February 23, 1999
To Shareholders of the following series of the Exeter Fund:
Small Cap Series
International Series
World Opportunities Series
Global Fixed Income Series
New York Tax Exempt Series
Ohio Tax Exempt Series
Diversified Tax Exempt Series
Dear Shareholder:
Enclosed are copies of the Annual Reports for each of the above Series of the
Exeter Fund in which you owned shares as of December 31, 1998. The reports
include information about the Series performance as well as portfolio listings
as of that date.
If you owned shares of the International Series as of December 31, a copy of a
supplement to the prospectus is also enclosed. Like the Small Cap Series and
the World Opportunities Series, this Series of the Fund is now available for
direct investment as well as with discretionary investment accounts. This
supplement to the prospectus provides information regarding transactions for
direct investors.
Please contact our Fund Services department at 1-800-466-3863 or your Client
Consultant if you have any questions about your holdings in the Exeter Fund.
Sincerely,
/s/ Amy J. Williams
Amy J. Williams
Fund Services Manager
<PAGE>
<PAGE>
EXETER FUND, INC.
SMALL CAP SERIES
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
DEAR SHAREHOLDERS:
As a result of the economic environment during 1998, the Small Cap Series has
underperformed over the year. Economic crises in Asian countries, the collapse
of the Russian economy, and concerns over Latin America led to growing fears
of a recession in the United States. Investors continued to put their
investment assets in large blue-chip companies, hoping they will continue the
extremely high returns of the past few years, despite their overvaluation.
Within the small cap sector, investors turned to defensive stocks such as drug
and food stores, pharmaceuticals, and utilities in search of safe havens. The
Series is underweighted in these sectors, however, because valuations for
these defensive stocks are quite high by historical standards and do not meet
our investment criteria.
The fourth quarter of 1998 saw Asian crisis fears begin to dissipate, and both
large company and small company stocks underwent a dramatic rebound during
this period. With both large and small sectors of the market moving together,
the extreme undervaluation of small cap stocks relative to the market leaders,
the popular blue chip stocks, continued despite the rebound. As large
capitalization and momentum-driven stocks have risen over the past few years,
small capitalization stocks have been overlooked, causing them to
underperform. Even within the small cap arena, larger companies outperformed
smaller ones. Since we believe there are more attractive investment
opportunities among smaller company stocks, the average market capitalization
of the Small Cap Series is smaller than that of the Russell 2000 Total
Return Index.
The Series' investments in the basic industries, capital goods, consumer
cyclical, energy, and technology sectors have underperformed the market due to
recessionary fears, but we believe that these concerns are already well
discounted. The problems in emerging markets have delayed the expected
cyclical upturn in the Series' basic material holdings. Supply and demand
imbalances in basic materials holdings are expected to come back into balance
as companies lower production levels and reduce their inventory levels.
Accordingly, we believe that valuations have become even more attractive in
these sectors and that gains will be realized once sentiment has changed and
investors begin to take a long-term view of each companys potential.
Furthermore, the Series investments in the energy sector, where holdings
represented approximately 6% of the portfolio at the end of December, suffered
as oil prices fell to their lowest levels in forty years. Looking ahead, we
expect a reduction of the excess supply of oil to lead to an increase in oil
prices, which would allow these stocks to generate above average returns.
Performance for the Series recovered somewhat over the fourth quarter,
resulting in a return consistent with the widely used small cap index, the
Russell 2000 Total Return Index. However, the disparity between the
performance of growth-momentum strategies and value-oriented approaches, as
well as between large cap and small cap stocks, remains uncorrected and a
potential source of future opportunity.
We hope you and your family have a safe and prosperous 1999.
Sincerely,
Exeter Asset Management
1
<PAGE>
Portfolio Compostion
Portfolio Composition * - As of 12/31/98
[graphic]
<pie chart>
Data for pie chart to follow:
<TABLE>
<CAPTION>
<S> <C>
Apparel 3.50%
Cash, equivalents, and other assets,
less liabilities 19.00%
Chemical & Allied Products 5.80%
Communications 4.20%
Computer Equipment 8.30%
Crude Petroleum & Natural Gas 5.60%
Electronics & Electrical Equipment 8.30%
Glass Products 3.60%
Industrial & Commercial Machinery 9.40%
Miscellaneous ** 11.80%
Paper & Allied Products 5.80%
Retail - Specialty Stores 4.10%
Technical Instruments & Supplies 3.00%
Textile Mill Products 3.00%
Transportation 4.60%
* As a percentage of net assets
</TABLE>
** Miscellaneous includes:
Agricultural Production
Computer Integrated Systems Design
Jewelry
Management Services
Printing & Publishing
Refuse Systems
Testing Laboratories
2
<PAGE>
Performance Update as of December 31, 1998
Exeter Fund, Inc. Small Cap Series
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 8,641 -13.59% -13.59%
Five Year $ 13,219 32.19% 5.74%
Inception 2 $ 17,603 76.03% 8.84%
</TABLE>
S&P 500 Total Return Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 12,858 28.58% 28.58%
Five Year $ 29,375 193.75% 24.04%
Inception 2 $ 34,666 246.66% 20.48%
</TABLE>
The value of a $10,000 investment in the
Exeter Fund, Inc. - Small Cap
Series from its current activation (4/30/92)
to present (12/31/98) as compared to the
Standard & Poor's (S&P) 500 Total Return
Index and Russell 2000 Total Return Index. 1
Russell 2000 Total Return Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 9,745 -2.55% -2.55%
Five Year $ 17,517 75.17% 11.86%
Inception 2 $ 23,778 137.78% 13.87%
</TABLE>
[graphic]
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Exeter Fund, Inc. S&P 500
Small Cap Series Total Return Index Russel 2000 Total
Return Index
04/30/92 $10,000 $ 10,000 $ 10,000
12/31/92 11,610 10,725 11,415
12/31/93 13,317 11,799 13,574
12/31/94 14,383 11,959 13,327
12/31/95 16,497 16,437 17,117
12/31/96 18,156 20,206 19,940
12/31/97 20,388 26,944 24,399
12/31/98 17,603 34,666 23,778
</TABLE>
1 The Standard and Poor's (S&P) 500 Total Return Index is an unmanaged
capitalization_weighted measure of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange, and Over_the_Counter
Market. S&P 500 Total Return Index returns assume reinvestment of dividends
and, unlike Fund returns, do not reflect any fees or expenses. The Russell
2000 Total Return Index is an unmanaged index that consists of approximately
2000 small-capitalization stocks. Members of the index represent only U.S.
common stocks that are invested in the U.S. equity market. The index returns
are based on a maket capitalization-weighted average of relative price changes
of the component stock plus dividends whose reinvestments are compounded
daily. Unlike Fund returns,the index returns do not reflect any fees or
expenses.
2 Performance information numbers of the Fund and Indices are calculated from
April 30, 1992, the Fund's current activation date. The Fund's performance is
historical and may not be indicative of future results.
3
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (Note 2)
COMMON STOCK - 81.03%
AGRICULTURAL PRODUCTION - 2.46%
Sylvan, Inc.* 165,000 $2,454,375
-----------
APPAREL - 3.45%
Novel Denim Holdings Ltd.* 162,000 3,442,500
-----------
CHEMICAL & ALLIED PRODUCTS - 5.84%
Cypress Bioscience, Inc.* 710,000 2,130,000
Orion-Yhtyma OY - B Shares (Finland) (Note 6) 154,000 3,694,522
-----------
5,824,522
-----------
COMMUNICATIONS - 4.23%
Granite Broadcasting Corp.* 290,000 1,740,000
Microcell Telecommunications, Inc.- ADR*
(Note 6) 417,000 2,475,937
-----------
4,215,937
-----------
COMPUTER EQUIPMENT - 8.27%
Bell & Howell Co.* 218,000 8,243,125
-----------
COMPUTER INTEGRATED SYSTEMS DESIGN - 0.27%
Apache Medical Systems, Inc.* 725,000 271,875
-----------
CRUDE PETROLEUM & NATURAL GAS - 5.60%
Gulf Canada Resources Ltd. - ADR (Note 6) 1,900,000 5,581,250
-----------
ELECTRONICS & ELECTRICAL EQUIPMENT - 8.29%
Gold Peak Industries Ltd. (Hong Kong)(Note 6) 6,300,000 1,768,993
Scientific Atlanta, Inc. 138,000 3,148,125
The Carbide/Graphite Group, Inc.* 130,000 1,917,500
Ultralife Batteries, Inc.* 275,000 1,426,563
-----------
8,261,181
-----------
GLASS PRODUCTS - 3.63%
Libbey, Inc. 125,000 3,617,187
-----------
INDUSTRIAL & COMMERCIAL MACHINERY - 9.37%
Comfort Systems USA, Inc.* 130,500 2,332,687
Hussmann International, Inc. 165,000 3,196,875
Lam Research Corp.* 94,400 1,681,500
NN Ball & Roller, Inc. 360,000 2,115,000
-----------
9,326,062
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Shares Value
(Note 2)
JEWELRY - 1.88%
Jostens, Inc. 71,550 $ 1,873,716
------------
MANAGEMENT SERVICES - 2.44%
Boron, Lepore & Associates, Inc.* 70,500 2,432,250
------------
PAPER & ALLIED PRODUCTS - 5.83%
Schweitzer-Mauduit International, Inc. 132,850 2,050,872
Smurfit-Stone Container Corp. 237,600 3,757,050
------------
5,807,922
------------
PRINTING & PUBLISHING - 1.78%
Scholastic Corp.* 33,000 1,769,625
------------
REFUSE SYSTEMS - 1.37%
Newpark Resources, Inc. 200,000 1,362,500
------------
RETAIL - SPECIALTY STORES - 4.08%
Hancock Fabrics, Inc. 213,500 1,788,063
Talbots, Inc. 72,700 2,280,962
------------
4,069,025
------------
TECHNICAL INSTRUMENTS & SUPPLIES - 3.04%
CardioGenesis Corp.* 207,925 1,169,578
Sola International, Inc.* 108,000 1,863,000
------------
3,032,578
------------
TESTING LABORATORIES - 1.61%
Paradigm Geophysical Ltd.* 312,350 1,600,794
------------
TEXTILE MILL PRODUCTS - 3.03%
Albany International Corp. - Class A 159,684 3,024,016
------------
TRANSPORTATION - 4.56%
Trico Marine Services, Inc.* 342,000 1,667,250
Guangshen Railway Co. Ltd. ADR (Note 6) 480,000 2,880,000
------------
4,547,250
------------
TOTAL COMMON STOCK
(Identified Cost $98,158,650) 80,757,690
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Principal Amount/ Value
Shares (Note 2)
SHORT-TERM INVESTMENTS - 17.55%
Federal National Mortgage Association
Discount Note, 1/04/1999 $ 500,000 $ 499,787
Federal National Mortgage Credit
Discount Note, 1/20/1999 4,750,000 4,737,265
Federal National Mortgage Association
Discount Note, 2/01/1999 4,000,000 3,984,942
U.S. Treasury Bill, 2/04/1999 4,000,000 3,983,642
Dreyfus Treasury Cash Management Fund 4,290,517 4,290,517
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $17,496,153) 17,496,153
------------
TOTAL INVESTMENTS - 98.58%
(Identified Cost $115,654,803) 98,253,843
OTHER ASSETS, LESS LIABILITIES - 1.42% 1,412,329
------------
NET ASSETS - 100% $99,666,172
============
</TABLE>
* Non-income producing security
Federal Tax Information:
At December 31, 1998, the net unrealized depreciation (based on identified
cost for federal income tax purposes of $115,654,803) was as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $ 10,147,810
Unrealized depreciation (27,548,770)
-------------
UNREALIZED DEPRECIATION - NET $(17,400,960)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <C>
December 31, 1998
ASSETS:
Investments, at value (identified cost $115,654,803)(Note 2) $ 98,253,843
Cash 73,538
Dividends receivable 24,650
Receivable for securities sold 5,453,362
Receivable for fund shares sold 22,530
-------------
TOTAL ASSETS 103,827,923
-------------
LIABILITIES:
Accrued management fee (Note 3) 81,267
Accrued Directors' fees (Note 3) 3,310
Payable for securities purchased 3,984,942
Payable for fund shares repurchased 62,428
Audit fee payable 16,162
Other payables and accrued expenses 13,642
-------------
TOTAL LIABILITIES 4,161,751
-------------
NET ASSETS FOR 10,337,315 SHARES
OUTSTANDING $ 99,666,172
=============
NET ASSETS CONSIST OF:
Capital stock $ 103,374
Additional paid-in-capital 117,919,475
Undistributed net investment income 525,165
Accumulated net realized loss on investments (1,480,888)
Net unrealized depreciation on investments, foreign currency,
and other assets and liabilities (17,400,954)
-------------
TOTAL NET ASSETS $ 99,666,172
=============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($99,666,172/10,337,315 shares) $ 9.64
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
<S> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Interest $ 1,020,143
Dividends (net of withholding) 750,111
-------------
Total Investment Income 1,770,254
-------------
EXPENSES:
Management fee (Note 3) 1,162,115
Directors' fees (Note 3) 6,700
Custodian fee 35,500
Audit fee 23,750
Registration and filing fees 13,290
Printing and postage fees 10,300
Miscellaneous 10,385
-------------
Total Expenses 1,262,040
-------------
NET INVESTMENT INCOME 508,214
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain(loss) on -
Investments (identified cost basis) (1,498,104)
Foreign currency and forward foreign currency
exchange contracts 64,466
-------------
Net realized gain(loss) on investments (1,433,638)
-------------
Net change in unrealized depreciation on-
Investments (15,646,349)
Foreign currency, forward foreign currency exchange
contracts, and other assets and liabilities (29,350)
-------------
Net change in unrealized depreciation on investments (15,675,699)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (17,109,337)
-------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(16,601,123)
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
For the For the
Year Ended Year Ended
12/31/98 12/31/97
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss) $ 508,214 $ (141,498)
Net realized gain (loss) on investments (1,433,638) 21,344,730
Net change in unrealized depreciation
on investments (15,675,699) (8,858,291)
------------- -------------
Net increase (decrease) from operations (16,601,123) 12,344,941
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income -- (105,557)
From net realized gain on investments (6,778,592) (13,616,840)
------------- -------------
Total distributions to shareholders (6,778,592) (13,722,397)
------------- -------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase from capital share
transactions (Note 5) 1,445,861 22,289,055
------------- -------------
Net increase (decrease) in net assets (21,933,854) 20,911,599
NET ASSETS:
Beginning of year 121,600,026 100,688,427
------------- -------------
END OF YEAR (including undistributed
net investment income of $525,165
and $0, respectively) $ 99,666,172 $121,600,026
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C>
For The
Years Ended
12/31/98 12/31/97
------------- ----------
Per share data (for a share outstanding
throughout each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 12.05 $ 12.09
------------- ----------
Income from investment operations:
Net investment income (loss) 0.049 (0.015)
Net realized and unrealized gain(loss)
on investments (1.774) 1.502
------------- ----------
Total from investment operations (1.725) 1.487
------------- ----------
Less distributions to shareholders: --
From net investment income -- (0.009)
From net realized gain on investments (0.685) (1.518)
In excess of net realized gain
on investments -- --
------------- ----------
Total distributions to shareholders (0.685) (1.527)
------------- ----------
NET ASSET VALUE - END OF PERIOD $ 9.64 $ 12.05
============= ==========
Total return1 (13.59)% 12.29%
Ratios to average net assets /
Supplemental Data:
Expenses 1.09% 1.07%
Net investment income (loss) 0.44% (0.12)%
Portfolio turnover 81% 94%
NET ASSETS - END OF PERIOD
(000'S OMITTED) $ 99,666 $ 121,600
============= ==========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For The
Years Ended
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 $ 11.95 $ 12.92 $ 12.52
------------- ---------- ----------
Income from investment operations:
Net investment income (loss) 0.045 (0.004) (0.066)
Net realized and unrealized gain(loss)
on investments 1.112 1.934 1.051
------------- ---------- ----------
Total from investment operations 1.157 1.930 0.985
------------- ---------- ----------
Less distributions to shareholders:
From net investment income (0.035) -- --
From net realized gain on investments (0.889) (2.900) (0.585)
In excess of net realized gain
on investments (0.093) -- --
------------- ---------- ----------
Total distributions to shareholders (1.017) (2.900) (0.585)
------------- ---------- ----------
NET ASSET VALUE - END OF PERIOD $ 12.09 $ 11.95 $ 12.92
============= ========== ==========
Total return1 10.06% 14.70% 8.01%
Ratios of expenses
(to average net assets)/
Supplemental Data:
Expenses 1.08% 1.07% 1.10%
Net investment income (loss) 0.29% (0.03)% (0.58)%
Portfolio turnover 31% 77% 31%
NET ASSETS - END OF PERIOD
(000'S OMITTED) $ 100,688 $ 143,003 $ 105,522
============= ========== ==========
</TABLE>
1Represents aggregate total return for the period indicated.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
Small Cap Series (the "Fund") is a no-load diversified series of Exeter Fund,
Inc. (the "Corporation"), formerly known as Manning & Napier Fund, Inc. The
Corporation is organized in Maryland and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
On April 30, 1992, the Fund resumed sales of shares to advisory clients and
employees of Manning & Napier Advisors, Inc. (the "Advisor") and
its affiliates. On July 8, 1993, the Fund began offering shares directly to
investors. Previously, the Fund was available from time to time to Manning &
Napier employees and advisory clients of Manning & Napier Advisors, Inc.
