the series' performance during its last
fiscal year. The SAI provides more detailed information about the series. It
is incorporated by reference into this prospectus.
How to Obtain These Reports and Additional Information.
You may obtain shareholder reports and the SAI or other information about
the series without charge, by calling 1-800-466-3863 or sending written requests
to Exeter Fund, P.O. Box 41118, Rochester, New York 14604.
You may review shareholder reports, the prospectus and SAI at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get a copy of these materials by writing to the Public Reference Section
of the Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the SEC's Internet web site
(http://www.sec.gov).
If someone makes a statement about the series that is not in this prospectus,
you should not rely upon that information. Neither the series nor its
distributor is offering to sell shares to any person to whom it may not lawfully
sell shares.
Investment Company Act file no. 811-04087
<PAGE>
[Logo]
Prospectus
Exeter Fund, Inc.
May 1, 1999
International Series
The Securities and Exchange Commission has not approved or disapproved the
series' shares or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.
<PAGE>
[Intentionally left blank]
<PAGE>
Exeter Asset Management is a division of Manning and Napier Advisors, Inc.,
which was founded in 1970, and manages over $7 billion for individual and
institutional investors.
Contents Page
Goals, strategies, and risks 4
More about the series' investments 6
The advisor 7
How to buy shares 8
How to exchange and how to redeem shares 9
Investment and account information 10
Dividends, distributions and taxes 11
Financial Highlights 12
<PAGE>
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of
companies located outside the United States.
Key investments
The series invests primarily in common stocks of foreign companies.
Investment strategies
The advisor examines macro-economic trends and industry-specific factors to
identify investment themes, such as those being created by economic and
political changes taking place around the world. This approach is often called a
"top-down" strategy. The series is different from many stock funds because the
advisor's primary focus is not on individual stock selection. Rather, the
advisor seeks to identify broad themes that cut across countries or issuers and
then purchases stocks to capture those themes. The advisor buys one or more
stocks representing a particular investment theme as it attempts to benefit from
that theme. The series may invest in stocks of companies both in developed
countries and in emerging markets.
Who may want to invest
The series may be an appropriate investment if you are:
Seeking a long-term investment and are willing to accept the risk of
significant price volatility in exchange for the added diversification of
foreign stocks.
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year since its inception. The total return table
shows how the average annual total returns for different calendar periods
compare to those of the Standard & Poor's 500 Composite Stock Price Index, an
unmanaged index of common stocks, and the Morgan Stanley Capital International
All Country World ex US Index, a market-capitalization-weighted measure of the
total return of 2,068 companies listed on the stock exchanges of 46 countries.
<PAGE>
[Bar chart showing the percent total return for the International Series for
1993, 1994, 1995, 1996, 1997 and 1998, with calendar years ended December 31st.
The results are 26.05% for 1993, -14.48% for 1994, 4.14% for 1995, 22.35% for
1996, 27.70% for 1997, and 23.63% for 1998.]
<TABLE>
<CAPTION>
Average Annual Total Returns
(for periods ended 12/31/98)
Since
Inception on
1 Year 5 Years 8/27/92
-------------------------
<S> <C> <C> <C>
International Series . . . . . . . 23.63% 11.46% 14.00%
------ ------ ------
S&P 500 Index. . . . . . . . . . . 28.58% 24.04% 21.48%
------ ------ ------
MSCI All Country World Index ex US 14.09% 7.54% 10.21%
- ---------------------------------- ------ ------ ------
Quarterly returns
- ----------------------------------
Highest: . . . . . . . . . . . . . 19.04% in 1st quarter 1998
- ---------------------------------- ----------------------------
Lowest:. . . . . . . . . . . . . . -16.96% in 3rd quarter 1998
- ---------------------------------- ----------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform
In the future.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
Stock markets go down.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a strategy or security prove to be incorrect.
Because the series is "non-diversified", the performance of a particular
investment or small group of investments may affect the series more than if it
were diversified.
In addition to the general risks of stock funds, the series has special risks
due to its focus on foreign stocks. These risks include:
The prices of foreign common stocks may, at times, move in a different
direction than the prices of U.S. common stocks.
Because the series' investments are usually denominated in the currencies
of the countries in which they are located, the value of the series may be
affected by changes in exchange rates between those foreign currencies and the
U.S. dollar.
Investments in emerging market countries may be more volatile than
investments in more developed markets.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 International Series
- --------------------------------------- ---------------------
<S> <C>
Shareholder fees (paid directly from your
investment) . . . . . . . . . . . . . . . . None1
---------------------
Annual fund operating expenses (expenses that
are deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . 1.00%
---------------------
Distribution and service (Rule 12b-1) fees. . . . None
---------------------
Other expenses. . . . . . . . . . . . . . . . 0.12%
---------------------
Total annual fund operating expenses. . . . . 1.12%
- ------------------------------------------------- ---------------------
</TABLE>
A wire charge, currently $15, may be deducted by the transfer agent from the
amount of a wire redemption payment made at the request of a shareholder. A
shareholder may effect up to four exchanges in a twelve-month period without
charge; subsequent exchanges are subject to a fee of $15.
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$114 $356 $617 $1,363
- ---- ---- ---- ------
</TABLE>
<PAGE>
More about the series' investments
Principal investments
EQUITY SECURITIES Equity securities in which the series may invest include
exchange-traded and over-the-counter (OTC) common and preferred stocks,
warrants, rights, convertible debt securities, trust certificates, partnership
interests and equity participations.
FOREIGN SECURITIES The series invests principally in the common stocks of
foreign companies; however, the series may also invest in American Depository
Receipts (ADRs) and other U.S. dollar denominated securities of foreign issuers.
ADRs are securities that are listed and traded in the United States but
represent an ownership interest in securities issued by a foreign issuer.
CURRENCY HEDGING In order to attempt to manage the currency risk associated
with owning and trading foreign securities, the series may, but is not required
to, use several kinds of derivative contracts. The series primarily uses
forward foreign currency exchange contracts for hedging purposes. These
derivatives may be used to hedge against changes in the value of foreign
currencies relative to the U.S. dollar in connection with specific transactions
or portfolio positions.
Additional Risks
EMERGING MARKET RISK Emerging market countries are foreign countries that are
generally considered to be less developed than the United States, Canada, Japan,
Australia, New Zealand, and most of the nations in Western Europe. As a result,
they may be more likely to experience political, social, or economic turmoil.
In addition, the financial conditions of issuers in these countries may be more
precarious than those in developed countries. These characteristics may result
in greater price volatility for investments in emerging markets. This price
volatility may be heightened by currency fluctuations relative to the U.S.
dollar.
RISKS RELATED TO CURRENCY HEDGING The value of the series' portfolio may
decline if a currency is not hedged and that currency later declines with
respect to the U.S. dollar. There are also additional risks because a hedging
strategy relies upon the ability of the advisor to accurately predict movements
in currency exchange rates. In addition, there may not be an exact relationship
between changes in the prices of a forward foreign currency exchange contract
and the underlying currency.
Defensive investing
The series may depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. If the series takes a temporary defensive position, it
may be unable to achieve its investment goal.
The Series' investment goal
The series' board of directors may change its investment goal (described above
under "Goals and strategies") without obtaining the approval of the
shareholders. The series might not succeed in achieving its goal.
<PAGE>
The advisor
The advisor
The series' advisor is Exeter Asset Management, a division of Manning & Napier
Advisors, Inc., 1100 Chase Square, Rochester, New York 14604. The advisor is
responsible for the day-to-day operations of the series and generally is
responsible for supervision of the series' overall business affairs, service
providers and officers.
A team made up of investment professionals and analysts makes all of the series'
investment decisions.
Management fees
In return for the services it provides to the series, the advisor receives a
management fee, which is computed daily and payable monthly at an annual rate of
1.00% of the series' average daily net assets.
Clients for whom the Advisor provides advisory services pursuant to separate
investment advisory contracts will be separately credited by the advisor an
amount equal to the portion of their client advisory fee attributable to the
portion of their assets invested in the series.
The advisor may use its own resources to engage in activities that may promote
the sale of the series, including payments to third parties who provide
shareholder support servicing and distribution assistance. Investors may be
charged a fee if they effect transactions through a broker or agent.
The distributor
The distributor of the series' shares is Manning & Napier Investor Services,
Inc. Shares are offered to investors who purchase shares directly from the
distributor or through certain registered investment advisors. Shares of the
International Series are not subject to any distribution or shareholder
servicing fees. The advisor may, from its own resources, defray or absorb costs
relating to distribution, including compensation of employees who are involved
in distribution.
Discretionary account management
Shares of the series are also offered to the advisor's clients and those of its
affiliates who have authorized investment in the series as part of the
discretionary account management services of the advisor or its affiliates.
Shares may also be used in connection with a discretionary account management
service provided by the advisor that uses shares of the series as the principal
underlying investment.
<PAGE>
How to Buy, Exchange, and Redeem Shares
For discretionary account management clients of the advisor or its affiliates,
investment decisions pertaining to purchases and sales of fund shares are made
at the advisor's discretion pursuant to authorization received from clients.
The instructions provided below apply to all other investors.
How to buy shares
The minimum initial investment in the series is $2,000, and the minimum for each
additional investment is $100. The minimum investment requirements are lower
for participants in the Automatic Investment Plan, which is described below.
These investment minimums may be waived at the advisor's discretion.
All orders to purchase shares received in good order by the distributor,
transfer agent or other agent before the close of trading on the New York Stock
Exchange (NYSE) will be executed at that day's share price. Orders received in
good order after that day's close will be executed at the next business day's
price. All orders must include the required documentation and be accompanied by
proper payment. The series reserves the right to reject purchase orders or to
stop offering its shares without notice to shareholders.
By mail
Opening an account
Send a check payable to Exeter Fund, Inc. with the completed original
account application. The address is:
Exeter Fund, Inc.
P.O. Box 41118
Rochester, NY 14604
To request an account application, call the fund at 1-800-466-3863.
Adding to an account
Send a check payable to Exeter Fund, Inc. and a letter of instruction
with the name of the series to be purchased and the account name and number.
By wire
Opening an account
or
Adding to an account
After the fund has received your completed account application, you
may wire funds to open or add shares to your account. Before sending a wire,
call 1-800-466-3863 for wire instructions.
<PAGE>
Automatic Investment Plan
You may participate in the automatic investment plan by completing the
applicable section of the account application or contacting the fund. Through
the plan, you can authorize transfers of a specified amount from your bank
account into the series on a regular basis. The minimum amount of each
investment is $25. If you have insufficient funds in your account to complete a
transfer, your bank may charge you a fee.
<PAGE>
How to exchange and how to redeem shares
How to exchange shares
You may exchange shares of a series for shares of any other series of the Exeter
Fund, if the registration of both accounts is identical. If received with
proper documentation before the close of trading on the NYSE, exchange requests
will be executed at that day's share prices. Otherwise, they will be executed
at the prices determined on the next business day after receipt with proper
documentation.
The minimum exchange amount is $1,000 (or all the shares in your account, if
less than $1,000). You may exchange up to 4 times during any 12-month period
without paying a sales charge or any other fee. For any additional exchanges,
you may be charged $15 per exchange. A series may refuse any exchange order and
may alter, limit or suspend its exchange privilege on 60 days' notice. An
exchange involves a taxable redemption of shares surrendered in the exchange.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page, signed by each registered account owner, exactly as your
names appear on the account registration.
Provide the name of the current series, the series to exchange into and
dollar amount to be exchanged.
Provide both account numbers.
By telephone
Unless you have declined telephone privileges, call the fund at
1-800-466-3863.
Provide the name of the current series, the series to exchange into and
dollar amount to be exchanged.
Provide both account numbers.
The fund may ask for identification, and all telephone transactions are
recorded.
<PAGE>
How to redeem shares
All orders to redeem shares received in good order by the distributor, transfer
agent or other agent before the close of trading on the NYSE will be executed at
that day's share price. Orders received in good order after the close of
trading will be executed at the next business day's price. All redemption
orders must include the required documentation and signatures. The series may
postpone payment of redemption proceeds for up to seven days, or suspend
redemptions to the extent permitted by law. If you recently purchased your
shares by check, your redemption proceeds will not be sent to you for 15 days.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page signed by each registered account owner.
State the name of the series and the number of shares or dollar amount to
be sold.
Provide the account number.
Signature guarantees may be required.
Additional documentation may be required (call the fund for details).
<PAGE>
Investment and account information
Accounts with low balances
If your account falls below $1,000 due to the redemption of shares, the fund may
ask you to bring your account up to the minimum requirement. If your account is
still below $1,000 after 60 days, the fund may close your account and send you
the redemption proceeds.
In-kind purchases and redemptions
Securities you own may be used to purchase shares of the series. The advisor
will determine if acquiring the securities is consistent with the series' goals
and policies. If accepted, the securities will be valued the same way the
series values securities it already owns.
The series may make payment for shares in part by giving you portfolio
securities. As a redeeming shareholder, you will pay transaction costs to
dispose of these securities.
Signature guarantees
A signature guarantee may be required for any written request to sell shares, or
to change the account registration.
The transfer agent will accept signature guarantees from:
Members of the STAMP program or the NYSE's Medallion Signature Program.
A broker or securities dealer.
A federal savings, cooperative or other type of bank.
A savings and loan or other thrift institution.
A credit union.
A securities exchange or clearing agency.
A notary public cannot provide a signature guarantee.
Valuation of shares
The series offers its shares at the net asset value (NAV) per share of the
series. The series calculates its NAV once daily as of the close of regular
trading on the NYSE (generally at 4:00 p.m., New York time) on each day the
exchange is open. If the exchange closes early, the series will accelerate the
calculation of NAV and transaction deadlines to that time.
The series values the securities in its portfolio on the basis of market
quotations and valuations provided by independent pricing services. If
quotations are not readily available, or the value of a security has been
materially affected by events occurring after the closing of a foreign exchange,
the series values its assets by a method that the directors believe accurately
reflects fair value. If the series uses fair value to price securities, it may
value those securities higher or lower than another series that uses market
quotations to price the same securities.
The foreign securities held by the series may be listed on foreign exchanges
that trade on days when the NYSE is not open and the portfolios do not price
their shares. As a result, the net asset value of a portfolio may change at a
time when shareholders are not able to purchase or redeem shares.
Year 2000 issue
Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
series. The cost of addressing the Year 2000 issue, if substantial, could
adversely affect companies and governments that issue securities held by the
series. The advisor, the transfer agent and the distributor are addressing the
Year 2000 issue for their systems. Its other service providers have informed
the series that they are taking similar measures. Although the series does not
expect the Year 2000 issue to adversely affect it, the series cannot guarantee
that the efforts of the series or its service providers to correct the problem
will be successful.
<PAGE>
Dividends, distributions and taxes
Dividends and distributions
The series generally:
Pays dividends once a year, in December.
Makes capital gains distributions, if any, once a year, typically in
December.
The series also may pay additional distributions and dividends at other times if
necessary for the series to avoid a federal tax.
Capital gain distributions and dividends are reinvested in additional shares of
series. Alternatively, you can instruct the transfer agent in writing or by
telephone to have your capital gains and/or dividends paid in cash. You can
change your choice at any time to be effective as of the next distribution or
dividend, except that any change given to the transfer agent after the record
date will not be effective until the next distribution or dividend is made. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.
Taxes
<TABLE>
<CAPTION>
Transaction Federal Tax Status
- ------------------------------------- ----------------------------------------
<S> <C>
Redemption or exchange of shares. . . Usually taxable as capital gain or loss;
long-term only if shares owned more
than one year
----------------------------------------
Long-term capital gain distributions. Taxable as long-term capital gain
----------------------------------------
Short-term capital gain distributions Taxable as ordinary income
----------------------------------------
Dividends . . . . . . . . . . . . . . Taxable as ordinary income
- ------------------------------------- ----------------------------------------
</TABLE>
If you are a taxable investor, you may want to avoid buying shares when the
series is about to declare a capital gain distribution or a dividend, because it
will be taxable to you even though it may actually be a return of a portion of
your investment.
After the end of each year, the series will provide you with information about
the distributions and dividends that you received and any redemptions of shares
during the previous year. Shareholders may be able to claim a credit or
deduction on their income tax returns for their pro rata portion of qualified
taxes paid by the series to foreign countries. In calculating your gain or loss
on any sale of shares, note that your tax basis in your shares is increased by
the amounts of dividends and distributions that you have reinvested in the
series. Dividends and distributions are taxable as described above whether
received in cash or reinvested.
If you do not provide the series with your correct taxpayer identification
number and any required certifications, you may be subject to back-up
withholding of 31% of your distributions, dividends, and redemption proceeds.
Because each shareholder's circumstances are different and special tax rules may
apply, you should consult with your tax adviser about your investment in the
series and your receipt of dividends, distributions or redemption proceeds.
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the series'
financial performance for the past five years. Certain information reflects
financial results for a single share. The total returns in the table represent
the rate that an investor would have earned on an investment in the series
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
series' financial statements, are included in the annual report, which is
available upon request.
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
For Years Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
---------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
NET ASSET VALUE -
BEGINNING OF PERIOD. $13.08 $ 11.54 $ 9.57 $ 9.54 $ 11.33
---------- -------- -------- --------- --------
Income from investment
operations:
Net investment income 0.097 0.154 0.156 0.123 0.143
Net realized and
unrealized gain (loss)
on investments. . . 2.948 2.992 1.976 0.262 (1.784)
---------- -------- ---------- -------- -------
Total from investment
operations . . . . 3.045 3.146 2.132 0.385 (1.641)
---------- ------- --------- -------- -------
Less distributions to
shareholders:
From net investment
income. . . . . . (0.109) (0.150) (0.143) (0.118) --
From paid-in-capital. -- -- -- (0.160) --
From net realized
gain on investments . (0.446) (1.456) (0.019) (0.077) (0.149)
---------- ---------- -------- -------- --------
Total distributions to
shareholders. . . (0.555) (1.606) (0.162) (0.355) (0.149)
---------- ---------- ---------- ------- --------
NET ASSET VALUE -
END OF PERIOD. . . . . $15.57 $13.08 $11.54 $ 9.57 $ 9.54
========== ========= ======== ======== ==========
Total return1. . . . 23.63% 27.70% 22.35% 4.14% (14.48)%
Ratios to average net
assets/
Supplemental Data:
Expenses . . . . 1.12% 1.08% 1.12% 1.20% 1.18%
Net investment income 0.59% 1.18% 1.46% 1.42% 1.38%
Portfolio turnover . . . . 0% 10% 2% 14% 31%
NET ASSETS - END OF PERIOD
(000'S OMITTED) . . . . .$ 199,259 $ 199,256 $ 149,331 $ 128,294 $ 85,964
======== ========= ========= ========= ========
</TABLE>
1 Represents aggregate total return for the period indicated.
<PAGE>
[Back Cover Page]
Exeter Fund, Inc.
International Series
Shareholder Reports and the Statement of Additional Information (SAI). Annual
and semiannual reports to shareholders provide additional information about the
series' investments. These reports discuss the market conditions and investment
strategies that significantly affected the series' performance during its last
fiscal year. The SAI provides more detailed information about the series. It
is incorporated by reference into this prospectus.
How to Obtain These Reports and Additional Information.
You may obtain shareholder reports and the SAI or other information about
the series without charge, by calling 1-800-466-3863 or sending written requests
to Exeter Fund, P.O. Box 41118, Rochester, New York 14604.
You may review shareholder reports, the prospectus and SAI at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get a copy of these materials by writing to the Public Reference Section
of the Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the SEC's Internet web site
(http://www.sec.gov).
If someone makes a statement about the series that is not in this prospectus,
you should not rely upon that information. Neither the series nor its
distributor is offering to sell shares to any person to whom it may not lawfully
sell shares.
Investment Company Act file no. 811-04087
<PAGE>
[LOGO]
Prospectus
Exeter Fund, Inc.
May 1, 1999
New York Tax Exempt Series
The Securities and Exchange Commission has not approved or disapproved the
series' shares or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.
<PAGE>
[This page intentionally blank]
<PAGE>
Exeter Asset Management is a division of Manning & Napier Advisors, Inc., which
was founded in 1970 and manages over $7 billion for individual and institutional
investors.
Contents Page
Goals, strategies, and risks 4
More about the series' investments 6
The advisor 7
How to buy shares 8
How to exchange and how to redeem shares 9
Investment and account information 10
Dividends, distributions and taxes 11
Financial highlights 12
<PAGE>
Goals, strategies, and risks
New York Tax Exempt Series
Investment goal
Provide as high a level of current income exempt from federal income tax and New
York State personal income tax as the advisor believes is consistent with the
preservation of capital.
Key investments and strategies
The series invests primarily in municipal bonds and other securities with income
that is exempt from federal income tax and New York personal income tax. The
main issuers of these securities are state and local agencies in New York. In
selecting investments for the series, the advisor attempts to balance the
series' goals of high income and capital preservation. With this approach, the
advisor attempts to build a portfolio that it believes provides the opportunity
to earn current income. However, the advisor will only purchase investment
grade securities and will maintain other selection criteria in an attempt to
avoid permanent capital loss.
Maturity
The series is not subject to any maturity restrictions but will vary its
maturity depending on the advisor's outlook for interest rates.
Credit quality
The Series' investments will be limited to investment grade securities.
Bond selection process
The advisor emphasizes those bond market sectors and selects for the series
those securities that it believes offer yields sufficient to compensate the
investor for the risks specific to the security or sector. In analyzing the
relative attractiveness of sectors and individual securities, the advisor
considers:
- - The interest rate sensitivity of each security.
- - The narrowing or widening of interest rate spreads between sectors,
securities of different credit quality or securities of different maturities.
Who may want to invest
This series may be an appropriate investment if you:
- - pay New York personal income tax
- - are in a high federal and state income tax bracket
- - are seeking a regular stream of income
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year since its inception. The total return table
shows how the average annual total returns for the series for different calendar
periods compared to those of the Merrill Lynch Intermediate Municipal Index.
[Bar chart showing the percent total return for the New York Tax Exempt Series
for 1995, 1996, 1997 and 1998, with calendar years ended December 31st. The
results are 16.78% for 1995, 3.32% for 1996, 8.33% for 1997, and 5.53% for 1998]
The Merrill Lynch Intermediate Municipal Index is a market value weighted
measure of approximately 140 municipal bonds issued across the United States.
The index is comprised of investment grade securities.
<PAGE>
<TABLE>
<CAPTION>
Avg. Annual Total Returns
(for periods ended 12/31/98)
1 Year Since Inception on 1/17/94
- --------------------------- -----------------------------------------
<S> <C> <C>
New York Tax Exempt Series 5.53% 5.19%
------------ -------------
Merrill Lynch Intermediate
Municipal Index. . . . . . 6.27% 5.75%
- -------------------------- ----------- -------------
Quarterly returns
Highest: . . . . . . . . . 6.69% in 1st quarter 1995
- -------------------------- ---------------------------
Lowest:. . . . . . . . . . -1.68% in 1st quarter 1996
- -------------------------- ---------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
New York Tax Exempt Series
Principal risks of investing in the series
As with most bond funds, the value of your investment will fluctuate with
changes in interest rates. This means that you could lose money on your
investment in the series or the series could underperform if any of the
following occurs:
- - Interest rates go up, which will make bond prices go down and reduce the
value of the series' portfolio. The risk will be higher when the series is
invested in longer-term bonds than when it is invested in bonds with shorter
maturities, because longer-term bonds are generally more sensitive to interest
rate changes. Changes in the value of portfolio securities will not affect
interest income derived from those securities, but will affect the value of the
series' portfolio.
- - The issuer of a bond owned by the series defaults on its obligation to pay
principal or interest or has its credit rating downgraded.
- - The advisor's judgments about the attractiveness, relative value or
potential appreciation of a particular security or sector prove to be incorrect.
In addition to the general risks of bond funds, this series has the following
special risks:
- - Concentration in New York tax exempt securities may lead to more
volatility than if the series invested in securities from a number of different
states.
- - The series is sensitive to political, economic, or demographic
developments within the state, public authorities, or political subdivisions,
particularly the New York City area.
- - The series is subject to the risk that its market segment (New York tax
exempt securities) may underperform other fixed income market segments or the
fixed income markets as a whole.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 New York Tax Exempt Series
- --------------------------------------------- ----------------------------
<S> <C>
Shareholder fees (paid directly from
your investment) . None1
-------
Annual fund operating expenses
(expenses that are deducted from assets
of the series)
- ---------------------------------------------
Management fee. . . . . . . . . . . . . 0.50%
- --------------------------------------------- ----------
Distribution and service (Rule 12b-1) fees. . None
----------
Other expenses. . . . . . . . . . . . . . . . .11%
----------
Total annual fund operating expenses. . . . . .61%
- ---------------------------------------------- ----------
</TABLE>
A wire charge, currently $15, may be deducted by the transfer agent from the
amount of a wire redemption payment made at the request of a shareholder. A
shareholder may effect up to four exchanges in a twelve-month period without
charge; subsequent exchanges are subject to a fee of $15.
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$62 $195 $340 $762
- --- ---- ---- ----
</TABLE>
<PAGE>
More about the series' investments
Principal investments
TAX EXEMPT SECURITIES Each series may invest in fixed income securities of any
maturity or duration. These securities may be issued by the State of New York
and its political subdivisions, agencies and instrumentalities or by other
governmental entities. These issuers may also be located in the District of
Columbia, Puerto Rico, and other U.S. territories and possessions. The series
has a fundamental investment policy of investing at least 80% of its net assets
in New York tax exempt securities, except when investing for defensive purposes
during times of adverse market conditions.
TAXABLE INVESTMENTS The series may also invest in taxable obligations or hold
its assets in money market instruments or cash. These investments could lead
the series to make a taxable distribution to shareholders. Taxable investments
in which the series may invest could include obligations of the U.S. government,
its agencies or instrumentalities; obligations issued by governmental issuers in
other states, the interest on which would be exempt from federal income tax; or
other fixed-income securities the advisor considers appropriate.
ADDITIONAL INFORMATION REGARDING CONCENTRATION IN NEW YORK TAX EXEMPT SECURITIES
This series will be particularly sensitive to economic and political
developments in the State of New York. Constitutional or statutory requirements
may limit the state's power to raise revenues or increase taxes and to meet its
obligations. In addition, changes to New York laws or regulations may impair
the ability of issuers of municipal securities to repay principal or to pay
interest. The amount of information about the condition of an issuer of New
York tax exempt securities may not be as extensive as information regarding a
corporate issuer whose securities are publicly traded.
Additional investment risks
LOWER-RATED SECURITIES The series limits its investments to investment grade
securities. Securities with the lowest ratings within the investment grade
category carry more risk than those with the highest ratings. When the series
invests in New York tax exempt securities in the lower rating categories, the
achievement of its goals is more dependent on the advisor's ability than would
be the case if the series were to invest in higher-rated securities. The
advisor seeks to minimize this risk through investment analysis and attention to
current developments in interest rates and economic conditions.
CALL RISK Some securities held by the series may permit the issuer at its
option to "call", redeem, its securities. If an issuer were to redeem
securities held by the series during a time of declining interest rates, the
series may not be able to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
Defensive investing
The series may depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. If the series takes a temporary defensive position, it
may be unable to achieve its investment goals.
The series' investment goals
The series' board of directors may change the series' investment goals
(described above under "Goals and strategies") without obtaining the approval of
the series' shareholders. The series might not succeed in achieving its goals.
<PAGE>
The advisor
The advisor
The series' advisor is Exeter Asset Management, a division of Manning & Napier
Advisors, Inc., 1100 Chase Square, Rochester, New York 14604. The advisor is
responsible for the day-to-day operations of the series and generally is
responsible for supervision of the series' overall business affairs, service
providers and officers.
A team made up of investment professionals and analysts makes all of the series'
investment decisions.
Management fees
In return for the services it provides to the series, the advisor receives a
management fee, which is computed daily and payable monthly at an annual rate of
0.50% of the series' average daily net assets.
Clients for whom the Advisor provides advisory services pursuant to separate
investment advisory contracts will be separately credited by the advisor an
amount equal to the portion of their client advisory fee attributable to the
portion of their assets invested in the series.
The advisor may use its own resources to engage in activities that may promote
the sale of the series, including payments to third parties who provide
shareholder support servicing and distribution assistance. Investors may be
charged a fee if they effect transactions through a broker or agent.
The distributor
The distributor of the series' shares is Manning & Napier Investor Services,
Inc. Shares are offered to investors who purchase shares directly from the
distributor or through certain registered investment advisors. Shares of the
New York Tax Exempt Series are not subject to any distribution or shareholder
servicing fees. The advisor may, from its own resources, defray or absorb costs
relating to distribution, including compensation of employees who are involved
in distribution.
Discretionary account management
Shares of the series are also offered to the advisor's clients and those of its
affiliates who have authorized investment in the series as part of the
discretionary account management services of the advisor or its affiliates.
Shares may also be used in connection with a discretionary account management
service provided by the advisor that uses shares of the series as the principal
underlying investment.
Year 2000 issue
Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
series. The cost of addressing the Year 2000 issue, if substantial, could
adversely affect companies and governments that issue securities held by the
series. The advisor, the transfer agent and the distributor are addressing the
Year 2000 issue for their systems. The series has been informed by its other
service providers that they are taking similar measures. Although the series
does not expect the Year 2000 issue to adversely affect it, the series cannot
guarantee that the efforts of the series or its service providers to correct the
problem will be successful.
<PAGE>
How to Buy, Exchange, and Redeem Shares
For discretionary account management clients of the advisor or its affiliates,
investment decisions pertaining to purchases and sales of fund shares are made
at the advisor's discretion pursuant to authorization received from clients.
The instructions provided below apply to all other investors.
How to buy shares
The minimum initial investment in the series is $2,000, and the minimum for each
additional investment is $100. The minimum investment requirements are lower
for participants in the Automatic Investment Plan, which is described below.
These investment minimums may be waived at the advisor's discretion.
All orders to purchase shares received in good order by the distributor,
transfer agent or other agent before the close of trading on the New York Stock
Exchange (NYSE) will be executed at that day's share price. Orders received in
good order after that day's close will be executed at the next business day's
price. All orders must include the required documentation and be accompanied by
proper payment. The series reserves the right to reject purchase orders or to
stop offering its shares without notice to shareholders.
By mail
Opening an account
Send a check payable to Exeter Fund, Inc. with the completed original
account application. The address is:
Exeter Fund, Inc.
P.O. Box 41118
Rochester, NY 14604
To request an account application, call the fund at 1-800-466-3863.
Adding to an account
Send a check payable to Exeter Fund, Inc. and a letter of instruction
with the name of the series to be purchased and the account name and number.
By wire
Opening an account
or
Adding to an account
After the fund has received your completed account application, you
may wire funds to open or add shares to your account. Before sending a wire,
call 1-800-466-3863 for wire instructions.
Automatic Investment Plan
You may participate in the automatic investment plan by completing the
applicable section of the account application or contacting the fund. Through
the plan, you can authorize transfers of a specified amount from your bank
account into the series on a regular basis. The minimum amount of each
investment is $25. If you have insufficient funds in your account to complete a
transfer, your bank may charge you a fee.
<PAGE>
How to exchange and how to redeem shares
How to exchange shares
You may exchange shares of a series for shares of any other series of the Exeter
Fund, if the registration of both accounts is identical. If received with
proper documentation before the close of trading on the NYSE, exchange requests
will be executed at that day's share prices. Otherwise, they will be executed
at the prices determined on the next business day after receipt with proper
documentation.
The minimum exchange amount is $1,000 (or all the shares in your account, if
less than $1,000). You may exchange up to 4 times during any 12-month period
without paying a sales charge or any other fee. For any additional exchanges,
you may be charged $15 per exchange. A series may refuse any exchange order and
may alter, limit or suspend its exchange privilege on 60 days' notice. An
exchange involves a taxable redemption of shares surrendered in the exchange.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page, signed by each registered account owner, exactly as your
names appear on the account registration.
Provide the name of the current series, series to exchange into and dollar
amount to be exchanged.
Provide both account numbers.
By telephone
Unless you have declined telephone privileges, call the fund at
1-800-466-3863.
Provide the name of the current series, series to exchange into and dollar
amount to be exchanged.
Provide both account numbers.
The fund may ask for identification, and all telephone transactions are
recorded.
How to redeem shares
All orders to redeem shares received in good order by the distributor, transfer
agent or other agent before the close of trading on the NYSE will be executed at
that day's share price. Orders received in good order after the close of
trading will be executed at the next business day's price. All redemption
orders must include the required documentation and signatures. The series may
postpone payment of redemption proceeds for up to seven days, or suspend
redemptions to the extent permitted by law. If you recently purchased your
shares by check, your redemption proceeds will not be sent to you for 15 days.
By mail
Send a letter of instruction to Exeter Fund, Inc., at the address on the
opposite page signed by each registered account owner.
State the name of the series and the number of shares or dollar amount to
be sold.
Provide the account number.
Signature guarantees may be required.
Additional documentation may be required (call the fund for details).
<PAGE>
Investment and account information
Accounts with low balances
If your account falls below $1,000 due to the redemption of shares, the fund may
ask you to bring your account up to the minimum requirement. If your account is
still below
$1,000 after 60 days, the fund may close your account and send you the
redemption proceeds.