The Fund is authorized to issue five classes of shares (Class A, B, C, D, E).
Currently, only Class A shares have been issued. Each class of shares is
substantially the same, except that class-specific distribution
and shareholder servicing expenses are borne by the specific class of shares
to which they relate.
The total authorized capital stock of the Corporation consists of one billion
shares of common stock each having a par value of $0.01. As of December 31,
1998, 940 million shares have been designated in total among 19 series, of
which 37.5 million have been designated as Small Cap Series Class A Common
Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including domestic equities, foreign equities,
options and corporate bonds, listed on an exchange are valued at the
latest quoted sales price of the exchange on which the security is
primarily traded. Securities not traded on valuation date or securities
not listed on an exchange are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities,
will, normally be valued on the basis of evaluated bid prices provided by the
Funds pricing service.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by the Advisor under procedures approved by and under the general
supervision and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES(continued)
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES(continued)
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is
not subject to federal income or excise tax to the extent the Fund
distributes to shareholders each year its taxable income, including any
net realized gains on investments in accordance with requirements of the
Internal Revenue Code. Accordingly, no provision for federal income tax
or excise tax has been made in the financial statements.
At December 31, 1998, the Fund, for federal income tax purposes, had
a capital loss carryforward of $1,480,888 which will expire on
December 31, 2006.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are made annually. An additional distribution may be necessary
to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result, net
investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund may
periodically make reclassifications among its capital accounts without
impacting the Fund's net asset value.
For the year ended December 31, 1998, the Fund distributed $5,313,573 of
long-term capital gains.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis: a)
investment securities, other assets and liabilities are converted to U.S.
dollars based upon current exchange rates; and b) purchase and sales of
securities and income and expenses are converted into U.S. dollars based upon
the currency exchange rates prevailing on the respective dates of such
transactions.
12
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES(continued)
FORWARD CURRENCY TRANSLATION(continued)
Gains and losses attributable to foreign currency exchange rates are recorded
for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreigncurrency exchange rates is
not separately stated.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency exchange contracts in
order to hedge a portfolio position or specific transaction. Risks may arise
if the counterparties to a contract are unable to meet the terms of the
contract or if the value of the foreign currency moves unfavorably.
All forward foreign currency exchange contracts are adjusted daily by the
exchange rate of the underlying currency and, for financial statement
purposes, any gain or loss is recorded as unrealized gain or loss until a
contract has been closed. Realized and unrealized gain or loss arising from a
transaction is included in net realized and unrealized gain (loss) from
foreign currency and forward foreign currency exchange contracts.
The Fund regularly trades forward foreign currency exchange contracts with
off-balance sheet risk in the normal course of its investing activities to
assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the
investment the Fund has in forward foreign currency exchange contracts and
does not necessarily represent the amounts
potentially at risk. The measurement of the risks associated with forward
foreign currency exchange contracts is meaningful only when all related and
offsetting transactions are considered.
At December 31, 1998 the fund had no open forward foreign currency exchange
contracts.
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of the revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which the
Fund pays a fee, computed daily and payable monthly, at an annual rate of 1%
of the Fund's average daily net assets. The fee amounted to $1,162,115 for
the year ended December 31, 1998.
13
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES(continued)
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Fund with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise
maintain the Fund's organization. The Advisor also provides the Fund with
necessary office space and portfolio accounting and bookkeeping services. The
salaries of all officers of the Fund and of all Directors who are "affiliated
persons" of the Fund or of the Advisor, and all personnel of the Fund or of
the Advisor performing services relating to research, statistical and
investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $6,700 for the year
ended December 31, 1998.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$78,373,602 and $100,771,948, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Small Cap Series Class A Shares were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Year For the Year
Ended 12/31/98 Ended 12/31/97
--------------- ---------------
Shares Amount Shares Amount
--------------- ------------- --------------- ------------
Sold 842,778 $ 9,931,958 1,150,766 $15,559,488
Reinvested 782,160 6,679,645 1,119,486 13,610,375
Repurchased (1,375,248) (15,165,742) (509,007) (6,880,808)
--------------- ------------- --------------- ------------
Total 249,690 $ 1,445,861 1,761,245 $22,289,055
=============== ============= =============== ============
</TABLE>
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
securities of domestic companies and the United States Government. These
risks include revaluation of currencies and future adverse political and
economic developments. Moreover, securities of foreign companies and foreign
governments and their markets may be less liquid and their prices more
volatile than those of securities of comparable domestic companies and the
United States Government.
14
<PAGE>
Independent Accountants' Report
To the Shareholders and the Board of Directors of
Exeter Fund, Inc.- Small Cap Series:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Exeter Fund,
Inc. (formerly Manning & Napier Fund, Inc.) - Small Cap Series at December 31,
1998, the results of its operations, the changes in its net assets, and its
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at December 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
15
<PAGE>
<PAGE>
Exeter Fund, Inc.
International Series
Annual Report
December 31, 1998
<PAGE>
Management Discussion and Analysis
DEAR SHAREHOLDERS:
Management of the International Series employs a "top-down" analysis to identify
investment opportunities by focusing on economic situations in countries
around the world as well as political shifts that may be taking place.
Despite growing economic problems around the globe during the second half of
1998, performance for the Series continued to be strong for the year, as the
International Series outperformed the Morgan Stanley Capital International All
Country World Index ex US , a widely used foreign markets index.
The Series has held large portions of its portfolio in European stocks since
its inception, and these holdings have been mainly responsible for the high
returns the Series has earned in the last few years relative to international
stock indices. Until recently, the Asian crisis did not have much of an
impact on Europe, which was seen as more insulated from the Asian economies
than other parts of the world. As has happened around the world, the markets
in Europe had begun to fall in response to the problems in Asia and other
emerging markets, such as Russia. Although economic growth in the region is
expected to slow, strong performance continued in European markets during the
fourth quarter. Furthermore, in the current environment of low inflation,
interest rates continued to fall. Restructuring at the corporate and
government level should continue to expand profit margins and keep rates low.
Looking ahead, January 1, 1999, begins the era of the single European
currency, the euro. A single European Central Bank will become responsible
for monetary policy across eleven member countries. Interest rates have been
unified at a low level while providing an increasingly level playing field in
terms of cross-border regulations. This environment will allow for greater
productivity and the potential for earnings growth. While returns for
European markets have been strong, we believe that Europe still has
significant potential and that European economies will continue to grow as
companies restructure and as governments implement more business-friendly
policies.
The Series' small holdings in Hong Kong represent companies in mainland China,
which has been somewhat insulated from the economic troubles of many other
Asian nations. Because the government controlled the growth of investment and
consumption by a greater extent than is the case in other Asian countries, it
has been able to continue its industrialization plan in the face of the Asian
currency crisis. Recently, the Chinese have affirmed their commitment to a
stable exchange rate policy to avoid the consequences of devaluation, and
their trade account is actually showing a surplus. We expect growth in China
to continue to be good, as the Chinese are taking more concrete steps to
reform their economy.
In Southeast Asia, the Series investments include holdings in Indonesia,
Malaysia, and Thailand. These stocks were purchased after the initial phases
of the Asian crisis had led to currency devaluations and steep declines in the
prices of many stocks. These countries continue to face massive bad debts,
high levels of bankruptcies, and many related problems. We expect it to take
several years for these countries to work out their problems, but we believe
that the selected stocks in the International Series offer a great deal of
value over the long term. Southeast Asian securities represented only about
1.6% of the equity investments in the International Series at the end of 1998.
We recently sold the Series' holdings in Japan due to fears of further economic
contraction and an
expectation that the yen would weaken substantially. Higher interest rates of
late will continue to stifle growth, and the Japanese governments attempt to
stimulate the economy via extensive spending increases and tax cuts will
1
<PAGE>
Management Discussion and Analysis
result in severe damage to their finances. Furthermore, their deficit is
approaching double digits as a percent of GDP, and their gross government debt
is now greater than GDP. We believe that Japan needs to make some painful
reforms in order to strengthen its economy.
As always, it has been a pleasure helping you meet your investment objectives,
and we look forward to helping you meet those goals in the future. We hope
you and your family have a safe and prosperous 1999.
Sincerely,
Exeter Asset Management
[graphic]
<pie chart>
Data for pie chart to follow:
Portfolio Allocation by Country*
<TABLE>
<CAPTION>
<S> <C>
France 32.71%
Germany 27.77%
Hong Kong 2.60%
Indonesia 0.23%
Italy 20.97%
Malaysia 1.44%
Spain 14.24%
Thailand 0.04%
</TABLE>
*As a percentage of common stocks.
2
<PAGE>
Update as of December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Exeter Fund, Inc.
International Series
Total Return
---------------------
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 12,363 23.63% 23.63%
Five Year $ 17,204 72.04% 11.46%
Inception 2 $ 22,983 129.83% 14.00%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
S&P 500 Total Return Index
Total Return
---------------------------
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ $12,858 28.58% 28.58%
Five Year $ 29,375 193.75% 24.04%
Inception 2 $ 34,398 243.98% 21.48%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Morgan Stanley
Capital International World Index
Total Return
-------------
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ $12,434 24.34% 24.34%
Five Year $ 20,719 107.19% 15.68%
Inception 2 $ 25,075 150.75% 15.58%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Morgan Stanley Capital International
All Country World Index ex US
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ $11,409 14.09% 14.09%
Five Year $ 14,384 43.84% 7.54%
Inception 2 $ 18,544 85.44% 10.21%
</TABLE>
The value of a $10,000 investment in the Exeter fund, Inc. - International
Series from its inception (8/27/92) to present (12/31/98) as compared to the
Standard & Poors (S&P) 500 Total Return Index, the Morgan Stanley Capital
International World Index and the Morgan Stanley Capital International All
Country World Index ex US.1
[graphic]
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Date Exeter Fund, Inc. - International Series S&P 500 Total Return Index
08/27/92 $ 10,000 $ 10,000
12/31/92 10,598 10,643
12/31/93 13,359 11,709
12/31/94 11,425 11,868
12/31/95 11,898 16,312
12/31/96 14,557 20,052
12/31/97 18,589 26,959
12/31/98 22,983 34,398
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Date Morgan Stanley Capital Morgan Stanley Capital International
International World Index All Country World Index ex US
08/27/92 $ 10,000 $ 10,000
12/31/92 9,880 9,510
12/31/93 12,103 12,892
12/31/94 12,717 13,808
12/31/95 15,351 14,985
12/31/96 17,421 15,981
12/31/97 20,167 16,254
12/31/98 25,075 18,544
</TABLE>
1The Standard & Poor's (S&P) 500 Total Return Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange, and Over-the-Counter market.
The Morgan Stanley Capital International World Index is a market
capitalization-weighted measure of the total return of 2,440 companies listed
on the stock exchanges of 48 countries. The Morgan Stanley Capital
International All country World Index ex US is a
market-capitalization-weighted measure of the total return of 2,068 companies
listed on the stock exchanges of 46 countries. The Morgan Stanley Capital
International World Index and the Morgan Stanley Capital International World
Index ex US are denominated in U.S. Dollars. The Indices returns assume
reinvestment of dividends and, unlike Fund returns, do not reflect any fees or
expenses.
2Performance numbers for the Fund and Indices are calculated from August 27,
1992, the Funds inception date. The Funds performance is historical and may
not be indicative of future results.
3
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (Note 2)
COMMON STOCK - 95.86%
FRANCE - 31.35%
AEROSPACE & MILITARY TECHNOLOGY - 0.31%
Thomson CSF 14,389 $ 614,836
-----------
AUTOMOBILES - 0.58%
PSA Peugeot Citroen 7,545 1,161,965
-----------
BANKING - 2.67%
Banque Nationale de Paris 18,100 1,483,006
Compagnie Financiere de Paribas 19,733 1,706,392
Societe Generale 13,155 2,119,615
-----------
5,309,013
-----------
BEVERAGE & TOBACCO - 1.16%
LVMH (Louis Vuitton Moet Hennessy) 11,764 2,316,476
-----------
BUILDING MATERIALS & COMPONENTS - 0.63%
Lafarge SA 13,327 1,259,924
-----------
BUSINESS & PUBLIC SERVICES - 2.26%
Vivendi 17,249 4,452,967
Vivendi warrants (Exp. 5/2/2001) 16,992 43,866
-----------
4,496,833
-----------
CHEMICALS - 2.15%
L'Air Liquide 16,356 2,984,823
Rhone-Poulenc - SA 25,300 1,295,469
-----------
4,280,292
-----------
ELECTRICAL & ELECTRONICS - 1.31%
Alcatel Alsthom 21,353 2,600,355
-----------
ENERGY SOURCES - 3.43%
Elf Aquitaine SA 37,335 4,294,042
Total SA - B 25,288 2,548,288
-----------
6,842,330
-----------
FINANCIAL SERVICES - 0.26%
Societe Eurafrance SA 780 513,823
-----------
FOOD & HOUSEHOLD PRODUCTS - 1.48%
Groupe Danone 10,381 2,957,173
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (Note 2)
FRANCE (continued)
HEALTH & PERSONAL CARE - 4.57%
Sanofi SA 11,667 $1,911,017
L'Oreal 10,013 7,202,167
-----------
9,113,184
-----------
INDUSTRIAL COMPONENTS - 0.31%
Michelin-B 15,313 609,334
-----------
LEISURE & TOURISM - 0.52%
Accor SA 4,809 1,035,995
-----------
MACHINERY & ENGINEERING - 0.41%
Schneider SA 13,595 820,534
-----------
MATERIALS & COMMODITIES - 1.12%
Compagnie de Saint-Gobain 15,911 2,235,075
-----------
MERCHANDISING - 4.20%
Carrefour Supermarche SA 6,048 4,542,960
Casino Guichard-Perrachon SA 10,600 1,098,364
Pinault-Printemps-Redoute SA 7,500 1,426,100
Promodes 1,800 1,302,398
-----------
8,369,822
-----------
MULTI-INDUSTRY - 3.98%
AXA 27,573 3,976,368
Chargeurs SA 1,235 67,943
Suez Lyonnaise des Eaux 17,368 3,549,844
Pathe SA 1,235 343,012
-----------
7,937,167
-----------
TOTAL FRENCH SECURITIES
(Identified Cost $30,664,468) 62,474,131
-----------
GERMANY - 26.62%
AIRLINES - 0.26%
Deutsche Lufthansa AG 23,700 524,571
-----------
BANKING - 3.02%
HypoVereinsbank AG 49,730 3,926,225
Dresdner Bank AG 50,000 2,090,580
-----------
6,016,805
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (Note 2)
GERMANY (continued)
BUSINESS & PUBLIC SERVICES - 1.48%
SAP AG 6,850 $ 2,954,367
------------
CHEMICALS - 1.76%
Bayer AG 83,750 3,509,246
------------
ELECTRICAL & ELECTRONICS - 3.95%
Siemens AG 120,000 7,871,123
------------
INSURANCE - 4.30%
Allianz AG 23,070 8,568,023
------------
MACHINERY & ENGINEERING - 3.75%
Mannesmann AG 57,250 6,610,148
MAN AG 2,902 860,486
------------
7,470,634
------------
MATERIALS & COMMODITIES - 0.50%
Degussa AG 17,900 986,466
------------
MULTI-INDUSTRY - 1.00%
Viag AG 3,356 1,980,156
------------
TELECOMMUNICATIONS - 2.30%
Deutsche Telekom AG 140,000 4,591,488
------------
UTILITIES - GAS & ELECTRIC - 4.30%
RWE AG 75,810 4,177,877
VEBA AG 74,150 4,383,991
------------
8,561,868
------------
TOTAL GERMAN SECURITIES
(Identified Cost $25,460,382) 53,034,747
------------
HONG KONG - 2.49%
BROADCAST SERVICES - 0.65%
Television Broadcasts Ltd. 500,000 1,291,000
------------
ENERGY SOURCES - OIL/GAS - 0.35%
Shanghai Petrochemical Co. Ltd. 7,750,000 700,367
------------
INVESTMENT HOLDING COMPANIES - 0.94%
Hutchison Whampoa Ltd. 265,000 1,873,080
------------
MULTI-INDUSTRY - 0.54%
Citic Pacific Ltd. 500,000 1,077,985
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (Note 2)
HONG KONG (continued)
WHOLESALE - SPECIAL LINES - 0.01%
Goldlion Holdings Ltd. 200,000 $ 15,234
-----------
TOTAL HONG KONG SECURITIES
(Identified Cost $6,882,952) 4,957,666
-----------
INDONESIA - 0.22%
BUILDING MATERIAL & COMPONENTS - 0.07%
PT Barito Pacific Timber 3,425,000 149,844
-----------
TEXTILES & APPAREL - 0.15%
Great River International 8,600,000 295,625
-----------
TOTAL INDONESIAN SECURITIES
(Identified Cost $3,765,253) 445,469
-----------
ITALY - 20.10%
BUILDING MATERIAL & COMPONENTS - 0.46%
Italcementi S.p.A. 83,600 922,193
-----------
CONSTRUCTION & HOUSING - 0.26%
Sirti S.p.A. 86,500 522,704
-----------
ENERGY SOURCES - OIL/GAS - 3.64%
Edison S.p.A. 104,000 1,226,965
ENI S.p.A 921,940 6,034,909
-----------
7,261,874
-----------
FINANCIAL SERVICES - 4.16%
Banca Commerciale Italiana 352,000 2,432,158
Banca Intesa S.p.A. 120,100 721,739
Uncredito Italiano S.p.A. 489,000 2,903,071
Istituto Bancario San Paolo di Torina 126,800 2,244,122
-----------
8,301,090
-----------
FOOD & HOUSEHOLD PRODUCTS - 0.27%
Parmalat Finanziaria S.p.A. 280,080 536,430
-----------
INSURANCE - 3.25%
Assicurazioni Generali 143,104 5,984,738
SAI S.p.A. 40,400 487,280
-----------
6,472,018
-----------
MULTI-INDUSTRY - 0.56%
Pirelli S.p.A. 348,000 1,116,836
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (Note 2)
ITALY (continued)
RETAIL - SPECIALTY STORES - 0.28%
La Rinascente S.p.A. 55,000 $ 566,537
La Rinascente S.p.A. warrants (Exp. 11/30/1999) 2,250 4,773
------------
571,310
------------
TELECOMMUNICATIONS - 6.46%
Telecom Italia S.p.A. 588,890 5,032,660
Telecom Italia Mobile S.p.A. 1,060,000 7,838,085
------------
12,870,745
------------
TEXTILES & APPAREL - 0.35%
Benetton Group S.p.A. 332,520 671,129
------------
UTILITIES - GAS & ELECTRIC - 0.41%
Italgas S.p.A. 150,000 813,235
------------
TOTAL ITALIAN SECURITIES
(Identified Cost $19,248,421) 40,059,564
------------
MALAYSIA - 1.38%
BUILDING MATERIALS & COMPONENTS - 0.40%
Jaya Tiasa Holdings Bhd** 850,000 790,730
------------
MULTI-INDUSTRY - 0.98%
Kumpulan Guthrie Bhd** 2,277,000 1,027,654
Sime Darby Bhd** 1,160,000 931,671
------------
1,959,325
------------
TOTAL MALAYSIAN SECURITIES
(Identified Cost $5,708,601) 2,750,055
------------
SPAIN - 13.66%
BEVERAGE & TOBACCO - 0.27%
Tabacalera SA 21,330 537,279
------------
CONSTRUCTION & HOUSING - 0.56%
Dragados & Construcciones SA 11,988 441,138
Fomento de Construcciones y Contratas SA 9,108 676,085
------------
1,117,223
------------
ENERGY SOURCES - OIL/GAS - 1.03%
Repsol SA 38,365 2,043,417
------------
FINANCIAL SERVICES - 4.62%
Banco Bilbao Vizcaya SA 254,610 3,985,945
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Value
Shares (Note 2)
SPAIN (continued)
FINANCIAL SERVICES (continued)
Banco Central Hispanoamericano SA 113,328 $ 1,343,578
Banco Santander SA 114,931 2,280,406
Corporacion Bancaria de Espana SA (Argentaria) 62,048 1,604,394
-------------
9,214,323
-------------
METAL - STEEL - 0.14%
Acerinox SA 11,715 272,420
-------------
MULTI-INDUSTRY - 0.26%
Autopistas Concesionaria Espanola SA 31,358 520,698
-------------
REAL ESTATE - 0.04%
Inmobiliaria Metropolitana Vasco Central SA 2,368 70,977
-------------
TELECOMMUNICATIONS - 2.50%
Telefonica SA 110,009 4,884,087
Telefonica SA bonus rights (Exp. 1/30/1999) 110,009 97,527
-------------
4,981,614
-------------
UTILITIES - GAS & ELECTRIC - 4.24%
Endesa SA 116,840 3,091,044
Gas Natural SDG - E SA 19,972 2,171,080
Iberdrola SA 122,474 2,287,885
Union Electrica Fenosa SA 52,126 900,392
-------------
8,450,401
-------------
TOTAL SPANISH SECURITIES
(Identified Cost $9,340,231) 27,208,352
-------------
THAILAND - 0.04%
FOOD & HOUSEHOLD PRODUCTS - 0.04%
Songkla Canning Public Co. Ltd. (Identified
Cost $24,031) 38,100 73,822
-------------
TOTAL COMMON STOCK
(Identified Cost $101,094,339) 191,003,806
-------------
SHORT-TERM INVESTMENTS - 2.82%
Dreyfus Treasury Cash Management Fund
(Identified Cost $5,616,807) 5,616,807 5,616,807
-------------
TOTAL INVESTMENTS - 98.66%
(Identified Cost $106,711,146) 196,620,613
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Value
(Note 2)
-------------
OTHER ASSETS, LESS LIABILITIES - 1.34% 2,638,211
-------------
NET ASSETS -100% $199,258,824
=============
</TABLE>
**Securities have been determined to be illiquid, and have been valued at fair
value by the Advisor.
Federal Tax Information:
At December 31, 1998, the net unrealized appreciation (based on identified
cost for federal income tax purposes of $107,045,024)was as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $98,141,667
Unrealized depreciation (8,566,078)
------------
UNREALIZED APPRECIATION - NET $89,575,589
============
</TABLE>
For its fiscal year ended December 31, 1998, the total amount of income
received by the fund from sources within foreign countries and possessions of
the United States was $0.092 per share (representing a total of $3,634,764).
The total amount of taxes paid by the Fund to such countries was $0.037 per
share (representing a total of $467,953).
Industry Concentration (as a percent of net assets)
<TABLE>
<CAPTION>
<S> <C>
Percent
of Net Assets
INDUSTRY CONCENTRATION
Aerospace & Military Technology 0.31%
Airlines 0.26%
Automobiles 0.58%
Banking 5.69%
Beverage & Tobacco 1.43%
Broadcast Services 0.65%
Building Materials & Components 1.57%
Business & Public Services 3.74%
Chemicals 3.91%
Construction & Housing 0.82%
Electrical & Electronics 5.26%
Energy Sources 8.45%
Financial Services 9.04%
Food & Household Products 1.79%
Health & Personal Care 4.57%
Industrial Components 0.31%
Insurance 7.55%
Investment Holding Companies 0.94%
Leisure & Tourism 0.52%
Machinery & Engineering 4.16%
Materials & Commodities 1.62%
Merchandising 4.20%
Metals-Steel 0.14%
Multi-Industry 7.32%
Real Estate 0.04%
Retail 0.28%
Telecommunications 11.26%
Textiles & Apparel 0.50%
Utilities - Gas & Electric 8.95%
Wholesale - Special Lines 0.01%
--------------
TOTAL COMMON STOCK 95.86%
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Statement of Assets and Liabilities
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (identified cost $106,711,146)(Note 2) $196,620,613
Cash 2,348,530
Foreign currency, at value (cost $234,985) 235,292
Foreign tax reclaims receivable 517,821
Receivable for fund shares sold 104,050
Dividends receivable 12,862
-------------
TOTAL ASSETS 199,839,168
-------------
LIABILITIES:
Accrued management fee (Note 3) 163,413
Accrued Directors' fees (Note 3) 3,310
Payable for open forward foreign currency exchange contracts
(Note 2) 301,699
Payable for fund shares repurchased 87,808
Audit fee payable 20,719
Other payables and accrued expenses 3,395
-------------
TOTAL LIABILITIES 580,344
-------------
NET ASSETS FOR 12,794,862 SHARES
OUTSTANDING $199,258,824
=============
NET ASSETS CONSIST OF:
Capital stock $ 127,949
Additional paid-in-capital 109,040,855
Undistributed net investment income (343,512)
Accumulated net realized gain on investments 799,934
Net unrealized appreciation on investments, foreign currency,
forward foreign currency exchange contracts, and other
assets and liabilities 89,633,598
-------------
TOTAL NET ASSETS $199,258,824
=============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($199,258,824/12,794,862 shares) $ 15.57
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Statement of Operations
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends (net of withholding $467,953) $ 3,166,811
Interest 397,729
------------
Total Investment Income 3,564,540
------------
EXPENSES:
Management fee (Note 3) 2,085,472
Directors' fees (Note 3) 6,700
Custodian fee 169,526
Audit fee 30,799
Miscellaneous 42,525
------------
Total Expenses 2,335,022
------------
NET INVESTMENT INCOME 1,229,518
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on -
Investments (identified cost basis) 7,161,287
Foreign currency and forward foreign currency
exchange contracts (2,904,945)
------------
Net realized gain on investments 4,256,342
------------
Net change in unrealized appreciation (depreciation) on -
Investments 41,165,605
Foreign currency, forward foreign currency exchange
contracts, and other assets and liabilities (1,018,189)
------------
Net change in unrealized appreciation on investments 40,147,416
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 44,403,758
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $45,633,276
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
For the For the
Year Ended Year Ended
12/31/98 12/31/97
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,229,518 $ 2,131,517
Net realized gain on investments 4,256,342 18,953,046
Net change in unrealized appreciation on
investments 40,147,416 20,653,854
------------- -------------
Net increase from operations 45,633,276 41,738,417
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 2):
From net investment income (1,375,610) (2,124,831)
From net realized gain on investments (5,728,238) (19,807,200)
------------- -------------
Total distributions to shareholders (7,103,848) (21,932,031)
------------- -------------
CAPITAL STOCK ISSUED AND
REPURCHASED:
Net increase (decrease) from capital share
transactions (Note 5) (38,526,473) 30,118,134
------------- -------------
Net increase in net assets 2,955 49,924,520
NET ASSETS:
Beginning of year 199,255,869 149,331,349
------------- -------------
END OF YEAR (including undistributed net
investment income of ($343,512) and
($51,917), respectively) $199,258,824 $199,255,869
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
For the Years
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 $ 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>
1Represents aggregate total return for the period indicated.
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
International Series (the "Fund") is a no-load non-diversified series of
Exeter Fund, Inc. (the Corporation), formerly known as Manning & Napier Fund,
Inc. The Corporation is organized in Maryland and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company.
Shares of the Fund are offered to investors, clients, and employees of Manning
& Napier Advisors, Inc. (the Advisor) and its affiliates. The total authorized
capital stock of the Corporation consists of one billion shares of common
stock each having a par value of $0.01. As of December 31, 1998, 940 million
shares have been designated in total among 19 series, of which 50 million have
been designated as International Series Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including domestic equities, foreign equities, options
and corporate bonds, listed on an exchange are valued at the latest quoted
sales price of the exchange on which the security is primarily traded.
Securities not traded on valuation date or securities not listed on an
exchange are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities,
will normally be valued on the basis of evaluated bid prices provided by the
Funds pricing service.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by the Advisor under procedures approved by and under the general
supervision of the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies. The Fund is not subject to
federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains on
investments in accordance with
15
<PAGE>
Notes to Financial Statements
SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
requirements of the Internal Revenue Code. Accordingly, no provision for
federal income tax or excise tax has been made in the financial statements.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result, net
investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund
may periodically make reclassifications among its capital accounts without
impacting the Fund's net asset value.
For the year ended December 31, 1998, the Fund distributed $5,797,005 of
long-term capital gains.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis: a)
investment securities, other assets and liabilities are converted to U.S.
dollars based upon current exchange rates; and b) purchase and sales of
securities and income and expenses are converted into U.S. dollars based upon
the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are recorded
for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates is
not separately stated.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency exchange contracts in
order to hedge a portfolio position or specific transaction. Risks may arise
if the counterparties to a contract are unable to meet the terms of the
contract or if the value of the foreign currency moves unfavorably.
16
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (continued)
All forward foreign currency contracts are adjusted daily by the exchange rate
of the underlying currency and, for financial statement purposes, any gain or
loss is recorded as unrealized gain or loss until a contract has been closed.
Realized and unrealized gain or loss arising from a transaction is included in
net realized and unrealized gain (loss) from foreign currency and forward
foreign currency exchange contracts.