In-kind purchases and redemptions
Securities you own may be used to purchase shares of a series. The advisor will
determine if acquiring the securities is consistent with the series' goals and
policies. If accepted, the securities will be valued the same way the series
values securities it already owns.
The series may make payment for shares in part by giving you portfolio
securities. As a redeeming shareholder, you will pay transaction costs to
dispose of these securities.
Signature guarantees
A signature guarantee may be required for any written request to sell shares, or
to change the account registration.
The transfer agent will accept signature guarantees from:
A member of the STAMP program or the NYSE's Medallion Signature Program.
A broker or securities dealer.
A federal savings, cooperative or other type of bank.
A savings and loan or other thrift institution.
A credit union.
A securities exchange or clearing agency.
A notary public cannot provide a signature guarantee.
Valuation of shares
The series offers its shares at the net asset value (NAV) per share of the
series. The series calculates its NAV once daily as of the close of regular
trading on the NYSE (generally at 4:00 p.m., New York time) on each day the
exchange is open. If the exchange closes early, the series will accelerate the
calculation of NAV and transaction deadlines to that time.
The series values the securities in its portfolio on the basis of market
quotations and valuations provided by independent pricing services. If
quotations are not readily available, the series values its assets by a method
that the directors believe accurately reflects fair value. A series that uses
fair value to price securities may value those securities higher or lower than
another series that uses market quotations to price the same securities.
<PAGE>
Dividends, distributions and taxes
Dividends and distributions
The series generally:
Pays dividends four time a year, in March, June, September, and December.
Makes capital gains distributions, if any, once a year, typically in
December.
The series may pay additional distributions and dividends at other times if
necessary for the series to avoid a federal tax.
Capital gain distributions and dividends are reinvested in additional shares of
the series. Alternatively, you can instruct the transfer agent in writing or by
telephone to have your capital gains and/or dividends paid in cash. You can
change your choice at any time to be effective as of the next distribution or
dividend, except that any change given to the transfer agent after the record
date will not be effective until the next distribution or dividend is made. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.
Taxes
Transaction Federal tax status
Redemption or exchange of shares Usually taxable as capital gain or
loss; long-term only if shares
owned more than one year
Long-term capital gain distributions Taxable as long-term capital gain
Short-term capital gain distributions Taxable as ordinary income
Dividends Taxable as ordinary income
Tax Exempt Income Free of federal income tax
The Series intends to pay exempt-interest dividends quarterly. These dividends
are exempt from regular federal income tax, but they may have other tax
consequences, including alternative minimum tax. Under New York law, dividends
that are derived from interest payments on New York obligations and are exempt
from gross income for federal income tax are also exempt from New York State and
New York City income tax for individuals who reside in New York. Other
distributions, including short-term and long-term capital gains distributions,
are generally taxable.
After the end of each year, the series will provide you with information about
the distributions and dividends that you received and any redemptions of shares
during the previous year. In calculating your gain or loss on any sale of
shares, note that your tax basis in your shares is increased by the amounts of
dividends and distributions that you have reinvested in a series. Dividends and
distributions are taxable as described above whether received in cash or
reinvested. If you do not provide the series with your correct taxpayer
identification number and any required certifications, you may be subject to
back-up withholding of 31% of your distributions, dividends and redemption
proceeds. Because each shareholder's circumstances are different and special
tax rules may apply, you should consult with your tax adviser about your
investment in the series and your receipt of dividends, distributions or
redemption proceeds.
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the series'
financial performance for the past five years. Certain information reflects
financial results for a single share. The total returns in the table represent
the rate that an investor would have earned on an investment in the series
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
series' financial statements, are included in the annual report, which is
available upon request.
<PAGE>
New York Tax Exempt Series
<TABLE>
<CAPTION>
FOR THE PERIOD
1/17/94
(COMMENCEMENT
--------------------------------------------- OF OPERATIONS)
FOR THE YEARS ENDED TO 12/31/94
-------------------------------------------- -----------
12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
- ------------------------
THROUGHOUT EACH PERIOD):
- ------------------------
NET ASSET VALUE -
BEGINNING OF PERIOD . . $10.37 $ 9.98 $10.07 $ 8.98 $10.00
- ------------------------ -------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.427 0.431 0.422 0.404 0.338
- ------------------------- ------- ------- ------- ------ ------
Net realized and
unrealized gain
(loss) on investments 0.138 0.384 (0.102) 1.086 (1.020)
- ------------------------- ------- ------ ------- ------ -------
Total from investment
operations . . . . . 0.565 0.815 0.320 1.490 (0.682)
- ------------------------ ------ ------ ----- ------- ------
Less distributions to
shareholders:
From net investment
income. . . . . (0.425) (0.425) (0.410) (0.400) (0.338)
- ------------------------- ------ ------- ------ ------- -------
NET ASSET VALUE -
END OF PERIOD. . . . . . $10.51 $10.37 $ 9.98 $10.07 $8.98
======================= ======= ======= ======== ======= ======
Total return1. . . . . . 5.53% 8.33% 3.32% 16.78% (6.82)%
- ------------------------ ------- -------- ------ ------ -------
Ratios to average net assets/
Supplemental Data:
Expenses . . . . . . 0.61% 0.61% 0.61% 0.65% 0.79%2
- ------------------------ ------ ------- ----- ----- ------
Net investment income 4.17% 4.36% 4.41% 4.36% 3.82%2
- ------------------------ ------ ------ ----- ------ -------
Portfolio turnover 3% 2% 6% 0% 6%
- ----------------------- ----- ------ ------ ------ -------
NET ASSETS - END OF
PERIOD (000'S OMITTED) $60,772 $45,681 $37,325 $28,817 $17,301
- ----------------------- ======== ======== ======= ======= ========
<FN>
Represents aggregate total return for the period indicated.
- -------------------------------------------------------------------
2 Annualized.
- --------------
</TABLE>
<PAGE>
[Back Cover Page]
Exeter Fund, Inc.
New York Tax Exempt Series
Shareholder Reports and the Statement of Additional Information (SAI). Annual
and semiannual reports to shareholders provide additional information about the
series' investments. These reports discuss the market conditions and investment
strategies that significantly affected the series' performance during its last
fiscal year. The SAI provides more detailed information about the series. It
is incorporated by reference into this prospectus.
How to Obtain These Reports and Additional Information.
You may obtain shareholder reports and the SAI or other information about
the fund without charge, by calling
1-800-466-3863 or sending written requests to Exeter Fund, Inc., P.O. Box 41118,
Rochester, New York 14604.
You may review shareholder reports, the prospectus and SAI at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get a copy of these materials by writing to the Public Reference Section
of the Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the SEC's Internet web site
(http://www.sec.gov).
If someone makes a statement that is not in this prospectus about any of the
series, you should not rely upon that information. Neither the series nor their
distributor is offering to sell shares of the series to any person to whom the
series may not lawfully sell their shares.
Investment Company Act file no. 811-04087
<PAGE>
[LOGO]
Prospectus
Exeter Fund, Inc.
May 1, 1999
Ohio Tax Exempt Series
The Securities and Exchange Commission has not approved or disapproved the
series' shares or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.
<PAGE>
[This page intentionally blank]
<PAGE>
Exeter Asset Management is a division of Manning & Napier Advisors, Inc., which
was founded in 1970 and manages over $7 billion for individual and institutional
investors.
Contents Page
Goals, strategies, and risks 4
More about the series' investments 6
The advisor 7
How to buy shares 8
How to exchange and how to redeem shares 9
Investment and account information 10
Dividends, distributions and taxes 11
Financial highlights 12
<PAGE>
Goals, strategies, and risks
Ohio Tax Exempt Series
Investment goal
Provide as high a level of current income exempt from federal income tax and
Ohio State personal income tax as the advisor believes is consistent with the
preservation of capital.
Key investments and strategies
The series invests primarily in municipal bonds and other securities with income
that is exempt from federal income tax and Ohio personal income tax. The main
issuers of these securities are state and local agencies in Ohio. In selecting
investments for the series, the advisor attempts to balance the series' goals of
high income and capital preservation. With this approach, the advisor attempts
to build a portfolio that it believes provides the opportunity to earn current
income. However, the advisor will only purchase investment grade securities and
will maintain other selection criteria in an attempt to avoid permanent capital
loss.
Maturity
The series is not subject to any maturity restrictions but will vary its
maturity depending on the advisor's outlook for interest rates.
Credit quality
The Series' investments will be limited to investment grade securities.
Bond selection process
The advisor emphasizes those bond market sectors and selects for the series
those securities that it believes offer yields sufficient to compensate the
investor for the risks specific to the security or sector. In analyzing the
relative attractiveness of sectors and individual securities, the advisor
considers:
- - The interest rate sensitivity of each security.
- - The narrowing or widening of interest rate spreads between sectors,
securities of different credit quality or securities of different maturities.
Who may want to invest
This series may be an appropriate investment if you:
- - pay Ohio personal income tax
- - are in a high federal and state income tax bracket
- - are seeking a regular stream of income
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year since its inception. The total return table
shows how the average annual total returns for the series for different calendar
periods compared to those of the Merrill Lynch Intermediate Municipal Index.
[Bar chart showing the percent total return for the Ohio Tax Exempt Series for
1995, 1996, 1997 and 1998, with calendar years ended December 31st. The results
are 17.14% for 1995, 3.16% for 1996, 7.91% for 1997, and 5.34% for 1998]
The Merrill Lynch Intermediate Municipal Index is a market value weighted
measure of approximately 140 municipal bonds issued across the United States.
The index is comprised of investment grade securities.
<PAGE>
<TABLE>
<CAPTION>
Avg. Annual Total Returns
(for periods ended 12/31/98)
1 Year Since Inception on 2/14/94
- -------------------------- ------- --------------------------
<S> <C> <C>
Ohio Tax Exempt Series . . 5.35% 5.32%
-------- -----
Merrill Lynch Intermediate
Municipal Index. . . . . . 6.27% 5.82%
- -------------------------- -------- -----
Quarterly returns
Highest: . . . . . . . . . 7.36% in 1st quarter 1995
- -------------------------- ---------------------------
Lowest:. . . . . . . . . . -1.79% in 1st quarter 1996
- -------------------------- ---------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
Ohio Tax Exempt Series
Principal risks of investing in the series
As with most bond funds, the value of your investment will fluctuate with
changes in interest rates. This means that you could lose money on your
investment in the series or the series could underperform if any of the
following occurs:
- - Interest rates go up, which will make bond prices go down and reduce the
value of the series' portfolio. The risk will be higher when the series is
invested in longer-term bonds than when it is invested in bonds with shorter
maturities, because longer-term bonds are generally more sensitive to interest
rate changes. Changes in the value of portfolio securities will not affect
interest income derived from those securities, but will affect the value of the
series' portfolio.
- - The issuer of a bond owned by the series defaults on its obligation to pay
principal or interest or has its credit rating downgraded.
- - The advisor's judgments about the attractiveness, relative value or
potential appreciation of a particular security or sector prove to be incorrect.
In addition to the general risks of bond funds, this series has the following
special risks:
- - Concentration in Ohio tax exempt securities may lead to more volatility
than if the series invested in securities from a number of different states.
- - The series is sensitive to political, economic, or demographic
developments within the state, public authorities, or political subdivisions.
- - The series is subject to the risk that its market segment (Ohio tax exempt
securities) may underperform other fixed income market segments or the fixed
income markets as a whole.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 Ohio Tax Exempt Series
- ------------------------------------------------------ ----------------------
<S> <C>
Shareholder fees (paid directly from your investment) None1
------
Annual fund operating expenses
(expenses that are deducted from assets of the series)
- -------------------------------------------------------
Management fee. . . . . . . . . . . . . . . . . . . . . 0.50%
- ------------------------------------------------------- -----
Distribution and service (Rule 12b-1) fees. . . . . . . None
-----
Other expenses. . . . . . . . . . . . . . . . . . . . . .29%
-----
Total annual fund operating expenses. . . . . . . . . .79%
- ------------------------------------------------------- -----
</TABLE>
A wire charge, currently $15, may be deducted by the transfer agent from the
amount of a wire redemption payment made at the request of a shareholder. A
shareholder may effect up to four exchanges in a twelve-month period without
charge; subsequent exchanges are subject to a fee of $15.
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$81 $252 $439 $978
- ---- ---- ---- ----
</TABLE>
<PAGE>
More about the series' investments
Principal investments
TAX EXEMPT SECURITIES Each series may invest in fixed income securities of any
maturity or duration. These securities may be issued by the State of Ohio and
its political subdivisions, agencies and instrumentalities or by other
governmental entities. These issuers may also be located in the District of
Columbia, Puerto Rico, and other U.S. territories and possessions. The series
has a fundamental investment policy of investing at least 80% of its net assets
in Ohio tax exempt securities, except when investing for defensive purposes
during times of adverse market conditions.
TAXABLE INVESTMENTS The series may also invest in taxable obligations or hold
its assets in money market instruments or cash. These investments could lead
the series to make a taxable distribution to shareholders. Taxable investments
in which the series may invest could include obligations of the U.S. government,
its agencies or instrumentalities; obligations issued by governmental issuers in
other states, the interest on which would be exempt from federal income tax; or
other fixed-income securities the advisor considers appropriate.
ADDITIONAL INFORMATION REGARDING CONCENTRATION IN OHIO TAX EXEMPT SECURITIES
This series will be particularly sensitive to economic and political
developments in the State of Ohio. Constitutional or statutory requirements may
limit the state's power to raise revenues or increase taxes and to meet its
obligations. In addition, changes to Ohio laws or regulations may impair the
ability of issuers of municipal securities to repay principal or to pay
interest. The amount of information about the condition of an issuer of Ohio
tax exempt securities may not be as extensive as information regarding a
corporate issuer whose securities are publicly traded.
Additional investment risks
LOWER-RATED SECURITIES The series limits its investments to investment grade
securities. Securities with the lowest ratings within the investment grade
category carry more risk than those with the highest ratings. When the series
invests in Ohio tax exempt securities in the lower rating categories, the
achievement of its goals is more dependent on the advisor's ability than would
be the case if the series were to invest in higher-rated securities. The
advisor seeks to minimize this risk through investment analysis and attention to
current developments in interest rates and economic conditions.
CALL RISK Some securities held by the series may permit the issuer at its
option to "call", redeem, its securities. If an issuer were to redeem
securities held by the series during a time of declining interest rates, the
series may not be able to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
Defensive investing
The series may depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. If the series takes a temporary defensive position, it
may be unable to achieve its investment goals.
The series' investment goals
The series' board of directors may change the series' investment goals
(described above under "Goals and strategies") without obtaining the approval of
the series' shareholders. The series might not succeed in achieving its goals.
<PAGE>
The advisor
The advisor
The series' advisor is Exeter Asset Management, a division of Manning & Napier
Advisors, Inc., 1100 Chase Square, Rochester, New York 14604. The advisor is
responsible for the day-to-day operations of the series and generally is
responsible for supervision of the series' overall business affairs, service
providers and officers.
A team made up of investment professionals and analysts makes all of the series'
investment decisions.
Management fees
In return for the services it provides to the series, the advisor receives a
management fee, which is computed daily and payable monthly at an annual rate of
0.50% of the series' average daily net assets.
Clients for whom the Advisor provides advisory services pursuant to separate
investment advisory contracts will be separately credited by the advisor an
amount equal to the portion of their client advisory fee attributable to the
portion of their assets invested in the series.
The advisor may use its own resources to engage in activities that may promote
the sale of the series, including payments to third parties who provide
shareholder support servicing and distribution assistance. Investors may be
charged a fee if they effect transactions through a broker or agent.
The distributor
The distributor of the series' shares is Manning & Napier Investor Services,
Inc. Shares are offered to investors who purchase shares directly from the
distributor or through certain registered investment advisors. Shares of the
Ohio Tax Exempt Series are not subject to any distribution or shareholder
servicing fees. The advisor may, from its own resources, defray or absorb costs
relating to distribution, including compensation of employees who are involved
in distribution.
Discretionary account management
Shares of the series are also offered to the advisor's clients and those of its
affiliates who have authorized investment in the series as part of the
discretionary account management services of the advisor or its affiliates.
Shares may also be used in connection with a discretionary account management
service provided by the advisor that uses shares of the series as the principal
underlying investment.
Year 2000 issue
Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
series. The cost of addressing the Year 2000 issue, if substantial, could
adversely affect companies and governments that issue securities held by the
series. The advisor, the transfer agent and the distributor are addressing the
Year 2000 issue for their systems. The series has been informed by its other
service providers that they are taking similar measures. Although the series
does not expect the Year 2000 issue to adversely affect it, the series cannot
guarantee that the efforts of the series or its service providers to correct the
problem will be successful.
<PAGE>
How to Buy, Exchange, and Redeem Shares
For discretionary account management clients of the advisor or its affiliates,
investment decisions pertaining to purchases and sales of fund shares are made
at the advisor's discretion pursuant to authorization received from clients.
The instructions provided below apply to all other investors.
How to buy shares
The minimum initial investment in the series is $2,000, and the minimum for each
additional investment is $100. The minimum investment requirements are lower
for participants in the Automatic Investment Plan, which is described below.
These investment minimums may be waived at the advisor's discretion.
All orders to purchase shares received in good order by the distributor,
transfer agent or other agent before the close of trading on the New York Stock
Exchange (NYSE) will be executed at that day's share price. Orders received in
good order after that day's close will be executed at the next business day's
price. All orders must include the required documentation and be accompanied by
proper payment. The series reserves the right to reject purchase orders or to
stop offering its shares without notice to shareholders.
By mail
Opening an account
Send a check payable to the Exeter Fund, Inc. with the completed
original account application. The address is:
Exeter Fund, Inc.
P.O. Box 41118
Rochester, NY 14604
To request an account application, call the fund at 1-800-466-3863.
Adding to an account
Send a check payable to the Exeter Fund, Inc. and a letter of
instruction with the name of the series to be purchased and the account name and
number.
By wire
Opening an account
or
Adding to an account
After the fund has received your completed account application, you
may wire funds to open or add shares to your account. Before sending a wire,
call 1-800-466-3863 for wire instructions.
Automatic Investment Plan
You may participate in the automatic investment plan by completing the
applicable section of the account application or contacting the fund. Through
the plan, you can authorize transfers of a specified amount from your bank
account into the series on a regular basis. The minimum amount of each
investment is $25. If you have insufficient funds in your account to complete a
transfer, your bank may charge you a fee.
<PAGE>
How to exchange and how to redeem shares
How to exchange shares
You may exchange shares of a series for shares of any other series of the Exeter
Fund, if the registration of both accounts is identical. If received with
proper documentation before the close of trading on the NYSE, exchange requests
will be executed at that day's share prices. Otherwise, they will be executed
at the prices determined on the next business day after receipt with proper
documentation.
The minimum exchange amount is $1,000 (or all the shares in your account, if
less than $1,000). You may exchange up to 4 times during any 12-month period
without paying a sales charge or any other fee. For any additional exchanges,
you may be charged $15 per exchange. A series may refuse any exchange order and
may alter, limit or suspend its exchange privilege on 60 days' notice. An
exchange involves a taxable redemption of shares surrendered in the exchange.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page, signed by each registered account owner, exactly as your
names appear on the account registration.
Provide the name of the current series, the series to exchange into and
dollar amount to be exchanged.
Provide both account numbers.
By telephone
Unless you have declined telephone privileges, call the fund at
1-800-466-3863.
Provide the name of the current series, series to exchange into and dollar
amount to be exchanged.
Provide both account numbers.
The fund may ask for identification, and all telephone transactions are
recorded.
How to redeem shares
All orders to redeem shares received in good order by the distributor, transfer
agent or other agent before the close of trading on the NYSE will be executed at
that day's share price. Orders received in good order after the close of
trading will be executed at the next business day's price. All redemption
orders must include the required documentation and signatures. The series may
postpone payment of redemption proceeds for up to seven days, or suspend
redemptions to the extent permitted by law. If you recently purchased your
shares by check, your redemption proceeds will not be sent to you for 15 days.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page signed by each registered account owner.
State the name of the series, and the number of shares or dollar amount to
be sold.
Provide the account number.
Signature guarantees may be required.
Additional documentation may be required (call the fund for details).
<PAGE>
Investment and account information
Accounts with low balances
If your account falls below $1,000 due to the redemption of shares, the fund may
ask you to bring your account up to the minimum requirement. If your account is
still below
$1,000 after 60 days, the fund may close your account and send you the
redemption proceeds.
In-kind purchases and redemptions
Securities you own may be used to purchase shares of a series. The advisor will
determine if acquiring the securities is consistent with the series' goals and
policies. If accepted, the securities will be valued the same way the series
values securities it already owns.
The series may make payment for shares in part by giving you portfolio
securities. As a redeeming shareholder, you will pay transaction costs to
dispose of these securities.
Signature guarantees
A signature guarantee may be required for any written request to sell shares, or
to change the account registration.
The transfer agent will accept signature guarantees from:
A member of the STAMP program or the NYSE's Medallion Signature Program.
A broker or securities dealer.
A federal savings, cooperative or other type of bank.
A savings and loan or other thrift institution.
A credit union.
A securities exchange or clearing agency.
A notary public cannot provide a signature guarantee.
Valuation of shares
The series offers its shares at the net asset value (NAV) per share of the
series. The series calculates its NAV once daily as of the close of regular
trading on the NYSE (generally at 4:00 p.m., New York time) on each day the
exchange is open. If the exchange closes early, the series will accelerate the
calculation of NAV and transaction deadlines to that time.
The series values the securities in its portfolio on the basis of market
quotations and valuations provided by independent pricing services. If
quotations are not readily available, the series values its assets by a method
that the directors believe accurately reflects fair value. A series that uses
fair value to price securities may value those securities higher or lower than
another series that uses market quotations to price the same securities.
<PAGE>
Dividends, distributions and taxes
Dividends and distributions
The series generally:
Pays dividends four time a year, in March, June, September, and December.
Makes capital gains distributions, if any, once a year, typically in
December.
The series may pay additional distributions and dividends at other times if
necessary for the series to avoid a federal tax.
Capital gain distributions and dividends are reinvested in additional shares of
the series. Alternatively, you can instruct the transfer agent in writing or by
telephone to have your capital gains and/or dividends paid in cash. You can
change your choice at any time to be effective as of the next distribution or
dividend, except that any change given to the transfer agent after the record
date will not be effective until the next distribution or dividend is made. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.
Taxes
Transaction Federal tax status
Redemption or exchange of shares Usually taxable as capital gain or
loss; long-term only if shares
owned more than one year
Long-term capital gain distributions Taxable as long-term capital gain
Short-term capital gain distributions Taxable as ordinary income
Dividends Taxable as ordinary income
Tax Exempt Income Free of federal income tax
The Series intends to pay exempt-interest dividends quarterly. These dividends
are exempt from regular federal income tax, but they may have other tax
consequences, including alternative minimum tax. Under Ohio law, dividends that
are derived from interest payments on Ohio obligations and are exempt from gross
income for federal income tax are also exempt from Ohio State income tax, Ohio
school district income taxes, and Ohio municipal income taxes for individuals
who reside in Ohio.
Distributions of capital gains are exempt from Ohio State income tax, Ohio
school district income taxes, and Ohio municipal income taxes, and the net
income base of the Ohio corporation franchise tax to the extent that they are
due to profit made on the sale, exchange, or other disposition by the series of
Ohio State securities.
After the end of each year, the series will provide you with information about
the distributions and dividends that you received and any redemptions of shares
during the previous year. In calculating your gain or loss on any sale of
shares, note that your tax basis in your shares is increased by the amounts of
dividends and distributions that you have reinvested in a series. Dividends and
distributions are taxable as described above whether received in cash or
reinvested. If you do not provide the series with your correct taxpayer
identification number and any required certifications, you may be subject to
back-up withholding of 31% of your distributions, dividends and redemption
proceeds. Because each shareholder's circumstances are different and special
tax rules may apply, you should consult with your tax adviser about your
investment in the series and your receipt of dividends, distributions or
redemption proceeds.
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the series'
financial performance for the past five years. Certain information reflects
financial results for a single share. The total returns in the table represent
the rate that an investor would have earned on an investment in the series
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
series' financial statements, are included in the annual report, which is
available upon request.
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
-------------------------------- 2/14/94
FOR THE YEARS ENDED (COMMENCEMENT
-------------------------------- OF OPERATIONS)
12/31/98 12/31/97 12/31/96 12/31/95 TO 12/31/94
- ---------------------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
NET ASSET VALUE -
BEGINNING OF PERIOD $10.53 $10.18 $10.31 $ 9.18 $10.00
- ------------------------ ------ ------ ------ ------- -------
Income from investment
operations:
Net investment income* 0.430 0.446 0.439 0.419 0.205
- ------------------------ ------ ------ ----- ------ -------
Net realized and
unrealized gain (loss)
on investments 0.125 0.344 (0.129) 1.136 (0.828)
- ------------------------ ------- ------ ------- ----- -------
Total from investment
Operations 0.555 0.790 0.310 1.555 (0.623)
- ------------------------ ------- ----- ------ ------ -------
Less distributions to
shareholders:
From net investment
income (0.425) (0.440) (0.438) (0.425) (0.197)
From net realized
gain on investments -- -- (0.002) -- --
- ------------------------- ------- ------ ------- ------- ------
Total distributions
to shareholders (0.425) (0.440) (0.440) (0.425) (0.197)
- ------------------------- ------- ------- ------ ------- ------
NET ASSET VALUE -
END OF PERIOD $10.66 $10.53 $10.18 $10.31 $ 9.18
========================= ======== ======= ======= ======= =======
Total return 1 5.35% 7.92% 3.16% 17.14% (6.23)%
- ------------------------- -------- -------- ------- ------- --------
Ratios to average net
assets/
Supplemental Data:
Expenses* 0.79% 0.79% 0.85% 0.85% 0.85%2
- ------------------------ ------- ----- ------ ------- -----
Net investment income* 4.10% 4.37% 4.40% 4.50% 4.03%2
- ------------------------ ------ ----- ----- ------- ------
Portfolio turnover 5% 12% 2% 1% 2%
- ------------------------ ----- ---- ----- ------- ------
NET ASSETS - END
OF PERIOD (000's omitted) 12,569 $9,306 $7,698 $6,144 $3,901
========================== ====== ======= ======= ======= =======
<FN>
* 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:
- --------------------------------------------
Net investment income N/A N/A $0.437 $0.411 $0.141
--- --- ------ ------ ------
Ratios (to average net assets):
Expenses N/A N/A 0.87% 0.94% 2.07%2
--- --- ------ ----- ------
Net investment income N/A N/A 4.38% 4.41% 2.81%2
--- --- ----- ----- ------
1 Represents aggregate total return for the period indicated.
- ---------------------------------------------------------------------
2 Annualized.
</TABLE>
<PAGE>
[Back Cover Page]
Exeter Fund, Inc.
Ohio Tax Exempt Series
Shareholder Reports and the Statement of Additional Information (SAI). Annual
and semiannual reports to shareholders provide additional information about the
series' investments. These reports discuss the market conditions and investment
strategies that significantly affected the series' performance during its last
fiscal year. The SAI provides more detailed information about the series. It
is incorporated by reference into this prospectus.
How to Obtain These Reports and Additional Information.
You may obtain shareholder reports and the SAI or other information about the
fund without charge, by calling
1-800-466-3863 or sending written requests to Exeter Fund, Inc., P.O. Box 41118,
Rochester, New York 14604.
You may review shareholder reports, the prospectus and SAI at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get a copy of these materials by writing to the Public Reference Section
of the Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the SEC's Internet web site
(http://www.sec.gov).
If someone makes a statement that is not in this prospectus about any of the
series, you should not rely upon that information. Neither the series nor their
distributor is offering to sell shares of the series to any person to whom the
series may not lawfully sell their shares.
Investment Company Act file no. 811-04087
<PAGE>
[LOGO]
Prospectus
Exeter Fund, Inc.
May 1, 1999
Diversified Tax Exempt Series
The Securities and Exchange Commission has not approved or disapproved the
series' shares or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.
<PAGE>
[This page intentionally blank]
<PAGE>
Exeter Asset Management is a division of Manning & Napier Advisors, Inc., which
was founded in 1970 and manages over $7 billion for individual and institutional
investors.
Contents Page
Goals, strategies, and risks 4
More about the series' investments 6
The advisor 7
How to buy shares 8
How to exchange and how to redeem shares 9
Investment and account information 10
Dividends, distributions and taxes 11
Financial highlights 12
<PAGE>
Goals, strategies, and risks
Diversified Tax Exempt Series
Investment goal
Provide as high a level of current income exempt from federal income tax as the
advisor believes is consistent with the preservation of capital.
Key investments and strategies
The series invests primarily in municipal bonds and other securities with income
that is exempt from federal income tax. The main issuers of these securities
are state and local agencies. In selecting investments for the series, the
advisor attempts to balance the series' goals of high income and capital
preservation. With this approach, the advisor attempts to build a portfolio
that it believes provides the opportunity to earn current income. However, the
advisor will only purchase investment grade securities and will maintain other
selection criteria in an attempt to avoid permanent capital loss.
Maturity
The series is not subject to any maturity restrictions but will vary its
maturity depending on the advisor's outlook for interest rates.
Credit quality
The Series' investments will be limited to investment grade securities.
Bond selection process
The advisor emphasizes those bond market sectors and selects for the series
those securities that it believes offer yields sufficient to compensate the
investor for the risks specific to the security or sector. In analyzing the
relative attractiveness of sectors and individual securities, the advisor
considers:
- - The interest rate sensitivity of each security.
- - The narrowing or widening of interest rate spreads between sectors,
securities of different credit quality or securities of different maturities.
Who may want to invest
This series may be an appropriate investment if you:
- - are in a high federal income tax bracket
- - are seeking a regular stream of income
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year since its inception. The total return table
shows how the average annual total returns for the series for different calendar
periods compared to those of the Merrill Lynch Intermediate Municipal Index.
[Bar chart showing the percent total return for the Diversified Tax Exempt
Series for 1995, 1996, 1997 and 1998, with calendar years ended December 31st.
The results are 16.29% for 1995, 3.33% for 1996, 7.92% for 1997, and 5.50% for
1998]
The Merrill Lynch Intermediate Municipal Index is a market value weighted
measure of approximately 140 municipal bonds issued across the United States.
The index is comprised of investment grade securities.
<TABLE>
<CAPTION>
Avg. Annual Total Returns
(for periods ended 12/31/98)
1 Year Since Inception on 2/14/94
- ----------------------------- ------- --------------------------
<S> <C> <C>
Diversified Tax Exempt Series 5.49% 5.43%
------- -----
Merrill Lynch Intermediate
Municipal Index . . . . . . . 6.27% 5.82%
- ----------------------------- ------ ------
Quarterly returns
Highest:. . . . . . . . . . . 6.48% in 1st quarter 1995
- ----------------------------- ---------------------------
Lowest: . . . . . . . . . . . -1.54% in 1st quarter 1996
- ----------------------------- ---------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goal, strategies, and risks
Diversified Tax Exempt Series
Principal risks of investing in the series
As with most bond funds, the value of your investment will fluctuate with
changes in interest rates. This means that you could lose money on your
investment in the series or the series could underperform if any of the
following occurs:
- - Interest rates go up, which will make bond prices go down and reduce the
value of the series' portfolio. The risk will be higher when the series is
invested in longer-term bonds than when it is invested in bonds with shorter
maturities, because longer-term bonds are generally more sensitive to interest
rate changes. Changes in the value of portfolio securities will not affect
interest income derived from those securities, but will affect the value of the
series' portfolio.
- - The issuer of a bond owned by the series defaults on its obligation to pay
principal or interest or has its credit rating downgraded.
- - The advisor's judgments about the attractiveness, relative value or
potential appreciation of a particular security or sector prove to be incorrect.
In addition to the general risks of bond funds, this is subject to the risk that
its market segment (tax exempt securities) may underperform other fixed income
market segments or the fixed income markets as a whole.
<PAGE>
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 Diversified Tax Exempt Series
- --------------------------------------------- ------------------------------
<S> <C>
Shareholder fees (paid directly from your
investment) None1
------
Annual fund operating expenses
(expenses that are deducted from assets of the
series)
- ----------------------------------------------
Management fee. . . . . . . . . . . . . . . . 0.50%
- ---------------------------------------------- -----
Distribution and service (Rule 12b-1) fees. . None
-----
Other expenses. . . . . . . . . . . . . . . . 19%
-----
Total annual fund operating expenses. . . . . .69%
- ---------------------------------------------- -----
</TABLE>
A wire charge, currently $15, may be deducted by the transfer agent from the
amount of a wire redemption payment made at the request of a shareholder. A
shareholder may effect up to four exchanges in a twelve-month period without
charge; subsequent exchanges are subject to a fee of $15.
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
<S> <C> <C> <C>
1 year 3 years 5 years 10 years
- ------- ------- ------- ---------
$70 $221 $384 $859
- ------- ------- ------- ---------
</TABLE>
<PAGE>
More about the series' investments
Principal investments
TAX EXEMPT SECURITIES Each series may invest in fixed income securities of any
maturity or duration. These securities may be issued by a state and its
political subdivisions, agencies and instrumentalities or by other governmental
entities. These issuers may also be located in the District of Columbia, Puerto
Rico, and other U.S. territories and possessions. The series has a fundamental
investment policy of investing at least 80% of its net assets in tax exempt
securities, except when investing for defensive purposes during times of adverse
market conditions.