The Fund regularly trades forward foreign currency exchange contracts with
off-balance sheet risk in the normal course of its investing activities to
assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the
investment the Fund has in forward foreign currency exchange contracts and
does not necessarily represent the amounts potentially at risk. The
measurement of the risks associated with forward foreign currency exchange
contracts is meaningful only when all related and offsetting transactions are
considered. A summary of obligations for forward foreign currency exchange
contracts outstanding as of December 31, 1998 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Unrealized
Settlement Contracts In Exchange Contracts Appreciation/
Date to Deliver For At Value (Depreciation)
- ---------- -------------- ------------ ----------- ---------------
01/08/99 Japanese Yen $ 4,853,245 $ 5,158,908 $ (305,663)
01/22/99 Deutsche Marks $ 26,340,996 $26,385,597 $ (44,601)
01/22/99 French Francs $ 29,278,394 $29,229,829 $ 48,565
---------------
Total $ (301,698)
===============
</TABLE>
On December 31, 1998, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
OTHER
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of the revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which
the Fund pays a fee, computed daily and payable monthly, at an annual rate of
1% of the Fund's average daily net assets. The fee amounted to $2,085,472 for
the year ended December 31, 1998.
17
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (continued)
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the
Fund with necessary office space and portfolio accounting and bookkeeping
services. The salaries of all officers of the Fund and of all Directors who
are "affiliated persons" of the Fund or of the Advisor, and all personnel of
the Fund or of the Advisor performing services relating to research,
statistical and investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer
affiliate of the Advisor, acts as distributor for the Fund's shares. The
services of Manning & Napier Investor Services, Inc. are provided at no
additional cost to the Fund.
The compensation of the non-affiliated Directors totaled $6,700 for the
year ended December 31, 1998.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$100,323 and $43,183,088, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of International Series were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Year For the Year
Ended 12/31/98 Ended 12/31/97
--------------- ---------------
Shares Amount Shares Amount
Sold 1,300,678 $ 19,592,425 1,557,079 $ 21,366,816
Reinvested 480,490 6,973,915 1,695,615 21,716,296
Repurchased (4,221,337) (65,092,813) (956,763) (12,964,978)
--------------- ------------- --------------- -------------
Total (2,440,169) $(38,526,473) 2,295,931 $ 30,118,134
=============== ============= =============== =============
</TABLE>
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
securities of domestic companies and the United States Government. These
risks include revaluation of currencies and future adverse political and
economic developments. Moreover, securities of foreign companies and foreign
governments and their markets may be less liquid and their prices more
volatile than those of securities of comparable domestic companies and the
United States Government.
18
<PAGE>
Independent Accountants' Report
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF EXETER FUND, INC. -
INTERNATIONAL SERIES:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Exeter Fund,
Inc. (formerly Manning & Napier Fund, Inc.) - International Series at December
31, 1998, the results of its operations, the changes in its net assets, and
its financial highlights for each of the periods indicated therein, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as financial
statements) are the responsibility of the Funds management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at December 31, 1998 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
February 5, 1999
19
<PAGE>
<PAGE>
Exeter Fund, Inc.
World Opportunities Series
Annual Report
December 31, 1998
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
The World Opportunities Series invests in stocks of companies throughout the
world, with the objective of providing long-term growth. Stocks are chosen
for the portfolio based on their long-term business prospects and valuations.
At the onset of the second half of 1998, the effect of the Asian crisis on
Latin America worsened, causing stocks there to decline sharply.
Subsequently, global stocks began to rebound sharply, and emerging markets
benefited along with the developed countries. A stabilization of currencies
and a return of current accounts to surpluses helped to generate an optimistic
view for some of these countries. Accordingly, we have taken advantage of
opportunities in emerging markets where stocks had been oversold to low
valuation levels, particularly Hong Kong and Singapore, as well as the Latin
American countries. At the end of the year, approximately 65% of the
portfolio was invested in emerging markets. The Series performance reflects
the difficulties of the emerging markets, but we believe that the sell-off
that has occurred in emerging markets has created an outstanding opportunity
in this sector of the market, since many companies with strong businesses have
been driven to extremely low valuations.
In Asia, many countries continue to have massive debt problems, high levels of
bankruptcies, and various related issues. We expect it to take several years
for these countries to work out their problems, but we believe that the
selected stocks in the Series offer a great deal of value over the long term.
In contrast, we believe the situation in Latin America is quite different from
Asia, and that it will be much shorter in duration and depth of the downturn.
Latin American economies do not have the high levels of non-performing debt
that many Asian countries do, nor do they have the excess capacity built up
over years of excessive investment expenditures. The markets are focusing on
a potential liquidity crunch because their debt tends to be short-term.
Short-term debt must be rolled over more frequently, and this becomes harder
as foreign investors flee from Latin American investments. We have recently
added to the Series' Latin American holdings, because we
1
<PAGE>
Management Discussion and Analysis
believe that many stocks there have declined more than enough to discount the
risk involved and do not reflect the long-term upside of these companies.
Additionally, approximately 17% of the Series stock portfolio was invested in
European stocks at the end of December. Recently, the markets in Europe have
fallen in response to the problems in Asia and other emerging markets, such as
Russia. We believe the stocks owned by the Series still offer strong growth
potential, and that the downturn will be overcome as investors begin to take a
long-term view in Europe.
As always it has been a pleasure helping you meet your investment objectives,
and we looks forward to helping you meet those goals in the future. We hope
you and your family have a safe and prosperous 1999.
Sincerely,
Exeter Asset Management
[graphic]
<pie chart>
Data for pie chart to follow:
Portfolio Allocation by Country*
<TABLE>
<CAPTION>
<S> <C>
Argentina 2.6%
Australia 2.2%
Brazil 8.3%
Canada 7.0%
Chile 2.0%
China 6.3%
Finland 2.1%
Hong Kong 14.4%
Indonesia 0.3%
Malaysia 0.8%
Mexico 18.3%
Netherlands 7.6%
Peru 0.8%
Philippines 6.4%
Singapore 8.6%
South Africa 0.6%
Venezuela 2.8%
United Kingdom 7.5%
United States 1.4%
</TABLE>
*As a percentage of common stock
2
<PAGE>
Performance Update as of December 31, 1998
Exeter Fund, Inc. World Opportunities Series
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
-------------
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 9,562 -4.38% -4.38%
Inception 2 $ 10,806 8.06% 3.40%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
S&P 500 Total Return Index
Total Return
-------------
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 12,858 28.58% 28.58%
Inception 2 $ 19,619 96.19% 38.51%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Morgan Stanley
Capital International World Index
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 12,434 24.34% 24.34%
Inception 2 $ 15,639 56.39% 21.25%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Morgan Stanley Capital/International
All Country World Index ex U.S.
Total Return
-------------
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 11,409 14.09% 14.09%
Inception 2 $ 12,066 20.66% 8.43%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - World
Opportunities Series from its inception (9/6/96) to present (12/31/98) as
compared to the Standard & Poor's (S&P) 500 Total Return Index and the Morgan
Stanley Capital International World Index, and the Morgan Stanley Capital
International All Country World Index ex U.S. 1
[graphic]
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Morgan Stanley Capital/
Exeter Fund, Inc. - S&P 500 Total Morgan Stanley Capital International All Counrty
Date World Opportunity Series Return Index International World Index World Index ex U.S.
09/06/96 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/31/96 10,482 11,372 10,865 10,398
12/31/97 11,301 15,165 12,578 10,576
12/31/98 10,806 19,619 15,639 12,066
</TABLE>
1 The Standard & Poors' (S&P) 500 Total Return Index is an unmanaged
capitalization-weighted measure of 500 widely held common stocks listed on the
New York Stock Exchange, American Stock Exchange, and Over-the-Counter market.
The Morgan Stanley Capital International World Index is a market
capitalization-weighted measure of the total return of 2,440 companies listed
on the stock exchanges of 48 countries. The Morgan Stanley Capital
International All Country World Index ex U.S. is a
market-capitalization-weighted measure of the total return of 2,068 companies
listed on the stock exchanges of 46 countries. The Morgan Stanley Capital
International World Index and the Morgan Stanley Capital International All
Country World Index ex U.S. are denominated in U.S. Dollars. The Indices'
returns assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
2 Performance numbers for the Fund and Indices are calculated from September
6, 1996, the Fund's inception date. The Fund's performance is historical and
may not be indicative of future results.
3
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
VALUE
SHARES (NOTE 2)
----------- ------------
COMMON STOCK - 96.91%
AMUSEMENT & RECREATIONAL SERVICES - 0.77%
Resorts World Bhd. (Malaysia)** 2,050,000 $ 1,654,039
------------
APPLIANCES - 0.77%
Brasmotor S.A. (Brazil) 16,800,000 1,668,462
------------
BROADCAST SERVICES - 1.82%
Television Broadcasts Ltd. (Hong Kong) 1,525,000 3,937,550
------------
CHEMICALS & ALLIED PRODUCTS - 3.40%
Celltech plc* (United Kingdom) 450,000 2,969,325
Orion-Yhtyma OY - B Shares (Finland) 182,000 4,366,253
------------
7,335,578
------------
COMPUTER EQUIPMENT - 4.73%
Founder Hong Kong Ltd. (Hong Kong) 24,246,000 5,383,873
Varitronix International Ltd. (Hong Kong) 2,578,000 4,825,887
------------
10,209,760
------------
CONCRETE PRODUCTS - 1.80%
Cemex S.A. - ADR (Mexico) 785,000 3,881,432
------------
CRUDE PETROLEUM & NATURAL GAS - 5.64%
Gulf Canada Resources Ltd. - ADR (Canada) 2,993,900 8,794,581
Petroleo Brasileiro S.A. (Petrobras) - ADR
(Brazil) 165,000 1,870,968
YPF Sociedad Anonima - ADR (Argentina) 53,500 1,494,656
------------
12,160,205
------------
DAIRY FARMS - 1.83%
Dairy Farm International Holding Ltd. - ADR (Hong Kong) 3,437,000 3,952,550
------------
DIAMONDS - 1.13%
De Beers Centenary AG - ADR (South Africa) 100,000 1,275,000
Fertilizantes Fosfatados S.A. - (Fosfertil) (Brazil) 451,100,000 1,157,338
------------
2,432,338
------------
ELECTRONICS & ELECTRICAL EQUIPMENT - 6.47%
Philips Electronics N.V. - ADR (Netherlands) 146,000 9,882,375
V-Tech Holdings Ltd. (Hong Kong) 937,000 4,088,674
------------
13,971,049
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
VALUE
SHARES (NOTE 2)
FOOD & BEVERAGE - 23.25%
Coca-Cola Amatil (Australia)
1,236,370 $ 4,587,704
Coca-Cola Femsa S.A. - ADR (Mexico)
360,000 4,770,000
Compania Cervejaria Brahma - S.A. (Brazil)
550,000 5,190,625
Diageo plc (United Kingdom)
829,475 9,418,191
Fraser & Neave Ltd. (Singapore)
1,926,000 5,627,920
Grupo Industrail Maseca S.A. - ADR (Mexico)
193,400 2,405,413
NG Fung Hong Ltd. (Hong Kong)
2,704,000 2,426,150
Panamerican Beverages, Inc. - ADR (Mexico)
260,000 5,671,250
San Miguel Corp. (Philippines)
4,364,400 8,435,294
Vitasoy International Holdings Ltd. (Hong Kong)
4,508,000 1,644,101
------------
50,176,648
------------
HOLDING COMPANIES - 1.57%
BTR plc - ADR (United Kingdom) 415,625 3,395,365
------------
HOTELS & MOTELS - 1.76%
Mandarin Oriental International Ltd. - ADR (Hong Kong)
6,014,000 3,788,820
------------
INDUSTRIAL & COMMERCIAL MACHINERY - 2.95%
Creative Technology Ltd. - ADR* (Singapore)
425,000 6,375,000
------------
LEATHER & LEATHER PRODUCTS - 2.82%
Gucci Group - ADR (Netherlands)
125,000 6,078,125
------------
PAPER & ALLIED PRODUCTS - 7.72%
Aracruz Celulose S.A. - ADR (Brazil)
470,000 3,760,000
Asia Pulp & Paper Co. Ltd. - ADR (Singapore)
725,000 5,935,937
Industrias Klabin de Papel e Celulose S.A. (Brazil)
3,370,000 641,481
Kimberly Clark de Mexico S.A. - ADR (Mexico)
400,000 6,319,680
------------
16,657,098
------------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES - 1.37%
Eastman Kodak Co. (United States)
41,000 2,952,000
------------
PLASTICS MATERIALS - 2.45%
Beijing Yanhua Petrochemical Co. Ltd. (China)
19,040,000 1,720,645
Beijing Yanhua Petrochemical Co. Ltd. - ADR (China)
37,300 149,200
Shanghai Petrochemical Co. Ltd. (China) 29,626,000 2,677,302
Shanghai Petrochemical Co. Ltd. - ADR (China) 86,000 731,000
------------
5,278,147
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES/PRINCIPAL VALUE
AMOUNT (Note 2)
PRINTING & PUBLISHING - 1.89%
South China Morning Post - ADR (Holdings) Ltd. (China) 1,589,800 $ 4,078,632
-------------
TELECOMMUNICATION SERVICES - 17.81%
Cia de Telecomunicaciones de Chile S.A. - ADR (Chile) 120,000 2,482,500
Compania Anonima Nacional Telefonos de
Venezuela (CANTV) - ADR (Venezuela) 330,000 5,878,125
Grupo Radio Centro S.A. - ADR (Mexico) 890,000 4,783,750
Grupo Televisa S.A. - ADR (Mexico) 225,000 5,554,688
Microcell Telecommunications, Inc. - ADR* (Canada) 240,000 1,425,000
Philippine Long Distance Telephone Co. - ADR (Philippines) 187,000 4,850,313
Telecommunicacoes Brasileiras S.A. (Telebras) -
ADR *(Brazil) 40,000 2,907,500
Telecom Argentina S.A. - ADR (Argentina) 70,000 1,925,000
Telefonica de Argentina S.A - ADR (Argentina) 75,000 2,095,313
Telefonica del Peru S.A.A. - ADR (Peru) 125,000 1,585,938
Telefonos de Mexico S.A. - ADR (Mexico) 45,000 2,190,938
TV Azteca S.A. - ADR (Mexico) 410,000 2,741,875
-------------
38,420,940
-------------
TOBACCO - 0.33%
PT Hanjaya Mandala Sampoerna (Indonesia) 1,070,000 705,531
-------------
TRANSPORTATION-RAILROAD - 3.78%
Canadian National Railway Co. - ADR (Canada) 85,000 4,409,375
Guangshen Railway Co. Ltd. - ADR (China) 625,000 3,750,000
-------------
8,159,375
-------------
UTILITIES-ELECTRIC - 0.85%
Enersis S.A. - ADR (Chile) 71,000 1,832,687
-------------
TOTAL COMMON STOCK
(Identified Cost $209,554,895) 209,101,331
-------------
SHORT-TERM INVESTMENTS - 6.40%
Federal National Mortgage Association Discount
Note, 1/4/1999 $ 9,000,000 8,996,295
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
SHARES/PRINCIPAL VALUE
AMOUNT (NOTE 2)
SHORT-TERM INVESTMENTS (continued)
Dreyfus Treasury Cash Management Fund 4,818,627 4,818,627
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $13,814,922) $ 13,814,922
-------------
TOTAL INVESTMENTS - 103.31%
(Identified Cost $223,369,817) 222,916,253
OTHER ASSETS, LESS LIABILITIES - (3.31)% (7,137,785)
-------------
NET ASSETS -100% $215,778,468
=============
</TABLE>
* Non-income producing security.
** Securities have been determined to be illiquid and have been valued at fair
value by the Advisor.
Federal Tax Information:
At December 31, 1998, the net unrealized depreciation (based on identified
cost for federal income tax purposes of $227,363,489) was as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $ 27,544,536
Unrealized depreciation (31,991,772)
-------------
UNREALIZED DEPRECIATION - NET $ (4,447,236)
=============
</TABLE>
For its fiscal year ended December 31, 1998, the total amount of income
received by the Fund from sources within foreign countries and possessions of
the United States was $0.087 per share (representing a total of $3,675,575).
The total amount of taxes paid by the Fund to such countries was $0.0067 per
share (representing a total of $157,869).
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Assets and Liabilities
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (identified cost $223,369,817)
(Note 2) $222,916,253
Foreign currency, at value (cost $650,257) 629,934
Cash 67,929
Dividends receivable 156,319
Receivable for fund shares sold 120,990
-------------
TOTAL ASSETS 223,891,425
-------------
LIABILITIES:
Accrued management fee (Note 3) 181,933
Accrued Directors' fees (Note 3) 3,200
Payable for securities purchased 7,769,060
Payable for fund shares repurchased 127,062
Custodian fee payable 15,399
Audit fee payable 12,002
Other payables and accrued expenses 4,301
-------------
TOTAL LIABILITIES 8,112,957
-------------
NET ASSETS FOR 25,249,242 SHARES
OUTSTANDING $215,778,468
=============
NET ASSETS CONSIST OF:
Capital stock $ 252,493
Additional paid-in-capital 218,836,671
Undistributed net investment income 663,586
Accumulated net realized loss on investments (3,500,434)
Net unrealized depreciation on investments, foreign currency,
And other assets and liabilities (473,848)
-------------
TOTAL NET ASSETS $215,778,468
=============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($215,778,468/25,249,242 shares) $ 8.55
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statement of Operations
FOR THE FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Dividends (net of withholding $157,869) $ 3,589,868
Interest 1,105,451
------------
Total Investment Income 4,695,319
------------
EXPENSES:
Management fee (Note 3) 1,365,694
Directors' fees (Note 3) 6,700
Custodian fee 105,418
Audit fee 26,499
Registration and filing fees 19,473
Miscellaneous 25,766
------------
Total Expenses 1,549,550
------------
NET INVESTMENT INCOME 3,145,769
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on -
Investments (identified cost basis) 10,236,700
Foreign currency and forward foreign currency exchange contracts 886,391
------------
Net realized gain on investments 11,123,091
------------
Net change in unrealized appreciation (depreciation) on -
Investments 4,060,130
Foreign currency, forward foreign currency exchange contracts
and other assets and liabilities (469,833)
------------
Net change in unrealized appreciation on investments 3,590,297
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS 14,713,388
------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $17,859,157
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE YEAR FOR THE YEAR
ENDED 12/31/98 ENDED 12/31/97
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 3,145,769 $ 733,858
Net realized gain on investments 10,471,176 11,636,976
Net change in unrealized appreciation
(depreciation) on investments 4,242,212 (7,176,949)
---------------- ----------------
Net increase from operations 17,859,157 5,193,885
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income (3,194,797) (730,313)
From net realized gain on investments (14,305,423) (11,273,357)
---------------- ----------------
Total distributions to shareholders (17,500,220) (12,003,670)
---------------- ----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase from capital share
Transactions (Note 5) 120,204,580 24,686,416
---------------- ----------------
Net increase in net assets 120,563,517 17,876,631
NET ASSETS:
Beginning of year 95,214,951 77,338,320
---------------- ----------------
END OF YEAR (including undistributed net investment
income of $663,586 and $183,266 respectively) $ 215,778,468 $ 95,214,951
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE
FOR THE FOR THE PERIOD 9/6/96
YEAR YEAR (COMMENCEMENT OF OPERATIONS)
ENDED 12/31/98 ENDED 12/31/97 TO 12/31/96
---------------- ---------------- -----------------------------
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 (loss)
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 of expenses (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>
1The amount shown for a share outstanding does not correspond with the
aggregate net gain on investments for the period due to the timing of shares
and repurchases of fund shares in relation to fluctuating market values of the
investment of the Fund.
2Represents aggregate total return for the period indicated.
3Annualized
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
World Opportunities Series (the "Fund") is a no-load non-diversified series of
Exeter Fund, Inc. (the "Corporation"), formerly known as Manning & Napier
Fund, Inc. The Corporation is organized in Maryland and is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Fund is authorized to issue five classes of shares (Class A, B, C, D, and
E). Currently, only Class A shares have been issued. Each class of shares is
substantially the same, except that class-specific distribution and
shareholder servicing expenses are borne by the specific class of shares to
which they relate.
Shares of the Fund are offered to investors, employees, and clients of Manning
& Napier Advisors, Inc. (the "Advisor") and its affiliates. The total
authorized capital stock of the Corporation consists of one billion shares of
common stock each having a par value of $0.01. As of December 31, 1998, 940
million shares have been designated in total among 19 series, of which 37.5
million have been designated as World Opportunities Series Class A Common
Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including domestic equities, foreign equities, options
and corporate bonds, listed on an exchange are valued at the last quoted sales
price of the exchange on which the security is primarily traded. Securities
not traded on valuation date or securities not listed on an exchange are
valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage-backed securities,
will normally be valued on the basis of evaluated bid prices provided by the
Fund=s pricing service.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by Advisor under procedures established by and under the general
supervision and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
12
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies. The Fund is not subject to
federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains on
investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are made annually. An additional distribution may be necessary
to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result, net
investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Fund may
periodically make reclassifications among its capital accounts without
impacting the Fund's net asset value.
For the year ended December 31, 1998, the Fund distributed $9,016,844 of
long-term capital gains.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis: a)
investment securities, other assets and liabilities are converted to U.S.
dollars based upon current exchange rates; and b) purchase and sales of
securities and income and expenses are converted into U.S. dollars based upon
the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are recorded
for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates is
not separately stated.
13
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency exchange contracts in
order to hedge a portfolio position or specific transaction. Risks may arise
if the counterparties to a contract are unable to meet the terms of the
contract or if the value of the foreign currency moves unfavorably.
All forward foreign currency exchange contracts are adjusted daily by the
exchange rate of the underlying currency and, for financial statement
purposes, any gain or loss is recorded as unrealized gain or loss until a
contract has been closed or settled. Realized and unrealized gain or loss
arising from a transaction is included in net realized and unrealized gain
(loss) from foreign currency and forward foreign currency exchange contracts.
The Fund regularly trades forward foreign currency exchange contracts with
off-balance sheet risk in the normal course of its investing activities to
assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the
investment the Fund has in forward foreign currency exchange contracts and
does not necessarily represent the amounts potentially at risk. The
measurement of the risks associated with forward foreign currency exchange
contracts is meaningful only when all related and offsetting transactions are
considered.
At December 31, 1998, the Fund had no open forward foreign currency exchange
contracts.
OPTIONS CONTRACTS
The Fund may write (sell) or buy call or put options on securities and other
financial instruments. When the Fund writes a call, the Fund gives the
purchaser the right to buy the underlying security from the Fund at the price
specified in the option contract (the Aexercise price@) at any time during the
option period. When the Fund writes a put option, the Fund gives the
purchaser the right to sell to the Fund the underlying security at the
exercise price at any time during the option period. The Fund will only write
options on a Acovered basis.@ This means that the Fund will own the
underlying security when the Fund writes a call or the Fund will put aside
cash, U.S. Government securities, or other liquid assets in the amount not
less than the exercise price at all times the put option is outstanding.
When the Fund writes a call or put option, an amount equal to the premium
received is included in the Fund=s Statement of Assets and Liabilities as an
asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the
option. The current market value of the option is the closing price or, in
the absence of a closing price, the bid price.
14
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
OPTIONS CONTRACTS (continued)
If a written option expires on its stipulated expiration date or if the Fund
enters into a closing transaction, a gain or loss is realized on the contract.
When a gain or loss is realized, the liability related to such option
contract is extinguished. If a written call option is exercised, a gain or
loss is realized from the sale of the underlying security and the premium
received from the option is added to proceeds from the sale of the underlying
security thereby increasing the gain or decreasing the loss from the sale of
the underlying security. If a written put option is exercised, the cost of
the underlying security purchased by the Fund will be decreased by the premium
originally received.
The Fund may also purchase options in an attempt to hedge against fluctuations
in the value of its portfolio and to protect against declines in the value of
the securities. The premium paid by the Fund for the purchase of a call or
put option is included in the Fund=s Statement of Assets and Liabilities as an
investment and subsequently marked-to-market to reflect the current market
value of the option. The current market value of the option is the closing
price or, in the absence of a closing price, the bid price.
If an option the Fund has purchased expires on the stipulated expiration date,
the Fund realizes a loss in the amount of the cost of the option. If the Fund
exercises a call option, the cost of the securities acquired by exercising the
call is increased by the premium paid to buy the call. If the Fund exercises
a put option, it realizes a gain or loss from the sale of the underlying
security and the proceeds from such a sale are decreased by the premium
originally paid.
The measurement of the risks associated with option contracts is meaningful
only when all related and offsetting transactions are considered. A summary of
obligations for options contracts for the year ended December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Written Put Options
Contract Amount
---------- ----------
Balance, December 31, 1997 0 0
Options written 400 $ 232,992
Option terminated in closing transactions (400) (232,992)
---------- ----------
Balance, December 31, 1998 $ 0 $ 0
========== ==========
</TABLE>
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of the revenues and expenses during the reporting
period. Actual results could differ from those estimates.
15
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which the
Fund pays a fee, computed daily and payable monthly, at an annual rate of 1%
of the Fund's average daily net assets. The fee amounted to $1,365,694 for
the year ended December 31, 1998.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Fund with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise
maintain the Fund's organization. The Advisor also provides the Fund with
necessary office space and portfolio accounting and bookkeeping services. The
salaries of all officers of the Fund and of all
Directors who are "affiliated persons" of the Fund or of the Advisor, and all
personnel of the Fund or of the Advisor performing services relating to
research, statistical and investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate
of the Advisor, acts as distributor for the Fund's shares. The services of
Manning & Napier Investor Services, Inc. are provided at no additional cost to
the Fund.
The compensation of the non-affiliated Directors totaled $6,700 for the year
ended December 31, 1998.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$165,477,453 and $60,632,552, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of World Opportunities Series Class A Shares were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Year For the Year
Ended 12/31/98 Ended 12/31/97
--------------- ---------------
Shares Amount Shares Amount
--------------- ------------ --------------- ------------
Sold 15,718,371 124,416,600 1,618,889 $19,147,297
Reinvested 2,113,935 17,233,683 1,260,495 11,848,761
Repurchased (2,338,228) (21,445,703) (543,078) (6,309,642)
--------------- ------------ --------------- ============
Total 15,494,078 120,204,580 2,336,306 $24,686,416
=============== ============ =============== ============
</TABLE>
16
<PAGE>
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
securities of domestic companies and the United States Government. These
risks include revaluation of currencies and future adverse political and
economic developments. Moreover, securities of foreign companies and foreign
governments and their markets may be less liquid and their prices more
volatile than of those securities of comparable domestic companies and the
United States Government.
17
<PAGE>
Independent Accountants Report
To the Shareholders and the Board of Directors of
Exeter Fund, Inc.- World Opportunities Series:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Exeter Fund,
Inc. (formerly Manning & Napier Fund, Inc.) - World Opportunities Series at
December 31, 1998, the results of its operations, the changes in its net
assets, and its financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
18
<PAGE>
<PAGE>
Exeter Fund, Inc.
Global Fixed Income
Annual Report
December 31, 1998
<PAGE>
Management Discussion and Analysis
Dear Shareholders:
The Global Fixed Income Series has been open for a little over a year now, and
while the primary investment catalyst behind the activation on the fund (i.e.
the first Latin American debt crisis) has not played out as quickly as we
anticipated, the rationale behind having a global fund is more important today
than it was one year ago. The Global Fixed Income Series exists so that our
clients have access to a greater number of fixed income investment
opportunities. That is more important today than it was one year ago because
of the relatively low level of U.S. interest rates. For years we have
projected that interest rates could fall to as low as 5%. At times, that
seemed crazy, but by the end of 1998, domestic interest rates had broken
through the 5% level.
Our falling interest rate forecast was based upon a realization of the fact
that the world's economy was becoming increasingly globalized. The associated
increase in the competitive environment established a disinflationary tone
within the U.S. economy. It was not, however, limited to the U.S. The
disinflationary pressures that have pushed down U.S. rates had, or are having,
the same impact around the world. The Global Fixed Income Series allows us to
act on opportunities tied to that dynamic, as well as other opportunities
outside of the U.S. Traditionally, international fixed income securities are
introduced into a portfolio for diversification reasons. However, with
interest rates converging around the world, diversification as an investment
rationale may be losing some of its luster. Beyond diversification however,
there will always be individual opportunities in the global fixed income
marketplace.
As was mentioned earlier, the catalyst behind the activation of the Global
Fixed Income Series was the sell-off of Latin American debt (specifically
Brazil, Argentina, and Mexico). We believe, the increase in Latin American
yields at the end of 1997 occurred in sympathy with the problems in the
Pacific Rim. We were of the opinion that the economic fundamentals in Latin
America are quite different from those in the Pacific Rim, and did not justify
the sell off. Our opinions were correct for the first six months of 1998;
however, Latin American debt as well as all emerging market debt was hit quite
hard when the Russian financial crisis developed in August of last year. That
situation stabilized somewhat later in the year when the U.S. Federal Reserve
cut interest rates on three separate occasions. However as the year came to a
close, new problems began to emerge in Brazil and at the end of the year, the
Latin American holdings were holding back the overall performance of the
series. That is not to say the fund failed to generate a positive return.
It did. The Global Fixed Income Series returned 2.78% in 1998. Unfortunately,
its return did not measure up to the return of the Merrill Global Government
Bond Index which posted a total return of 14.12% last year.
The positive return that the Series did generate can be traced to the 80% of
its assets that were not invested in Latin America. Those monies were invested
in seven different developed countries with an overweighting in U.S.
securities. The rationale for this can be traced to a positive overview on the
U.S. dollar, plus the opportunity to invest in non-U.S. Treasury securities
Such as "putable" corporate bonds, yankee bonds, and selected mortgaged-backed
securities. The Global Fixed Income Series also invested in Canada and the
U.K., as well as the relatively higher yielding government bonds of the
Monetary Union (EMU) members, Spain and Italy. The currency exposures
associated with these later two positions are partially hedged to mitigate the
currency risk. The bonds of Australia and New Zealand were also purchased
because both of these countries are characterized by very high real
interest rates and we correctly expected both to experience
1
<PAGE>
Management Discussion and Analysis
economic slowdowns associated with the problems in the Pacific Rim. Those
positions were also partially hedged.
We are excited about the first full year of the Global Fixed Income Series
because of the investment opportunities that it has opened up for us. While we
are disappointed with performance of the Latin American investments, we still
firmly believe that over a three to five year investment horizon these
securities will be strong relative performers. Our other investments have
performed pretty much as expected because they have been based upon the same
fixed income processes that have been so successful within the U.S. markets.
We appreciate your business and we hope that you and your families have a
healthy and prosperous 1999.