TAXABLE INVESTMENTS The series may also invest in taxable obligations or hold
its assets in money market instruments or cash. These investments could lead
the series to make a taxable distribution to shareholders. Taxable investments
in which the series may invest could include obligations of the U.S. government,
its agencies or instrumentalities; obligations issued by governmental issuers in
other states, the interest on which would be exempt from federal income tax; or
other fixed-income securities the advisor considers appropriate.
Additional investment risks
LOWER-RATED SECURITIES The series limits its investments to investment grade
securities. Securities with the lowest ratings within the investment grade
category carry more risk than those with the highest ratings. When the series
invests in tax exempt securities in the lower rating categories, the achievement
of its goals is more dependent on the advisor's ability than would be the case
if the series were to invest in higher-rated securities. The advisor seeks to
minimize this risk through investment analysis and attention to current
developments in interest rates and economic conditions.
CALL RISK Some securities held by the series may permit the issuer at its
option to "call", redeem, its securities. If an issuer were to redeem
securities held by the series during a time of declining interest rates, the
series may not be able to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
Defensive investing
The series may depart from its principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. If the series takes a temporary defensive position, it
may be unable to achieve its investment goals.
The series' investment goals
The series' board of directors may change the series' investment goals
(described above under "Goals and strategies") without obtaining the approval of
the series' shareholders. The series might not succeed in achieving its goals.
<PAGE>
The advisor
The advisor
The series' advisor is Exeter Asset Management, a division of Manning & Napier
Advisors, Inc., 1100 Chase Square, Rochester, New York 14604. The advisor is
responsible for the day-to-day operations of the series and generally is
responsible for supervision of the series' overall business affairs, service
providers and officers.
A team made up of investment professionals and analysts makes all of the series'
investment decisions.
Management fees
In return for the services it provides to the series, the advisor receives a
management fee, which is computed daily and payable monthly at an annual rate of
0.50% of the series' average daily net assets.
Clients for whom the Advisor provides advisory services pursuant to separate
investment advisory contracts will be separately credited by the advisor an
amount equal to the portion of their client advisory fee attributable to the
portion of their assets invested in the series.
The advisor may use its own resources to engage in activities that may promote
the sale of the series, including payments to third parties who provide
shareholder support servicing and distribution assistance. Investors may be
charged a fee if they effect transactions through a broker or agent.
The distributor
The distributor of the series' shares is Manning & Napier Investor Services,
Inc. Shares are offered to investors who purchase shares directly from the
distributor or through certain registered investment advisors. Shares of the
Diversified Tax Exempt Series are not subject to any distribution or shareholder
servicing fees. The advisor may, from its own resources, defray or absorb costs
relating to distribution, including compensation of employees who are involved
in distribution.
Discretionary account management
Shares of the series are also offered to the advisor's clients and those of its
affiliates who have authorized investment in the series as part of the
discretionary account management services of the advisor or its affiliates.
Shares may also be used in connection with a discretionary account management
service provided by the advisor that uses shares of the series as the principal
underlying investment.
Year 2000 issue
Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
series. The cost of addressing the Year 2000 issue, if substantial, could
adversely affect companies and governments that issue securities held by the
series. The advisor, the transfer agent and the distributor are addressing the
Year 2000 issue for their systems. The series has been informed by its other
service providers that they are taking similar measures. Although the series
does not expect the Year 2000 issue to adversely affect it, the series cannot
guarantee that the efforts of the series or its service providers to correct the
problem will be successful.
<PAGE>
How to Buy, Exchange, and Redeem Shares
For discretionary account management clients of the advisor or its affiliates,
investment decisions pertaining to purchases and sales of fund shares are made
at the advisor's discretion pursuant to authorization received from clients.
The instructions provided below apply to all other investors.
How to buy shares
The minimum initial investment in the series is $2,000, and the minimum for each
additional investment is $100. The minimum investment requirements are lower
for participants in the Automatic Investment Plan, which is described below.
These investment minimums may be waived at the advisor's discretion.
All orders to purchase shares received in good order by the distributor,
transfer agent or other agent before the close of trading on the New York Stock
Exchange (NYSE) will be executed at that day's share price. Orders received in
good order after that day's close will be executed at the next business day's
price. All orders must include the required documentation and be accompanied by
proper payment. The series reserves the right to reject purchase orders or to
stop offering its shares without notice to shareholders.
By mail
Opening an account
Send a check payable to the Exeter Fund, Inc. with the completed
original account application. The address is:
Exeter Fund, Inc.
P.O. Box 41118
Rochester, NY 14604
To request an account application, call the fund at 1-800-466-3863.
Adding to an account
Send a check payable to the Exeter Fund, Inc. and a letter of
instruction with the name of the series to be purchased and the account name and
number.
By wire
Opening an account
or
Adding to an account
After the fund has received your completed account application, you
may wire funds to open or add shares to your account. Before sending a wire,
call 1-800-466-3863 for wire instructions.
Automatic Investment Plan
You may participate in the automatic investment plan by completing the
applicable section of the account application or contacting the fund. Through
the plan, you can authorize transfers of a specified amount from your bank
account into the series on a regular basis. The minimum amount of each
investment is $25. If you have insufficient funds in your account to complete a
transfer, your bank may charge you a fee.
<PAGE>
How to exchange and how to redeem shares
How to exchange shares
You may exchange shares of a series for shares of any other series of the Exeter
Fund, if the registration of both accounts is identical. If received with
proper documentation before the close of trading on the NYSE, exchange requests
will be executed at that day's share prices. Otherwise, they will be executed
at the prices determined on the next business day after receipt with proper
documentation.
The minimum exchange amount is $1,000 (or all the shares in your account, if
less than $1,000). You may exchange up to 4 times during any 12-month period
without paying a sales charge or any other fee. For any additional exchanges,
you may be charged $15 per exchange. A series may refuse any exchange order and
may alter, limit or suspend its exchange privilege on 60 days' notice. An
exchange involves a taxable redemption of shares surrendered in the exchange.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page, signed by each registered account owner, exactly as your
names appear on the account registration.
Provide the name of the current series, series to exchange into and dollar
amount to be exchanged.
Provide both account numbers.
By telephone
Unless you have declined telephone privileges, call the fund at
1-800-466-3863.
Provide the name of the current series, series to exchange into and dollar
amount to be exchanged.
Provide both account numbers.
The fund may ask for identification, and all telephone transactions are
recorded.
How to redeem shares
All orders to redeem shares received in good order by the distributor, transfer
agent or other agent before the close of trading on the NYSE will be executed at
that day's share price. Orders received in good order after the close of
trading will be executed at the next business day's price. All redemption
orders must include the required documentation and signatures. The series may
postpone payment of redemption proceeds for up to seven days, or suspend
redemptions to the extent permitted by law. If you recently purchased your
shares by check, your redemption proceeds will not be sent to you for 15 days.
By mail
Send a letter of instruction to the Exeter Fund, Inc., at the address on
the opposite page signed by each registered account owner.
State the name of the series and the number of shares or dollar amount to
be sold.
Provide the account number.
Signature guarantees may be required.
Additional documentation may be required (call the fund for details).
<PAGE>
Investment and account information
Accounts with low balances
If your account falls below $1,000 due to the redemption of shares, the fund may
ask you to bring your account up to the minimum requirement. If your account is
still below
$1,000 after 60 days, the fund may close your account and send you the
redemption proceeds.
In-kind purchases and redemptions
Securities you own may be used to purchase shares of a series. The advisor will
determine if acquiring the securities is consistent with the series' goals and
policies. If accepted, the securities will be valued the same way the series
values securities it already owns.
The series may make payment for shares in part by giving you portfolio
securities. As a redeeming shareholder, you will pay transaction costs to
dispose of these securities.
Signature guarantees
A signature guarantee may be required for any written request to sell shares, or
to change the account registration.
The transfer agent will accept signature guarantees from:
A member of the STAMP program or the NYSE's Medallion Signature Program.
A broker or securities dealer.
A federal savings, cooperative or other type of bank.
A savings and loan or other thrift institution.
A credit union.
A securities exchange or clearing agency.
A notary public cannot provide a signature guarantee.
Valuation of shares
The series offers its shares at the net asset value (NAV) per share of the
series. The series calculates its NAV once daily as of the close of regular
trading on the NYSE (generally at 4:00 p.m., New York time) on each day the
exchange is open. If the exchange closes early, the series will accelerate the
calculation of NAV and transaction deadlines to that time.
The series values the securities in its portfolio on the basis of market
quotations and valuations provided by independent pricing services. If
quotations are not readily available, the series values its assets by a method
that the directors believe accurately reflects fair value. A series that uses
fair value to price securities may value those securities higher or lower than
another series that uses market quotations to price the same securities.
<PAGE>
Dividends, distributions and taxes
Dividends and distributions
The series generally:
Pays dividends four time a year, in March, June, September, and December.
Makes capital gains distributions, if any, once a year, typically in
December.
The series may pay additional distributions and dividends at other times if
necessary for the series to avoid a federal tax.
Capital gain distributions and dividends are reinvested in additional shares of
the series. Alternatively, you can instruct the transfer agent in writing or by
telephone to have your capital gains and/or dividends paid in cash. You can
change your choice at any time to be effective as of the next distribution or
dividend, except that any change given to the transfer agent after the record
date will not be effective until the next distribution or dividend is made. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks.
Taxes
Transaction Federal tax status
Redemption or exchange of shares Usually taxable as capital gain or
loss; long-term only if shares owned
more than one year
Long-term capital gain distributions Taxable as long-term capital gain
Short-term capital gain distributions Taxable as ordinary income
Dividends Taxable as ordinary income
Tax Exempt Income Free of federal income tax
The Series intends to pay exempt-interest dividends quarterly. These dividends
are exempt from regular federal income tax, but they may have other tax
consequences, including alternative minimum tax.
Depending upon the extent of the series' activities in those states and
localities in which its offices are maintained or in which its agents or
independent contractors are located, the series may be subject to the tax laws
of such states or localities. While the series expects to pay income that is
exempt from federal income tax, this income may be subject to taxation under the
income or other tax laws of any state or local taxing authority. The laws of
the several states and local taxing authorities vary with respect to the
taxation of such interest income, and each holder of shares of the series is
advised to consult his own tax advisor in that regard. The series will report
annually the percentage of interest income received during the preceding year on
tax exempt obligations, and on a state-by-state basis, the source of that
income.
After the end of each year, the series will provide you with information about
the distributions and dividends that you received and any redemptions of shares
during the previous year. In calculating your gain or loss on any sale of
shares, note that your tax basis in your shares is increased by the amounts of
dividends and distributions that you have reinvested in a series. Dividends and
distributions are taxable as described above whether received in cash or
reinvested. If you do not provide the series with your correct taxpayer
identification number and any required certifications, you may be subject to
back-up withholding of 31% of your distributions, dividends and redemption
proceeds. Because each shareholder's circumstances are different and special
tax rules may apply, you should consult with your tax adviser about your
investment in the series and your receipt of dividends, distributions or
redemption proceeds.
<PAGE>
Financial highlights
The financial highlights table is intended to help you understand the series'
financial performance for the past five years. Certain information reflects
financial results for a single share. The total returns in the table represent
the rate that an investor would have earned on an investment in the series
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
series' financial statements, are included in the annual report, which is
available upon request.
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
FOR THE PERIOD
------------------------------------ 2/14/94
FOR THE YEARS ENDED (COMMENCEMENT
------------------------------------- OF OPERATIONS)
12/31/98 12/31/97 12/31/96 12/31/95 TO 12/31/94
-------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
NET ASSET VALUE -
BEGINNING OF PERIOD . . $10.59 $10.23 $10.32 $ 9.26 $10.00
- ------------------------- ------- -------- ------- ------- -------
Income from investment
operations:
Net investment income 0.435 0.434 0.434 0.428 0.210
- ------------------------- ------ ------- -------- -------- ------
Net realized and
unrealized gain (loss)
on investments . . . . 0.139 0.361 (0.104) 1.062 (0.749)
- ------------------------- ----- ------- ------- -------- --------
Total from investment
operations . . . . . 0.574 0.795 0.330 1.490 (0.539)
- ------------------------- ----- ------ ------- ------- --------
Less distributions to
shareholders:
From net investment
income. . . . . . . (0.425) (0.435) (0.420) (0.430) (0.201)
From net realized gain
on investments . (0.009) -- -- -- --
- ------------------------- -------- ------ ------ ------- -------
Total distributions
to shareholders . . (0.434) (0.435) (0.420) (0.430) (0.201)
- ------------------------- -------- ------ ------- -------- --------
NET ASSET VALUE -
END OF PERIOD. . . . . . $10.73 $10.59 $10.23 $10.32 $9.26
======================== ====== ======== ======= ====== =======
Total return1. . . . 5.49% 7.92% 3.33% 16.29% (5.39)%
- ------------------------ ------ -------- ------- ------- -------
Ratios to average net
assets/
Supplemental Data:
Expenses . . . . 0.69% 0.69% 0.70% 0.79% 0.85%2,3
--------------------- ------ ------- ------- ----- --------
Net investment
income. . . . 4.19% 4.41% 4.44% 4.52% 3.71%2,3
--------------------- ------- ------- ------- ------ --------
Portfolio turnover . . . 5% 1% 2% 5% 4%
--------------------- ------- ------- ------- ------ -------
NET ASSETS-END OF
PERIOD (000'S OMITTED) $34,570 $ 23,651 $16,949 $12,452 $8,481
====================== ======== ======== ======= ======= =======
<FN>
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%.
- ------------------------------------------------------------
</TABLE>
<PAGE>
[Back Cover Page]
Exeter Fund, Inc.
Diversified Tax Exempt Series
Shareholder Reports and the Statement of Additional Information (SAI). Annual
and semiannual reports to shareholders provide additional information about the
series' investments. These reports discuss the market conditions and investment
strategies that significantly affected the series' performance during its last
fiscal year. The SAI provides more detailed information about the series. It
is incorporated by reference into this prospectus.
How to Obtain These Reports and Additional Information.
You may obtain shareholder reports and the SAI or other information about the
fund without charge, by calling 1-800-466-3863 or sending written requests to
Exeter Fund, Inc., P.O. Box 41118, Rochester, New York 14604.
You may review shareholder reports, the prospectus and SAI at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. You can get a
copy of these materials by writing to the Public Reference Section of the
Commission, Washington, D.C. 20549-6009. Information about the public reference
room may be obtained by calling 1-800-SEC-0330. You can get the same reports
and information free from the SEC's Internet web site (http://www.sec.gov).
If someone makes a statement that is not in this prospectus about any of the
series, you should not rely upon that information. Neither the series nor their
distributor is offering to sell shares of the series to any person to whom the
series may not lawfully sell their shares.
Investment Company Act file no. 811-04087.
<PAGE>
[Logo]
Prospectus
Exeter Fund, Inc.
May 1, 1999
Small Cap Series
Energy Series
Technology Series
Financial Services Series
International Series
Life Sciences Series
Global Fixed Income Series
World Opportunities Series
The Securities and Exchange Commission has not approved or disapproved the
series' shares or determined whether this prospectus is accurate or complete.
Any statement to the contrary is a crime.
<PAGE>
[Intentionally left blank]
<PAGE>
Exeter Asset Management is a division of Manning and Napier Advisors, Inc.,
which was founded in 1970, and manages over $7 billion for individual and
institutional investors.
Contents Page
Goals, strategies, and risks
Small Cap Series 4
Energy Series 6
Technology Series 8
Financial Services Series 10
International Series 12
Life Sciences Series 14
Global Fixed Income Series 16
World Opportunities Series 18
More about the series' investments 20
The advisor 21
More about discretionary investment accounts 21
Management fees 21
Offering of shares 22
How to redeem shares 22
Valuation of shares 23
Year 2000 issue 23
Dividends, distributions and taxes 24
Financial Highlights 25
This prospectus includes information on the Small Cap Series, Energy Series,
Technology Series, Financial Services Series, International Series, Life
Sciences Series, Global Fixed Income Series, and World Opportunities Series of
the Exeter Fund, Inc. Shares of these series are used in connection with an
investment strategy that the advisor and its affiliates use for discretionary
investment account clients who have authorized the advisor to acquire and
dispose of fund shares on their behalf.
<PAGE>
Small Cap Series
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of small
companies.
Key investments
The series invests primarily in common stocks of small companies. The series
defines a small company generally as one with a market capitalization of less
than $1.7 billion. The series may also invest to a limited extent in American
Depository Receipts (ADRs) and common stocks of foreign companies. In addition,
the series may hold sizable investments in cash and short-term fixed income
securities when the advisor is unable to find appropriate investments.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection. The advisor analyzes factors such as the management, financial
condition, and market position of individual companies to select small companies
that it believes will make attractive long-term investments. The advisor looks
for one or more of the following characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
Class A shares of the series for each full calendar year since the inception of
its most recent activation. The total return table shows how the average annual
total returns for the Class A shares for different calendar periods compare to
those of the Standard & Poor's 500 Composite Stock Price Index, an unmanaged
index of common stocks, and the Russell 2000 Index, an unmanaged index of small
company stocks.
<PAGE>
[Bar chart showing the percent total return for the Small Cap Series for 1993,
1994, 1995, 1996, 1997 and 1998, with calendar years ended December 31st. The
results are 14.59% for 1993, 8.01% for 1994, 14.70% for 1995, 10.06% for 1996,
12.29% for 1997, and -13.59% for 1998.]
<TABLE>
<CAPTION>
Average Annual Total Returns
(for periods ended 12/31/98)
Since Current
Activation
1 Year 5 Years on 4/30/92
- -----------------------------------------------------
<S> <C> <C> <C>
Small Cap Series -13.59% 5.74% 8.84%
------- ------ ------
S&P 500 Index 28.58% 24.05% 20.48%
------ ------ ------
Russell 2000 Index -2.55% 11.86% 13.87%
- ------------------------- ------ ------ ------
Quarterly returns
- ------------------
Highest: . . . . . 21.54% in 2nd quarter 1997
- ------------------ ------------------------------------
Lowest:. . . . . . -27.96% in 3rd quarter 1998
- ------------------ ------------------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
The U.S. and/or foreign stock markets go down.
Small company stocks go down in value or underperform larger company
stocks.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a security or strategy prove to be incorrect.
In addition to the general risks of stock funds, the series has special risks
due to its concentration in small company stocks. These risks include the
following:
The stocks of small companies may be subject to more abrupt or erratic
market movements than the stocks of larger companies
The stocks of small companies may be less marketable than the stocks of
larger companies
Small companies may have limited product lines, markets, or financial
resources, and they may depend on a small management group. As a result, small
companies fail more often than larger companies.
At times the series may hold a sizable cash position, which may reduce the
series' performance during periods when small company stocks are increasing in
value.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 Small Cap Series
- ------------------------------------------------------ -----------------
<S> <C>
Shareholder fees (paid directly from your investment) None
-----------------
Annual fund operating expenses (expenses that are
deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . . 1.00%
-----------------
Distribution and service (Rule 12b-1) fees. . . . None
-----------------
Other expenses. . . . . . . . . . . . . . . . . . 0.09%
-----------------
Total annual fund operating expenses. . . . . . . 1.09%
- ----------------------------------------------------- -----------------
</TABLE>
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$111 $347 $601 $1,329
- ---- ---- ---- ------
</TABLE>
<PAGE>
Energy Series
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of
companies in the energy industry and related to the energy industry.
Key investments
The series will invest primarily in common stocks of companies in the energy
industry, including industries connected with, marketing the products of,
serving and/or supplying the energy industry or that use energy extensively in
their product development or operations. The series may also invest to a
limited extent in American Depository Receipts (ADRs) and common stocks of
foreign companies engaged in the energy industry. An equity security will
generally be considered appropriate for investment by the Energy Series if, as
determined by the advisor, at least 50% of the company's assets, revenues or net
income are derived from or related to the energy and related industries.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection. The advisor analyzes factors such as the management, financial
condition, and market position of individual companies to select companies in
the energy sector that it believes will make attractive long-term investments.
The advisor looks for one or more of the following characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value
Summary of past performance
This series was not active as of the date of this prospectus; therefore, no
performance information is provided.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
The U.S. and/or foreign stock markets go down.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a security or strategy prove to be incorrect.
In addition to the general risks of stock funds, the series has special risks
due to its concentration in energy-related stocks. These risks include the
following:
The stocks of energy-related companies may underperform other sectors or the
market as a whole.
The stocks of energy-related companies may experience greater price
volatility than other types of common stocks.
Energy-related stocks are sensitive to changes in the prices of energy
supplies. The prices of energy supplies, in turn, may be affected by
international economic, political and regulatory events.
Because the series is "non-diversified", the performance of a particular
investment or small group of investments may affect the series more than if it
were diversified.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 Energy Series
- ---------------------------------------------------- --------------
<S> <C>
Shareholder fees (paid directly from your investment)
None
--------------
Annual fund operating expenses (expenses that are
deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . . . 1.00%
--------------
Distribution and service (Rule 12b-1) fees. . . . . None
--------------
Other expenses. . . . . . . . . . . . . . . . 0.13%
--------------
Total annual fund operating expenses. . . . . 1.13%
- ---------------------------------------------------- --------------
</TABLE>
<PAGE>
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<C> <C> <C> <C>
$115 $359 N/A N/A
- ---- ---- ----- ------
</TABLE>
Because the series was not active as of the date of this prospectus, the "Annual
Fund Operating Expenses" presented are estimates based upon projections made by
the advisor. In addition, the series has not calculated these expenses beyond
the three year period shown.
<PAGE>
Technology Series
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of
companies in science and technology-based industries.
Key investments
The series will invest primarily in common stocks of companies in science and
technology-based industries and in industries connected with, marketing the
products of, serving and/or supplying science and technology-based industries or
which use scientific and technological advances extensively in their product
development or operations. The series may also invest to a limited extent in
American Depository Receipts (ADRs) and common stocks of foreign companies in
such industries. An equity security will generally be considered appropriate
for investment by the Technology Series if, as determined by the advisor, at
least 50% of the company's assets, revenues or net income are derived from or
related to technology and related industries.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection. The advisor analyzes factors such as the management, financial
condition, and market position of individual companies to select companies in
the technology sector that it believes will make attractive long-term
investments. The advisor looks for one or more of the following
characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year during periods in which it has been active.
The series was previously active from November 4, 1988 to May 11, 1992 and from
August 29, 1994 to April 16, 1997. The total return table shows how the average
annual total returns for the series for different calendar periods compare to
those of the Standard & Poor's 500 Composite Stock Price Index, an unmanaged
index of common stocks.
[Bar chart showing the percent total return for the Technology Series for 1989,
1990, 1991, 1995, and 1996 with calendar years ended December 31st. The results
are -0.90% for 1989, -8.90% for 1990, 36.10% for 1991, 40.25% for 1995, and
20.90% for 1996]
<TABLE>
<CAPTION>
Most
Previous Recent
Average Annual Total Returns Activation Activation
11/4/88 to 8/29/94 to
5/11/92 4/16/97
<S> <C> <C>
Technology Series . . . . . . . . . . . . . . 11.16% 28.23%
------- -----------
S&P 500 Index . . . . . . . . . . . . . . . . 16.37% 22.62%
- --------------------------------------------- ------- -----------
Quarterly returns during most recent activation
- -----------------------------------------------
Highest:. . . . . . . . . . . . . . . . . . . . 18.84% in 2nd quarter 1995
- ----------------------------------------------- ---------------------------
Lowest: . . . . . . . . . . . . . . . . . . . . -3.61% in 1st quarter 1996
- ----------------------------------------------- ---------------------------
</TABLE>
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
The U.S. and/or foreign stock markets go down.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a security or strategy prove to be incorrect.
In addition to the general risks of stock funds, the series has special risks
due to its concentration in technology stocks. These risks include the
following:
The stocks of technology companies may underperform other sectors or the
market as a whole
The stocks of technology companies may experience greater price volatility
than other types of common stocks.
Technology companies may be smaller companies with limited product lines,
markets or financial resources, and they may depend on a small management group.
Because the series is "non-diversified", the performance of a particular
investment or small group of investments may affect the series more than if it
were diversified.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 Technology Series
- ------------------------------------------------------- ------------------
<S> <C>
Shareholder fees (paid directly from your investment) None
------------------
Annual fund operating expenses (expenses that are
deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . . . . 1.00%
------------------
Distribution and service (Rule 12b-1) fees. . . . . . None
------------------
Other expenses. . . . . . . . . . . . . . . . . . . . 0.07%
------------------
Total annual fund operating expenses. . . . . . . . . 1.07%
- ------------------------------------------------------- ------------------
</TABLE>
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$109 $340 $590 $1,306
- ---- ---- ---- ------
</TABLE>
Because the Technology Series is not currently active, the above tables reflect
the actual management fees and other expenses that were in effect when the
series was in active investment operations from January 1, 1997 to April 16,
1997.
<PAGE>
Financial Services Series
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of
companies in the financial services industry and related to the financial
services industry.
Key investments
The series will invest primarily in common stocks of companies in the financial
services industry and in industries connected with, marketing the products of,
serving and/or supplying the financial services industry or that use financial
services extensively in their product development or operations. The series may
also invest to a limited extent in American Depository Receipts (ADRs) and
common stocks of foreign companies in such industries. An equity security will
generally be considered appropriate for investment by the Financial Services
Series if, as determined by the advisor, at least 50% of the company's assets,
revenues or net income are derived from or related to the financial services and
related industries.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection. The advisor analyzes factors such as the management, financial
condition, and market position of individual companies to select companies in
the financial services sector that it believes will make attractive long-term
investments. The advisor looks for one or more of the following
characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value
Summary of past performance
This series was not active as of the date of this prospectus; therefore, no
performance information is provided.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
The U.S. and/or foreign stock markets go down.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a security or strategy prove to be incorrect.
In addition to the general risks of stock funds, the series has special risks
due to its concentration in financial services stocks. These risks include the
following:
The stocks of financial services companies may underperform other sectors
or the market as a whole.
The stocks of financial services companies may experience greater price
volatility than other types of common stocks.
Financial services stocks may be particularly sensitive to changes in
interest rates and other economic and regulatory events.
Because the series is "non-diversified", the performance of a particular
investment or small group of investments may affect the series more than if it
were diversified.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 Financial Services Series
- ---------------------------------------------------- -------------------------
<S> <C>
Shareholder fees (paid directly from your investment) None
------
Annual fund operating expenses (expenses that are
deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . . . 1.00%
------
Distribution and service (Rule 12b-1) fees. . . . . None
------
Other expenses. . . . . . . . . . . . . . . . . . . 0.13%
------
Total annual fund operating expenses. . . . . . . . 1.13%
- --------------------------------------------------- -------
</TABLE>
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<C> <C> <C> <C>
$115 $359 N/A N/A
- ----- ------ ------- -------
</TABLE>
Because the series was not active as of the date of this prospectus, the "Annual
Fund Operating Expenses" presented are estimates based upon projections made by
the advisor. In addition, the series has not calculated these expenses beyond
the three year period shown.
<PAGE>
International Series
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of
companies located outside the United States.
Key investments
The series invests primarily in common stocks of foreign companies.
Investment strategies
The advisor examines macro-economic trends and industry-specific factors to
identify investment themes, such as those being created by economic and
political changes taking place around the world. This approach is often called a
"top-down" strategy. The series is different from many stock funds because the
advisor's primary focus is not on individual stock selection. Rather, the
advisor seeks to identify broad themes that cut across countries or issuers and
then purchases stocks to capture those themes. The advisor buys one or more
stocks representing a particular investment theme in an attempt to benefit from
that theme. The series may invest in stocks of companies both in developed
countries and in emerging markets.
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year since its inception. The total return table
shows how the average annual total returns for different calendar periods
compare to those of the Standard & Poor's 500 Composite Stock Price Index, an
unmanaged index of common stocks, and the Morgan Stanley Capital International
All Country World ex US Index, a market-capitalization-weighted measure of the
total return of 2,068 companies listed on the stock exchanges of 46 countries.
[Bar chart showing the percent total return for the International Series for
1993, 1994, 1995, 1996, 1997 and 1998, with calendar years ended December 31st.
The results are 26.05% for 1993, -14.48% for 1994, 4.14% for 1995, 22.35% for
1996, 27.70% for 1997, and 23.63% for 1998.]
<PAGE>
<TABLE>
<CAPTION>
Average Annual Total Returns
(for periods ended 12/31/98)
1 Year 5 Years Since Inception
on 8/27/92
------ -------- -----------------
<S> <C> <C> <C>
International Series. . . . . . 23.63% 11.46% 14.00%
------ ------ ------
S&P 500 Index . . . . . . . . . 28.58% 24.05% 21.48%
------- ------ ------
MSCIAll Country World Index ex US 14.09% 7.54% 10.21%
- --------------------------------- ------- ------ ------
Quarterly returns
- ---------------------------------
Highest:. . . . . . . . . . . . . 19.04% in 1st quarter 1998
- --------------------------------- ----------------------------
Lowest: . . . . . . . . . . . . . -16.96% in 3rd quarter 1998
- --------------------------------- ----------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
Stock markets go down.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a strategy or security prove to be incorrect.
In addition to the general risks of stock funds, the series has special risks
due to its focus on foreign stocks. These risks include:
The prices of foreign common stocks may, at times, move in a different
direction than the prices of U.S. common stocks.
Because the series' investments are usually denominated in the currencies
of the countries in which they are located, the value of the series may be
affected by changes in exchange rates between those foreign currencies and the
U.S. dollar.
Investments in emerging market countries may be more volatile than
investments in more developed markets.
Because the series is "non-diversified", the performance of a particular
investment or small group of investments may affect the series more than if it
were diversified.
<PAGE>
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 International Series
- ------------------------------------------------- ---------------------
<S> <C>
Shareholder fees (paid directly from your
investment) . . . . . . . . . . . . . . . . None
------
Annual fund operating expenses (expenses that are
deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . . 1.00%
------
Distribution and service (Rule 12b-1) fees. . . . None
------
Other expenses. . . . . . . . . . . . . . . . . . 0.12%
------
Total annual fund operating expenses. . . . . . . 1.12%
- -------------------------------------------------- ------
</TABLE>
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$114 $356 $617 $1,363
- ---- ---- ---- ------
</TABLE>
<PAGE>
Life Sciences Series
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of
companies in industries based on the life sciences and related industries.
Key investments
The series will invest primarily in common stocks of companies engaged in
research, development, production, or distribution of products and services
related to the life sciences. Examples of companies involved in the life
sciences and related industries include those in the following areas:
pharmaceuticals, biotechnology, medical products and supplies, health care
services, and environmental services. The series may also invest to a limited
extent in American Depository Receipts (ADRs) and common stocks of foreign
companies in such industries. An equity security will generally be considered
appropriate for investment by the Life Sciences Series if, as determined by the
advisor, at least 50% of the company's assets, revenues or net income are
derived from or related to the life sciences or related industries.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection. The advisor analyzes factors such as the management, financial
condition, and market position of individual companies to select companies in
the life sciences sector that it believes will make attractive long-term
investments. The advisor looks for one or more of the following
characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year during periods in which it has been active.
The series was previously active from October 7, 1992 to September 21, 1995.
The total return table shows how the average annual total returns for the series
for different calendar periods compare to those of the Standard & Poor's 500
Composite Stock Price Index, an unmanaged index of common stocks.
<PAGE>
[Bar chart showing the percent total return for the Life Sciences Series for
1993 and 1994. The results are 3.16% for 1993 and 10.30% for 1994]
<TABLE>
<CAPTION>
Average Annual Total Returns
Most
Recent
Activation 10/7/92 to 9/21/95
------------------------------
<S> <C>
Life Sciences Series 18.06%
------------------------------
S&P 500 Index. . . . 16.36%
- -------------------- ------------------------------
Quarterly returns
- --------------------
Highest: . . . . . . 17.82% in 3rd quarter 1994
- -------------------- ------------------------------
Lowest:. . . . . . . -6.52% in 1st quarter 1993
- -------------------- ------------------------------
</TABLE>
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
The U.S. and/or foreign stock markets go down.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a security or strategy prove to be incorrect.
In addition to the general risks of stock funds, the series has special risks
due to its concentration in life science stocks. These risks include the
following:
The stocks of life-science companies may underperform other sectors or the
market as a whole.
The stocks of life science companies may experience greater price volatility
than other types of common stocks.
Life science stocks may be particularly sensitive to changes in economic and
regulatory changes.
Life science companies may be smaller companies with limited product lines,
markets or financial resources, and they may depend on a small management group.
Because the series is "non-diversified", the performance of a particular
investment or small group of investments may affect the series more than if it
were diversified.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
Life Sciences Series
---------------------
<S> <C>
Shareholder fees (paid directly from your
investment) None
-----
Annual fund operating expenses (expenses that are
deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . 1.00%
------
Distribution and service (Rule 12b-1) fees. . . . None
------
Other expenses. . . . . . . . . . . . . . . . . . 0.06%
-------
Total annual fund operating expenses. . . . . . . 1.06%
- ------------------------------------------------- ------
</TABLE>
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be after:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$108 $337 $585 $1,294
- ---- ---- ---- ------
</TABLE>
Because the Life Sciences Series is not currently active, the above tables
reflect the actual management fees and other expenses that were in effect when
the series was in active investment operations from January 1, 1995 to September
21, 1995.