Sincerely,
Exeter Asset Management
[graphic]
<pie chart>
Data for pie chart to follow:
Portfolio Composition 1 - As of 12/31/98
<TABLE>
<CAPTION>
<S> <C>
Argentina 1.69%
Australia 6.48%
Brazil 5.78%
Canada 12.19%
Spain 4.66%
Italy 7.17%
Mexico 7.07%
New Zealand 2.70%
United Kingdom 6.69%
Corporate Bonds 22.01%
U.S. Government Securities 18.51%
Cash , equivalents, & assets,
less other liabilities 5.05%
</TABLE>
1 As a percentage of net assets
2
<PAGE>
Performance Update of December 31, 1998
Exeter Fund, Inc. Global Fixed Income Series.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 10,278 2.78% 2.78%
Inception 2 $ 10,483 4.83% 4.11%
</TABLE>
Merill Lynch Global Government Bond Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 11,412 14.12% 14.12%
Inception 2 $ 11,231 12.31% 10.43%
</TABLE>
Merill Lynch U.S. Treasury Index Bond Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 11,003 10.03% 10.03%
Inception 2 $ 11,180 11.80% 10.00%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - Global Fixed
Income Series from its inception (10/31/97) to present (12/31/98) as compared
to the Merrill Lynch Global Government Bond Index and Merrill Lynch U.S.
Treasury Bond Index.
[graphic]
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Exeter Fund Inc., Merrill Lynch Global Merrill Lynch U.S.
Global Fixed Income Government Bond Treasury Index
Date Series Index Bond Index
10/31/97 $ 10,000 $ 10,000 $ 10,000
12/31/97 10,200 9,841 10,161
12/31/98 10,483 11,231 11,180
</TABLE>
1 The unmanaged Merrill Lynch Global Government Bond Index is a
market value weighted measure of approximately 535 global government bonds.
The unmanaged Merrill Lynch U.S. Treasury Bond Index is a
market value weighted measure of approximately 164 U.S. Treasury bonds.
The Indices' returns assume reinvestment of coupons and, unlike Fund returns,
do not reflect any fees or expenses.
2 Performance numbers for the Fund and Indices are calculated from
October 31,1997, the Fund's inception date. The Fund's performance is
historical and may not be indicative of future results.
3
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal Value
Currency Amount (Note 2)
ARGENTINA - 1.69%
Republic of Agrentina, 11.375%,
1/30/2017
(Identified Cost $2,058,727) USD 2,000,000 $ 2,006,250
------------
AUSTRALIA - 6.48%
Australian Government, 8.75%,
1/30/2017 AUD 5,320,000 3,504,007
Australian Government, 6.75%,
1/15/2001 AUD 6,140,000 4,186,231
------------
TOTAL AUSTRALIAN SECURITIES
(Identified Cost $8,472,844) 7,690,238
------------
BRAZIL - 5.78%
Federal Republic of Brazil, 10.125%,
5/15/2027
(Identified Cost $8,275,000) USD 10,000,000 6,862,500
------------
CANADA - 12.19%
Canadian Government, 4.75%, 9/15/1999 CAD 1,875,000 1,218,225
Canadian Government, 5.50%, 9/1/2002 CAD 1,845,000 1,228,396
Canadian Government, 7.25%, 6/1/2007 CAD 11,745,000 8,867,308
Canadian Government, 6.00%, 6/1/2008 CAD 4,500,000 3,166,849
------------
TOTAL CANADIAN SECURITIES
(Identified Cost $14,913,753) 14,480,778
------------
SPAIN - 4.66%
Bonos Y Oblig Del Estado, 9.40%,
4/30/1999 SP 250,000,000 1,792,660
Bonos Y Oblig Del Estado, 7.90%,
2/28/2002 SP 468,000,000 3,744,943
------------
TOTAL SPANISH SECURITIES
(Identified Cost $5,193,697) 5,537,603
------------
ITALY - 7.17%
Buoni Poliennali del Tesoro, 7.50%,
10/1/1999 ITL 6,625,000,000 4,123,828
Buoni Poliennali del Tesoro, 6.25%,
3/1/2002 ITL 6,700,000,000 4,395,892
------------
TOTAL ITALIAN SECURITIES
(Identified Cost $8,017,691) 8,519,720
------------
MEXICO - 7.07%
United Mexican States, 11.50%,
5/15/2026
(Identified Cost $7,652,785) USD 7,800,000 8,399,625
------------
NEW ZEALAND - 2.70%
New Zealand Government, 6.50%,
2/15/2000 NZD 3,065,000 1,647,345
New Zealand Government, 8.00%,
11/15/2006 NZD 2,550,000 1,566,497
------------
TOTAL NEW ZEALAND SECURITIES
(Identified Cost $3,656,548) 3,213,842
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Value
Currency Principal Amount (Note 2)
UNITED KINGDOM - 6.69%
United Kingdom Bond, 9.50%, 1/15/1999 BP 1,726,500 $ 2,867,423
United Kingdom Bond, 8.00%, 12/07/2000 BP 2,900,000 5,081,177
------------
TOTAL UNITED KINGDOM SECURITIES
(Identified Cost $7,866,305) 7,948,600
------------
UNITED STATES - 18.51%
U.S. GOVERNMENT AGENCIES -10.93%
Federal Home Loan Mortgage Corp. Discount
Note, 5.125%, 10/15/2008 USD 2,000,000 1,961,352
GNMA, POOL #417346, 6.00%, 4/15/2026 USD 5,722,950 5,671,101
GNMA, POOL #441545, 9.00%, 3/15/2027 USD 5,019,098 5,354,750
------------
Note, 5.125%, 10/15/2008
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $12,819,853) 12,987,203
------------
U.S. TREASURY SECURITIES - 1.70%
U.S. Treasury Note, 5.75%, 9/30/1999 USD
(Identified Cost $2,000,543) 2,000,000 2,015,626
------------
U.S. Treasury Stripped Securities - 5.88%
Interest Stripped - Principal Payment.
11/15/2002 USD 4,000,000 3,365,836
Interest Stripped - Principal Payment.
11/15/2017 USD 10,300,000 3,614,260
------------
Total U.S. Treasury Stripped Securities
(Identified Cost $6,628,219) 6,980,096
------------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $8,628,762) 8,995,722
------------
TOTAL UNITED STATES SECURITIES
(Identified Cost $21,448,615) 21,982,925
------------
CORPORATE BONDS -22.01%
Asia Pulp & Paper, 3.50%, 4/30/2003 USD 5,140,000 2,891,250
Bayer Corp., 6.20%, 2/15/2028 USD 2,000,000 2,077,340
Canadian National Railway, 6.90%, 7/15/2028 USD 3,000,000 3,094,011
General Electric, 7.44%, 12/11/2002 USD 2,300,000 2,459,100
Gulf Canada Resources, 8.375%, 11/15/2005 USD 2,000,000 1,970,000
Merrill Lynch & Co. Inc., Stock Linked Note,
(Telebras),11/28/2003 USD 5,000,000 4,233,750
Motorola. Inc., 6.50%, 9/1/2025 USD 3,000,000 3,171,828
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal Value
Amount/Shares (Note2)
CORPORATE BONDS (continued)
Oracle Corp., 6.91%, 2/15/2007 USD 2,000,000 $ 2,083,306
Xerox Corp., 6.25%, 11/15/2026 USD 3,990,000 4,168,125
-------------
TOTAL CORPORATE BONDS
(Identified Cost $28,753,530) 26,148,710
-------------
SHORT-TERM INVESTMENTS - 3.59%
Federal Mortgage Corp. Discount Note,
2/22/1999 USD 3,000,000 2,978,637
Dreyfus Treasury Cash Management Fund USD 1,291,679 1,291,679
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $4,270,316) 4,270,316
-------------
TOTAL INVESTMENTS - 98.55%
(Identified Cost $120,579,811) 117,061,107
OTHER ASSETS, LESS LIABILITIES - 1.45% 1,731,610
-------------
NET ASSETS -100% $118,792,717
=============
</TABLE>
KEY:
AUD- Australian Dollar BP- British Pound
CAD- Canadian Dollar ITL- Italian Lira
NZD- New Zealand Dollar SP- Spanish Peseta
USD- United States Dollar
Federal Tax Information
At December 31, 1998, the net unrealized depreciation (based on identified
cost for federal income tax purposes of $120,579,811) was as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation
$ 2,930,753
Unrealized depreciation
(6,449,457)
------------
Unrealized depreciation - net $(3,518,704)
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Statement of Assets and Liabilities
December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments, at value (identified cost $120,579,811) (Note 2) $117,061,107
Receivable for open forward foreign currency exchange contracts (Note 2) 86,055
Interest receivable 1,810,472
Receivable for fund shares sold 43,790
-------------
TOTAL ASSETS 119,001,424
-------------
LIABILITIES:
Accrued management fee (Note 3) 101,547
Accrued Directors' fees (Note 3) 3,300
Payable for fund shares repurchased 78,314
Audit fee payable 17,585
Other payables and accrued expenses 7,961
-------------
TOTAL LIABILITIES 208,707
-------------
NET ASSETS FOR 12,303,383 SHARES OUTSTANDING 118,792,717
=============
NET ASSETS CONSIST OF:
Capital stock $ 123,034
Additional paid-in-capital 122,406,373
Undistributed net investment income 113,492
Accumulated net realized loss on investments (430,074)
Net unrealized depreciation on investments, foreign currency, forward
foreign curreny exchange contracts, and other assets and liabilities (3,420,108)
-------------
TOTAL NET ASSETS 118,792,717
=============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($118,792,717/12,303,383 shares) $ 9.66
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Statement of Operations
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME:
Interest $ 8,312,073
--------------
EXPENSES:
Management fee (Note 3) 1,248,572
Directors' fees (Note 3) 6,700
Registration and filing fees 37750
Custodian fee 26247
Audit fee 26,500
Miscellaneous 12,691
--------------
Total Expenses 1,358,460
--------------
NET INVESTMENT INCOME 6,953,613
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on-
Investments(identified cost basis) 797,653
Foreign currency and forward foreign
currency exchange contracts 465,444
--------------
Net realized gain on investments 1,263,097
--------------
Net change in unrealized depreciation on-
Investments (4,043,064)
Foreign currency, forward foreign
currency exchange contracts, and other
assets and liabilities (818,667)
--------------
Net unrealized depreciation on
investments (4,861,731)
--------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (3,598,634)
--------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,354,979.00
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
For The Period
For the 10/31/97
Year (commencement
Ended of operations)
12/31/98 to 12/31/97
------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 6,953,613 $ 1,011,923
Net realized gain on investments 1,263,097 11,482
Net change in unrealized appreciation on investments
and forward foreign currency exchange contracts (4,861,731) 1,441,623
------------- ----------------
Net increase from operations 3,354,979 2,465,028
------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (Note 2):
From net investment income (7,343,129) (982,372)
From realized gain on investments (1,231,571) --
------------- ----------------
Total distribution to shareholders (8,574,700) (982,372)
------------- ----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase (decrease) from capital share
transactions (Note 5) (3,159,203) 125,688,985
------------- ----------------
Net increase(decrease) in net assets (8,378,924) 127,171,641
NET ASSETS:
Beginning of period 127,171,641 --
------------- ----------------
End of period (including undistributed net investment
income of $113,942 and $21,366) $118,792,717 $ 127,171,641
============= ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C>
For the Year For the Period
Ended 12/31/98 10/31/97 to 12/31/97
---------------- ----------------------
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 shareholders (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:
Expenses 1.10% 1.09%2
Net investment income 5.75% 4.75%2
Portfolio turnover 29% 3%
Net assets-End of period (000's omitted) $ 118,793 $ 127,172
================ ======================
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
Global Fixed Income Series (the "Fund") is a no-load non-diversified series of
Exeter Fund Inc. (the "Corporation"), formerly known as Manning & Napier Fund,
Inc. The Corporation is organized in Maryland and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company.
Shares of the Fund are offered to clients and employees of Manning & Napier
Advisors, Inc. (The "Advisor") and its affiliates. The total authorized capital
stock of the corporation consists of one billion shares of common stock each
having a par value of $0.01. As of December 31, 1998, 940 million shares have
been designated in total among 19 series, of which 50 million have been
designated as Global Fixed Income Series Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities, including corporate bonds, listed on an exchange are
valued at the latest quoted sales price of the exchange on which the security
is traded most extensively. Securities not traded on valuation date or
securities not listed on an exchange are valued at the latest quoted bid
price.
Debt securities, including domestic and foreign government bonds and mortgage
backed securities, will normally be valued on the basis of evaluated bid
prices provided by the Funds pricing service.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by the Advisor under procedures approved by and under the general
supervision and responsibility of the the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Interest income and expenses are recorded on an accrual
basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies. The Fund is not subject to
federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains on
investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
11
<PAGE>
Notes to Fianacial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are made annually. An additional distribution may be necessary
to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses, foreign denominated investments or
character reclassification between net income and net gains. As a result, net
investment income (loss) and net investment gain (loss) on investment
transactions for a reporting period may differ significantly from distributions
to shareholders during such period. As a result, the Fund may periodically
make reclassifications among its capital accounts without impacting the Fund's
net asset value.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis: a)
investment securities, other assets and liabilities are converted to U.S.
dollars based upon current exchange rates; and b) purchase and sales of
securities and income and expenses are converted into U.S. dollars based upon
the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are recorded
for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investment that result from fluctuations in foreign currency exchange rates is
not separately stated.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may purchase or sell forward foreign currency exchange contracts in
order to hedge a portfolio position or specific transaction. Risks may arise
if the counterparties to a contract are unable to meet the terms of the
contract or if the value of the foreign currency moves unfavorably.
All forward foreign currency exchange contracts are adjusted daily by the
exchange rate of the underlying currency and, for financial statement
purposes, any gain or loss is recorded as unrealized gain or loss until a
contract has been closed. Realized and unrealized gain or loss arising from a
transaction is included in net realized and unrealized gain (loss) from
foreign currency and forward foreign currency exchange contracts.
12
<PAGE>
Notes to Financial Statements
.
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (continued)
The Fund regularly trades forward foreign currency exchange contracts with
off-balance sheet risk in the normal course of its investing activities to
assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the
investment the Fund has in forward foreign currency exchange contracts and
does not necessarily represent the amounts potentially at risk. The
measurement of the risks associated with forward foreign currency exchange
contracts is meaningful only when all related and offsetting transactions are
considered. A summary of obligations for forward foreign currency exchange
contracts sold on December 31, 1998 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Settlement Contracts In Exchange Contracts Net Unrealized
Date to Deliver For At Value Appreciation
- ---------- -------------- ------------ ---------- ---------------
02/04/99 Deutsche Marks $ 7,106,738 $7,020,683 $ 86,055
</TABLE>
On December 31, 1998, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which the
Fund pays a fee, computed daily and payable monthly, at an annual rate of 1%
of the Fund's average daily net assets. The fee amounted to $1,248,572 for
year ended December 31, 1998.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Fund with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise
maintain the Fund's organization. The Advisor also provides the Fund with
necessary office space and portfolio accounting and bookkeeping services. The
salaries of all officers of the Fund and of all Directors who are "affiliated
persons" of the Fund or of the Advisor, and all personnel of the Fund or of
the Advisor performing services relating to research, statistical and
investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. These services are provided at no additional
cost to the Fund.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate
of the Advisor, acts as distributor for the Fund's shares. The services of
Manning & Napier Investor Services, Inc. are provided at no additional cost to
the Fund.