<PAGE>
Global Fixed Income Series
Goals, strategies, and risks
Investment goal
Provide long-term total return by investing principally in fixed income
securities issued by governments, banks, corporations, and supranational
entities located anywhere in the world.
Key investments
The series' portfolio will consist primarily of government debt securities and
of investment grade corporate debt securities, bank debt, and money market
securities. The series may also invest a substantial portion of its assets in
high-yield, high-risk bonds, commonly called junk bonds.
Investment strategies
The advisor attempts to identify bond market sectors and individual securities
that offer yields sufficient for the risks specific to the sector or security.
In analyzing the relative attractiveness of countries, sectors, and individual
securities, the advisor considers:
Relative economic conditions of each country
Interest rate sensitivity of particular countries, sectors, and securities.
Differences in yields offered by bonds of different sectors, credit
quality, or maturities.
The impact of currency changes on the sectors
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year since its inception. The total return table
shows how the average annual total returns for different calendar periods
compare to those of the Merrill Lynch Global Government Bond Index, a market
value weighted measure of approximately 535 global government bonds and the
Merrill Lynch U.S. Treasury Bond Index, a market value weighted measure of
approximately 164 U.S. Treasury bonds.
<PAGE>
[Bar chart showing the percent total return for the Global Fixed Income Series
for the calendar year ending December 31,1998. The result was -4.38%.]
<TABLE>
<CAPTION>
Average Annual Total Returns
(for periods ended 12/31/98)
1 Year Since Inception
on 10/31/97
<S> <C> <C>
Global Fixed Income Series. . 2.78% 4.11%
------- ------
M.L. Global Govt. Bond Index. 14.12% 10.43%
------- ------
M.L. U.S. Treasury Bond Index 10.03% 10.00%
- ----------------------------- ------ ------
Quarterly returns
- -----------------------------
Highest:. . . . . . . . . . . 3.12% in 4th quarter 1998
- ----------------------------- ----------------------------
Lowest: . . . . . . . . . . . -2.17% in 3rd quarter 1998
- ----------------------------- ----------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any bond fund, the value of your investment will fluctuate in response
to interest rate movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
Interest rates go up, which will make bond prices go down and reduce the
value of the series' portfolio.
The issuer of a bond owned by the series defaults on its obligation to pay
principal and/or interest or has its credit rating downgraded. This risk is
higher for lower quality bonds.
Longer-term bonds will experience greater fluctuations than shorter-term
bonds in response to interest rate changes.
The advisor's judgments about the attractiveness, relative value, or
potential appreciation of a particular sector, security, or hedging strategy
prove to be incorrect.
In addition to the risks discussed above, the series is subject to additional
risks due to the large portion of the portfolio invested in foreign bonds. These
risk include:
The prices of foreign bonds, may, at times, move in a different direction
than the prices of bonds issued in the United States.
Because much of the series' investments are usually denominated in the
currencies of the countries in which they are located, the value of the series
may be affected by changes in exchange rates between those foreign currencies
and the U.S. dollar.
Investments in emerging market countries may be more volatile than
investments in more developed markets.
The series' investments in high-yield bonds will subject it to a substantial
degree of credit risk. Because the series is "non-diversified", the performance
of a particular investment or small group of investments may affect the series
more than if it were diversified.
<PAGE>
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
For the year ended 12/31/98 Global Fixed
Income Series
- ------------------------------------------------- --------------------------
<S> <C>
Shareholder fees (paid directly from your
investment) . . . . . . . . . . . . . . . . None
---------
Annual fund operating expenses (expenses that are
deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . 1.00%
--------
Distribution and service (Rule 12b-1) fees. . . None
--------
Other expenses. . . . . . . . . . . . . . . . . 0.10%
--------
Total annual fund operating expenses. . . . 1.10%
- --------------------------------------------- ---------
</TABLE>
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$112 $350 $606 $1,340
- ---- ---- ---- ------
</TABLE>
<PAGE>
World Opportunities Series
Goals, strategies, and risks
Investment goal
Provide long-term growth by investing principally in the common stocks of
companies located around the world.
Key investments
The series invests primarily in common stocks of companies from around the
world. The series may also invest in American Depository Receipts (ADRs) and
other U.S. dollar denominated securities of foreign issuers, including those in
emerging markets.
Investment strategies
The advisor uses a "bottom-up" strategy, focusing on individual security
selection to choose stocks from companies around the world. The advisor
analyzes factors such as the management, financial condition, and market
position of individual companies to select companies that it believes will make
attractive long-term investments. The advisor looks for one or more of the
following characteristics:
Strong strategic profiles (e.g., strong market position, benefits from
technology, capital appreciation in a mature market and high barriers to entry).
Improving market share in consolidating industries.
Low price relative to fundamental or break-up value
Summary of past performance
The bar chart and total return table provide some indication of the risks of
investing in the series. The bar chart shows changes in the performance of the
series for each full calendar year since its inception. The total return table
shows how the average annual total returns for different calendar periods
compare to those of the Morgan Stanley Capital International World Index and the
Morgan Stanley Capital International All Country World ex US Index. The MSCI
World Index is a market-capitalization-weighted measure of the total return of
2,440 companies listed on the stock exchanges of 22 countries, including the
United States. It has a very small weighting in emerging markets. The MSCI All
Country World ex US Index is a market-capitalization-weighted measure of the
total return of 2,068 companies listed on the stock exchanges of 47 countries,
including emerging markets and excluding the United States.
[Bar chart showing the percent total return for the World Opportunities Series
for 1997 and 1998, with calendar years ended December 31st. The results are
7.81% for 1997, and -4.38% for 1998.]
<TABLE>
<CAPTION>
Average Annual Total Returns
(for periods ended 12/31/98)
1 Year Since Inception
on 9/6/96
<S> <C> <C>
World Opportunities Series . . . . -4.38% 3.40%
------ ------
MSCI World Index . . . . . . . . . 24.34% 21.25%
------ ------
MSCI All Country World Index ex US 14.09% 8.43%
- ---------------------------------- ------ ------
Quarterly returns
- ----------------------------------
Highest: . . . . . . . . . . . . . 17.21% in 4th quarter 1998
- ---------------------------------- ----------------------------
Lowest:. . . . . . . . . . . . . . -19.49% in 3rd quarter 1998
- ---------------------------------- ----------------------------
</TABLE>
Past performance does not necessarily indicate how the series will perform in
the future.
<PAGE>
Goals, strategies, and risks
Principal risks of investing in the series
As with any stock fund, the value of your investment will fluctuate in response
to stock market movements. You could lose money on your investment in the
series or the series could underperform if any of the following occurs:
Stock markets go down.
An adverse event, such as an unfavorable earnings report, depresses the
value of a particular company's stock.
The advisor's judgments about the attractiveness, relative value or
potential appreciation of a strategy or security prove to be incorrect.
Because the series is "non-diversified", the performance of a particular
investment or small group of investments may affect the series more than if it
were diversified.
In addition to the general risks of stock funds, the series has special risks
due to its focus on foreign stocks. These risks include:
The prices of foreign common stocks may, at times, move in a different
direction than the prices of U.S. common stocks.
Because the series' investments are usually denominated in the currencies
of the countries in which they are located, the value of the series may be
affected by changes in exchange rates between those foreign currencies and the
U.S. dollar.
Investments in emerging market countries may be more volatile than
investments in more developed markets.
Fees and expenses of the series
This table describes the fees and expenses you may pay if you invest in shares
of the series.
<TABLE>
<CAPTION>
World Opportunities Series
For the year ended 12/31/98
- ----------------------------------------------------------------------------
<S> <C>
Shareholder fees (paid directly from your
investment) . . . . . . . . . . . . . . . . None
------
Annual fund operating expenses (expenses
that are deducted from assets of the series)
Management fee. . . . . . . . . . . . . . . . . . 1.00%
------
Distribution and service (Rule 12b-1) fees. . . . None
------
Other expenses. . . . . . . . . . . . . . . . . . 0.13%
------
Total annual fund operating expenses. . . . . . . 1.13%
- -------------------------------------------------- ------
</TABLE>
This example is intended to help you compare the cost of investing in the series
with the cost of investing in other mutual funds.
The example assumes that:
You invest $10,000 for the periods shown
You redeem at the end of each period
The fund's operating expenses remain the same
Your investment has a 5% return each year
Although your actual costs may be higher or lower, under these assumptions your
costs would be after:
<TABLE>
<CAPTION>
After After After After
- ------ ------- ------- --------
1 year 3 years 5 years 10 years
- ------ ------- ------- --------
<S> <C> <C> <C>
$115 $359 $622 $1,375
- ---- ---- ---- ------
</TABLE>
<PAGE>
More about the series' investments
Principal investments
EQUITY SECURITIES Each of the series, with the exception of the Global
Fixed Income Series, may invest in equity securities. These equity securities
may include exchange-traded and over-the-counter (OTC) common and preferred
stocks, warrants, rights, convertible debt securities, trust certificates,
partnership interests and equity participations.
FOREIGN SECURITIES The International and World Opportunities series
invests principally in the common stocks of foreign companies; however, the
series may also invest in ADRs and other U.S. dollar denominated securities of
foreign issuers. The Global Fixed Income Series invests principally in foreign
bonds. The other series may also invest in ADRs and other U.S. dollar
denominated securities of foreign issuers. ADRs are securities that are listed
and traded in the United States but represent an ownership interest in
securities issued by a foreign issuer. Prices of foreign securities may go down
because of foreign government actions, political instability or the more limited
availability of accurate information about foreign companies.
FIXED INCOME SECURITIES The Global Fixed Income Series invests primarily in
a variety of fixed income investments. These securities may be issued by the
U.S. government or any of its agencies, foreign governments, supranational
entities such as the World Bank, and U.S. and foreign companies. Investments in
fixed income securities may be of any credit quality and have all types of
interest rate payment and reset terms, including fixed rate, adjustable rate,
zero coupon and pay in kind.
SHORT-TERM FIXED INCOME SECURITIES During periods when the advisor is
unable to identify appropriate investments, the series may invest in fixed
income securities as a temporary investment. These securities will primarily
consist of short-term obligations of the U.S. government and its agencies and
money market instruments.
HIGH-YIELD BONDS The Global Fixed Income Series invests in high-yield
bonds. High-yield bonds are lower-rated debt securities often referred to as
"junk bonds." These securities offer a higher yield than other securities, but
they carry a greater degree of risk and are considered speculative by the major
credit rating agencies. High-yield securities may be issued by companies that
are restructuring, are smaller and less creditworthy, or are more highly
indebted than other companies. This means that the issuer may have more
difficulty making scheduled payments of principal and interest. Compared to
investment grade securities, high-yield bonds are influenced more by changes in
the financial and business position of the issuing company than by changes in
interest rates.
CURRENCY HEDGING In order to attempt to manage the currency risk
associated with owning and trading foreign securities in the International,
Global Fixed Income, and World Opportunities Series, the series may, but is not
required to, use several kinds of derivative contracts. The series primarily
uses forward foreign currency exchange contracts for hedging purposes. These
derivatives may be used to hedge against changes in the value of foreign
currencies relative to the U.S. dollar in connection with specific transactions
or portfolio positions.
Additional Risks
EMERGING MARKET RISK The International, Global Fixed Income, and World
Opportunities Series may be exposed to risks associated with investments in
emerging market countries. Emerging market countries are foreign countries that
are generally considered to be less developed than the United States, Canada,
Japan, Australia, New Zealand, and most of the nations in Western Europe. As a
result, they may be more likely to experience political, social, or economic
turmoil. In addition, the financial conditions of issuers in these countries
may be more precarious than those in developed countries. These characteristics
may result in greater price volatility for investments in emerging markets.
This price volatility may be heightened by currency fluctuations relative to the
U.S. dollar.
RISKS RELATED TO CURRENCY HEDGING The International, Global Fixed Income,
and World Opportunities Series may be exposed to risks associated with currency
hedging. The value of the series' portfolio may decline if a currency is not
hedged and that currency later declines with respect to the U.S. dollar. There
are also additional risks because a hedging strategy relies upon the ability of
the advisor to accurately predict movements in currency exchange rates. In
addition, there may not be an exact relationship between changes in the prices
of a forward foreign currency exchange contract and the underlying currency.
Defensive investing
The series may depart from their principal investment strategies by taking
temporary defensive positions in response to adverse market, economic or
political conditions. If a series takes a temporary defensive position, it may
be unable to achieve its investment goal.
The Series' investment goals
The series' board of directors may change their investment goals (described
above under "Goals and strategies") without obtaining the approval of the
shareholders. The series might not succeed in achieving their goal.
<PAGE>
The advisor
The series' advisor is Exeter Asset Management, a division of Manning & Napier
Advisors, Inc., 1100 Chase Square, Rochester, New York 14604. The advisor is
responsible for the day-to-day operations of the series and generally is
responsible for supervision of the series' overall business affairs, service
providers and officers.
A team made up of investment professionals and analysts makes all of the series'
investment decisions.
More about discretionary investment accounts
The advisor uses these series as a means of capturing investment opportunities
in specific market or industry sectors and to provide diversification among
asset classes (for example, international stocks or small company stocks) that
could not otherwise be captured efficiently and with sufficient diversification.
The advisor invests discretionary investment accounts in a sector when it
believes that the market sector to which it is dedicated presents an opportunity
to capture investment values or to diversify investment risk.
The advisor's decisions on when to purchase shares for discretionary investment
accounts are based on the following points:
1. The advisor holds a strong overview for the sector, but it believes that
purchasing individual securities in that sector would involve a high degree of
risk.
2. The advisor believes that the fund will provide the opportunity to invest
in an undervalued segment of the financial markets and that this opportunity
could not be efficiently captured without the use of the fund.
3. The advisor believes that the fund will provide the ability to diversify
risk in clients' accounts through investing in a market sector or asset class
(e.g., small capitalization stocks or international securities), and that this
diversification could not be efficiently achieved without the use of the fund.
The portion of a client account invested in each series may increase or decrease
in size depending upon the number of opportunities identified for the advisor
and the client's investment objectives. Once the advisor decides an investment
opportunity has been captured, shares of the series will be sold from clients'
accounts. It is possible for more than one sector to be activated at the same
time, but each sector will be activated and deactivated based on an individual
analysis of that sector and on the advisor's assessment of the appropriateness
of Fund participation to each client's investment objectives.
As a general rule, the investment in shares of a series on behalf of clients is
limited to a maximum of 5% - or if the advisor believes that the opportunity to
capture investment values or to diversify risk among asset classes is
particularly compelling, to a maximum of 10% - of the client's portfolio. For
clients who have selected a fixed income investment objective, the advisor may
invest up to 25% of their portfolio in the Global Fixed Income Series.
Management fees
In return for the services it provides to the series, the advisor receives a
management fee, which is computed daily and payable monthly at an annual rate of
1.00% of each series' average daily net assets.
Clients for whom the Advisor provides advisory services pursuant to separate
investment advisory contracts will be separately credited by the advisor an
amount equal to the portion of their client advisory fee attributable to the
portion of their assets invested in the series.
The advisor may use its own resources to engage in activities that may promote
the sale of the series, including payments to third parties who provide
shareholder support servicing and distribution assistance.
<PAGE>
Offering of shares
Shares of the series are offered to persons who are discretionary investment
account clients or employees of the fund's advisor or its affiliates. In
addition, shares of the Small Cap Series, World Opportunities Series, and
International Series are offered to investors who purchase shares directly from
the distributor. All orders to purchase shares on behalf of discretionary
investment account clients will be processed at the net asset value next
determined after receipt by the distributor of a duly completed purchase order
transmitted by the advisor to the distributor.
The minimum initial investment in each series is $2,000. For investment
advisory accounts held custody by the advisor or an affiliate of the advisor,
the minimum initial or subsequent investment in each series is $400. The
distributor reserves the right to waive these minimum initial or subsequent
investment requirements in its sole discretion. The distributor has the right
to refuse any order. The distributor may suspend offering shares to other than
discretionary accounts of the advisor.
Manning & Napier Investor Services, Inc. acts as distributor of the fund shares.
There are no additional costs to clients for this service.
<PAGE>
How to redeem shares
Discretionary investment account clients wishing to rescind or modify their
authorization for the advisor to invest in the fund on their behalf must send a
letter of instructions signed by all the registered owners of the account.
All redemption orders received in good order by the distributor or transfer
agent before the close of trading on the New York Stock Exchange (NYSE) will be
executed at that day's share price. Orders received in good order after the
close of trading will be executed at the next business day's price. All
redemption orders must include the required documentation and signatures.
Proceeds of the sale will be forwarded to the custodian of the investment
advisor account.
The series may postpone payment of redemption proceeds for up to seven days, or
suspend redemptions to the extent permitted by law. The series may make payment
for shares in part by giving you portfolio securities. As a redeeming
shareholder, you will pay transaction costs to dispose of these securities.
<PAGE>
Valuation of shares
The series offer their shares at the net asset value (NAV) per share of the
series. The series calculates its NAV once daily as of the close of regular
trading on the New York Stock Exchange (generally at 4:00 p.m., New York time)
on each day the exchange is open. If the exchange closes early, the series will
accelerate the calculation of NAV and transaction deadlines to that time.
The series value the securities in their portfolios on the basis of market
quotations and valuations provided by independent pricing services. If
quotations are not readily available, or the value of a security has been
materially affected by events occurring after the closing of a foreign exchange,
the series value their assets by a method that the directors believe accurately
reflects fair value. If a series uses fair value to price securities, it may
value those securities higher or lower than another series that uses market
quotations to price the same securities.
The foreign securities held by the series may be listed on foreign exchanges
that trade on days when the New York Stock Exchange is not open and the
portfolios do not price their shares. As a result, the net asset value of a
portfolio may change at a time when shareholders are not able to purchase or
redeem shares.
Year 2000 issue
Information technology experts are concerned about computer systems' ability to
process date-related information on and after January 1, 2000. This situation,
commonly known as the "Year 2000" issue, could have an adverse impact on the
series. The cost of addressing the Year 2000 issue, if substantial, could
adversely affect companies and governments that issue securities held by the
series. The advisor, the transfer agent and the distributor are addressing the
Year 2000 issue for their systems. Its other service providers have informed
the fund that they are taking similar measures. Although the fund does not
expect the Year 2000 issue to adversely affect it, the fund cannot guarantee
that the efforts of the fund or its service providers to correct the problem
will be successful.
<PAGE>
Dividends, distributions and taxes
Dividends and distributions
Each series generally:
Pays dividends once a year, in December.
Makes capital gains distributions, if any, once a year, typically in
December.
Each series also may pay additional distributions and dividends at other times
if necessary for the series to avoid a federal tax.
Capital gain distributions and dividends paid by each series are reinvested in
additional shares of that series. Alternatively, you can instruct the transfer
agent in writing or by telephone to have your capital gains and/or dividends
paid in cash. You can change your choice at any time to be effective as of the
next distribution or dividend, except that any change given to the transfer
agent after the record date will not be effective until the next distribution or
dividend is made. No interest will accrue on amounts represented by uncashed
distribution or redemption checks.
Taxes
<TABLE>
<CAPTION>
Transaction Federal Tax Status
- ------------------------------------- ---------------------------------------
<S> <C>
Redemption or exchange of shares. . . Usually taxable as capital gain or loss;
long-term only if shares owned more than
one year
--------------------------------------
Long-term capital gain distributions. Taxable as long-term capital gain
--------------------------------------
Short-term capital gain distributions Taxable as ordinary income
--------------------------------------
Dividends . . . . . . . . . . . . . . Taxable as ordinary income
- ------------------------------------- --------------------------------------
</TABLE>
After the end of each year, the fund will provide you with information about the
distributions and dividends that you received and any redemptions of shares
during the previous year. Shareholders may be able to claim a credit or
deduction on their income tax returns for their pro rata portion of qualified
taxes paid by a series to foreign countries. In calculating your gain or loss
on any sale of shares, note that your tax basis in your shares is increased by
the amounts of dividends and distributions that you have reinvested in the
series. Dividends and distributions are taxable as described above whether
received in cash or reinvested.
If you do not provide the fund with your correct taxpayer identification number
and any required certifications, you may be subject to back-up withholding of
31% of your distributions, dividends, and redemption proceeds. Because each
shareholder's circumstances are different and special tax rules may apply, you
should consult with your tax adviser about your investment in the series and
your receipt of dividends, distributions or redemption proceeds.
<PAGE>
Financial highlights
The financial highlights tables are intended to help you understand the series'
financial performance for the past five years. Certain information reflects
financial results for a single share. The total returns in the table represent
the rate that an investor would have earned on an investment in the series
(assuming reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
series' financial statements, are included in the annual reports, which are
available upon request.
<PAGE>
Small Cap Series
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
---------------------
<S> <C> <C> <C> <C> <C>
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- --------- -------- --------- -------
PER SHARE DATA
(FOR A SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
NET ASSET VALUE -
BEGINNING OF PERIOD. . . . $12.05 $12.09 $11.95 $12.92 $12.52
- --------------------------- ------- ------ ------ ------ ------
Income from investment
operations:
Net investment income
(loss) . . . . . . . . . 0.049 (0.015) 0.045 (0.004) (0.066)
------- ------- ----- ------- ------
Net realized and
unrealized gain (loss)
on investments. . . . . (1.774) 1.502 1.112 1.934 1.051
- ---------------------------- -------- ------- ------ ------ ------
Total from investment
operations. . . . . . . . . (1.725) 1.487 1.157 1.930 0.985
- ---------------------------- -------- ------ ------ ------ ------
Less distributions to
shareholders: . . . . . . --
--------
From net investment
income . . . . . . . . . -- (0.009) (0.035) -- --
-------- ------- ------- ------ -------
From net realized
gain on investments. . (0.685) (1.518) (0.889) (2.900) (0.585)
-------- ------- ------- ------- -------
In excess of net
realized gain on
investments. -- -- (0.093) -- --
- ------------------------ -------- ------- ------- ------- -------
Total distributions
to shareholders . . . . (0.685) (1.527) (1.017) (2.900) (0.585)
- ------------------------- -------- ------- ------ ------- -------
NET ASSET VALUE -
END OF PERIOD . . . . . $9.64 $12.05 $12.09 $11.95 $12.92
- ------------------------ ======= ======= ====== ======= =======
Total return1 . . . . . (13.59)% 12.29% 10.06% 14.70% 8.01%
- ----------------------- -------- ------- ------- ------ -------
Ratios to average
net assets /
Supplemental Data:
Expenses. . . . . . 1.09% 1.07% 1.08% 1.07% 1.10%
------ ------ ------ ------ -------
Net investment
income (loss). . . . 0.44% (0.12)% 0.29% (0.03)% (0.58)%
------ ------- ------ ------- --------
Portfolio turnover. 81% 94% 31% 77% 31%
----- ------- ------ ------ --------
NET ASSETS -
END OF PERIOD
(000'S OMITTED). . . . . $99,666 $121,600 $100,688 $143,003 $105,522
======================== ======= ========= ======== ========= ========
</TABLE>
1Represents aggregate total return for the period indicated.
<PAGE>
International Series
<TABLE>
<CAPTION>
For Years Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA (FOR A
SHARE OUTSTANDING
THROUGHOUT EACH PERIOD):
NET ASSET VALUE -
BEGINNING OF PERIOD. $13.08 $11.54 $ 9.57 $9.54 $11.33
-------- ------- ------- ------ ------
Income from investment
operations:
Net investment income 0.097 0.154 0.156 0.123 0.143
Net realized and
unrealized gain (loss)
on investments. . . . 2.948 2.992 1.976 0.262 (1.784)
-------- ---------- ------ ------ -------
Total from investment
operations . . . . 3.045 3.146 2.132 0.385 (1.641)
-------- ---------- ------ ------ -------
Less distributions to
shareholders:
From net investment
income. . . . . . (0.109) (0.150) (0.143) (0.118) --
From paid-in-capital -- -- -- (0.160) --
From net realized gain
on
Investments . . . (0.446) (1.456) (0.019) (0.077) (0.149)
---------- -------- ------- ------- -------
Total distributions to
shareholders. . . (0.555) (1.606) (0.162) (0.355) (0.149)
---------- -------- ------- ------- -------
NET ASSET VALUE -
END OF PERIOD. . . . . $15.57 $13.08 $11.54 $9.57 $9.54
======= ======= ====== ====== ======
Total return1. . . . . 23.63% 27.70% 22.35% 4.14% (14.48)%
Ratios to average net
assets/
Supplemental Data:
Expenses . . . . . 1.12% 1.08% 1.12% 1.20% 1.18%
Net investment income 0.59% 1.18% 1.46% 1.42% 1.38%
Portfolio turnover . . . 0% 10% 2% 14% 31%
NET ASSETS -
END OF PERIOD
(000'S OMITTED) . . . . $199,259 $ 199,256 $ 149,331 $ 128,294 $ 85,964
========= ========= ========= ========== ==========
</TABLE>
1 Represents aggregate total return for the period indicated.
<PAGE>
Global Fixed Income
<TABLE>
<CAPTION>
<PAGE>
FOR THE YEAR FOR THE PERIOD
ENDED 12/31/98 10/31/97
TO 12/31/97
<S> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING THROUGHOUT
EACH PERIOD):
NET ASSET VALUE BEGINNING OF PERIOD. . . $ 10.12 $10.00
Income from investment operations:
Net investment income. . . . . . . . . 0.597 0.081
Net realized and unrealized gain (loss)
on investments. . . . . . . . . . . (0.322) 0.118
Total from investment operations. . . . . 0.275 0.199
Less distributions to shareholders:
From net investment income . . . . . . (0.629) (0.079)
From Realized gain on investments. . . (0.106) --
Total distributions to shareholder. (0.735) (0.079)
NET ASSET VALUE - END OF PERIOD . . . . . $ 9.66 $10.12
Total return 1. . . . . . . . . . . . . . . 2.78% 2.00%
Ratios to average net assets /
Supplemental Data: . . . . . . . . . . 1.10% 1.09%2
Expenses. . . . . . . . . . . . . . . 5.75% 4.75%2
Net investment income
Portfolio turnover. . . . . . . . . . . . 29% 3%
NET ASSETS - END OF PERIOD (000'S OMITTED) $118,793 $127,172
<FN>
1 Represents aggregate total return for the period indicated.
2 Annualized
</TABLE>
<PAGE>
World Opportunities
<TABLE>
<CAPTION>
PERIOD 9/6/96
FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS)
ENDED 12/31/98 ENDED 12/31/97 TO 12/31/96
-------------- ------------- ----------------
<S> <C> <C> <C>
PER SHARE DATA (FOR A SHARE
OUTSTANDING
THROUGHOUT EACH PERIOD)
NET ASSET VALUE -
BEGINNING OF PERIOD $ 9.76 $10.42 $10.00
Income from investment
operations:
Net investment income . 0.121 0.086 0.051
-------- ---------- --------
Net realized and
unrealized gain
on investments . (0.593)1 0.669 0.429
- --------------------------- -------- --------- --------
Total from investment
operations . . . . . (0.472) 0.755 0.480
- --------------------------- -------- --------- --------
Less distributions to
shareholders:
From net investment
income (0.135) (0.086) (0.051)
------------- -------------- --------
From net realized gain
on investments . (0.603) (1.329) (0.009)
- ---------------------------- ------------ ------------- ---------
Total distributions to
shareholders. . . . (0.738) (1.415) (0.060)
- ------------------------------------------ ------------ ---------
NET ASSET VALUE -
END OF PERIOD. . . . . . $ 8.55 $ 9.76 $ 10.42
=========================== ======== ========== ========
Total return2. . . (4.38)% 7.81% 4.82%
---------- --------- ---------
Ratios to Average Net Assets/
Supplemental Data:
Expenses. . . . . . . . . 1.13% 1.15% 1.17%3
-------- --------- -------
Net investment income . . 2.30% 0.79% 1.54%3
-------- --------- -------
Portfolio turnover . . . . . 52% 62% 1%
------- --------- -------
NET ASSETS -
END OF PERIOD (000'S OMITTED) $215,778 $95,215 $77,338
- --------------------------- ========== ======== ========
</TABLE>
1 The amount shown for a share outstanding does not correspond with the
aggregate net gain on investments for the period due to the
timing of sales and repurchases of fund shares in relation to
fluctuating market value of the investments of the Fund.
2 Represents aggregate total return for the period indicated.
3 Annualized.
<PAGE>
[Back Cover Page]
Exeter Fund, Inc.
Small Cap Series
Energy Series
Technology Series
Financial Services Series
International Series
Life Sciences Series
Global Fixed Income Series
World Opportunities Series
Shareholder Reports and the Statement of Additional Information (SAI). Annual
and semiannual reports to shareholders provide additional information about each
series' investments. These reports discuss the market conditions and investment
strategies that significantly affected the series' performance during its last
fiscal year. The SAI provides more detailed information about each series. It
is incorporated by reference into this combined prospectus.
How to Obtain These Reports and Additional Information.
You may obtain shareholder reports and the SAI or other information about
the fund without charge, by calling 1-800-466-3863 or sending written requests
to Exeter Fund, P.O. Box 41118, Rochester, New York 14604.
You may review shareholder reports, the prospectus and SAI at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
You can get a copy of these materials by writing to the Public Reference Section
of the Commission, Washington, D.C. 20549-6009. Information about the public
reference room may be obtained by calling 1-800-SEC-0330. You can get the same
reports and information free from the SEC's Internet web site
(http://www.sec.gov).
If someone makes a statement about the series that is not in this prospectus,
you should not rely upon that information. Neither the fund nor its distributor
is offering to sell shares to any person to whom it may not lawfully sell
shares.
Investment Company Act file no. 811-04087
<PAGE>
EXETER FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION DATED MAY 1, 1999
This Statement of Additional Information is not a Prospectus, and it should
be read in conjunction with the Prospectus for each of the following series of
Exeter Fund, Inc. (the "Fund"): Small Cap Series, Energy Series, Technology
Series, Financial Services Series, International Series, Life Sciences Series,
Global Fixed Income Series, World Opportunities Series (each a "series"), copies
of which may be obtained from Exeter Asset Management, 1100 Chase Square,
Rochester, NY 14604. This SAI also relates to the Class A, B, C, D and E Shares
of the Small Cap Series and the World Opportunities Series.
TABLE OF CONTENTS
Page
----
Investment Goals B-2
Investment Policies and Risks B-2
Investment Restrictions B-27
Portfolio Turnover B-31
The Fund B-31
Management B-33
The Advisor B-37
Distribution of Fund Shares B-39
Custodian and Independent Accountant B-41
Portfolio Transactions and Brokerage B-41
Net Asset Value B-42
Federal Tax Treatment of Dividends and
Distributions B-43
Yield and Total Return B-48
Financial Statements B-48
Appendix - Description of Bond Ratings B-49
<PAGE>
INVESTMENT GOALS
Each of the series' investment goals as well as its principal investment
policies and strategies with respect to the composition of their respective
portfolios are described in the prospectus. The following sections provide more
information about those principal policies and strategies as well as information
about other policies and strategies. For the Small Cap Series, and the World
Opportunities Series, the investment goal is not fundamental and may be changed
by the Board of Directors without shareholder approval. If there is a
change in a series' investment objective, shareholders will be notified thirty
(30) days prior to any such change and will be advised to consider whether the
fund remains an appropriate investment in light of their then current financial
position and needs. For the other Series, the investment goal is
fundamental. Fundamental investment policies may not be changed without the
approval of a majority of the outstanding voting shares of the Series. The
Small Cap Series is a diversified mutual fund. The other Series are
non-diversified.
INVESTMENT POLICIES AND RISKS
EQUITY INVESTMENTS
Common Stocks. Each series, with the exception of the Tax Exempt Series and the
- -------------
Global Fixed Income Series, may purchase common stocks. Common stocks are
shares of a corporation or other entity that entitle the holder to a pro rata
share of the profits of the corporation, if any, without preference over any
other shareholder or class of shareholders, including holders of the entity's
preferred stock and other senior equity. Common stock usually carries with it
the right to vote and frequently an exclusive right to do so.
Preferred Stocks. Each series may invest in preferred stocks. Preferred stocks
may pay a dividend at a fixed rate, and may entitle the holder to acquire the
issuer's stock by exchange or purchase for a predetermined rate.
Convertible Securities. Each series may invest in securities that are
convertible at either a stated price or a stated rate into underlying shares of
common stock, thus enabling the investor to benefit from increases in the market
price of the common stock. Convertible securities provide higher yields than
the underlying equity, but generally offer lower yields than non-convertible
securities of similar quality. Like bonds, the value of convertible securities
fluctuates in relation to changes in interest rates and, in addition, also
fluctuates in relation to the underlying common stock. The principal factor in
selecting convertible bonds is the potential to benefit from movement in the
stock price. There is no minimum rating standard for the debt aspects of such
securities. Convertible bonds purchased by a series may be subject to the risk
of being called by the issuer.
<PAGE>
Warrants. Each series (with the exception of the Global Fixed Income Series,
New York Tax Exempt Series, Ohio Tax Exempt Series, and the Diversified Tax
Exempt) may purchase warrants. Warrants acquired by a series entitle it to buy
common stock from the issuer at a specified price and time. Warrants may be
considered more speculative than certain other types of investments because they
(1) do not carry rights to dividends or voting rights with respect to the
securities which the warrant entitles the holder to purchase, and (2) do not
represent any rights in the assets of the issuer. Warrants purchased by the
Fund may or may not be listed on a national securities exchange.
REITs. Each series may invest in shares of real estate investment trusts
("REITs"), which are pooled investment vehicles that invest in real estate or
real estate loans or interests. Investing in REITs involves risks similar to
those associated with investing in equity securities of small capitalization
companies. REITs are dependent upon management skills, are not diversified, and
are subject to risks of project financing, default by borrowers,
self-liquidation, and the possibility of failing to qualify for the exemption
from taxation on distributed amounts under the Internal Revenue Code of 1986, as
amended (the "Code").
Trust Certificates, Partnership Interests and Equity Participations. Each
series may invest in equity securities that are interests in non-corporate
entities. These securities, which include trust certificates, partnership
interests and equity participations, have different liability and tax
characteristics than equity securities issued by a corporation, and thus may
present additional risks to the series. However, the investment characteristics
of these securities are similar to those of traditional corporate equity
securities.
FIXED INCOME INVESTMENTS
Corporate Debt Obligations. Each series may invest in corporate debt
obligations issued by financial institutions and corporations. Corporate debt
obligations are subject to the risk of an issuer's inability to meet principal
and interest payments on the obligations and may also be subject to price
volatility due to such factors as market interest rates, market perception of
the creditworthiness of the issuer and general market liquidity.
U.S. Government Securities. Each series may invest in debt obligations of
varying maturities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. Direct obligations of the U.S. Treasury which are backed by
the full faith and credit of the U.S. Government, include a variety of Treasury
securities that differ only in their interest rates, maturities and dates of
issuance. U.S. Government agencies or instrumentalities which issue or
guarantee securities include, but are not limited to, the Federal Housing
Administration, Federal National Mortgage Association, Farmers Home
Administration, Export-Import Bank of the United States, Small Business
Administration, Governmental National Mortgage Association, General Services
Administration, Central Bank for Cooperatives, Federal Home Loan Banks, Federal
Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks, Maritime Administration, the Tennessee Valley Authority, District of
Columbia Armory Board and the Student Loan Marketing Association.
<PAGE>
Obligations of U.S. Government agencies and instrumentalities may or may not be
supported by the full faith and credit of the United States. Some are backed by
the right of the issuer to borrow from the U.S. Treasury; others by
discretionary authority of the U.S. Government to purchase the agencies'
obligations; while still others, such as the Student Loan Marketing Association,
are supported only by the credit of the instrumentality. In the case of
securities not backed by the full faith and credit of the United States, the
investor must look principally to the agency or instrumentality issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the United States itself in the event the agency or
instrumentality does not meet its commitment.
A series will invest in securities of such instrumentality only when the Fund's
investment advisor, Exeter Asset Management (the Advisor ), is satisfied that
the credit risk with respect to any instrumentality is minimal.
Mortgage-Backed Securities. Each series, except for the Tax Exempt Series, may
invest in mortgage-backed securities which represent an interest in a pool of
mortgage loans. These securities are issued or guaranteed by U.S. Government
agencies or instrumentalities such as the Government National Mortgage
Association ("GNMA"), Fannie Mae, and the Federal Home Loan Mortgage Corporation
("FHLMC"). Obligations of GNMA are backed by the full faith and credit of the
United States Government. Obligations of Fannie Mae and FHLMC are not backed by
the full faith and credit of the United States Government but are considered to
be of high quality since they are considered to be instrumentalities of the
United States. The market value and interest yield of these mortgage-backed
securities can vary due to market interest rate fluctuations and early
prepayments of underlying mortgages. These securities represent ownership in a
pool of federally insured mortgage loans with a maximum maturity of 30 years.
However, due to scheduled and unscheduled principal payments on the underlying
loans, these securities have a shorter average maturity and, therefore, less
principal volatility than a comparable 30-year bond. Since prepayment rates
vary widely, it is not possible to accurately predict the average maturity of a
particular mortgage-backed security. The scheduled monthly interest and
principal payments relating to mortgages in the pool will be "passed through" to
investors. Government mortgage-backed securities differ from conventional bonds
in that principal is paid back to the certificate holders over the life of the
loan rather than at maturity. As a result, there will be monthly scheduled
payments of principal and interest. In addition, there may be unscheduled
principal payments representing prepayments on the underlying mortgages.
Although these securities may offer yields higher than those available from
other types of U.S. Government securities, mortgage-backed securities may be
less effective than other types of securities as a means of "locking in"
attractive long-term rates because of the prepayment feature. For instance,
when interest rates decline, the value of these securities likely will not rise
as much as comparable debt securities due to the prepayment feature. In
addition, these prepayments can cause the price of a mortgage-backed security
originally purchased at a premium to decline in price to its par value, which
may result in a loss.
<PAGE>
Each series, except for the Tax Exempt Series, may also invest in collateralized
mortgage obligations ("CMOs") and real estate mortgage investment conduits
("REMICs"), which are rated in one of the two top categories by Standard &
Poor's Corporation ("S&P") or Moody's Investors Service ("Moody's"). CMOs are
securities collateralized by mortgages, mortgage pass-throughs, mortgage
pay-through bonds (bonds representing an interest in a pool of mortgages where
the cash flow generated from the mortgage collateral pool is dedicated to bond
repayment), and mortgage-backed bonds (general obligations of the issuers
payable out of the issuer's general funds and additionally secured by a first
lien on a pool of single family detached properties). Many CMOs are issued with
a number of classes or series which have different maturities and are retired in
sequence. Investors purchasing such CMOs in the shortest maturities receive or
are credited with their pro rata portion of the scheduled payments of interest
and principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be
supported by various types of insurance, and some CMOs may be backed by GNMA
certificates of other mortgage pass-throughs issued or guaranteed by U.S.
government agencies or instrumentalities, the CMOs themselves are not generally
guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
Asset-Backed Securities. Each series, except for the Tax Exempt Series, may
invest in asset-backed securities. These securities, issued by trusts and
special purpose corporations, are backed by a pool of assets, such as credit
card and automobile loan receivables, representing the obligations of a number
of different parties.
Asset-backed securities present certain risks. For instance, in the case of
credit card receivables, these securities may not have the benefit of any
security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
<PAGE>
Asset-backed securities are often backed by a pool of assets representing the
obligations of a number of different parties. To lessen the effect of failures
by obligors to make payments on underlying assets, the securities may contain
elements of credit support which fall into two categories: (i) liquidity
protection and (ii) protection against losses resulting from ultimate default by
an obligor on the underlying assets. Liquidity protection refers to the
provision of advances, generally by the entity administering the pool of assets,
to ensure that the receipt of payments on the underlying pool occurs in a timely
fashion. Protection against losses resulting from ultimate default ensures
payment through insurance policies or letters of credit obtained by the issuer
or sponsor from third parties. The degree of credit support provided for each
issue is generally based on historical information respecting the level of
credit risk associated with the underlying assets. Delinquency or loss in
excess of that anticipated or failure of the credit support could adversely
affect the return on an instrument in such a security.
The estimated life of an asset-backed security varies with the prepayment
experience with respect to the underlying debt instruments. The rate of such
prepayments, and hence the life of an asset-backed security, will be primarily a
function of current market interest rates, although other economic and
demographic factors may be involved. For example, falling interest rates
generally result in an increase in the rate of prepayments of mortgage loans
while rising interest rates generally decrease the rate of prepayments.
Consequently, asset-backed securities are subject to call risk and extension
risk (described below).
Below Investment Grade Debt Securities. The Global Fixed Income Series may
invest up to 20% of its assets in corporate debt securities rated below
investment grade. High risk, high yield securities rated below BBB or lower by
S&P or Baa or lower by Moody's are "below investment grade" and are considered
to have speculative characteristics and involve greater risk of default or price
changes due to changes in the issuer's credit-worthiness. Market prices of
these securities may fluctuate more than high-rated securities and they are
difficult to price at times because they are more thinly traded and less liquid
securities. Market prices may decline significantly in periods of general
economic difficulty which may follow periods of rising interest rates.
Securities in the lowest rating category may be in default. For these reasons,
it is the series' policy not to rely primarily on ratings issued by established
credit rating agencies, but to utilize such ratings in conjunction with the
Advisor's own independent and ongoing review of credit quality. In the event a
security is downgraded below these ratings after purchase, the Advisor will
review and take appropriate action with regard to the security. Each series
will also seek to minimize risk by diversifying its holdings.
<PAGE>
Yankee Bonds. Each series may invest in U.S. dollar-denominated bonds sold in
the United States by non-U.S. issuers ("Yankee bonds"). As compared with bonds
issued in the United States, such bond issues normally carry a higher interest
rate but are less actively traded.
Obligations of Supranational Agencies. The Global Fixed Income Series may
purchase securities issued or guaranteed by supranational agencies including,
but not limited to, the following: Asian Development Bank, Inter-American
Development Bank, International Bank for Reconstruction and Development (World
Bank), African Development Bank, European Coal and Steel Community, European
Economic Community, European Investment Bank and the Nordic Investment Bank.
For concentration purposes, supranational entities are considered an industry.
<PAGE>
Zero-Coupon Bonds. Some of the securities in which the series invest may
include so-called "zero-coupon" bonds. Zero-coupon bonds are issued at a
significant discount from face value and generally pay interest only at maturity
rather than at intervals during the life of the security. Each series is
required to accrue and distribute income from zero-coupon bonds on a current
basis, even though it does not receive that income currently in cash. Thus, the
series may have to sell investments to obtain cash needed to make income
distributions. The discount in the absence of financial difficulties of the
issuer decreases as the final maturity of the security approaches. Zero-coupon
bonds can be sold prior to their maturity date in the secondary market at the
then prevailing market value, which depends primarily on the time remaining to
maturity, prevailing level of interest rates and the perceived credit quality of
the issues. The market prices of zero-coupon securities are subject to greater
fluctuations in response to changes in market interest rates than bonds which
pay interest currently.
Variable and Floating Rate Instruments. Certain of the obligations purchased by
a series may carry variable or floating rates of interest, may involve a
conditional or unconditional demand feature and may include variable amount
master demand notes. Such instruments bear interest at rates which are not
fixed, but which vary with changes in specified market rates or indices, such as
a Federal Reserve composite index. The interest rate on these securities may be
reset daily, weekly, quarterly, or at some other interval, and it may have a
floor or ceiling rate. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates.
Short-Term Investments. For temporary defensive purposes during periods when
the Advisor determines that market conditions warrant, each series may depart
from its investment goals and invest up to 100% of its assets in all types of
money market instruments (including securities guaranteed by the U.S.
Government, its agencies or instrumentalities, certificates of deposit, time
deposits and bankers' acceptances issued by banks or savings and loan
institutions deemed creditworthy by the Advisor, commercial paper rated A-1 by
S&P or Prime-1 by Moody's, repurchase agreements involving such securities and
shares of other investment companies as permitted by applicable law) and may
hold a portion of its assets in cash. For a description of the above ratings,
see the Appendix.
<PAGE>
Risks of Fixed Income Securities. Investments in fixed income securities may
subject the series to risks, including the following:
Interest Rate Risk. When interest rates decline, the market value of fixed
income securities tends to increase. Conversely, when interest rates increase,
the market value of fixed income securities tends to decline. The volatility of
a security s market value will differ depending upon the security s duration,
the issuer and the type of instrument.
Default Risk/Credit Risk. Investments in fixed income securities are subject to
the risk that the issuer of the security could default on its obligations,
causing a series to sustain losses on such investments. A default could impact
both interest and principal payments.
Call Risk and Extension Risk. Fixed income securities may be subject to both
call risk and extension risk. Call risk exists when the issuer may exercise its
right to pay principal on an obligation earlier than scheduled, which would
cause cash flows to be returned earlier than expected. This typically results
when interest rates have declined and a series will suffer from having to
reinvest in lower yielding securities. Extension risk exists when the issuer
may exercise its right to pay principal on an obligation later than scheduled,
which would cause cash flows to be returned later than expected. This typically
results when interest rates have increased, and a series will suffer from the
inability to invest in higher yield securities.
Foreign Securities. In seeking its objective, the International Series will
invest primarily in common stocks of non-United States issuers, while the World
Opportunities Series will invest 65% of its assets in common stocks of companies
domiciled in at least three different countries. The Global Fixed Income Series
will invest primarily in government and corporate fixed income securities issued
anywhere in the world, including the United States. In addition, the Life
Sciences Series may invest up to 25% of its assets and each other series, with
the exception of the Tax Exempt Series, may invest up to 10% of its assets in
foreign securities which are not publicly traded in the United States. The
series' investments in foreign securities will be of the same types and quality
as the domestic securities in which the series may invest when the anticipated
performance of foreign securities is believed by the Advisor to offer more
potential than domestic alternatives in keeping with the investment goals of the
series. Each series, except the Global Fixed Income Series, will invest no more
than 25% of its assets in securities issued by any one foreign government. Each
series may invest without limit in equity securities of foreign issuers that are
listed on a domestic securities exchange or are represented by American
Depository Receipts that are listed on a domestic securities exchange or are
traded in the United States on the over-the-counter market. Foreign debt
securities may be denominated either in U.S. dollars or foreign currencies.
<PAGE>
Each series' restrictions on investment in foreign securities are fundamental
policies that cannot be changed without the approval of a majority, as defined
in the Investment Company Act of 1940 (the "1940 Act"), of the outstanding
voting securities of the series.
There are risks in investing in foreign securities not typically involved in
domestic investing. An investment in foreign securities may be affected by
changes in currency rates and in exchange control regulations. Foreign
companies are frequently not subject to the accounting and financial reporting
standards applicable to domestic companies, and there may be less information
available about foreign issuers. There is frequently less government regulation
of foreign issuers than in the United States. In addition, investments in
foreign countries are subject to the possibility of expropriation or
confiscatory taxation, political or social instability or diplomatic
developments that could adversely affect the value of those investments. There
may also be imposition of withholding taxes. Foreign financial markets may have
less volume and longer settlement periods than U.S. markets which may cause
liquidity problems for a series. In addition, costs associated with
transactions on foreign markets are generally higher than for transactions in
the U.S. The Global Fixed Income Series' policy under which it has no limit on
the amount it may invest in any one country may involve a higher degree of risk
than if the series were more diversified among countries. The special risks
associated with investing in just one country include a greater effect on
portfolio holdings of country-specific economic factors, currency fluctuations,
and country-specific social or political factors. These risks generally are
greater for investments in securities of companies in emerging markets, which
are usually in the initial stages of their industrialization cycle.
Obligations of foreign governmental entities are subject to various types of
governmental support and may or may not be supported by the full faith and
credit of a foreign government.
Currency Risks. The U.S. dollar value of securities denominated in a foreign
currency will vary with changes in currency exchange rates, which can be
volatile. Accordingly, changes in the value of the currency in which a series'
investments are denominated relative to the U.S. dollar will affect the series'
net asset value. Exchange rates are generally affected by the forces of supply
and demand in the international currency markets, the relative merits of
investing in different countries and the intervention or failure to intervene of
U.S. or foreign governments and central banks. However, currency exchange rates
may fluctuate based on factors intrinsic to a country s economy. Some emerging
market countries also may have managed currencies, which are not free floating
against the U.S. dollar. In addition, emerging markets are subject to the risk
of restrictions upon the free conversion of their currencies into other
currencies. Any devaluations relative to the U.S. dollar in the currencies in
which a series' securities are quoted would reduce the series' net asset value
per share.
<PAGE>
The initial phase of the introduction of a new European currency, the Euro, took
place on January 1, 1999. The introduction of the Euro will require the
redenomination of European debt and equity securities over a period of time,
which may result in various accounting differences and/or tax treatments that
otherwise would not likely occur. Additional questions are raised by the fact
that certain other EMU members, including the United Kingdom, have not
officially implemented the Euro. If the introduction of the Euro does not take
place as planned, there could be negative effects, such as severe currency
fluctuations and market disruptions.
<PAGE>
Energy securities. The Energy Series concentrates its investments in the
securities of companies in the energy and related industries. Earnings and
dividends of companies in these industries are greatly affected by changes in
the prices and supplies of oil and other energy fuels. Prices and supplies can
fluctuate significantly over a short period of time due to changes in
international politics, policies of the Organization of Petroleum Exporting
Countries (OPEC), relationships among OPEC nations, energy conservation, the
regulatory environment, governmental tax policies and the economic growth and
stability of countries which consume large amounts of energy resources.
Technology securities. The Technology Series concentrates its investments in
the securities of companies in technology and related industries. Earnings
prospects of these companies may be particularly uncertain or volatile for a
variety of reasons. These companies may have limited product lines, market or
financial resources, or they may be dependent upon a limited management group.
Products and services they offer may not prove to be commercially successful or
may be rendered obsolete by advances in science and technology. In addition,
biotechnology and health care companies may be subject to extensive regulatory
requirements causing considerable expense and delay. Hence, such stocks may
exhibit relatively high price volatility and involve a high degree of risk.
Financial services securities. The Series concentrates its investments in the
securities of companies in the financial services and related industries.
Earnings prospects of these companies may be uncertain or volatile for a variety
of reasons. These companies may be subject to uncertainties from changes in:
interest rates; the rate of inflation; the quality of their loan or investment
portfolios; government policies involving regulation or taxation; the ability or
willingness of consumers, companies, and governments to repay loans; and the
economic growth and political stability of outstanding debtor nations. Certain
financial services companies may also have limited product lines, markets or
financial resources, or they may be dependent upon a limited management group or
be affected by severe price competition.
Life sciences securities. The Life Sciences Series concentrates its investments
in the securities of companies in the life sciences and related industries.
Earnings prospects of these companies may be uncertain or volatile for a variety
of reasons. For example, the Life Sciences Series' industries are subject to
substantial government regulation and, in some instances, funding or subsidies.
Accordingly, changes in government policies or regulations could have a material
effect on the demand and/or supply of products and services. In addition,
scientific and technological advances present the risk that products and
services may be subject to rapid obsolescence. Moreover, there may be
significant liability risks associated with medical or environmental products
and services.
<PAGE>
Tax-exempt Securities. The New York Tax Exempt Series, the Ohio Tax Exempt
Series and the Diversified Tax Exempt Series (collectively, the Tax Exempt
Series ) may invest in tax-exempt securities issued by New York, Ohio or any
State of the United States, respectively, and such States political
subdivisions, agencies and instrumentalities, the interest from which is, in the
opinion of bond counsel, exempt from federal income tax.
Each tax-exempt series is a diversified investment company under the
Investment Company Act of 1940. This means that with respect to 75% of its
total assets the Series may not invest more than 5% of its total assets in the
securities of any one issuer (except U.S. government securities). The other 25%
of each Series total assets may be in the securities of any one issuer.
Each Series will not invest more than 25% of its total assets in any industry.
Governmental issuers of tax-exempt securities are not considered part of any
industry. However, Tax Exempt Securities backed only by the assets and
revenues of nongovernmental users may for this purpose (and for the
diversification purposes discussed above) be deemed to be issued by such
nongovernmental users, and the 25% limitation would apply to such obligations.
Each of the tax-exempt series believes that in general the secondary market for
tax-exempt securities is less liquid than that for taxable fixed-income
securities. Accordingly, the ability of the Series to buy and sell securities
may, at any particular time and with respect to any particular securities, be
limited.
It is nonetheless possible that a Series may invest more than 25% of its assets
in a broader segment of the market (but not in one industry) for tax-exempt
securities, such as revenue obligations of hospitals and other health care
facilities, housing agency revenue obligations, or transportation revenue
obligations. This would be the case only if the Advisor determined that the
yields available from obligations in a particular segment of the market
justified the additional risks associated with such concentration. Although
such obligations could be supported by the credit of governmental users or by
the credit of nongovernmental users engaged in a number of industries, economic,
business, political and other developments generally affecting the revenues of
issuers (for example, proposed legislation or pending court decisions affecting
the financing of such projects and market factors affecting the demand for their
services or products) may have a general adverse effect on all tax-exempt
securities in such a market segment.
<PAGE>
Housing revenue bonds typically are issued by a state, county or local housing
authority and are secured only by the revenues of mortgages originated by the
authority using the proceeds of the bond issue. Because of the impossibility of
precisely predicting demand for mortgages from the proceeds of such an issue,
there is a risk that the proceeds of the issue will be in excess of demand,
which would result in early retirement of the bonds by the issuer. Moreover,
such housing revenue bonds depend for their repayment in part upon the cash flow
from the underlying mortgages, which cannot be precisely predicted when the
bonds are issued. The financing of multi-family housing projects is affected by
a variety of factors, including satisfactory completion of construction, a
sufficient level of occupancy, sound management, adequate rent to cover
operating expenses, changes in applicable laws and governmental regulations and
social and economic trends.
Health care facilities include life care facilities, nursing homes and
hospitals. Bonds to finance these facilities are issued by various authorities.
The bonds are typically secured by the revenues of each facility and not by
state or local government tax payments. The projects must maintain adequate
occupancy levels to be able to provide revenues adequate to maintain debt
service payments. Moreover, in the case of life care facilities, since a
portion of housing, medical care and other services may be financed by an
initial deposit, there may be risk if the facility does not maintain adequate
financial reserves to secure future liabilities. Life care facilities and
nursing homes may be affected by regulatory cost restrictions applied to health
care delivery in general, restrictions imposed by medical insurance companies
and competition from alternative health care or conventional housing facilities.
Hospital bond ratings are often based on feasibility studies which contain
projections of expenses, revenues and occupancy levels. A hospital s income
available to service its debt may be influenced by demand for hospital services,
management capabilities, the service area economy, efforts by insurers and
government agencies to limit rates and expenses, competition, availability and
expense of malpractice insurance, and Medicaid and Medicare funding.
In recent years, nationally recognized rating organizations have reduced their
ratings of a substantial number of the obligations of issuers in the health care
sector of the tax-exempt securities market. Reform of the health care system is
a topic of increasing discussion in the United States, with proposals ranging
from reform of the existing employer-based system of insurance to a
single-payer, public program. Depending upon their terms, certain reform
proposals could have an adverse impact on certain health care sector issuers of
tax-exempt securities. Because the outcome of current discussions concerning
health care, including the deliberations of President Clinton s task force on
health care reform, is highly uncertain, the Advisor cannot predict the likely
impact of reform initiatives.
<PAGE>
Risk Factors Relating to New York Tax Exempt Securities
The New York Tax Exempt Series invests primarily in the obligations of the New
York state government, state agencies, state authorities and various
governments, including countries, cities, towns, special districts, and
authorities. In general, the credit quality and credit risk of any issuer's
debt depend on the state and local economy, the health of the issuer's finances,
the amount of the issuer's debt, the quality of management, and the strength of
legal provisions in debt documents that protect debt holders. Credit risk is
usually lower wherever the economy is strong, growing and diversified; financial
operations are sound; and the debt burden is reasonable. Obligations of local
issuers may have markedly different capacities to repay their obligations.
Although the following discussion focuses primarily on the strength of New York
state, investors should be aware that the performance of the Series will also
depend on the value of its obligations issued by local issuers.
The average rating among American states for full faith and credit state debt is
"Aa" and "AA" by Moody's Investors Services, Inc. and Standard & Poor's
Corporation, respectively. Against this measure and the criteria listed above,
the credit risk associated with direct obligations of the State of New York and
State agencies and authorities, including general obligation and revenue bonds,
"moral obligation" bonds, lease debt, appropriation debt, and notes, compares
somewhat unfavorably. During most of the last two decades, the State's general
obligation bonds have been rated just below this average by both rating
agencies. Additionally, the State's credit quality could be characterized as
more volatile than that of other states, since the State's credit rating has
been upgraded and downgraded much more often than usual. This rating has
fluctuated between "Aa" and "A" since the early 1970s. Nonetheless, during this
period the State's obligations could still be characterized as providing upper
medium grade security, with a strong capacity for timely repayment of debt.
The wealth of New York State, as well as the size and diversity of its economy,
serve to limit the credit risk of its securities. New York ranks third among
the states in per capita personal income, which is 19% above the U.S. average.
During most of the 1980's, economic indicators for New York, including income
and employment growth and unemployment rates, outperformed the nation as a
whole. The engine of growth for the State in the past decade was the surge in
financial and other services, especially in New York City. Manufacturing
centers in upstate New York, which more closely parallel the Midwestern economy,
suffered during the 1970s and early 1980s. The upstate economy continues to be
characterized by cities with aging populations and aging manufacturing plants.
Credit risk in New York State is heightened by a large and increasing debt
burden, historically marginal financial operations, limited revenue-raising
flexibility, and the uncertainty of the future credit quality of New York City,
which comprises 40% of the State's population and economy. Combined state and
local debt per capita is about 50% above the U.S. average, and debt service
expenditures have been growing as a claim on the state and City budget. New
York's debt structure is also complicated. To circumvent voter approval, most
state debt is issued by agencies, is not backed by the State's full faith and
credit and therefore has lower credit ratings. In the past, the State had to
rely on short-term borrowing to meet its obligations, but this practice has
ended.
Buoyed by rapid economic growth in the mid-1980s, the State's financial
operations generated surpluses. Beginning in 1988, however, unforeseen
consequences of federal tax reform, combined with a weakening economy, resulted
in a series of state budget deficits. New York's heavy commitment to local aid
and social welfare programs allowed expenditure growth to exceed available
revenues. This lack of budgetary discipline caused the State's credit rating to
fall. Moreover, New York's ability to raise revenues is limited, since combined
state and local taxes are among the highest in the nation as a percent of
personal income. Recent state budgets have been balanced, and constitute
operating surpluses have been recorded although the State continues to have a
nearly $3 billion GAAP accumulated deficit. State personal income tax cuts have
been offset by strong revenue performance emanating from Wall Street and by
solid expenditure restraint.
<PAGE>
New York State's future credit quality will be heavily influenced by the future
of New York City. As the City's economic boom in the 1980s lifted the State,
the severe downturn in the financial services and real estate sectors, which are
concentrated in the City, has been serving as a drag on the State's economy.
Stabilization or recovery in these areas is crucial to the economic and fiscal
health of the City and the State. Moreover, the City faces daunting challenges
in combating deteriorating infrastructure and serious social problems of
housing, health, education and public safety. So far, City government has
demonstrated an ability to keep abreast of these problems, but the City's and
the State's ability to meet these challenges will be a continuing risk factor.
Buoyed by Wall Street, the addition of 140,000 private sector jobs over the
1994-97 period and public sector workforce attrition, the City has posted
recurring operating surpluses. The largest, $856 million, was projected for
fiscal year 1997. The City will shortly be creating a new vehicle to access the
debt markets, called the Transitional Finance Authority, as G.O. capacity is
limited due to archaic statutory issuing formulas.
Major areas of credit strength continue to exist in localities in Long Island,
and north of New York City where affluent population bases continue to exist.
HEDGING (DERIVATIVE TRANSACTIONS)
All of the series' policies regarding options discussed below are fundamental,
and may only be changed by a shareholder vote.
In General. Each series has reserved the right, subject to authorization by the
Board of Directors prior to implementation, to engage in certain strategies in
an attempt to hedge the series' portfolios, that is, to reduce the overall level
of risk that normally would be expected to be associated with their investments.
Each series may write covered call options on common stocks (fixed income
securities in the case of the Global Fixed Income Series; may purchase and sell
(on a secured basis) put options; and may engage in closing transactions with
respect to put and call options. Each series also may purchase forward foreign
currency exchange contracts to hedge currency exchange rate risk. In addition,
each series is authorized to purchase and sell stock index futures contracts and
options on stock index futures contracts. Each series is also authorized to
conduct spot (i.e., cash basis) currency transactions or to use currency futures
contracts and options on futures contracts and foreign currencies in order to
protect against uncertainty in the future levels of foreign currency exchange
rates. These strategies are primarily used for hedging purposes; nevertheless,
there are risks associated with these strategies as described below.
Options on Securities. As a means of protecting its assets against market
declines, and in an attempt to earn additional income, each series may write
covered call option contracts on its securities and may purchase call options
for the purpose of terminating its outstanding obligations with respect to
securities upon which covered call option contracts have been written.
<PAGE>
When a series writes a call option on securities which it owns, it gives the
purchaser of the option the right to buy the securities at an exercise price
specified in the option at any time prior to the expiration of the option. If
any option is exercised, a series will realize the gain or loss from the sale of
the underlying security and the proceeds of the sale will be increased by the
net premium originally received on the sale of the option. By writing a covered
call option, a series may forego, in exchange for the net premium, the
opportunity to profit from an increase in the price of the underlying security
above the option's exercise price. A series will have kept the risk of loss if
the price of the security declines, but will have reduced the effect of that
risk to the extent of the premium it received when the option was written.
A series will write only covered call options which are traded on national
securities exchanges. Currently, call options on stocks may be traded on the
Chicago Board Options Exchange and the New York, American, Pacific and
Philadelphia Stock Exchanges. Call options are issued by the Options Clearing
Corporation ("OCC"), which also serves as the clearing house for transactions
with respect to standardized or listed options. The price of a call option is
paid to the writer without refund on expiration or exercise, and no portion of
the price is retained by OCC or the exchanges listed above. Writers and
purchasers of options pay the transaction costs, which may include commissions
charged or incurred in connection with such option transactions.
A series may write only covered call options. A call option is considered to be
covered if the option writer owns the security underlying the call or has an
absolute and immediate right to acquire that security without payment of
additional cash consideration (or for additional cash consideration held in a
separate account) upon conversion or exchange of other securities. A call
option is also considered to be covered if the writer holds on a unit-for-unit
basis a call on the same security as the call written, has the same expiration
date and the exercise price of the call purchased is equal to or less than the
exercise price of the call written or greater than the exercise price of the
call written if the difference is maintained in cash or other liquid securities
in a separate account, and marked-to-market daily. A series will not sell
(uncover) the securities against which options have been written until after the
option period has expired, the option has been exercised or a closing purchase
has been executed.
Options written by a series will have exercise prices which may be below
("in-the-money"), equal to ("at-the-money") or above ("out-of-the-money") the
market price of the underlying security at the time the options are written.
However, a series generally will not write so-called "deep-in-the-money"
options.
The market value of a call option generally reflects the market price of the
underlying security. Other principal factors affecting market value include
supply and demand, dividend yield and interest rates, the price volatility of
the underlying security and the time remaining until the expiration date.
<PAGE>
If a call option on a security expires unexercised, a series will realize a gain
in the amount of the premium on the option, less all commissions paid. Such a
gain, however, may be offset by a decline in the value of the underlying
security during the option period. If a call option is exercised, a series will
realize a gain or loss from the sale of the underlying security equal to the
difference between the cost of the underlying security and the proceeds of the
sale of the security (exercise price minus commission) plus the amount of the
premium on the option, less all commissions paid.
Call options may also be purchased by a series, but only to terminate (entirely
or in part) a series' obligation as a writer of a call option. This is
accomplished by making a closing purchase transaction, that is, the purchase of
a call option on the same security with the same exercise price and expiration
date as specified in the call option which had been written previously. A
closing purchase transaction with respect to calls traded on a national
securities exchange has the effect of extinguishing the obligation of the writer
of a call option. A series may enter into a closing purchase transaction, for
example, to realize a profit on an option it had previously written, to enable
it to sell the security which underlies the option, to free itself to sell
another option or to prevent its portfolio securities from being purchased
pursuant to the exercise of a call. A series may also permit the call option to
be exercised. A closing transaction cannot be effected with respect to an
optioned security once a series has received a notice that the option is to be
exercised.
The cost to a series of such a closing transaction may be greater than the net
premium received by a series upon writing the original call option. A profit or
loss from a closing purchase transaction will be realized depending on whether
the amount paid to purchase a call to close a position is less or more than the
amount received from writing the call. Any profit realized by a series from the
execution of a closing transaction may be partly or completely offset by a
reduction in the market price of the underlying security.
A series may also write secured put options and enter into closing purchase
transactions with respect to such options. A series may write secured put
options on national securities exchanges to obtain, through the receipt of
premiums, a greater return than would be realized on the underlying securities
alone. A put option gives the purchaser of the option the right to sell, and
the writer has the obligation to buy, the underlying security at the stated
exercise price during the option period. The secured put writer retains the
risk of loss should the market value of the underlying security decline below
the exercise price of the option. During the option period, the writer of a put
option may be required at any time to make payment of the exercise price against
delivery of the underlying security. The operation of put options in other
respects is substantially identical to that of call options. The Fund will
establish a separate account consisting of liquid assets equal to the amount of
the series assets that could be required to consummate the put options. For
purposes of determining the adequacy of the securities in the account, the
deposited assets will be valued at fair market value. If the value of such
assets declines, additional cash or assets will be placed in the account daily
so that the value of the account will equal the amount of such commitments by
the series.
<PAGE>
A put option is secured if a series maintains in a separate account liquid
assets in an amount not less than the exercise price of the option at all times
during the option period. A series may write secured put options when the
Advisor wishes to purchase the underlying security for a series' portfolio at a
price lower than the current market price of the security. In such event a
series would write a secured put option at an exercise price which, reduced by
the premium received on the option, reflects the lower price it is willing to
pay. The potential gain on a secured put option is limited to the income earned
on the amount held in liquid assets plus the premium received on the option
(less the commissions paid on the transaction) while the potential loss equals
the difference between the exercise price of the option and the current market
price of the underlying securities when the put is exercised, offset by the
premium received (less the commissions paid on the transaction) and income
earned on the amount held in liquid assets.