The compensation of the non-affiliated Directors totaled $6,700 for the year
ended December 31, 1998.
13
<PAGE>
Notes to Financial Statements
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$36,040,033 and $21,160,328, respectively. Purchases and sales of United
States Government securities were $1,962,340 and $11,610,106, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Global Fixed Income Series were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
FOR THE PERIOD 10/31/97
FOR THE YEAR (COMMENCEMENT OF OPERATIONS)
ENDED 12/31/98 TO 12/31/97
--------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ------------- ---------------------------- -------------
SOLD 787,498 $ 8,046,051 12,643,992 $126,446,410
REINVESTED 860,110 8,297,448 96,809 967,123
REPURCHASED (1,912,940) (19,502,702) (172,086) (1,724,548)
--------------- ------------- ---------------------------- -------------
TOTAL (265,332) (3,159,203) 12,568,715 $125,688,985
=============== ============= ============================ =============
</TABLE>
6. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
securities of U.S. companies and the United States Government. These risks
include revaluation of currencies and future adverse political and economic
developments. Moreover, securities of foreign companies and foreign
governments and their markets may be less liquid and their prices more
volatile than of those securities of comparable U.S. companies and the United
States Government.
14
<PAGE>
Independent Accountants Report
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF
EXETER FUND, INC.- GLOBAL FIXED INCOME SERIES:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Exeter Fund,
Inc. (formerly Manning & Napier Fund, Inc.) - Global Fixed Income Series at
December 31, 1998, the results of its operations, the changes in its net
assets, and its financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
15
<PAGE>
<PAGE>
Exeter Fund, Inc.
New York Tax Exempt Series
Annual Report
December 31, 1998
<PAGE>
Management Discussion and Analysis
DEAR SHAREHOLDERS:
If you step back and think about it, domestic fixed income portfolio
management is primarily an economic exercise. With the growth of global trade,
the ability of electronic commerce to connect geographically diverse regions,
and the development of highly efficient, fully integrated financial markets,
the world has shrunk in an economic sense. That means that bond managers,
whether they focus on taxable or tax-exempt securities, can no longer rely
strictly on a domestic economic perspective. They must incorporate the global
factors that impact domestic interest rates into their investment process.
The logical question that arises is what can international events possibly
have to do with municipal bonds issued by state and local governments? The
answer is that interest rates across all sectors, including munis, key off of
U.S. Treasury interest rates. The relative attractiveness of municipal bonds
depends upon their relationship to U.S. Treasury rates. That is why they are
often quoted as a percentage of U.S. Treasury yields.
With that in mind, we would like to discuss some of the global events that
have impacted the U.S. fixed income markets during the second half of 1998.
The international event that triggered the greatest response occurred in
August of last year when Russia effectively defaulted on its internal debt,
and the world concluded that the Russian economy was about to implode. That
triggered an almost universal reassessment of investors risk tolerances, and
what followed was an overall flight to quality.
One of the primary beneficiaries of this was the U.S. fixed income markets.
However, not all sectors of the market benefited equally. The vast majority of
the money flowed into the U.S. Treasury marketplace, causing their yields to
move down much faster than all other fixed income sectors, including munis.
The disparity became so great that there were times at the end of the third
quarter and the start of the fourth, that the yields for long munis were
higher than the yields for 30-year U.S. Treasury bonds.
Interestingly, longer-term U.S. Treasuries performed the best at first.
Shorter-term U.S. Treasury securities are much more dependent on the actions
of the Federal Reserve ( the "fed") and the Fed did not cut short-term rates
until the beginning of October. The Fed's focus was a touch different. It was
more concerned with the growing credit crunch conditions that were associated
with the problems in Russia, the spread of the Asian contagion to Latin
America, and the collapse of a number of high-profile hedge funds. The
problems at the hedge funds were due to over-leverage during a period when
emerging market securities, and most non-Treasury securities, were under
duress. The combination of these events and the defaults they engendered
caused banks to reassess their lending standards. As a result, banks reigned
in their standards, and made credit a touch more difficult to get. That
concerned the Fed, and it cut short-term interest rates on three separate
occasions.
By the end of October, U.S. Treasury interest rates were down more than 100
basis points
from the beginning of the year. The declines in muni yields were much less
pronounced. Shorter-term muni rates had fallen by about 50 basis points
(0.50%), while longer-term munis only experienced declines in the neighborhood
of 25 basis points (0.25%).
The actions of the Fed helped alleviate the concerns of the financial markets
and the flight to quality that drove U.S. Treasury rates so low reversed
itself somewhat. This caused U.S. Treasury rates to rise modestly during the
last two months of the year, while most other fixed income sectors including
munis held their ground.
1
<PAGE>
Management Discussion and Analysis
The performance of the New York Tax Exempt series reflects the decline in
municipal interest rates as it earned its coupon and generated modest, yet
unrealized capital gains. The New York Tax Exempt Series returned 5.53% over
the last 12 months, a touch lower than its comparable benchmark, the Merrill
Lynch Intermediate Municipal Index which returned 6.27% for the year, but that
return does not account for fees. Furthermore, the index includes higher
yielding, lower rated securities (i.e. securities rated triple-B) which our
funds at this time do not.
It has been an interesting year in the financial markets with global events
dictating how the domestic fixed income markets, including munis, have
performed. In some cases, interesting has meant "troubling" (i.e. emerging
markets) while in others, it has meant joyous (i.e. long U.S. Treasury bonds).
Going forward investors should expect their managers to rely upon an
increasingly global focus. Failure to do so can be expensive.
As always it has been a pleasure helping you meet your investment objectives,
and we look forward to helping you meet those goals in the future. We hope you
and your family have a safe and prosperous 1999.
Sincerely,
Exeter Asset Management
[graphic]
<pie chart>
Data for pie chart to follow:
Portfolio Composition1 - As of 12/31/98
<TABLE>
<CAPTION>
<S> <C>
General Obligation Bonds - 60%
Revenue Bonds - 38%
Pre-Refunded Bonds - 2%
</TABLE>
As a percentage of municipal securities
[graphic]
<pie chart>
Data for pie chart to follow:
Quality Ratings2 - As of 12/31/98
<TABLE>
<CAPTION>
<S> <C>
Aaa 81%
Aa 15%
A 4%
</TABLE>
2 Using Moodys Ratings, as a percentage of municipal securities (unaudited).
2
<PAGE>
Performance Update as of December 31, 1998
Exeter Fund, Inc. New York Tax Exempt Series
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
-------------
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 10,553 5.53% 5.53%
Inception 2 $ 12,853 28.53% 5.19%
</TABLE>
Merrill Lynch Intermediate Municipal Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
-------------
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 10,627 6.27% 6.27%
Inception 2 $ 13,197 31.97% 5.75%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - New York Tax
Exempt Series from its inception (1/17/94) to present (12/31/98) as compared
to the Merrill Lynch Intermediate Municipal Index.1
[graphic]
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Date Exeter Fund, Inc. - Merrill Lynch Intermediate
New York Tax Exempt Series Municipal Index
01/17/94 $ 10,000 $ 10,000
12/31/94 9,318 9,719
12/31/95 10,882 11,020
12/31/96 11,243 11,532
12/31/97 12,180 12,419
12/31/98 12,853 13,197
</TABLE>
1 The unmanaged Merrill Lynch Intermediate Municipal Index is a market value
weighted measure of approximately 116 municipal bonds issued across the United
States. The Index is comprised of investment grade securities. Index returns
assume reinvestment of coupons and, unlike Fund returns, do not reflect any
fees or expenses.
2 The Fund and Index performance numbers are calculated from January 17, 1994,
the Funds inception date. The Funds performance is historical and may not be
indicative of future results.
3
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CREDIT
RATING* PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 2)
NEW YORK MUNICIPAL SECURITIES - 97.2%
Albany City School District, G.O. Bond, 4.35%, 2/1/2001 Aaa $ 475,000 $483,270
Albany City School District, G.O. Bond, 4.35%, 2/1/2002 Aaa 150,000 152,997
Albany County, G.O. Bond, 5.75%, 6/1/2010 Aaa 200,000 218,392
Amherst Public Improvement, G.O. Bond, 4.625%, 3/1/2004 Aaa 250,000 258,952
Amherst Public Improvement, G.O. Bond, 4.625%, 3/1/2007 Aaa 200,000 207,172
Auburn Central School District, G.O. Bond, 4.55%, 12/1/2006 Aaa 385,000 397,439
Battery Park City Authority, Revenue Bond, 7.70%, 5/1/2015 Aaa 500,000 517,555
Bayport-Blue Point Union Free School District, G.O. Bond, 5.60%, 6/15/2012 Aaa 250,000 274,497
Brighton Central School District, G.O. Bond, 5.40%, 6/1/2012 Aaa 250,000 268,137
Brockport Central School District, G.O. Bond, 5.50%, 6/15/2015 Aaa 300,000 316,002
Broome County Public Safety, Certificate Participation, 5.00%, 4/1/2006 Aaa 250,000 264,052
Buffalo General Improvement, G.O. Bond, Series A, 4.75%, 2/1/2004 Aaa 500,000 519,830
Buffalo Municipal Water Authority, Revenue Bond, Series B, 5.00%, 7/1/2019 Aaa 1,000,000 993,660
Buffalo Municipal Water Authority, Revenue Bond, Series A, 5.00%, 7/1/2028 Aaa 750,000 739,747
Buffalo Schools, G.O. Bond, Series B, 5.05%, 2/1/2009 Aaa 250,000 262,097
Buffalo, G.O. Bond, 5.00%, 12/1/2009 Aaa 150,000 158,511
Buffalo, G.O. Bond, Series A, 5.20%, 2/1/2010 Aaa 250,000 267,293
Cattaraugus County Public Improvement, G.O. Bond, 5.00%, 8/1/2007 Aaa 300,000 319,092
Chittenango Central School District, G.O. Bond, 5.375%, 6/15/2016 Aaa 200,000 207,958
Colonie, G.O. Bond, 5.20%, 8/15/2008 Aaa 100,000 107,774
Cortlandville, G.O. Bond, 5.40%, 6/15/2013 Aaa 155,000 164,464
Dryden Central School District, G.O. Bond, 5.50%, 6/15/2011 Aaa 200,000 214,442
East Aurora Union Free School District, G.O. Bond, 5.20%, 6/15/2011 Aaa 300,000 319,665
East Hampton, G.O. Bond, 4.625%, 1/15/2007 Aaa 175,000 179,735
East Hampton, G.O. Bond, 4.625%, 1/15/2008 Aaa 175,000 179,174
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CREDIT
RATING* PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 2)
NEW YORK MUNICIPAL SECURITIES(continued)
Eastchester Public Improvement, G.O. Bond, Series B, 4.90%, 10/15/2011 Aaa $ 385,000 $400,877
Ellenville Central School District, G.O. Bond, 5.375%, 5/1/2009 Aaa 210,000 229,175
Ellenville Central School District, G.O. Bond, Series B, 5.70%, 5/1/2011 Aaa 700,000 776,188
Erie County Public Improvement, G.O. Bond, 5.80%, 1/15/2003 Aaa 230,000 247,462
Erie County, G.O. Bond, Series B, 5.50%, 6/15/2009 Aaa 100,000 108,376
Erie County, G.O. Bond, Series B, 5.50%, 6/15/2025 Aaa 400,000 418,696
Fillmore Central School District, G.O. Bond, 5.25%, 6/15/2015 Aaa 300,000 312,855
Gloversville City School District, G.O. Bond, 5.00%, 6/15/2005 Aaa 350,000 370,569
Greene Central School District, G.O. Bond, 5.25%, 6/15/2012 Aaa 195,000 206,259
Guilderland School District, G.O. Bond, 4.90%, 6/15/2008 Aaa 370,000 382,887
Guilderland School District, G.O. Bond, 5.00%, 5/15/2014 Aaa 505,000 513,120
Guilderland School District, G.O. Bond, 5.00%, 5/15/2016 Aaa 400,000 402,588
Hamburg Central School District, G.O. Bond, 5.375%, 6/1/2014 Aaa 600,000 638,424
Hempstead Town, G.O. Bond, Series B, 5.625%, 2/1/2010 Aaa 200,000 219,746
Holland Central School District, G.O. Bond, 6.125%, 6/15/2010 Aaa 245,000 275,316
Huntington, G.O. Bond, 5.90%, 1/15/2007 Aaa 300,000 333,267
Huntington, G.O. Bond, 5.875%, 9/1/2009 Aaa 250,000 275,885
Indian River Central School District, G.O. Bond, Second Series, 4.30%, 12/15/2003 Aaa 475,000 487,982
Irvington Union Free School District, G.O. Bond, Series B, 5.10%, 7/15/2005 Aaa 275,000 292,138
Jamesville-Dewitt Central School District, G.O. Bond, 5.75%, 6/15/2009 Aaa 420,000 474,054
Jordan-El Bridge Central School District, G.O. Bond, 5.875%, 6/15/2008 Aaa 500,000 556,095
Le Roy Central School District, G.O. Bond, 0.10%, 6/15/2008 Aaa 350,000 238,325
Middletown City School District, G.O. Bond, Series A, 5.50%, 11/15/2005 Aaa 175,000 190,990
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CREDIT
RATING* PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 2)
NEW YORK MUNICIPAL SECURITIES(continued)
Monroe County Public Improvement - Pre-refunded, G.O. Bond, 6.00%, 3/1/2002 Aaa $ 95,000 $ 101,605
Monroe County Public Improvement - Pre-refunded, G.O. Bond, 6.00%, 3/1/2002 Aaa 390,000 417,140
Monroe County Public Improvement - Pre-refunded, G.O. Bond, 6.10%, 6/1/2015 Aaa 20,000 22,508
Monroe County Public Improvement - Unrefunded Balance,
G.O. Bond, 6.00%, 3/1/2002 Aaa 15,000 15,996
Monroe County Public Improvement - Unrefunded Balance,
G.O. Bond, 6.10%, 6/1/2015 Aaa 180,000 202,572
Monroe County Public Improvement, G.O. Bond, 4.90%, 6/1/2005 Aaa 250,000 263,222
Monroe County Water Authority, Revenue Bond, Series B, 5.25%, 8/1/2011 Aa3 500,000 526,885
Monroe County Water Authority, Revenue Bond, 5.00, 8/1/2019 Aa3 1,700,000 1,695,597
Monroe County Water Improvement, G.O. Bond, 5.25%, 2/1/2017 Aa2 320,000 330,848
Nassau County, G.O. Bond, Series A, 4.00%, 5/1/1999 Aaa 100,000 100,337
Nassau County, G.O. Bond, Series S, 5.00%, 3/1/2005 Aaa 300,000 315,684
Nassau County General Improvement, G.O. Bond, Series U, 5.25%, 11/1/2014 Aaa 335,000 348,872
Nassau County General Improvement, G.O. Bond, Series V, 5.25%, 3/1/2015 Aaa 385,000 398,721
New Castle, G.O. Bond, 4.75%, 6/1/2010 Aa1 450,000 459,153
New Rochelle City School District, G.O. Bond, Series A, 4.30%, 2/1/2003 Aaa 500,000 510,385
New Rochelle, G.O. Bond, Series C, 6.20%, 3/15/2007 Aaa 175,000 195,206
New York City Municipal Water Authority, Revenue Bond,
Series B, 5.00%, 6/15/2003 A1 400,000 418,064