A series may purchase put options on national securities exchanges in an attempt
to hedge against fluctuations in the value of its portfolio securities and to
protect against declines in the value of individual securities. Purchasing a
put option allows the purchaser to sell the particular security covered by the
option at a certain price (the "exercise price") at any time up to a specified
future date (the "expiration date").
Purchase of a put option creates a "hedge" against a decline in the value of the
underlying security by creating the right to sell the security at a specified
price. Purchase of a put option requires payment of a premium to the seller of
that option. Payment of this premium necessarily reduces the return available
on the individual security should that security continue to appreciate in value.
In return for the premium paid, a series protects itself against substantial
losses should the security suffer a sharp decline in value. In contrast to
covered call option writing, where one obtains greater current income at the
risk of foregoing potential future gains, one purchasing put options is in
effect foregoing current income in return for reducing the risk of potential
future losses.
A series will purchase put options as a means of "locking in" profits on
securities held in the portfolio. Should a security increase in value from the
time it is initially purchased, a series may seek to lock in a certain profit
level by purchasing a put option. Should the security thereafter continue to
appreciate in value the put option will expire unexercised and the total return
on the security, if it continues to be held by a series, will be reduced by the
amount of premium paid for the put option. At the same time, a series will
continue to own the security. Should the security decline in value below the
exercise price of the put option, however, a series may elect to exercise the
option and "put" or sell the security to the party that sold the put option to
that series, at the exercise price. In this case a series would have a higher
return on the security than would have been possible if a put option had not
been purchased.
<PAGE>
Risks Factors and Certain Other Factors Relating to Options. Positions in
options on securities may be closed only by a closing transaction, which may be
made only on an exchange which provides a liquid secondary market for such
options. Although a series will write options only when the Advisor believes a
liquid secondary market will exist on an exchange for options of the same
series, there can be no assurance that a liquid secondary market will exist for
any particular security option. If no liquid secondary market exists respecting
an option position held, a series may not be able to close an option position,
which will prevent that series from selling any security position underlying an
option until the option expires and may have an adverse effect on its ability
effectively to hedge its security positions. A secured put option writer who is
unable to effect a closing purchase transaction would continue to bear the risk
of decline in the market price of the underlying security until the option
expires or is exercised. In addition, a secured put writer would be unable to
use the amount held in liquid assets as security for the put option for other
investment purposes until the exercise or expiration of the option.
Possible reasons for the absence of a liquid secondary market on an exchange
include the following: (i) insufficient trading; (ii) restrictions that may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions that may be imposed with
respect to particular classes or series of contracts, or underlying securities;
(iv) unusual or unforeseen circumstances that may interrupt normal operations on
an exchange; (v) the facilities of an exchange or a clearing corporation may not
be adequate to handle unusual trading volume; or (vi) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of contracts (or particular class or series of
contracts), in which event the secondary market on that exchange would cease to
exist, although outstanding contracts on the exchange that had been issued by a
clearing corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms. There is no assurance that higher
than anticipated trading activity or other unforeseen events might not, at
times, render certain of the facilities of any of the clearing corporations
inadequate, and thereby result in the institution by an exchange of special
procedures which may interfere with timely execution of customers' orders.
Each of the exchanges on which options on securities are traded has established
limitations on the number of options which may be written by any one investor or
group of investors. These limitations apply regardless of whether the options
are written in different accounts or through different brokers. It is possible
that a series and certain other accounts managed by the Advisor, may constitute
such a group. If so, the options positions of the series may be aggregated with
those of other clients of the Advisor.
If a series writes an over-the-counter ("OTC") option, it will enter into an
arrangement with a primary U.S. government securities dealer, which would
establish a formula price at which the series would have the absolute right to
repurchase that OTC option. This formula price would generally be based on a
multiple of the premium received for the option, plus the amount by which the
option is exercisable below the marked price of the underlying security
("in-the-money"). For an OTC option a series writes, it will treat as illiquid
(for purposes of the 10% net asset limitation on illiquid securities) an amount
of assets used to cover written OTC options, equal to the formula price for the
repurchase of the OTC option less the amount by which the OTC option is
"in-the-money". A series will also treat as illiquid any OTC option held by it.
The Securities and Exchange Commission ("SEC") is evaluating the general issue
of whether or not the OTC options should be considered to be liquid securities,
and the procedure described above could be affected by the outcome of that
evaluation.
<PAGE>
Although the OCC has stated that it believes (based on forecasts provided by the
exchanges on which options are traded), that its facilities are adequate to
handle the volume of reasonably anticipated options transactions, and although
each exchange has advised the OCC that it believes that its facilities will also
be adequate to handle reasonably anticipated volume, there can be no assurance
that higher than anticipated trading activity or order flow or other unforeseen
events might not at times render certain of these facilities inadequate and
thereby result in the institution of special trading procedures or restrictions.
The series will pay brokerage and other transaction costs to write and purchase
options on securities, including any closing transactions which the series may
execute. Therefore, frequent writing and/or purchasing of options may increase
the transaction costs borne by the series.
Stock Index Futures Contracts and Options on Stock Index Futures Contracts.
Each series may enter into stock index futures contracts to provide: (1) a
hedge for a portion of the series' portfolio; (2) a cash management tool; (3) as
an efficient way to implement either an increase or decrease in portfolio market
exposure in response to changing market conditions. The series may also use
stock index futures as a substitute for comparable market position in the
underlying securities. Although techniques other than the sale and purchase of
stock index futures contracts could be used to adjust the exposure or hedge the
series' portfolio, the series may be able to do so more efficiently and at a
lower cost through the use of stock index futures contracts.
A stock index futures contract is a contract to buy or sell units of a stock
index at a specified future date at a price agreed upon when the contract is
made. Entering into a contract to buy units of a stock index is commonly
referred to as buying or purchasing a contract or holding a long position in the
index. Entering into a contract to sell units of a stock index is commonly
referred to as selling a contract or holding a short position. A stock index
future obligates the seller to deliver (and the purchaser to take) an amount of
cash equal to a specific dollar amount times the difference between the value of
a specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made. No physical delivery of the
underlying stocks in the index is made. The series intend to purchase and sell
futures contracts on the stock index for which they can obtain the best price
with consideration also given to liquidity.
The series will not enter into a stock index futures contract or option thereon
if, as a result thereof, the sum of the amount of initial margin deposits on any
such futures (plus deposits on any other futures contracts and premiums paid in
connection with any options or futures contracts) that do not constitute "bona
fide hedging" under Commodity Futures Trading Commission ("CFTC") rules would
exceed 5% of the liquidation value of the series' total assets after taking into
account unrealized profits and losses on such contracts. In addition, the value
of all futures contracts sold will not exceed the total market value of the
series' portfolio. The series will comply with guidelines established by the
Securities and Exchange Commission with respect to the covering of obligations
under future contracts and will set aside liquid assets in a separate account in
the amount prescribed.
<PAGE>
Unlike the purchase or sale of an equity security, no price is paid or received
by the series upon the purchase or sale of a stock index futures contract. Upon
entering into a Futures Contract, the series would be required to deposit into a
separate account in the name of the futures broker an amount of cash or liquid
securities known as "initial margin." This amount is required by the rules of
the exchanges and is subject to change. The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures margin does not involve the borrowing of funds by the series to finance
the transactions. Rather, initial margin is in the nature of a performance bond
or good faith deposit on the contract that is returned to the series upon
termination of the futures contract, assuming all contractual obligations have
been satisfied.
Subsequent payments, called "variation margin", to and from the futures broker,
are made on a daily basis as the price of the underlying stock index fluctuates,
making the long and short positions in the futures contract more or less
valuable, a process known as "marking-to-market". For example, when the series
has purchased a stock index futures contract and the price of the underlying
stock index has risen, that futures position will have increased in value and
the series will receive from the broker a variation margin payment equal to that
increase in value. Conversely, when the series has purchased a stock index
futures contract and the price of the stock index has declined, the position
would be less valuable and the series would be required to make a variation
payment to the broker.
The loss from investing in futures transactions is potentially unlimited. To
limit such risk, the series will not enter into stock index futures contracts
for speculation and will only enter into futures contracts which are traded on
established futures markets. The series may, however, purchase or sell stock
index futures contracts with respect to any stock index. Nevertheless, to hedge
the series' portfolio successfully, the Advisor must sell stock index futures
contracts with respect to indices whose movements will, in its judgment, have a
significant correlation with movements in the prices of the series' portfolio
securities.
Closing out an open stock index futures contract sale or purchase is effected by
entering into an offsetting stock index futures contract purchase or sale,
respectively, for the same aggregate amount of identical securities with the
same delivery date. If the offsetting purchase price is less than the original
sale price, the series realize a gain; if it is more, the series realize a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, the series realize a gain; if it is less, the series realize a loss. The
series must also be able to enter into an offsetting transaction with respect to
a particular stock index futures contract at a particular time. If the series
are not able to enter into an offsetting transaction, the series will continue
to be required to maintain the margin deposits on the stock index futures
contract.
<PAGE>
The series may elect to close out some or all of their futures positions at any
time prior to expiration. The purpose of making such a move would be either to
reduce equity exposure represented by long futures positions or increase equity
exposure represented by short futures positions. The series may close their
positions by taking opposite positions which would operate to terminate the
series' position in the stock index futures contracts. Final determinations of
variation margin would then be made, additional cash would be required to be
paid or released to the series, and the series would realize a loss or a gain.
Stock index futures contracts may be closed out only on the exchange or board of
trade where the contracts were initially traded. Although the series intend to
purchase or sell stock index futures contracts only on exchanges or boards of
trade where there appears to be an active market, there is no assurance that a
liquid market on an exchange or board of trade will exist for any particular
time. In such an event, it might not be possible to close a stock index futures
contract, and in the event of adverse price movements, the series would continue
to be required to make daily cash payments of variation margin. However, in the
event stock index futures contracts have been used to hedge portfolio
securities, the series would continue to hold securities subject to the hedge
until the stock index futures contracts could be terminated. In such
circumstances, an increase in the price of the securities, if any, might
partially or completely offset losses on the stock index futures contract.
However, as described below, there is no guarantee that the price of the
securities will, in fact, correlate with price movements in the futures contract
and thus provide an offset to losses on a stock index futures contract.
There are several risks in connection with the use by the series of stock index
futures contracts as a hedging device. One risk arises because of the imperfect
correlation between movements in the prices of the futures contracts and
movements in the prices of securities which are the subject of the hedge. The
Advisor will, however, attempt to reduce this risk by entering into stock index
futures contracts on indices whose movements, in its judgment, will have a
significant correlation with movements in the prices of the series' portfolio
securities sought to be hedged.
<PAGE>
Successful use of stock index futures contracts by the series for hedging
purposes is also subject to the Advisor's ability to correctly predict movements
in the direction of the market. It is possible that, when the series have sold
futures to hedge their portfolios against a decline in the market, the index or
indices on which the futures are written might advance and the value of
securities held in the series' portfolio might decline. If this were to occur,
the series would lose money on the futures and also would experience a decline
in value in its portfolio securities. However, while this might occur to a
certain degree, the Advisor believes that over time the value of the series'
portfolio will tend to move in the same direction as the securities underlying
the futures, which are intended to correlate to the price movements of the
portfolio securities sought to be hedged. It is also possible that if the series
were to hedge against the possibility of a decline in the market (adversely
affecting stocks held in their portfolios) and stock prices instead increased,
the series would lose part or all of the benefit of increased value of those
stocks that it had hedged, because it would have offsetting losses in their
futures positions. In addition, in such situations, if the series had
insufficient cash, they might have to sell securities to meet their daily
variation margin requirements. Such sales of securities might be, but would not
necessarily be, at increased prices (which would reflect the rising market).
Moreover, the series might have to sell securities at a time when it would be
disadvantageous to do so.
In addition to the possibility that there might be an imperfect correlation, or
no correlation at all, between price movements in the stock index futures
contracts and the portion of the portfolio to be hedged, the price movements in
the futures contracts might not correlate perfectly with price movements in the
underlying stock index due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors might close stock index futures contracts through offsetting
transactions which could distort the normal relationship between the index and
futures markets. Second, the margin requirements in the futures market are less
onerous than margin requirements in the securities markets. Due to the
possibility of price distortion in the futures market and also because of the
imperfect correlation between price movements in the stock index and movements
in the prices of stock index futures contracts, even a correct forecast of
general market trends by the Advisor might not result in a successful hedging
transaction over a very short time period.
Options on futures give the purchaser the right, in return for a premium paid,
to assume a position in a futures contract (a long position if a call option and
a short position if a put option), rather than to purchase or sell the stock
index futures contract, at a specified exercise price at any time during the
period of the option. Upon exercise of the option, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's futures
margin account which represents the amount by which the market price of the
stock index futures contract, at exercise, exceeds (in the case of a call) or is
less than (in the case of a put) the exercise price of the option on the futures
contract. Alternatively, settlement may be made totally in cash.
The series may seek to close out an option position on an index by writing or
buying an offsetting option covering the same index or contract and having the
same exercise price and expiration date. The ability to establish and close out
positions on such options will be subject to the development and maintenance of
a liquid secondary market. It is not certain that this market will develop.
See "Risk Factors and Certain Other Factors Relating to Options" above for
possible reasons for the absence of a liquid secondary market on an exchange.
<PAGE>
Futures on Securities. A futures contract on a security is a binding
contractual commitment which, if held to maturity, will result in an obligation
to make or accept delivery, during a particular month, of securities having a
standardized face value and rate of return. Futures contracts by law are not
permitted on individual corporate securities and municipal securities but
instead are traded on exempt securities, such as government securities and
broad-based indexes of securities. Accordingly, these futures contracts will
primarily consist of futures based on government securities (i.e., Treasury
Bonds). By purchasing futures on securities, the Fund will legally obligate
itself to accept delivery of the underlying security and pay the agreed price;
by selling futures on securities, it will legally obligate itself to make
delivery of the security against payment of the agreed price. Open futures
positions on securities are valued at the most recent settlement price, unless
such price does not reflect the fair value of the contract, in which case the
positions will be valued by or under the direction of the Board of Directors.
Positions taken in the futures markets are not normally held to maturity, but
are instead liquidated through offsetting transactions which may result in a
profit or a loss. While the series' futures contracts on securities will
usually be liquidated in this manner, it may instead make or take delivery of
the underlying securities whenever it appears economically advantageous for the
series to do so. However, the loss from investing in futures transactions is
potentially unlimited. A clearing corporation associated with the exchange on
which futures on securities or currency are traded guarantees that, if still
open, the sale or purchase will be performed on the settlement date.
Foreign Currency Transactions. In order to protect against a possible loss on
investments resulting from a decline in a particular foreign currency against
the U.S. dollar or another foreign currency, each series is authorized to enter
into forward foreign currency exchange contracts. In addition, each series is
authorized to conduct spot (i.e., cash basis) currency transactions or to use
currency futures contracts, options on such futures contracts, and options on
foreign currencies in order to protect against uncertainty in the future levels
of currency exchange rates.
Forward Foreign Currency Exchange Contracts. Forward foreign currency exchange
contracts involve an obligation to purchase or sell a specified currency at a
future date at a price set at the time of the contract. Forward currency
contracts do not eliminate fluctuations in the values of portfolio securities
but rather allow a series to establish a rate of exchange for a future point in
time. A series may enter into forward foreign currency exchange contracts when
deemed advisable by the Advisor under only two circumstances.
<PAGE>
First, when entering into a contract for the purchase or sale of a security in a
foreign currency, a series may enter into a forward foreign currency exchange
contract for the amount of the purchase or sale price to protect against
variations, between the date the security is purchased or sold and the date on
which payment is made or received, in the value of the foreign currency relative
to the U.S. dollar or other foreign currency. This hedging technique is known
as "transaction hedging".
Second, when the Advisor anticipates that a particular foreign currency may
decline substantially relative to the U.S. dollar or other leading currencies,
in order to reduce risk, a series may enter into a forward contract to sell, for
a fixed amount, the amount of foreign currency approximating the value of some
or all of its portfolio securities denominated in such foreign currency. This
hedging technique is known as "position hedging". With respect to any such
forward foreign currency contract, it will not generally be possible to match
precisely the amount covered by that contract and the value of the securities
involved due to the changes in the values of such securities resulting from
market movements between the date the forward contract is entered into and the
date it matures. In addition, while forward contracts may offer protection from
losses resulting from declines in the value of a particular foreign currency,
they also limit potential gains which might result from increases in the value
of such currency. A series will also incur costs in connection with forward
foreign currency exchange contracts and conversions of foreign currencies and
U.S. dollars.
A separate account of each series consisting of cash or liquid securities equal
to the amount of that series' assets that would be required to consummate
forward contracts entered into under the second circumstance, as set forth
above, will be established. For the purpose of determining the adequacy of the
securities in the account, the deposited securities will be valued at market or
fair value. If the market or fair value of such securities declines, additional
cash or securities will be placed in the account daily so that the value of the
account will equal the amount of such commitments by such series.
Currency Futures Contracts and Options on Futures Contracts. Each series is
authorized to purchase and sell currency futures contracts and options thereon.
Currency futures contracts involve entering into contracts for the purchase or
sale for future delivery of foreign currencies. A "sale" of a currency futures
contract (i.e., short) means the acquisition of a contractual obligation to
deliver the foreign currencies called for by the contract at a specified price
on a specified date. A "purchase" of a futures contract (i.e., long) means the
acquisition of a contractual obligation to acquire the foreign currencies called
for by the contract at a specified price on a specified date. These investment
techniques will be used only to hedge against anticipated future changes in
exchange rates which otherwise might either adversely affect the value of
portfolio securities held by the series or adversely affect the prices of
securities which the series intend to purchase at a later date. The loss from
investing in futures transactions is potentially unlimited. To minimize this
risk, such instruments will be used only in connection with permitted
transaction or position hedging and not for speculative purposes. The series
will not enter in a currency futures contract or option thereon, if as a result
thereof, the sum of the amount of initial margin deposits on any such futures
(plus deposits on any other futures contracts and premiums paid in connection
with any options or futures contracts) that do not constitute "bona fide
hedging" under CFTC rules will not exceed 5% of the liquidation value of the
series' total assets after taking into account unrealized profits and losses on
such contracts. In addition, the value of all futures contracts sold will not
exceed the total market value of the series' portfolio. The series will comply
with guidelines established by the SEC with respect to covering of obligations
under future contracts and will set aside cash and/or liquid securities in a
separate account in the amount prescribed.
<PAGE>
Although the series intend to purchase or sell futures contracts only if there
is an active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. In
addition, due to the risk of an imperfect correlation between securities in the
series' portfolio that are the subject of a hedging transaction and the futures
contract used as a hedging device, it is possible that the hedge will not be
fully effective. For example, losses on the portfolio securities may be in
excess of gains on the futures contract or losses on the futures contract may be
in excess of the gains on the portfolio securities that were the subject of such
hedge.
Brokerage fees are incurred when a futures contract is bought or sold and margin
deposits must be maintained for such contract. Although futures contracts
typically require actual delivery of and payment for financial instruments or
currencies, the contracts are usually closed out before the delivery date.
Closing out an open futures contract sale or purchase is effected by entering
into an offsetting futures contract purchase or sale, respectively, for the same
aggregate amount of the identical type of financial instrument or currency and
the same delivery date. If the offsetting purchase price is less than the
original sale price, a series realizes a gain; if it is more, a series realizes
a loss. Conversely, if the offsetting sale price is more than the original
purchase price, a series realizes a gain; if it is less, a series realizes a
loss. Transaction costs must also be included in these calculations. There can
be no assurance, however, that a series will be able to enter into an offsetting
transaction with respect to a particular contract at a particular time. If a
series is not able to enter into an offsetting transaction, a series will
continue to be required to maintain the margin deposits on the contract. The
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid secondary market. It is not certain
that a liquid market will develop for any particular futures contracts. See
"Certain Risk and Other Factors Respecting Options" above for possible reasons
for the absence of a liquid secondary market on an exchange.
An option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract (a long position if a
call option and a short position if a put option) at a specified price at any
time during the option exercise period. The writer of the option is required
upon exercise to assume an offsetting futures position (a short position if a
call option and a long position if a put option). Upon exercise of the option,
the assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account which represents the amount by which the market
price of the futures contract, at exercise, exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Call options sold by the series with respect to futures contracts will be
covered by, among other things, entering into a long position in the same
contract at a price no higher than the strike price of the call option, or by
ownership of the instruments underlying the futures contract, or the placement
of liquid assets in a segregated account to fulfill the obligations undertaken
by the futures contract. A put option sold by the series is covered when, among
other things, liquid assets are placed in a segregated account to fulfill the
obligations undertaken.
<PAGE>
Foreign Currency Options. Each series, except for the Tax Exempt Series, is
authorized to purchase and write put and call options on foreign currencies. A
call option is a contract whereby the purchaser, in return for a premium, has
the right, but not the obligation, to buy the currency underlying the option at
a specified price during the exercise period. The writer of the call option,
who receives the premium, has the obligation, upon exercise of the option during
the exercise period, to deliver the underlying currency against payment of the
exercise price. A put option is a similar contract that gives its purchaser, in
return for a premium, the right to sell the underlying currency at a specified
price during the term of the option. The writer of the put option, who receives
the premium, has the obligation, upon exercise of the option during the option
period, to buy the underlying currency at the exercise price. The series will
use currency options only to hedge against the risk of fluctuations of foreign
exchange rates related to securities held in its portfolio or which it intends
to purchase, and to earn a high return by receiving a premium for writing
options. Options on foreign currencies are affected by all the factors which
influence foreign exchange rates and investments generally.
Risks Associated with Hedging Strategies. There are risks associated with the
hedging strategies described above, including the following: (1) the success of
a hedging strategy may depend on the ability of the Advisor to accurately
predict movements in the prices of individual securities, fluctuations in
domestic and foreign markets and currency exchange rates, and movements in
interest rates; (2) there may be an imperfect correlation between the changes in
market value of the securities held by the series and the prices of currency
contracts, options, futures and options on futures; (3) there may not be a
liquid secondary market for a currency contract, option, futures contract or
futures option; (4) trading restrictions or limitations may be imposed by an
exchange; and (5) government regulations, particularly requirements for
qualification as a "regulated investment company" under the Code, may restrict
trading in forward currency contracts, options, futures contracts and futures
options.
Even a small investment in derivative contracts can have a big impact on stock
market, currency and interest rate exposure. Derivatives can also make a series
less liquid and harder to value, especially in declining markets.
OTHER INVESTMENT POLICIES
Repurchase Agreements. Each series may enter into repurchase agreements with
respect to portfolio securities. Under the terms of a repurchase agreement, the
series purchases securities ("collateral") from various financial institutions
such as a bank or broker-dealer (a "seller") which the Advisor deems to be
creditworthy, subject to the seller's agreement to repurchase them at a mutually
agreed-upon date and price. The repurchase price generally equals the price
paid by the series plus interest negotiated on the basis of current short-term
rates (which may be more or less than the rate on the underlying portfolio
securities).
<PAGE>
The seller under a repurchase agreement is required to maintain the value of the
collateral held pursuant to the agreement at not less than 100% of the
repurchase price, and securities subject to repurchase agreements are held by
the series' custodian either directly or through a securities depository.
Default by the seller would, however, expose the series to possible loss because
of adverse market action or delay in connection with the disposition of the
underlying securities. Repurchase agreements are considered to be loans by the
series under the 1940 Act.
Securities Lending. The World Opportunities Series may seek to increase its
income by lending portfolio securities. Such loans will usually be made to
member firms (and subsidiaries thereof) of the New York Stock Exchange and to
member banks of the Federal Reserve System, and would be required to be secured
continuously by collateral in liquid securities maintained on a current basis at
an amount at least equal to the market value of the securities loaned. If the
Advisor determines to make securities loans, the value of the securities loaned
would not exceed 30% of the value of the total assets of the series.
Short Sales. Each series may, within limits, engage in short sales "against the
box". A short sale is the sale of borrowed securities; a short sale against the
box means that a series owns securities equivalent to those sold short. No more
than 25% of the net assets (taken at current value) of a series may be held as
collateral for such sales at any one time. Such short sales can be used as a
hedge. The Fund has no current intention to engage in short sales against the
box.
Forward Commitments or Purchases on a When-Issued Basis. Each series may enter
into forward commitments or purchase securities on a when-issued basis. These
securities normally are subject to settlement within 45 days of the purchase
date. The interest rate realized on these securities is fixed as of the
purchase date and no interest accrues to the series before settlement. These
securities are subject to market fluctuation due to changes in market interest
rates. Each series will enter into these arrangements with the intention of
acquiring the securities in question and not for speculative purposes and will
maintain a separate account consisting of liquid assets in an amount at least
equal to the purchase price.
Investment in Restricted Securities. Each series may invest in "restricted
securities" subject to the 10% net asset limitation regarding illiquid
securities. Restricted securities are securities which were originally sold in
private placements and which have not been registered under the Securities Act
of 1933, as amended (the "1933 Act"). Such securities generally have been
considered illiquid because they may be resold only subject to statutory
restrictions and delays or if registered under the 1933 Act. The SEC adopted
Rule 144A to provide for a safe harbor exemption from the registration
requirements of the 1933 Act for resales of restricted securities to "qualified
institutional buyers." The result has been the development of a more liquid and
efficient institutional resale market for restricted securities. Rule 144A
securities may be liquid if properly determined by the Board of Directors.
<PAGE>
INVESTMENT RESTRICTIONS
Each series has adopted certain restrictions set forth below
as fundamental policies, which may not be changed without the favorable vote of
the holders of a "majority" of the Fund's outstanding voting securities, which
means a vote of the holders of the lesser of (i) 67% of the shares represented
at a meeting at which more than 50% of the outstanding shares are represented or
(ii) more than 50% of the outstanding shares.
1. None of the Series may borrow money, except from a bank for temporary or
emergency purposes in amounts not exceeding 10% of the series' total assets, and
the series will not make additional investments while borrowings greater than 5%
of its total assets are outstanding;
2. With respect to 75% of its total assets, the Small Cap Series may not
invest more than 5% of the value of its total assets at the time of investment
in securities of any one issuer (other than obligations issued or guaranteed by
the United States Government, its agencies or its instrumentalities). None of
the series may purchase more than 10% of the outstanding voting securities of
any one issuer;
3. The Small Cap Series, International Series, Global Fixed Income Series,
and World Opportunities Series may not invest 25% or more of the value of its
total assets in securities of issuers in any one industry (other than U.S.
government Securities);
4. None of the Series may invest more than 10% of its total net assets in
securities of issuers that are restricted from being sold to the public without
registration under the Securities Act of 1933 and illiquid securities, including
repurchase agreements with maturities of greater than seven days;
5. Each Series may purchase shares of closed-end (and the World
Opportunities may also purchase shares of open-end) investment companies that
are traded on national exchanges to the extent permitted by applicable law.
6. None of the Series may make loans, except that each may invest in debt
securities and repurchase agreements;
7. None of the Series may purchase securities on margin (but a series may
obtain such short-term credits as may be necessary for the clearance of
transactions);
8. None of the Series may make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short (short sale
against-the-box), and unless not more than 25% of a series' net assets (taken at
a current value) are held as collateral for such sales at any one time;
9. Issue senior securities or pledge its assets, except that each series may
invest in futures contracts and related options;
<PAGE>
10. None of the Series may buy or sell commodities or commodity contracts
(the Small Cap, Energy, Technology, Financial Services, International, Life
Sciences, Global Fixed Income, and World Opportunities Series also expressly
provide that forward foreign currency contracts are not considered commodities
or commodity contracts for purposes of this restriction) or real estate or
interest in real estate, although it may purchase and sell securities which are
secured by real estate and securities of companies which invest or deal in real
estate.
11. None of the Series may act as underwriter except to the extent that, in
connection with the disposition of portfolio securities, it may be deemed to be
an underwriter under certain federal securities laws;
12. None of the Series may make investments for the purpose of exercising
control or management;
13. None of the Series may participate on a joint or joint and several basis
in any trading account in securities;
14. None of the Series may invest in interests in oil, gas or other mineral
exploration or development programs, although it may invest in the common stocks
of companies which invest in or sponsor such programs;
15. None of the Series may purchase foreign securities if as a result of
the purchase of such securities more than 10% of a series' assets (25% in the
case of the Life Sciences Series and 100% in the case of the International,
Global Fixed Income, and World Opportunities Series) would be invested in
foreign securities provided that this restriction shall not apply to foreign
securities that are listed on a domestic securities exchange or represented by
American depository receipts that are traded either on a domestic securities
exchange or in the United States on the over-the-counter market;
16. None of the Series (except for the Global Fixed Income Series, New York Tax
Exempt Series, Ohio Tax Exempt Series and Diversified Series) may invest more
than 5% of the value of its total net assets in warrants. Included within that
amount, but not to exceed 2% of the value of the series' net assets, may be
warrants which are not listed on the New York or American Stock Exchange.
In addition to the foregoing:
17. Under the Investment Company Act of 1940 and the rules and regulations
thereunder, each series is prohibited from acquiring the securities of other
investment companies if, as a result of such acquisition, such series owns more
than 3% of the total voting stock of the company; securities issued by any one
investment company represent more than 5% of its total assets; or securities
(other than treasury stock) issued by all investment companies represent more
than 10% of the total assets of a series. A series' purchase of such investment
companies would indirectly bear a proportionate share of the operating expenses
of such investment companies, including advisory fees. None of the series,
except the World Opportunities Series, will purchase or retain securities issued
by open-end investment companies (other than money market funds for temporary
investment).
<PAGE>
18. The Series' investment policies with respect to options on securities and
with respect to stock index and currency futures and related options are
subject to the following fundamental limitations: (1) with respect to any
series, the aggregate value of the securities underlying calls or obligations
underlying puts determined as of the date options are sold shall not exceed 25%
of the assets of the series; (2) a series will not enter into any option
transaction if immediately thereafter, the aggregate premiums paid on all such
options which are held at any time would exceed 20% of the total net assets of
the series; (3) the aggregate margin deposits required on all futures or options
thereon held at any time by a series will not exceed 5% of the total assets of
the series; (4) the security underlying the put or call is within the investment
policies of each series and the option is issued by the Options Clearing
Corporations; and (5) the series may buy and sell puts and calls on securities
and options on financial futures if such options are listed on a national
securities or commodities exchange.
19. The Series will not purchase or retain securities of an issuer if an
officer or director of such issuer is an officer or director of the Fund or its
investment adviser and one or more of such officers or directors of the Fund or
its investment adviser owns beneficially more than 1/2% of the shares or
securities of such issuer and all such directors and officers owning more than
1/2% of such shares or securities together own more than 5% of such shares or
securities.
20. The Series will not purchase securities of any company which has (with
predecessors) a record of less than three years continuous operation if as a
result more than 5% of the series assets would be invested in securities of
such companies.
Two Series are subject to the following investment limitations which are
not fundamental:
1. In the case of the Energy Series, the Public Utility Holding Company
Act of 1935 ( PUHCA ) places certain restrictions on affiliates of public
utility companies as defined in PUHCA. The Energy Series will not acquire 5% or
more of the outstanding voting securities of a public utility in order to avoid
imposition of these restrictions.
2. The Financial Services Series may purchase securities of an issuer
which derived more than 15% of its gross revenues in its most recent fiscal year
from securities-related activities, subject to the following conditions and
applicable SEC regulations:
a. the purchase cannot cause more than 5% of the Series total assets to
be invested in all securities of that issuer;
<PAGE>
b. for an equity security--(i) the purchase cannot result in the Series
owning more than 5% of the issuer s outstanding securities in that class; and
(ii) at the time of purchase, the security must meet the Federal Reserve Board s
definition of a margin security (i.e., registration on a national securities
exchange or listing by the Federal Reserve Board of Governors on the current OTC
Margin Stock list).
c. for a debt security--(i) the purchase cannot result in the Series
owning more than 10% of the outstanding principal amount of the issuers debt
securities; and (ii) at the time of purchase, the security must be of at least
investment grade quality (i.e., at least BBB/Baa as determined by one of the
major rating services or, if not rated, judged to be equivalent by the Series
Directors). See the Appendix to the Prospectus for an explanation of these
ratings.
All of the above percentage limitations, as well as the issuer s gross
revenue test, are applicable at the time of purchase. With respect to warrants,
rights, and convertible securities, a determination of compliance with the above
limitations shall be made as though such warrant, right, or conversion privilege
had been exercised. The Financial Services Series will not be required to
divest its holdings of a particular issuer when circumstances subsequent to the
purchase would cause one of the above conditions to not be met. The purchase of
a general partnership interest in a securities-related business is prohibited.
PORTFOLIO TURNOVER
An annual portfolio turnover rate is, in general, the percentage computed by
taking the lesser of purchases or sales of portfolio securities (excluding
certain debt securities) for a year and dividing that amount by the monthly
average of the market value of such securities during the year. Each series
expects that its long-term average turnover rate will be less than 100%.
However, turnover will in fact be determined by market conditions and
opportunities, and therefore it is impossible to estimate the turnover rate with
confidence.
THE FUND
The Fund is an open-end management investment company incorporated under the
laws of the State of Maryland on July 26, 1984. Prior to February 1998, the
Fund was named Manning & Napier Fund, Inc. The Board of Directors may, at its
own discretion, create additional series of shares, each of which would have
separate assets and liabilities.
Each share of a series represents an identical interest in the investment
portfolio of that series and has the same rights, except that (i) each class of
shares bears those distribution fees, service fees and administrative expenses
applicable to the respective class of shares as a result of its sales
arrangements, which will cause the different classes of shares to have different
expense ratios and to pay different rates of dividends, (ii) each class has
exclusive voting rights with respect to those provisions of the series' Rule
12b-1 distribution plan which relate only to such class and (iii) the classes
have different exchange privileges. As a result of each class' differing Rule
12b-1 distribution and shareholder services plan, shares of different classes of
the same series may have different net asset values per share.
<PAGE>
The Fund does not expect to hold annual meetings of shareholders but special
meetings of shareholders may be held under certain circumstances. Shareholders
of the Fund retain the right, under certain circumstances, to request that a
meeting of shareholders be held for the purpose of considering the removal of a
Director from office, and if such a request is made, the Fund will assist with
shareholder communications in connection with the meeting. The shares of the
Fund have equal rights with regard to voting, redemption and liquidations. The
Fund's shareholders will vote in the aggregate and not by series or Class except
as otherwise expressly required by law or when the Board of Directors determines
that the matter to be voted upon affects only the interests of the shareholders
of a series or a Class. Income, direct liabilities and direct operating
expenses of a series will be allocated directly to the series, and general
liabilities and expenses of the Fund will be allocated among the series in
proportion to the total net assets of the series by the Board of Directors. The
holders of shares have no preemptive or conversion rights. Shares when issued
are fully paid and non-assessable and do not have cumulative voting rights.
<PAGE>
MANAGEMENT
The overall business and affairs of the Fund are managed by the Fund's Board of
Directors. The Board approves all significant agreements between the Fund and
persons or companies furnishing services to the Fund, including the Fund's
agreements with its investment advisor, custodian and distributor. The
day-to-day operations of the Fund are delegated to the Fund's officers and to
the Advisor. A committee made up of investment professionals and analysts makes
all the investment decisions for the Fund.
<TABLE>
<CAPTION>
The Directors and officers of the Fund are:
Name, address, Position Principal occupations
date of birth with Fund During past five years
- --------------------- --------- ----------------------------------
<S> <C> <C>
B. Reuben Auspitz* Vice Executive Vice President, Manning
1100 Chase Square President & & Napier Advisors, Inc. since 1993;
Rochester, NY 14604 Director President and Director, Manning &
03/18/47 Napier Investor Services, Inc. since
1990; Director, Chairman and
Treasurer, Manning & Napier Advisory
Advantage Corporation since 1990;
Director, Manning & Napier Leveraged
Investing Co., Inc. since 1994; Director
and Chairman, Exeter Trust Co. since 1994;
Member, Qualified Plan Services, L.L.C.
(formerly known as Fiduciary Services,
L.L.C.) since 1995; Member, Manning &
Napier Associates, L.L.C. since 1995;
Member, Manning & Napier Capital Co., L.L.C.
Since 1995; President and Director,
Manning & Napier Insurance Fund, Inc.
since 1995; Managing Director, Manning &
Napier Advisors, Inc. from 1983-1992.
Martin Birmingham Director Trustee, The Freedom Forum, 1980 -
21 Brookwood Road 1997; Advisory Director, ACC
Pittsford, NY 14534 Corporation, 1997; Director,
10/30/21 Emeritus, ACC Corporation, 1994 - 1997;
Director, Manning & Napier Insurance
Fund, Inc. since 1995; Advisory
Trustee, The Freedom Forum, since 1997.
Harris H. Rusitzky Director President, Blimpie of Central New York
One Grove Street and The Greening Group since 1994;
Pittsford, NY 14534 Director, Manning & Napier Insurance
01/09/35 Fund, Inc. since 1995.
Peter L. Faber Director Former Partner, Kaye, Scholer, Fierman,
50 Rockefeller Plaza Hays & Handler from 1984-1995; Partner
New York, NY 10020-1605 McDermott, Will & Emery since 1995;
04/29/38 Director, Manning & Napier Insurance
Fund, Inc. since 1995.
Stephen B. Ashley Director Chairman and Chief Executive Officer,
600 Powers Building The Ashley Group since 1997 ;
16 West Main Street Chairman and CEO, Sibley Mortgage
Rochester, New York 14614 Corp., 1975 to 1996; Chairman and CEO,
03/22/40 Sibley Real Estate Services, Inc., 1975
to 1997[/R]; Director, Genesee Corp.
Since 1987; Director, Hahn Automotive
Since 1994; Director, Fannie Mae since
1995; Director, Manning & Napier
Insurance Fund, Inc. since 1996.
William Manning President President, Director and co-founder,
1100 Chase Square Manning & Napier Advisors, Inc. since
Rochester, NY 14604 1970; President, Director,
12/24/36 Founder & CEO, Manning Ventures, Inc.
since 1992; President, Director,
Founder & CEO, KSDS, Inc. since 1992;
Chairman of the Board, Director, CEO,
Kent Displays, Inc. since 1992;
President, Director, Founder & CEO,
Synmatix Corporation since 1993;
President, Director, Founder & CEO,
Manning Leasing, Inc.(dba Williams
International Air, Inc.)since 1994;
President and Treasurer, Manning &
Napier Leveraged Investing Company,
Inc. since 1994; Member, Manning &
Napier Capital Co., L.L.C. since 1994;
Member, Qualified Plan Services, L.L.C
(formerly known as Fiduciary Services,
L.L.C.) since 1995; Member, Manning &
Napier Associates, L.L.C. since 1995;
Director, CEO, President and Founder,
Burgandy Car Service, Inc. 1996 to
1997;Director, CEO, President and
Founder, BCS Leasing, Inc. since 1996.
Beth H. Galusha, CPA Chief Chief Financial Officer, Manning &
1100 Chase Square Financial Napier Advisors, Inc. since 1987;
Rochester, NY 14604 & Treasurer, Manning & Napier Investor
06/23/61 Accounting Services, Inc. since 1990; Director,
Officer, Manning & Napier Advisory Advantage
Treasurer Corporation since 1993; Treasurer,
Exeter Trust Company since 1995;
Member, Manning & Napier Capital Co.,
L.L.C since 1995; Chief
Financial & Accounting Officer,
Treasurer, Manning & Napier Insurance
Fund, Inc. since 1997.
Jodi L. Hedberg Corporate Senior Compliance Administrator,
1100 Chase Square Secretary Manning & Napier Advisors, Inc. from
Rochester, NY 14604 1994-1995 ; Compliance Manager,
11/26/67 Manning& Napier Advisors, Inc. since
1995; Corporate Secretary, Manning &
Napier Insurance Fund, Inc. since 1997.
</TABLE>
* Interested Director, within the meaning of the Investment Company Act of 1940
(the "1940 Act").
The only Committee of the Fund is an Audit Committee whose members are B. Reuben
Auspitz, Harris H. Rusitzky and Stephen B. Ashley.
Directors affiliated with the Advisor do not receive fees from the Fund. Each
Director who is not affiliated with the Advisor shall receive an annual fee of
$2,500. Annual fees will be calculated monthly and prorated. Each Director who
is not affiliated with the Advisor shall receive $375 per Board Meeting attended
for each active series of the Fund, plus $500 for any Committee Meeting held on
a day on which a Board Meeting is not held.
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE FOR FISCAL YEAR ENDED DECEMBER 31, 1998
Name Position Aggregate Pension Est. Annual Total
from Compensation Benefits upon Compensation
Registrant Retirement from
Registrant
<S> <C> <C> <C> <C> <C>
B. Reuben Director $0 N/A N/A $0
Auspitz*
Martin Director $25,000 N/A N/A $25,000
Birmingham
Harris H Director $25,500 N/A N/A $25,500
Rusitzky
Peter L. Director $25,000 N/A N/A $25,000
Faber
Stephen B. Director $25,500 N/A N/A $25,500
Ashley
</TABLE>
*Interested Director, within the meaning of the Investment Company Act of 1940
(the "1940 Act").
The following persons were known by the Fund to be owner of record 5% or more of
the outstanding voting securities of each series on February 5, 1999
.
NAME AND ADDRESS OF HOLDER OF RECORD PERCENTAGE OF SERIES
- ------------------------------------------ ----------------------
SMALL CAP SERIES
----------------
Manning & Napier Advisors, Inc. 6.33%
FBO American Electric Power Co.
Pension Plan
1100 Chase Square
Rochester, NY 14604
INTERNATIONAL SERIES
--------------------------
Manning & Napier Advisors, Inc. 7.05%
FBO American Electric Power Co.
Pension Plan
1100 Chase Square
Rochester, NY 14604
<PAGE>
OHIO TAX EXEMPT SERIES
----------------------
Manning & Napier Advisors, Inc. 18.88%<R/>
FBO Franklin Eck
1100 Chase Square
Rochester, NY 14604
Manning & Napier Advisory
5.39%
Advantage Corporation, Inc.
FBO Trust U/A Estelle B. Wright
FBO Jane W. Haynam
1100 Chase Square
Rochester, NY 14604
DIVERSIFIED TAX EXEMPT SERIES
--------------------------------
Manning & Napier Advisory 5.29%
Advantage Corporation, Inc.
FBO John Enterprises, LLC
1100 Chase Square
Rochester, NY 14604
THE ADVISOR
The Advisor, Exeter Asset Management, which is a division of Manning &
Napier Advisors, Inc. ( MNA ), acts as the Fund's investment advisor. Mr.
William Manning controls the Advisor by virtue of his ownership of the
securities of MNA. The Advisor also is generally responsible for supervision of
the overall business affairs of the Fund including supervision of service
providers to the Fund and direction of the Advisor's directors, officers or
employees who may be elected as officers of the Fund to serve as such.
The Fund pays the Advisor for the services performed a fee at the annual rate of
1% of each series' daily net assets. The advisory fee charged by the Advisor to
its investment advisory clients will not include or be based on assets of such
clients held in shares of the Series. As described below, the Advisor is
separately compensated for acting as transfer agent for the series.
Under the Investment Advisory Agreement (the "Agreement") between the Fund and
the Advisor, the Fund is responsible for its operating expenses, including: (i)
interest and taxes; (ii) brokerage commissions; (iii) insurance premiums; (iv)
compensation and expenses of its Directors other than those affiliated with the
Advisor; (v) legal and audit expenses; (vi) fees and expenses of the Fund's
custodian, and accounting services agent, if obtained for the Fund from an
entity other than the Advisor; (vii) expenses incidental to the issuance of its
shares, including issuance on the payment of, or reinvestment of, dividends and
capital gain distributions; (viii) fees and expenses incidental to the
registration under federal or state securities laws of the Fund or its shares;
(ix) expenses of preparing, printing and mailing reports and notices and proxy
material to shareholders of the Fund; (x) all other expenses incidental to
holding meetings of the Fund's shareholders; (xi) dues or assessments of or
contributions to the Investment Company Institute or any successor; and (xii)
such non-recurring expenses as may arise, including litigation affecting the
Fund and the legal obligations with respect to which the Fund may have to
indemnify its officers and directors.
For periods ended December 31, (unless otherwise indicated), the aggregate total
of advisory fees paid by the series to the Advisor were as follows:
<PAGE>
<TABLE>
<CAPTION>
Series 1996 1997 1998
- ------------- ------------------ ----------------- ------------------------
Fees Fees Fees Fees Fees Paid Fees Waived
Paid Waived Paid Waived
<S> <C> <C> <C> <C> <C> <C>
Small Cap $1,162,115 N/A $1,204,107 N/A $1,169,030 N/A
Technology $938,964 N/A $316,536(2) N/A $1,162,115 N/A
International $1,363,591 N/A $1,804,670 N/A $2,085,472 N/A
World
Opportunities $224,344(1) $0(1) $923,011 N/A $1,365,694 N/A
New York
Tax Exempt $160,913 N/A $207,477 N/A $ 250,787 N/A
Ohio Tax
Exempt $ 33,382 $1,181 $ 43,617 N/A $ 50,474 N/A
Diversified
Tax Exempt $ 74,427 $0 $ 96,872 N/A $ 136,071 N/A
Global Fixed
Income N/A N/A $209,630(3) N/A $1,248,572 N/A
</TABLE>
(1) For the period September 6, 1996 (Commencement of Operations) to
December 31, 1996.
(2) For the period January 1, 1997 to April 16, 1997 (Cessation of Operations).
(3) For the period October 31, 1997 (Commencement of Operations) to December 31,
1997.
The Agreement provides that in the event the expenses of the Fund (including the
fee of the Advisor but excluding: (i)brokerage commissions; (ii) interest; (iii)
taxes; and (iv) extraordinary expenses except for those incurred by the Fund as
a result of litigation in connection with a suit involving a claim for recovery
by the Fund, or as a result of litigation involving a defense against a
liability asserted against the Fund, provided that, if the adviser made the
decision or took the action which resulted in such claim the adviser acted in
good faith without gross negligence or misconduct, and for any indemnification
paid by the Fund to its officers, directors and advisers in accordance with
applicable state and federal laws as a result of such litigation) for any fiscal
year exceed the limits set by applicable regulations of state securities
commissions, the Advisor will reduce its fee by the amount of such excess. Any
such reductions or refunds are accrued and paid in the same manner as the
Advisor's fee and are subject to readjustment during the year.
<PAGE>
The Agreement states that the Advisor shall give the Fund the benefit of
its best judgment and effort in rendering services thereunder, but the Advisor
shall not be liable for any loss sustained by reason of the purchase, sale or
retention of any security, whether or not such purchase, sale or retention shall
have been based upon its own investigation and research or upon investigation
and research made by any other individual, firm or corporation, if such
purchase, sale or retention shall have been made and such other individual, firm
or corporation shall have been selected in good faith. The Agreement also
states that nothing contained therein shall, however, be construed to protect
the Advisor against any liability to the Fund or its security holders by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under the Agreement.
The Agreement also provides that it is agreed that the Advisor shall have no
responsibility or liability for the accuracy or completeness of the Fund's
Registration Statement under the 1940 Act or the Securities Act of 1933 except
for information supplied by the Advisor for inclusion therein; the Fund agrees
to indemnify the Advisor to the full extent permitted by the Fund's Articles of
Incorporation.
On April 30, 1993, the Advisor became the Fund s Transfer Agent. For servicing
the Ohio Tax Exempt Series, New York Tax Exempt Series and the Diversified Tax
Exempt Series in this capacity, for the fiscal years ended December 31, 1996,
December 31, 1997 and December 31, 1998, the Advisor received $12,960, $16,703
and $20,992, respectively, from the Fund. The Advisor will not charge for its
Transfer Agent Services to the other Series.
DISTRIBUTION OF FUND SHARES
Manning & Napier Investor Services, Inc. (the Distributor ) acts as Distributor
of the Fund shares and is located at the same address as the Advisor and the
Fund. The Distributor and the Fund are parties to a distribution agreement dated
September 25, 1997 (the Distribution Agreement ) which applies to each Class of
shares.
The Distribution Agreement will remain in effect for a period of two years after
the effective date of the agreement and is renewable annually. The Distribution
Agreement may be terminated by the Distributor, by a majority vote of the
Directors who are not interested persons and have no financial interest in the
Distribution Agreement ( Qualified Directors ) or by a majority of the
outstanding shares of the Fund upon not more than 60 days' written notice by
either party or upon assignment by the Distributor. The Distributor will not
receive compensation for distribution of Class A shares of the Portfolio. The
Fund has adopted Plans of Distribution with respect to the Class B, C, D and E
Shares (the Plans ), pursuant to Rule 12b-1 under the 1940 Act. Currently,
only the Small Cap Series and the World Opportunities Series offer multiple
classes pursuant to the Plans. The Advisor may impose separate requirements
in connection with employee purchases of the Class A Shares of the series.
<PAGE>
The Plans
The Fund has adopted each Plan in accordance with the provisions of Rule 12b-1
under the 1940 Act which regulates circumstances under which an investment
company may directly or indirectly bear expenses relating to the distribution of
its shares. Continuance of each Plan must be approved annually by a majority of
the Directors of the Fund and by a majority of the Qualified Directors. Each
Plan requires that quarterly written reports of amounts spent under the Plan and
the purposes of such expenditures be furnished to and reviewed by the Directors.
A Plan may not be amended to increase materially the amount which may be spent
thereunder without approval by a majority of the outstanding shares of the
respective class of the Fund. All material amendments of a Plan will require
approval by a majority of the Directors of the Fund and of the Qualified
Directors.
The Distributor expects to allocate most of its fee to investment dealers, banks
or financial service firms that provide distribution, administrative and/or
shareholder services ("Financial Intermediaries"). The Financial Intermediaries
may provide for their customers or clients certain services or assistance, which
may include, but not be limited to, processing purchase and redemption
transactions, establishing and maintaining shareholder accounts regarding the
Fund, and such other services as may be agreed to from time to time and as may
be permitted by applicable statute, rule or regulation. The Distributor may, in
its discretion, voluntarily waive from time to time all or any portion of its
distribution fee and the Distributor is free to make additional payments out of
its own assets to promote the sale of Fund shares.
The Distributor receives distribution and/or service fees, at the rates set
forth below, for providing distribution and/or shareholder services to the Class
B, C, D and E Shares. The Distributor expects to allocate most of its
distribution fees and shareholder service fees to Financial Intermediaries that
enter into shareholder servicing agreements ("Servicing Agreements") with the
Distributor. The different Classes permit the Fund to allocate an appropriate
amount of fees to a Financial Intermediary in accordance with the level of
distribution and/or shareholder services it agrees to provide.
<PAGE>
As compensation for providing distribution and shareholders services for the
Class B Shares, the Distributor receives a distribution fee equal to 0.75% of
the Class B Shares' average daily net assets and a shareholder servicing fee
equal to 0.25% of the Class B Shares' average daily net assets. As compensation
for providing distribution and shareholder services for the Class C Shares, the
Distributor receives an aggregate distribution and shareholder servicing fee
equal to 0.75% of the Class C Shares' average daily net assets. As compensation
for providing distribution and shareholders service for the Class D Shares, the
Distributor receives an aggregate distribution and shareholder servicing fee
equal to 0.50% of the Class D Shares' average daily net assets. The shareholder
services component of the foregoing fees for Classes C and D is limited to 0.25%
of the average daily net assets of the respective class. As compensation for
providing distribution services for the Class E Shares, the Distributor receives
an aggregate distribution and shareholder servicing fee equal to 0.25% of the
average daily net assets of the Class E Shares. The Distributor may, in its
discretion, voluntarily waive from time to time all or any portion of its
distribution fee.
Payments under the Plans are made as described above regardless of the
Distributor's actual cost of providing distribution services and may be used to
pay the Distributor's overhead expenses. If the cost of providing distribution
services to the Fund is less than the payments received, the unexpended portion
of the distribution fees may be retained as profit by the Distributor. The
Distributor may from time to time and from its own resources pay or allow
additional discounts or promotional incentives in the form of cash or other
compensation (including merchandise or travel) to Financial Intermediaries and
it is free to make additional payments out of its own assets to promote the sale
of Fund shares. Similarly, the Advisor may, from its own resources, defray or
absorb costs related to distribution, including compensation of employees who
are involved in distribution.
Class B, C, D and E shares were not offered prior to the end of the series
respective fiscal year ends and therefore the Distributor received no
compensation from the series for such periods.
CUSTODIAN AND INDEPENDENT ACCOUNTANT
The custodian for the Fund is Boston Safe Deposit and Trust Company, One Cabot
Road, 3rd Floor, Medford, MA 02155-5159. Boston Safe Deposit and Trust Company
may, at its own expense, employ one or more sub-custodians on behalf of
the Fund, provided that Boston Safe Deposit and Trust Company shall remain
liable for all its duties as custodian. The foreign sub-custodians will act
as custodian for the foreign securities held by the fund.
PricewaterhouseCoopers LLP, One Post Office Square, Boston, MA 02109 are the
independent accountants for the series.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Agreement states that in connection with its duties to arrange for the
purchase and the sale of securities held in the portfolio of the Fund by placing
purchase and sale orders for the Fund, the Advisor shall select such
broker-dealers ("brokers") as shall, in the Advisor's judgment, implement the
policy of the Fund to achieve "best execution", i.e., prompt and efficient
execution at the most favorable securities price. In making such selection, the
Advisor is authorized in the Agreement to consider the reliability, integrity
and financial condition of the broker, the size and difficulty in executing the
order and the value of the expected contribution of the broker to the investment
performance of the Fund on a continuing basis. The Advisor is also authorized
to consider whether a broker provides brokerage and/or research services to the
Fund and/or other accounts of the Advisor. The Fund understands that a
substantial amount of its portfolio transactions may be transacted with primary
market makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in a
profit to market makers. In certain instances the Advisor may make purchases of
underwritten issues for the Fund at prices which include underwriting fees. The
Agreement states that the commissions paid to such brokers may be higher than
another broker would have charged if a good faith determination is made by the
Advisor that the commission is reasonable in relation to the services provided,
viewed in terms of either that particular transaction or the Advisor's overall
responsibilities as to the accounts as to which it exercises investment
discretion and that the Advisor shall use its judgment in determining that the
amount of commissions paid are reasonable in relation to the value of brokerage
and research services provided. The Advisor is further authorized to allocate
the orders placed by it on behalf of the Fund to such brokers or dealers who
also provide research or statistical material, or other services, to the Fund,
the Advisor, or any affiliate of either. Such allocation shall be in such
amounts and proportions as the Advisor shall determine, and the Advisor shall
report on such allocations regularly to the Fund, indicating the broker-dealers
to whom such allocations have been made and the basis therefore.
<PAGE>
The research services discussed above may be in written form or through direct
contact with individuals and may include information as to particular companies
and securities as well as market economic or institutional areas and information
assisting the Fund in the valuation of its investments. The research which the
Advisor receives for the Fund's brokerage commissions, whether or not useful to
the Fund may be useful to the Advisor in managing the accounts of the Advisor's
other advisory clients. Similarly, the research received for the commissions of
such accounts may be useful to the Fund.
For years ended December 31, (unless otherwise indicated), the aggregate total
brokerage commissions paid by the series were as follows:
<TABLE>
<CAPTION>
Series 1996 1997 1998
<S> <C> <C> <C>
$214,565 $377,679 $420,163
Small Cap
Technology $ 151,177 $ 77,155 $0
International $ 49,487 $258,267 $ 121,865
World Opportunities $205,556(1) $342,033 $ 835,382
Global Fixed Income N/A N/A N/A
Life Sciences N/A N/A N/A
New York Tax Exempt $ 0 $ 0 $ 0
Ohio Tax Exempt $ 0 $ 0 $ 0
Diversified Tax Exempt $ 0 $ 0 $ 0
- ----------------------
</TABLE>
(1) For the period September 6, 1996 (Commencement of Operations) to December
31, 1996.
There were no brokerage commissions paid to affiliates during the last three
fiscal years.
<PAGE>
NET ASSET VALUE
The net asset value is determined on each day that the New York Stock Exchange
is open for trading. In determining the net asset value of the Fund's shares,
common stocks that are listed on national securities exchanges or the NASDAQ
National Market System are valued at the last sale price on the exchange on
which each stock is principally traded as of the close of the New York Stock
Exchange (generally 4:00 p.m., Eastern time), or, in the absence of recorded
sales, at the closing bid prices on such exchanges or on such System. Unlisted
securities that are not included in such National Market System are valued at
the quoted bid prices in the over-the-counter market. All securities initially
expressed in foreign currencies will be converted to U.S. dollars at the
exchange rates quoted at the close of the New York markets. Short securities
positions are accounted for at value, using the same method of valuation
described above. Securities and other assets for which market quotations are
not readily available are valued by appraisal at their fair value as determined
in good faith by the Advisor under procedures established by and under the
general supervision and responsibility of the Fund's Board of Directors. The
Advisor may use a pricing service to obtain the value of the Fund's portfolio
securities where the prices provided by such pricing service are believed to
reflect the fair market value of such securities. The methods used by the
pricing service and the valuations so established will be reviewed by the
Advisor under the general supervision of the Fund's Board of Directors. Several
pricing services are available, one or more of which may be used as approved by
the Fund's Board of Directors.
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain tax considerations generally
affecting a series and its shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisers with
specific reference to their own tax situations, including their state and local
tax liabilities.
The following discussion of certain federal income tax consequences is based on
the Code , and the regulations issued thereunder as in effect on the date
of this Statement of Additional Information. New legislation, certain
administrative changes, or court decisions may significantly change the
conclusions expressed herein, and may have a retroactive effect with respect to
the transactions contemplated herein.
<PAGE>
It is the policy of each of the series to qualify for the favorable tax
treatment accorded regulated investment companies under Subchapter M of the
Code. By following such policy, each of the series expects to be relieved of
federal income tax on investment company taxable income and net capital gain
(the excess of net long-term capital gain over net short-term capital loss)
distributed to shareholders.
In order to qualify as a regulated investment company each series must, among
other things, (1) derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in stock, securities or currencies; and (2)
diversify its holdings so that at the end of each quarter of each taxable year
(i) at least 50% of the market value of the series total assets is represented
by cash or cash items, U.S. government securities, securities of other regulated
investment companies, and other securities limited, in respect of any one
issuer, to a value not greater than 5% of the value of the series total assets
and 10% of the outstanding voting securities of such issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. government securities or securities of any other
regulated investment company) or of two or more issuers that the series controls
and that are engaged in the same, similar, or related trades or businesses.
These requirements may restrict the degree to which the series may engage in
certain hedging transactions and may limit the range of the series
investments. If a series qualifies as a regulated investment company, it will
not be subject to federal income tax on the part of its net investment income
and net realized capital gains, if any, which it distributes each year to the
shareholders, provided the series distributes at least (a) 90% of its
investment company taxable income (generally, net investment income plus the
excess, if any, of net short-term capital gain over net long-term capital loss)
and (b) 90% of its net exempt interest income (the excess of (i) its tax-exempt
interest income over (ii) certain deductions attributable to that income).
If for any taxable year, a series does not qualify as a regulated investment
company under Sub-chapter M of the Code, all of its taxable income will be
subject to tax at regular corporate tax rates without any deduction for
distributions to shareholders and all such distributions will be taxable to
shareholders as ordinary dividends to the extent of the series current or
accumulated earnings and profits. Such distributions will generally qualify for
the corporate dividends received deduction for corporate shareholders.
If a series fails to distribute in a calendar year at least 98% of its ordinary
income for the year and 98% of its capital gain net income (the excess of short
and long term capital gains over short and long term capital losses) for the
one-year period ending October 31 of that year (and any retained amount from the
prior year), the series will be subject to a nondeductible 4% federal excise tax
on the undistributed amounts. The series generally intend to make sufficient
distributions to avoid imposition of this tax.
Distributions declared in October, November, or December to shareholders of
record during those months and paid during the following January are treated as
if they were received by each shareholder on December 31 of the year in which
they are declared for tax purposes.
Any gain or loss recognized on a sale, exchange or redemption of shares of a
series by a shareholder who is not a dealer in securities will generally, for
individual shareholders, be treated as a long-term capital gain or loss if the
shares have been held for more than one year and otherwise generally will be
treated as short-term capital gain or loss. However, if shares on which a
shareholder has received a net capital gain distribution are subsequently sold,
exchanged or redeemed and such shares have been held for six months or less, any
loss recognized will be treated as long-term capital loss to the extent of the
net capital gain distribution. Long-term capital gains generally are currently
taxed at a maximum rate of 20%, and short-term capital gains are currently taxed
at ordinary income tax rates.
In certain cases, a series will be required to withhold and remit to the U.S.
Treasury 31% of any taxable dividends, capital gain distributions and redemption
proceeds paid to a shareholder (1) who has failed to provide a correct and
properly certified taxpayer identification number, (2) who is subject to backup
withholding by the Internal Revenue Service, or (3) who has not certified to the
Fund that such shareholder is not subject to backup withholding. This backup
withholding is not an additional tax, and any amounts withheld may be credited
against the shareholder s U.S. federal income tax liability.
Dividends paid to nonresident alien individuals and foreign entities are
potentially subject to different tax treatment, including a possible U.S.
federal income tax, required to be withheld by the applicable series, at a 30%
rate (or a lower rate provided by an applicable income tax treaty).
Certification of foreign status by such shareholders also will generally be
required to avoid backup withholding on capital gain distributions and
redemption proceeds.
A series transactions in certain futures contracts, options, forward contracts,
foreign currencies, foreign debt securities, foreign entities treated as
investment companies and certain other investment and hedging activities will be
subject to special tax rules. In a given case, these rules may accelerate
income to the series, defer losses to the series, cause adjustments in the
holding periods of the series assets, convert short-term capital losses into
long-term capital losses, or otherwise affect the character of the series
income. These rules could therefore affect the amount, timing, and character of
distributions to shareholders. Each series will endeavor to make any available
elections pertaining to such transactions in a manner believed to be in the best
interest of the series.
<PAGE>
Shareholders will be advised annually as to the federal income tax consequences
of distributions made during the year. Certain distributions may qualify for
a dividends received deduction for corporate shareholders, subject to holding
period requirements and other limitations under the Code, if they are
attributable to the qualifying dividend income a series receives from a domestic
corporation and are properly designated by that Series.
However, information set forth in the Prospectuses and this Statement of
Additional Information which relates to taxation is only a summary of some of
the important tax considerations generally affecting purchasers of shares of the
Fund s series. No attempt has been made to present a detailed explanation of
the tax treatment of the Fund or its shareholders, and this discussion is not
intended as a substitute for careful tax planning. Accordingly, potential
purchasers of shares of a series are urged to consult their tax advisors with
specific reference to their own tax situation.
Distributions by the Fund to shareholders and the ownership of shares may be
subject to state and local taxes. Therefore, shareholders are urged to consult
with their tax advisors concerning the application of state and local taxes to
investments in the Fund, which may differ from the federal income tax
consequences. For example, under certain specified circumstances, state income
tax laws may exempt from taxation distributions of a regulated investment
company to the extent that such distributions are derived from interest on
federal obligations. Shareholders are urged to consult with their tax advisors
regarding whether, and under what conditions, such exemption is available.
ADDITIONAL TAX INFORMATION CONCERNING THE NEW YORK TAX EXEMPT, OHIO TAX EXEMPT
AND DIVERSIFIED TAX EXEMPT SERIES -- As indicated in the Prospectuses of the New
York Tax Exempt Series, Ohio Tax Exempt Series and Diversified Tax Exempt Series
(the "Tax Exempt Series") are designed to provide shareholders with current tax
exempt interest income and is not intended to constitute a balanced investment
program. Certain recipients of Social Security and railroad retirement benefits
may be required to take into account income from the Tax Exempt Series in
determining the taxability of their benefits. In addition, the Tax Exempt
Series may not be an appropriate investment for shareholders that are
"substantial users" or persons related to such users of facilities financed by
private activity bonds or industrial revenue bonds. A "substantial user" is
defined generally to include certain persons who regularly use a facility in
their trade or business. Shareholders should consult their tax advisers to
determine the potential effect, if any, on their tax liability of investing in
the Tax Exempt Series.
If, at the close of each quarter of its taxable year, at least 50% of the value
of a Tax Exempt Series' total assets consists of securities the interest on
which is excludable from gross income, such Series may pay "exempt-interest
dividends" to its shareholders. The policy of the Tax Exempt Series is to pay
each year as dividends substantially all of its interest income, net of certain
deductions. An exempt-interest dividend is any dividend or part thereof (other
than a capital gain dividend) paid by a Tax Exempt Series, and designated by the
Series as an exempt-interest dividend in a written notice mailed to shareholders
within 60 days after the close of such Series' taxable year. However, aggregate
exempt-interest dividends for the taxable year may not exceed the net interest
from Municipal Securities and other securities exempt from the regular Federal
income tax received by the Tax Exempt Series during the taxable year. The
percentage of total dividends paid for any taxable year which qualifies as
Federal exempt-interest dividends will be the same for all shareholders
receiving dividends from the Tax Exempt Series during such year, regardless of
the period for which the shares were held.
<PAGE>
Exempt-interest dividends may nevertheless be subject to the alternative minimum
tax (the "Alternative Minimum Tax") imposed by Section 55 of the Code or the
environmental tax (the "Environmental Tax") imposed by Section 59A of the Code.
The Environmental Tax is imposed at the rate of 0.12% and applies only to
corporate taxpayers. The Alternative Minimum Tax and the Environmental Tax may
be imposed in two circumstances. First, exempt-interest dividends derived from
certain "private activity bonds" issued after August 7, 1986, will generally be
an item of tax preference (and therefore potentially subject to the Alternative
Minimum Tax and the Environmental Tax) for both corporate shareholders, all
exempt-interest dividends, regardless of when the bonds from which they are
derived were issued or whether they were derived from private activity bonds,
will be included in the corporation's "adjusted current earnings", as defined in
Section 56(g) of the Code, in calculating the corporation's alternative minimum
taxable income for purposes of determining the Alternative Minimum Tax and the
Environmental Tax.
The deduction otherwise allowable to property and casualty insurance companies
for "losses incurred" will be reduced by an amount equal to a portion of
exempt-interest dividends received or accrued during the taxable year. Foreign
corporations engaged in a trade or business in the United States will be subject
to a "branch profits tax" on their "dividend equivalent amount" for the taxable
year, which will include exempt-interest dividends. Certain Subchapter S
corporations may also be subject to taxes on their "passive investment income",
which could include exempt-interest dividends.
Issuers of bonds purchased by the Tax Exempt Series (or the beneficiary of such
bonds) may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Investors should be aware
that exempt-interest dividends derived from such bonds may become subject to
Federal income taxation retroactively to the date thereof if such
representations are determined to have been inaccurate or if the issuer of such
bonds (or the beneficiary of such bonds) fails to comply with the covenants.
Under the Code, if a shareholder receives an exempt-interest dividend with
respect to any share and such share is held for six months or less, any loss on
the sale or exchange of such share will be disallowed to the extent of the
amount of such exempt-interest dividend.
Although the Tax Exempt Series do not expect to earn any investment company
taxable income (as defined by the Code), any income earned on taxable
investments will be distributed and will be taxable to shareholders as ordinary
income. In general, "investment company taxable income" comprises taxable net
investment income plus the excess, if any, of and net short-term capital gains
over net long-term capital losses. The Tax Exempt Series would be taxed on any
undistributed investment company taxable income. Since any such income will be
distributed, it is anticipated that no such tax will be paid by the Tax Exempt
Series.
Although each Tax Exempt Series expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all Federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located, or in which it is otherwise deemed to be conducting business, the Tax
Exempt Series may be subject to the tax laws of such states or localities. In
addition, in those states and localities which have income tax laws, the
treatment of the Tax Exempt Series and their shareholders under such laws may
differ from their treatment under Federal income tax laws. Shareholders are
advised to consult their tax advisers concerning the application of state and
local taxes.
<PAGE>
If for any taxable year a Tax Exempt Series does not qualify for the special tax
treatment afforded regulated investment companies, all of its taxable income
will be subject to Federal tax at regular corporate rates (without any deduction
for distributions to its shareholders). Moreover, upon distribution to
shareholders, the Tax Exempt Series' income, including Municipal Securities
interest income, will be taxable to shareholders to the extent of such Series'
current and/or accumulated earnings and profits.
YIELD AND TOTAL RETURN
From time-to-time each series may advertise its yield and total return. Both
yield and total return figures are based on historical earnings and are not
intended to indicate future performance. The "total return" of a series refers
to the average annual compounded rates of return over one-, five-, and ten-year
periods or for the life of the series (as stated in the advertisement) that
would equate an initial amount invested at the beginning of a stated period to
the ending redeemable value of the investment, assuming the reinvestment of all
dividend and capital gains distributions. The respective performance figures
for the Classes will differ because of the different distribution and/or
shareholder services fees charged to Class B, C, D and E Shares.
The "30-day yield" of the Global Fixed Income Series and the Tax Exempt Series
is calculated by dividing the net investment income per share earned during a
30-day period by the net asset value per share on the last day of the period.
Net investment income includes interest and all recurring and nonrecurring
charges that have been applied to all shareholder accounts. The yield
calculation assumes that net investment income earned over 30 days is compounded
monthly for six months and then annualized. Methods used to calculate
advertised yields are standardized for all stock and bond mutual funds.
However, these methods differ from the accounting methods used by a series to
maintain its books and records, and so the advertised 30-day yield may not fully
reflect the income paid to your own account or the yield reported in a series'
reports to shareholders.
FINANCIAL STATEMENTSSTATEMENTS
The financial statements of the Fund are incorporated by reference into this
Statement of Additional Information. The financial statements with respect to
the series have been audited by PricewaterhouseCoopers LLP , independent
public accountants to such series. The Series' annual report(s) are
incorporated herein by reference in reliance upon their authority as experts in
accounting and auditing. A copy of the 1998 Annual Report(s) to
Shareholders must accompany the delivery of this Statement of Additional of
Information.
<PAGE>
- ------
- ---
APPENDIX - DESCRIPTION OF BOND RATINGSTHE RATINGS INDICATED HEREIN ARE BELIEVED
- ---------------------------------------
TO BE THE MOST RECENT RATINGS AVAILABLE AT THE DATE OF THIS STATEMENT OF
ADDITIONAL INFORMATION FOR THE SECURITIES LISTED. RATINGS ARE GENERALLY GIVEN
TO SECURITIES AT THE TIME OF ISSUANCE. WHILE THE RATING AGENCIES MAY FROM TIME
TO TIME REVISE SUCH RATINGS, THEY UNDERTAKE NO OBLIGATION TO DO SO, AND THE
RATINGS INDICATED DO NOT NECESSARILY REPRESENT RATINGS WHICH WILL BE GIVEN TO
THESE SECURITIES ON THE DATE OF THE FUND S FISCAL YEAR-END.
MOODY'S INVESTORS SERVICE, INC. ( MOODY S ) SHORT-TERM PRIME RATING SYSTEM -
TAXABLE DEBT AND DEPOSITS GLOBALLY
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Prime-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
Leading market positions in well-established industries.
High rates of return on funds employed.
Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
Broad margins in earnings coverage of fixed financial charges and high internal
cash generation.
Well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Not Prime: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Obligations of a branch of a bank are considered to be domiciled in the country
in which the branch is located. Unless noted as an exception, Moody's rating on
a bank s ability to repay senior obligations extends only to branches located in
countries which carry a Moody's Sovereign Rating for Bank Deposits. Such branch
obligations are rated at the lower of the bank s rating or Moody s Sovereign
Rating for Bank Deposits for the country in which the branch is located.
When the currency in which an obligation is denominated is not the same as the
currency of the country in which the obligation is domiciled, Moody s ratings do
not incorporate an opinion as to whether payment of the obligation will be
affected by actions of the government controlling the currency of denomination.
In addition, risks associated with bilateral conflicts between an investor s
home country and either the issuer s home country or the country where an issuer
s branch is located are not incorporated into Moody s short-term debt ratings.
If an issuer represents to Moody s that its short-term debt obligations are
supported by the credit of another entity or entities, then the name or names of
such supporting entity or entities are listed within the parenthesis beneath the
name of the issuer, or there is a footnote referring the reader to another page
for the name or names of the supporting entity or entities. In assigning ratings
to such issuers, Moody s evaluates the financial strength of the affiliated
corporations, commercial banks, insurance companies, foreign governments or
other entities, but only as one factor in the total rating assessment.
1 The ratings indicated herein are believed to be the most recent ratings
available at the date of this statement of additional information for the
securities listed. Ratings are generally given to securities at the time of
issuance. While the rating agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings indicated do not
necessarily represent ratings which will be give to these securities on the date
of the fund's fiscal year-end.
<PAGE>
MOODY'S MUNICIPAL AND CORPORATE BOND RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edge. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicated that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicated
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
Moody's may also assign conditional ratings to municipal bonds. Bonds for which
the security depends upon the completion of some act or the fulfillment of some
condition are rated conditionally. These are bonds secured by (a) earnings of
projects under construction, (b) earnings of projects unseasoned in operating
experience, (c) rentals which begin when facilities are completed, or (d)
payments to which some other limiting condition attaches. Parenthetical rating
denotes probable credit stature upon completion of construction or elimination
of basis of condition.
<PAGE>
STANDARD & POORS SHORT-TERM ISSUE CREDIT RATINGS
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor s. The obligor s capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor s capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor s capacity to meet
its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor s inadequate capacity to meet its financial
commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor s believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
<PAGE>
STANDARD & POORS MUNICIPAL AND CORPORATE BOND RATINGS
Aaa: An obligation rated Aaa has the highest rating assigned by Standard & Poor
s. The obligor s capacity to meet its financial commitment on the obligation is
extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only in a
small degree. The obligor s capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor s capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
Obligations rated BB, B, CCC, CC, and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor s capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial, or economic conditions will
likely impair the obligor s capacity or willingness to meet its financial
commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor s believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments are jeopardized.
Plus (+) or Minus (-): The rating from AA to CCC may be modified by the addition
of a plus or minus sign to show relative standing within the major categories.
Standard & Poor's ratings may also be indicated by "NR". This designation
indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.
Standard & Poor's may also assign conditional ratings to municipal bonds. The
letter "p" indicates that the rating is provisional. A provisional rating
assumes the successful completion of the project being financed by the debt
being rated and indicates that payment of debt service requirements is largely
or entirely dependent upon the successful timely completion of the project.
This rating, however, while addressing credit quality subsequent to completion
of the project, makes no comment on the likelihood of, or the risk of default
upon failure of, such completion. The investor should exercise his own judgment
with respect to such likelihood and risk.
r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk, such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS.
(a)
(1) Articles of Incorporation as filed with the State of Maryland on July
26, 1984 (incorporated by reference to Exhibit (1)(a) to Post-Effective
Amendment No. 30 to the Registration Statement on Form N-1A filed on October 23,
1998 with Accession Number 0000751173-98-00050).
(2) Articles of Amendment as filed with the State of Maryland on March 25,
1985 (incorporated by reference to Exhibit (1)(b) to Post-Effective Amendment
No. 30 to the Registration Statement on Form N-1A filed on October 23, 1998 with
Accession Number 0000751173-98-00050).
(3) Articles of Amendment as filed with the State of Maryland on May 23,
1985 (incorporated by reference to Exhibit (1)(c) to Post-Effective Amendment
No. 30 to the Registration Statement on Form N-1A filed on October 23, 1998 with
Accession Number 0000751173-98-00050).
(4) Articles of Amendment as filed with the State of Maryland on October
7, 1985 (incorporated by reference to Exhibit (1)(d) to Post-Effective Amendment
No. 30 to the Registration Statement on Form N-1A filed on October 23, 1998 with
Accession Number 0000751173-98-00050).
(5) Articles of Amendment as filed with the State of Maryland on July 3, 1986
(incorporated by reference to Exhibit (1)(e) to Post-Effective Amendment No. 30
to the Registration Statement on Form N-1A filed on October 23, 1998 with
Accession Number 0000751173-98-00050).
(6) Articles of Amendment as filed with the State of Maryland on September 26,
1997 (incorporated by reference to Exhibit (1)(f) to Post-Effective Amendment
No. 30 to the Registration Statement on Form N-1A filed on October 23, 1998 with
Accession Number 0000751173-98-00050).
(7) Certificate of Correction to Articles of Amendment as filed with the
State of Maryland on February 5, 1998 (incorporated by reference to Exhibit
(1)(g) to Post-Effective Amendment No. 30 to the Registration Statement on Form
N-1A filed on October 23, 1998 with Accession Number 0000751173-98-00050).
(8) Articles of Amendment as filed with the State of Maryland on February
26, 1998 (incorporated by reference to Exhibit (1)(h) to Post-Effective
Amendment No. 30 to the Registration Statement on Form N-1A filed on October 23,
1998 with Accession Number 0000751173-98-00050).
(b) By-Laws (incorporated by reference to Exhibit (2)(a) to Post- Effective
Amendment No. 30 to the Registration Statement on Form N-1A filed on October 23,
1998 with Accession Number 0000751173-98-00050).
(c) (1) Specimen Stock Certificate (incorporated by reference to Exhibit
1(a) (Articles of Incorporation) and Exhibit (2) (By-Laws) to Post-Effective
Amendment No. 30 to the Registration Statement on Form N-1A filed on October 23,
1998 with Accession Number 0000751173-98-00050).
(2) Articles Supplementary to the charter as filed with the State of
Maryland on July 3, 1986 (incorporated by reference to Exhibit
(4)(b) to Post-Effective Amendment No. 30 to the Registration
Statement on Form N-1A filed on October 23, 1998 with Accession Number
0000751173-98-00050).
(3) Articles Supplementary to the charter as filed with the State of
Maryland on January 20, 1989 (incorporated by reference to
Exhibit (4)(c) to Post-Effective Amendment No. 30 to the
Registration Statement on Form N-1A filed on October 23, 1998 with Accession
Number 0000751173-98-00050).
(4) Articles Supplementary to the charter as filed with the State of
Maryland on September 22, 1989 (incorporated by reference to
Exhibit (4)(d) to Post-Effective Amendment No. 30 to the
Registration Statement on Form N-1A filed on October 23, 1998 with Accession
Number 0000751173-98-00050).
(5) Articles Supplementary to the charter as filed with the State of
Maryland on November 8, 1989 (incorporated by reference to Exhibit
(4)(e) to Post-Effective Amendment No. 30 to the Registration
Statement on Form N-1A filed on October 23, 1998 with Accession Number
0000751173-98-00050).
(6) Articles Supplementary to the charter as filed with the State of
Maryland on January 30, 1991 (incorporated by reference to
Exhibit (4)(f) to Post-Effective Amendment No. 30 to the
Registration Statement on Form N-1A filed on October 23, 1998 with Accession
Number 0000751173-98-00050).
<PAGE>
(7) Articles supplementary to the charter as filed with the State of
Maryland on April 27, 1992 (incorporated by reference to Exhibit
(4)(g) to Post-Effective Amendment No. 30 to the Registration Statement
on Form N-1A filed on October 23, 1998 with Accession Number
0000751173-98-00050).
(8) Articles Supplementary to the charter as filed with the State of
Maryland on April 29, 1993 (incorporated by reference to Exhibit
(4)(h) to Post-Effective Amendment No. 30 to the Registration Statement
on Form N-1A filed on October 23, 1998 with Accession Number
0000751173-98-00050).
(9) Articles Supplementary to the charter as filed with the State of
Maryland on September 23, 1993 (incorporated by reference to
Exhibit (4)(i) to Post-Effective Amendment No. 30 to the Registration
Statement on Form N-1A filed on October 23, 1998 with Accession Number
0000751173-98-00050).
(10) Articles Supplementary to the charter as filed with the State of
Maryland on January 17, 1994 (incorporated by reference to Exhibit (4)(j)
to Post-Effective Amendment No. 30 to the Registration Statement on
Form N-1A filed on October 23, 1998 with Accession Number
0000751173-98-00050).
(11) Articles Supplementary to the charter as filed with the State of
Maryland on December 13, 1995 (incorporated by reference to Exhibit (4)(k) to
Post-Effective Amendment No. 30 to the Registration Statement on Form N-1A filed
on October 23, 1998 with Accession Number 0000751173-98-00050).
(12) Articles Supplementary to the charter as filed with the State of
Maryland on April 22, 1996 (incorporated by reference to Exhibit (4)(l) to
Post-Effective Amendment No. 30 to the Registration Statement on Form
N-1A filed on October 23, 1998 with Accession Number 0000751173-98-00050).
(13) Articles Supplementary to the charter as filed with the State of
Maryland on September 26, 1997 (incorporated by reference to Exhibit
(4)(m) to Post-Effective Amendment No. 30 to the Registration Statement on
Form N-1A filed on October 23, 1998 with Accession Number
0000751173-98-00050).
(14) Certificate of Correction to Articles Supplementary to the charter
filed with the State of Maryland on February 24, 1998 (incorporated by
reference to Exhibit (4)(n) to Post-Effective Amendment No. 30 to the
Registration Statement on Form N-1A filed on October 23, 1998 with Accession
Number 0000751173-98-00050).
(d) Investment Advisory Agreement (incorporated by reference to Exhibit
(5)(a) to Post-Effective Amendment No. 30 to the Registration Statement on
Form N-1A filed on October 23, 1998 with Accession Number
0000751173-98-00050).
(e) Amended and Restated Distribution Agreement (incorporated by
reference to Exhibit (6)(a) to Post-Effective Amendment No. 30 to the
Registration Statement on Form N-1A filed on October 23, 1998 with Accession
Number 0000751173-98-00050).
(f) Not Applicable.
(g) Custodian Agreement is incorporated by reference to Exhibit (8)(a) to
Post-Effective Amendment No. 30 to the Registration Statement on Form N-1A filed
on October 23, 1998 with Accession Number 0000751173-98-00050).
(h) (1) Transfer Agent Agreement (incorporated by reference to Exhibit
(9)(a) to Post-Effective Amendment No. 30 to the Registration Statement on Form
N-1A filed on October 23, 1998 with Accession Number 0000751173-98-00050).
(2)Form of Dealer Agreement (incorporated by reference to Exhibit
(9)(b) to Post-Effective Amendment No. 30 to the Registration Statement
on Form N-1A filed on October 23, 1998 with Accession Number
0000751173-98-00050).
(i) Opinion of Morgan, Lewis & Bockius is incorporated by reference to
Exhibit (10) to Post Effective Amendment No. 31 to the Registration Statement on
Form N-1A filed on December 24, 1998 with Accession Number
0000751173-98-000065 .
(j) Consent of Independent Auditors.(a)Consent of PricewaterhouseCoopers,
LLP is filed herewith
(k) Not Applicable.
(l) Investment letters (incorporated by reference to Exhibit (13) to
Post-Effective Amendment No. 30 to the Registration Statement on Form N-1A filed
on October 23, 1998 with Accession Number 0000751173-98-00050).
(m) Form of 12b-1 Plan with respect to Class B Shares is incorporated by
reference to Exhibit (15) to Post Effective Amendment No. 31 to the
Registration Statement on Form N-1A filed on December 24, 1998 with
Accession Number 0000751173-98-000065 .
(n) Financial Data Schedules are filed herewith.
(o) Rule 18f-3 Plan (incorporated by reference to Exhibit 18, to Post-
Effective Amendment No. 27 to the Registration Statement on Form N-1A
on October 22, 1997 with Accession Number 0001047469-97-001380).
ITEM 24.
PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Reference is made to Part B of the Registration Statement, under the heading
"Management."
ITEM 25.
INDEMNIFICATION.
Reference is made to subparagraph (b) of paragraph (7) of Article SEVENTH of
Registrant's Articles of Incorporation, which reflects the positions taken in
Investment Company Act Release 11330.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in that Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a trustee, officer or controlling persons of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Directors and Officers of the Registrant are covered parties under a
Directors & Officers/Errors & Omissions insurance policy with Gulf Insurance
Company. The effect of such insurance is to insure against liability for any
act, error, omission, misstatement, misleading statement, neglect or breach of
duty by the insureds as directors and/or officers of the Registrant.
ITEM 26.
BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
Manning & Napier Advisors, Inc. (dba Exeter Asset Management) is the investment
advisor of the Registrant. For information as to the business, profession,
vocation or employment of a substantial nature of Manning & Napier Advisors,
Inc. its directors and officers, reference is made to Part B of this
Registration Statement and to Form ADV as filed under the Investment Advisers
Act of 1940 by Manning & Napier Advisors, Inc.
ITEM 27.
PRINCIPAL UNDERWRITERS.
<PAGE>
(a) Not Applicable
(b) Manning & Napier Investor Services, Inc. is the Distributor for the
Registrant's shares.
<TABLE>
<CAPTION>
Name & Principal Positions & Offices Positions & Offices
Business Address with Distributor with Registrant
- -------------------- -------------------- -------------------
<S> <C> <C>
B. Reuben Auspitz. . President & Director Director & Vice
1100 Chase Square. . President
Rochester, NY 14604
- --------------------
Julie Raschella. . . Director N/A
1100 Chase Square
Rochester, NY 14604
- --------------------
Beth H. Galusha. . . Treasurer Chief Financial &
1100 Chase Square. . Accounting Officer,
Rochester, NY 14604. Treasurer
--------------------
Amy Williams . . . . Corporate Secretary N/A
1100 Chase Square
Rochester, NY 14604
George Nobiliski . . Director N/A
1100 Chase Square
Rochester, NY 14604
- --------------------
</TABLE>
(c) The Distributor does not receive any commissions or other form of
compensation for its distribution services to the Registrant.
ITEM 28.
LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by Registrant
pursuant to Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder are in the possession of Registrant except for the
records required by Rule 31a-1(b)(2)(a) and (b), which are in the possession of
the Custodian.
ITEM 29.
MANAGEMENT SERVICES.
Not Applicable.
ITEM 30.
UNDERTAKINGS.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 32 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Rochester and State of New York on the 26th day of February, 1999.
<TABLE>
<CAPTION>
<S> <C>
Exeter Fund, Inc.
(Registrant)
-----------------------
By: /s/ William Manning
------------------------
William Manning
President
------------------------
</TABLE>
<TABLE>
<CAPTION>
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 32 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
<S> <C> <C>
Signature. . . . . . . . Title Date
- ------------------------ -------------------- -----------------
/s/ William Manning . . Principal Executive February 26, 1999
- ------------------------
William Manning . . . Officer
/s/ B. Reuben Auspitz. . Director and Officer February 26, 1999
- ------------------------
B. Reuben Auspitz
/s/ Martin F. Birmingham Director February 26, 1999
- ------------------------
Martin F. Birmingham
/s/ Harris H. Rusitzky . Director February 26, 1999
- ------------------------
Harris H. Rusitzky
/s/ Peter L. Faber . . . Director February 26, 1999
- ------------------------
Peter L. Faber
/s/ Stephen B. Ashley. . Director February 26, 1999
- ------------------------
Stephen B. Ashley
/s/ Beth H. Galusha
- ------------------------
Beth H. Galusha. . . . . Chief Financial & February 26, 1999
Accounting Officer,
Treasurer
</TABLE>
EXHIBIT INDEX
EX-99.B11 Consent of Independent Auditors
(a) Consent of PricewaterhouseCoopers, LLP.
EX-99.B17 Financial Data Schedules.
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Exeter Fund, Inc.;
We hereby consent to the following with respect to Post-effective Amendment No.
32 to the Registration Statement on Form N-1A (File No. 2-92633) under the
Securities Act of 1933, as amended, of Exeter Fund, Inc. (formerly Manning &
Napier Fund, Inc.):
1. The incorporation by reference of our report dated February 5, 1999
accompanying the financial statements and financial highlights of the Small Cap
Series, Global Fixed Income Series, International Series, World Opportunities
Series, Diversified Tax Exempt Series, Ohio Tax Exempt Series and the New York
Tax Exempt Series (seven series of Exeter Fund, Inc.) as of December 31, 1998
into the Statement of Additional Information.
2. The reference to our firm under the heading "Financial Highlights" in the
Prospectuses.
3. The reference to our firm under the headings "Financial Statements" and
"Custodian and Independent Accountants" in the Statement of Additional
Information.
Boston, Massachusetts /s/ PricewaterhouseCoopers LLP
February 22, 1999
[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] DIVERSIFIED TAX EXEMPT SERIES
[NUMBER] 18
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] DEC-31-1998
[PERIOD-TYPE] YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 32698372
[INVESTMENTS-AT-VALUE] 34126434
[RECEIVABLES] 500983
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 34627417
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 57410
[TOTAL-LIABILITIES] 57410
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 33046472
[SHARES-COMMON-STOCK] 3221990
[SHARES-COMMON-PRIOR] 2233499
[ACCUMULATED-NII-CURRENT] 95434
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 39
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 1428062
[NET-ASSETS] 34570007
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1327803
[OTHER-INCOME] 0
[EXPENSES-NET] 188088
[NET-INVESTMENT-INCOME] 1139715
[REALIZED-GAINS-CURRENT] 35973
[APPREC-INCREASE-CURRENT] 251930
[NET-CHANGE-FROM-OPS] 1427618
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1089090
[DISTRIBUTIONS-OF-GAINS] 27563
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1391383
[NUMBER-OF-SHARES-REDEEMED] 504283
[SHARES-REINVESTED] 101391
[NET-CHANGE-IN-ASSETS] 10918801
[ACCUMULATED-NII-PRIOR] 44809
[ACCUMULATED-GAINS-PRIOR] (8371)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 136071
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 188088
[AVERAGE-NET-ASSETS] 27431476
[PER-SHARE-NAV-BEGIN] 10.59
[PER-SHARE-NII] 0.435
[PER-SHARE-GAIN-APPREC] 0.139
[PER-SHARE-DIVIDEND] 0.425
[PER-SHARE-DISTRIBUTIONS] 0.009
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.73
[EXPENSE-RATIO] 0.69
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] GLOBAL FIXED INCOME SERIES
[NUMBER] 10
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] DEC-31-1998
[PERIOD-TYPE] YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 120579811
[INVESTMENTS-AT-VALUE] 117061107
[RECEIVABLES] 1940317
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 119001424
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 208707
[TOTAL-LIABILITIES] 208707
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 122529407
[SHARES-COMMON-STOCK] 12303383
[SHARES-COMMON-PRIOR] 12568715
[ACCUMULATED-NII-CURRENT] 113492
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (430074)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (3420108)
[NET-ASSETS] 118792717
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 8312073
[OTHER-INCOME] 0
[EXPENSES-NET] 1358460
[NET-INVESTMENT-INCOME] 6953613
[REALIZED-GAINS-CURRENT] 1263097
[APPREC-INCREASE-CURRENT] (4861731)
[NET-CHANGE-FROM-OPS] 3354979
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 7343129
[DISTRIBUTIONS-OF-GAINS] 1231571
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 787498
[NUMBER-OF-SHARES-REDEEMED] 1912940
[SHARES-REINVESTED] 860110
[NET-CHANGE-IN-ASSETS] (8378924)
[ACCUMULATED-NII-PRIOR] 21366
[ACCUMULATED-GAINS-PRIOR] 19667
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1248572
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1358460
[AVERAGE-NET-ASSETS] 124689785
[PER-SHARE-NAV-BEGIN] 10.12
[PER-SHARE-NII] 0.597
[PER-SHARE-GAIN-APPREC] (0.322)
[PER-SHARE-DIVIDEND] 0.629
[PER-SHARE-DISTRIBUTIONS] 0.106
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.66
[EXPENSE-RATIO] 1.10
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] INTERNATIONAL SERIES
[NUMBER] 7
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] DEC-31-1998
[PERIOD-TYPE] YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 106711146
[INVESTMENTS-AT-VALUE] 196620613
[RECEIVABLES] 634733
[ASSETS-OTHER] 2583822
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 199839168
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 580344
[TOTAL-LIABILITIES] 580344
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 109168804
[SHARES-COMMON-STOCK] 12794862
[SHARES-COMMON-PRIOR] 15235031
[ACCUMULATED-NII-CURRENT] (343512)
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 799934
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 89633598
[NET-ASSETS] 199258824
[DIVIDEND-INCOME] 3166811
[INTEREST-INCOME] 397729
[OTHER-INCOME] 0
[EXPENSES-NET] 2335022
[NET-INVESTMENT-INCOME] 1229518
[REALIZED-GAINS-CURRENT] 4256342
[APPREC-INCREASE-CURRENT] 40147416
[NET-CHANGE-FROM-OPS] 45633276
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1375610
[DISTRIBUTIONS-OF-GAINS] 5728238
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1300678
[NUMBER-OF-SHARES-REDEEMED] 4221337
[SHARES-REINVESTED] 480490
[NET-CHANGE-IN-ASSETS] 2955
[ACCUMULATED-NII-PRIOR] (51917)
[ACCUMULATED-GAINS-PRIOR] 2126327
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 2085472
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2335022
[AVERAGE-NET-ASSETS] 208521907
[PER-SHARE-NAV-BEGIN] 13.08
[PER-SHARE-NII] 0.097
[PER-SHARE-GAIN-APPREC] 2.948
[PER-SHARE-DIVIDEND] 0.109
[PER-SHARE-DISTRIBUTIONS] 0.446
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 15.57
[EXPENSE-RATIO] 1.12
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] NEW YORK TAX EXEMPT
[NUMBER] 16
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] DEC-31-1998
[PERIOD-TYPE] YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 57415846
[INVESTMENTS-AT-VALUE] 59964013
[RECEIVABLES] 850731
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 60814744
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 42310
[TOTAL-LIABILITIES] 42310
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 58104347
[SHARES-COMMON-STOCK] 5780577
[SHARES-COMMON-PRIOR] 4403651
[ACCUMULATED-NII-CURRENT] 139770
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (19850)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 2548167
[NET-ASSETS] 60772434
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 2398018
[OTHER-INCOME] 0
[EXPENSES-NET] 305671
[NET-INVESTMENT-INCOME] 2092347
[REALIZED-GAINS-CURRENT] (38)
[APPREC-INCREASE-CURRENT] 556299
[NET-CHANGE-FROM-OPS] 2648608
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2050623
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1763211
[NUMBER-OF-SHARES-REDEEMED] 577357
[SHARES-REINVESTED] 191072
[NET-CHANGE-IN-ASSETS] 15091117
[ACCUMULATED-NII-PRIOR] 98046
[ACCUMULATED-GAINS-PRIOR] (19812)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 250787
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 305671
[AVERAGE-NET-ASSETS] 50528604
[PER-SHARE-NAV-BEGIN] 10.37
[PER-SHARE-NII] 0.427
[PER-SHARE-GAIN-APPREC] 0.138
[PER-SHARE-DIVIDEND] 0.425
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.51
[EXPENSE-RATIO] 0.61
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] OHIO EXEMPT SERIES
[NUMBER] 17
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] DEC-31-1998
[PERIOD-TYPE] YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 11834061
[INVESTMENTS-AT-VALUE] 12454795
[RECEIVABLES] 137307
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 12592102
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 22816
[TOTAL-LIABILITIES] 22816
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 11933019
[SHARES-COMMON-STOCK] 1179070
[SHARES-COMMON-PRIOR] 883723
[ACCUMULATED-NII-CURRENT] 15886
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (353)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 620734
[NET-ASSETS] 12569286
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 494263
[OTHER-INCOME] 0
[EXPENSES-NET] 80166
[NET-INVESTMENT-INCOME] 414097
[REALIZED-GAINS-CURRENT] 426
[APPREC-INCREASE-CURRENT] 85980
[NET-CHANGE-FROM-OPS] 500503
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 405764
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 406999
[NUMBER-OF-SHARES-REDEEMED] 148132
[SHARES-REINVESTED] 36480
[NET-CHANGE-IN-ASSETS] 3263308
[ACCUMULATED-NII-PRIOR] 7553
[ACCUMULATED-GAINS-PRIOR] (779)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 50474
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 80166
[AVERAGE-NET-ASSETS] 10180428
[PER-SHARE-NAV-BEGIN] 10.53
[PER-SHARE-NII] 0.430
[PER-SHARE-GAIN-APPREC] 0.125
[PER-SHARE-DIVIDEND] 0.425
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.66
[EXPENSE-RATIO] 0.79
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] SMALL CAP SERIES
[NUMBER] 1
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] DEC-31-1998
[PERIOD-TYPE] YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 115654803
[INVESTMENTS-AT-VALUE] 98253843
[RECEIVABLES] 5500542
[ASSETS-OTHER] 73538
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 103827923
[PAYABLE-FOR-SECURITIES] 3984942
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 176809
[TOTAL-LIABILITIES] 4161751
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 118022849
[SHARES-COMMON-STOCK] 10337315
[SHARES-COMMON-PRIOR] 10087625
[ACCUMULATED-NII-CURRENT] 525165
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (1480888)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (17400954)
[NET-ASSETS] 99666172
[DIVIDEND-INCOME] 750111
[INTEREST-INCOME] 1020143
[OTHER-INCOME] 0
[EXPENSES-NET] 1262040
[NET-INVESTMENT-INCOME] 508214
[REALIZED-GAINS-CURRENT] (1433638)
[APPREC-INCREASE-CURRENT] (15675699)
[NET-CHANGE-FROM-OPS] (16601123)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 6778592
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 842778
[NUMBER-OF-SHARES-REDEEMED] 1375248
[SHARES-REINVESTED] 782160
[NET-CHANGE-IN-ASSETS] (21933854)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 6748399
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1162115
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1262040
[AVERAGE-NET-ASSETS] 115726390
[PER-SHARE-NAV-BEGIN] 12.05
[PER-SHARE-NII] 0.049
[PER-SHARE-GAIN-APPREC] (1.774)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0.685
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.64
[EXPENSE-RATIO] 1.09
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] WORLD OPPORTUNITIES SERIES
[NUMBER] 19
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-START] JAN-01-1998
[PERIOD-END] DEC-31-1998
[PERIOD-TYPE] YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 223369817
[INVESTMENTS-AT-VALUE] 222916253
[RECEIVABLES] 277309
[ASSETS-OTHER] 697863
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 223891425
[PAYABLE-FOR-SECURITIES] 7769060
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 343897
[TOTAL-LIABILITIES] 8112957
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 219089164
[SHARES-COMMON-STOCK] 25249242
[SHARES-COMMON-PRIOR] 9755164
[ACCUMULATED-NII-CURRENT] 663586
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (3500434)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (473848)
[NET-ASSETS] 215778468
[DIVIDEND-INCOME] 3589868
[INTEREST-INCOME] 1105451
[OTHER-INCOME] 0
[EXPENSES-NET] 1549550
[NET-INVESTMENT-INCOME] 3145769
[REALIZED-GAINS-CURRENT] 11123091
[APPREC-INCREASE-CURRENT] 3590297
[NET-CHANGE-FROM-OPS] 17859157
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 3194797
[DISTRIBUTIONS-OF-GAINS] 14305423
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 15718371
[NUMBER-OF-SHARES-REDEEMED] 2338228
[SHARES-REINVESTED] 2113935
[NET-CHANGE-IN-ASSETS] 120563517
[ACCUMULATED-NII-PRIOR] 183266
[ACCUMULATED-GAINS-PRIOR] 461471
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1365694
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 1549550
[AVERAGE-NET-ASSETS] 134760940
[PER-SHARE-NAV-BEGIN] 9.76
[PER-SHARE-NII] 0.121
[PER-SHARE-GAIN-APPREC] (0.593)
[PER-SHARE-DIVIDEND] 0.135
[PER-SHARE-DISTRIBUTIONS] 0.603
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.55
[EXPENSE-RATIO] 1.13
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