New York City Municipal Water Authority, Revenue Bond,
Series B, 5.375%, 6/15/2019 Aaa 250,000 255,250
New York City Municipal Water Finance Authority, Revenue
Bond, Series B, 5.50%, 6/15/2019 Aaa 1,000,000 1,040,690
New York City Municipal Water Finance Authority, Revenue
Bond, Series B, 5.125%, 6/15/2030 Aaa 1,000,000 997,650
New York City, G.O. Bond, Series K, 5.50%, 4/1/2007 Aaa 500,000 545,075
New York City, G.O. Bond, Series I, 5.00%, 5/15/2028 Aaa 1,900,000 1,873,970
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CREDIT
RATING* PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 2)
NEW YORK MUNICIPAL SECURITIES(continued)
New York Government Assistance Corp., Revenue Bond,
Series A, 5.90%, 4/1/2013 Aaa $ 500,000 $ 548,980
New York Government Assistance Corp., Revenue Bond,
Series A, 6.00%, 4/1/2024 A3 250,000 271,855
New York State Dorm Authority, Revenue Bond, 5.00%, 7/1/2022 Aaa 2,000,000 1,972,800
New York State Environmental Facilities Corp. Pollution Control,
Revenue Bond, Series A, 4.65%, 6/15/2007 Aaa 250,000 259,393
New York State Environmental Facilities Corp. Pollution Control,
Revenue Bond, Series A, 5.20%, 6/15/2015 Aaa 250,000 258,715
New York State Environmental Pollution Control, Revenue Bond
Pooled LN-B, 6.65%, 9/15/2013 Aaa 500,000 554,635
New York State Environmental Facilities Corp. Pollution Control,
Revenue Bond, Series E, 5.00%, 6/15/2012 Aaa 200,000 206,306
New York State Housing Finance Agency, State University
Construction, Revenue Bond, Series A, 8.00%, 5/1/2011 Aaa 250,000 327,283
New York State Local Government Assistance Corp.,
Revenue Bond, Series C, 5.00%, 4/1/2021 Aaa 750,000 741,015
New York State Local Government Assistance Corp.,
Revenue Bond, Series D, 5.00%, 4/1/2023 Aaa 1,375,000 1,357,771
New York State Medical Care Facility, Financial Agency,
Revenue Bond, 7.75%, 2/15/2020 Aaa 380,000 406,402
New York State Mortgage Agency, Homeowners Mortgage,
Revenue Bond, Series 31A, 5.375%, 10/1/2017 Aa2 500,000 508,300
New York State Power Authority, Revenue Bond, Series CC,
5.00%, 1/1/2014 Aaa 500,000 532,215
New York State Power Authority, Revenue Bond, Series CC,
5.25%, 1/1/2018 Aaa 250,000 268,410
New York State Power Authority Revenue & General Purpose,
Revenue Bond, Ref-Series CC, 4.80%, 1/1/2005 Aaa 250,000 264,340
New York State Thruway Authority, Highway & Bridge, Revenue
Bond, Series B, 5.75%, 4/1/2006 Aaa 100,000 110,152
New York State Thruway Authority, Highway & Bridge, Revenue
Bond, Series C, 5.00%, 4/1/2016 A3 950,000 945,583
New York State Thruway Authority, Highway & Bridge, Revenue
Bond, Series A, 5.25%, 4/1/2017 Aaa 555,000 571,728
New York State Thruway Authority, Revenue Bond, Series A,
5.50%, 1/1/2023 Aaa 1,020,000 1,074,050
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CREDIT
RATING* PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 2)
NEW YORK MUNICIPAL SECURITIES(continued)
New York State Thruway Authority, Revenue Bond, Series B,
4.90%, 1/1/2007 Aaa $ 450,000 $ 470,601
New York State Urban Development Correctional Capital Facilities,
Revenue Bond, Series A, 5.25%, 1/1/2014 Aaa 500,000 533,255
New York State Urban Development Corp. Correctional Facility,
Revenue Bond, Series G, 7.00%, 1/1/2017 Aaa 50,000 52,901
New York State Urban Development, Revenue Bond, 5.375%,
7/1/2022 Aaa 400,000 413,680
New York, G.O. Bond, 8.00%, 3/15/2016 Aaa 500,000 535,280
New York, G.O. Bond, Series B, 5.125%, 3/1/2018 A2 1,000,000 1,010,610
Niagara County, G.O. Bond, Series B, 5.20%, 1/15/2011 Aaa 400,000 420,468
Niagara County, G.O. Bond, 5.90%, 7/15/2014 Aaa 350,000 384,122
North Hempstead, G.O. Bond, Series B, 5.90%, 4/1/2004 Aaa 300,000 328,857
North Hempstead, G.O. Bond, Series C, 4.90%, 8/1/2006 Aaa 300,000 312,435
North Syracuse Central School District, G.O. Bond, 5.50%
6/15/2011 Aaa 295,000 316,874
Onondaga County, G.O. Bond, 5.85%, 2/15/2002 Aa2 300,000 319,068
Penfield Central School District, G.O. Bond, 5.20%, 6/15/2010 Aaa 560,000 595,594
Queensbury, G O. Bond, Series A, 5.50%, 4/15/2011 Aaa 150,000 162,693
Queensbury, G.O. Bond, Series A, 5.50%, 4/15/2012 Aaa 350,000 378,200
Rochester, G.O. Bond, Series A, 4.70%, 8/15/2006 Aaa 250,000 260,355
Rochester, G.O. Bond, Series A, 5.00%, 8/15/2020 Aaa 250,000 253,298
Rochester, G.O. Bond, Series A, 5.00%, 8/15/2022 Aaa 95,000 95,970
Rome, G.O. Bond, 5.20%, 12/1/2010 Aaa 390,000 412,979
Sands Point, G.O. Bond, 6.70%, 11/15/2014 A2a 700,000 800,121
Schenectady, G.O. Bond, 4.55%, 10/1/2002 Aaa 200,000 205,892
Schenectady, G.O. Bond, 5.30%, 2/1/2011 Aaa 250,000 267,883
South County Central School District Brookhaven, G.O. Bond,
5.50%, 9/15/2007 Aaa 380,000 408,572
South Huntington Union Free School District, G.O. Bond, 5.00%,
9/15/2016 Aaa 325,000 329,378
South Huntington Union Free School District, G.O. Bond, 5.10%,
9/15/2017 Aaa 100,000 101,856
Steuben County Public Improvement, G.O. Bond, 5.60%,
5/1/2006 Aaa 500,000 526,085
Suffolk County Water Authority, Revenue Bond, 5.10%,
6/1/2009 Aaa 250,000 268,510
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CREDIT
RATING* PRINCIPAL VALUE
(UNAUDITED) AMOUNT (NOTE 2)
NEW YORK MUNICIPAL SECURITIES(continued)
Suffolk County Water Authority, Series A, Revenue Bond, 5.00%,
6/1/2017 Aaa $ 400,000 $ 402,436
Suffolk County, G.O. Bond, Series G, 5.40%, 4/1/2013 Aaa 400,000 422,632
Suffolk County, G.O. Bond, Series A, 4.75%, 8/1/2019 Aaa 895,000 861,948
Sullivan County Public Improvement, G.O. Bond, 4.375%,
3/15/2001 Aaa 300,000 305,064
Sullivan County Public Improvement, G.O. Bond, 5.125%,
3/15/2013 Aaa 330,000 338,504
Three Village Central School District, G.O. Bond, 5.375%,
6/15/2007 Aaa 230,000 250,617
Tioga County Public Improvement, G.O. Bond, 5.25%,
3/15/2005 Aaa 250,000 263,828
Tompkins County Public Improvement, G.O. Bond, Series B,
5.10%, 4/1/2020 Aa2 400,000 402,608
Tompkins County, G.O. Bond, Series B, 5.625%, 9/15/2011 Aa2 135,000 146,042
Tompkins County, G.O. Bond, Series B, 5.625%, 9/15/2013 Aa2 300,000 324,537
Tompkins County, G.O. Bond, Series B, 5.625%, 9/15/2014 Aa2 300,000 323,196
Triborough Bridge & Tunnel Authority, Revenue Bond, Series A,
6.50%, 1/1/2004 Aaa 200,000 214,862
Triborough Bridge & Tunnel Authority, Revenue Bond, Series A,
5.00%, 1/1/2012 Aa3 500,000 507,050
Triborough Bridge & Tunnel Authority - General Purpose,
Revenue Bond, 5.00%, 1/1/2017 Aa3 250,000 250,265
Triborough Bridge & Tunnel Authority - General Purpose,
Revenue Bond, Series A, 4.75%, 1/1/2019 Aaa 300,000 288,750
Triborough Bridge & Tunnel Authority - General Purpose,
Revenue Bond, Series A, 5.125%, 1/1/2022 Aa3 1,700,000 1,698,861
Tri-Valley Central School District, G.O. Bond, 5.60%,
6/15/2008 Aaa 120,000 130,585
Westchester County, G.O. Bond, Series A, 4.75%, 12/15/2008 Aaa 250,000 261,335
Westchester County, G.O. Bond, Series A, 4.75%, 12/15/2009 Aaa 250,000 260,240
Westchester County, G.O. Bond, Series B, 4.30%, 12/15/2010 Aaa 215,000 215,243
Westchester County, G.O. Bond, Series B, 4.30%, 12/15/2011 Aaa 100,000 99,292
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CREDIT PRINCIPAL
RATING* AMOUNT/ VALUE
(UNAUDITED) SHARES (NOTE 2)
NEW YORK MUNICIPALS SECURITIES (CONTINUED)
White Plains, G.O. Bond, 4.50%, 9/1/2005 Aa1 $ 180,000 $ 186,140
White Plains, G.O. Bond, 4.50%, 9/1/2007 Aa1 315,000 323,140
William Floyd Union Free School District, G.O. Bond, 5.70%,
6/15/2008 Aaa 405,000 451,697
Williamsville Central School District, G.O. Bond, 5.375%,
5/1/2004 Aaa 800,000 857,992
Wyandanch Union Free School District, G.O. Bond, 5.60%,
4/1/2017 Aaa 500,000 533,425
------------
TOTAL MUNICIPAL SECURITIES
(Identified Cost $56,496,203) 59,044,370
------------
SHORT-TERM INVESTMENTS - 1.5%
Dreyfus Basic New York Tax Free Money Market Fund
(Identified Cost $919,643) 919,643 919,643
------------
TOTAL INVESTMENTS - 98.7%
(Identified Cost $57,415,846) 59,964,013
OTHER ASSETS, LESS LIABILITIES - 1.3% 808,421
------------
NET ASSETS - 100% $60,772,434
============
</TABLE>
KEY -
G.O. Bond - General Obligation Bond
Ref. - Referendum
*Credit Rating by Moodys (unaudited)
Federal Tax Information:
At December 31, 1998, the net unrealized appreciation (based on identified
cost for federal income tax purposes of $57,415,846) was as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $2,739,173
Unrealized depreciation (191,006)
-------------
Unrealized appreciation - net $2,548,167
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31, 1998
ASSETS:
Investments, at value (identified cost $57,415,846)(Note 2) $59,964,013
Interest receivable 818,411
Receivable for fund shares sold 32,320
------------
TOTAL ASSETS 60,814,744
------------
LIABILITIES:
Accrued management fee (Note 3) 25,971
Accrued Directors fees (Note 3) 3,276
Transfer agent fees payable (Note 3) 1,247
Audit fee payable 11,405
Other payables and accrued expenses 411
------------
TOTAL LIABILITIES 42,310
------------
NET ASSETS FOR 5,780,577 SHARES
OUTSTANDING $60,772,434
============
NET ASSETS CONSIST OF:
Capital stock $ 57,806
Additional paid-in-capital 58,046,541
Undistributed net investment income 139,770
Accumulated net realized loss on investments (19,850)
Net unrealized appreciation on investments 2,548,167
------------
TOTAL NET ASSETS $60,772,434
============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($60,772,434 / 5,780,577 shares) $ 10.51
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
<S> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Interest $2,398,018
-----------
EXPENSES:
Management fee (Note 3) 250,787
Directors' fees (Note 3) 6,700
Transfer agent fees (Note 3) 12,038
Audit fee 15,000
Custodian fee 12,000
Miscellaneous 9,146
-----------
Total Expenses 305,671
-----------
NET INVESTMENT INCOME 2,092,347
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on investments (identified cost basis) (38)
Net change in unrealized appreciation on investments 556,299
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS 556,261
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $2,648,608
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE YEAR FOR THE YEAR
Ended 12/31/98 Ended 12/31/97
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 2,092,347 $ 1,807,166
Net realized gain (loss) on investments (38) 632
Net change in unrealized appreciation
on investments 556,299 1,603,090
---------------- ----------------
Net increase from operations 2,648,608 3,410,888
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income (2,050,623) (1,768,897)
---------------- ----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase from capital share transactions (Note 5) 14,493,132 6,714,448
---------------- ----------------
Net increase in net assets 15,091,117 8,356,439
NET ASSETS:
Beginning of year 45,681,317 37,324,878
---------------- ----------------
END OF YEAR (including undistributed net investment
income of $139,770 and $98,046, respectively) $ 60,772,434 $ 45,681,317
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
For the period
1/17/94
For the Years Ended (Commencement
of operations)
12/31/98 12/31/97 12/31/96 12/31/95 to 12/31/94
---------- --------------------- ---------- ---------- ----------------
Per share data (for a share outstanding
throughout each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.37 $ 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
========== ===================== ========== ========== ================
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
New York Tax Exempt Series (the "Fund") is a no-load diversified series of
Exeter Fund, Inc. (the Corporation), formerly known as Manning & Napier Fund,
Inc. The Corporation is organized in Maryland and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company.
Shares of the Fund are offered to investors, employees and clients of Manning
& Napier Advisors, Inc. (the "Advisor") and its affiliates. The total
authorized capital stock of the Corporation consists of one billion shares of
common stock each having a par value of $0.01. As of December 31, 1998, 940
million shares have been designated in total among 19 series, of which 50
million have been designated as New York Tax Exempt Series Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Municipal securities will normally be valued on the basis of market valuations
provided by an independent pricing service (the "Service"). The Service
utilizes the latest price quotations and a matrix system (which considers such
factors as security prices of similar securities, yields, maturities, and
ratings). The Service has been approved by the Funds Board of Directors.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by the Advisor under procedures established by and under the general
supervision of the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies. The Fund is not subject
to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized
gains on investments in accordance with requirements of the Internal
Revenue Code. Accordingly, no provision for federal income tax or excise
tax has been made in the financial statements.
15
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAXES (continued)
At December 31, 1998, the Fund, for federal income tax purposes, had a capital
loss carryforward of $19,850. Of this amount, $1,918 will expire on December
31, 2002, $17,559 will expire on December 31, 2003, $335 will expire on
December 31, 2004, and $38 will expire on December 31, 2006.
The Fund uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made
quarterly. Distributions are recorded on the ex-dividend date.
Distributions of net realized gains are made annually. An additional
distribution may be necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses or character reclassification between net
income and net gains. As a result, net investment income (loss) and net
investment gain (loss) on investment transactions for a reporting period may
differ significantly from distributions to shareholders during such period.
As a result, the Fund may periodically make reclassifications among its
capital accounts without impacting the Fund's net asset value.
The Fund hereby designates 100% of its ordinary distributions as tax-exempt
dividends for the year ended December 31, 1998.
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of the revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which the
Fund pays a fee, computed daily and payable monthly, at an annual rate of
0.50% of the Fund's average daily net assets. The fee amounted to $250,787
for the year ended December 31, 1998.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Fund with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise
maintain the Fund's
16
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (continued)
organization. The Advisor also provides the Fund with necessary office space
and portfolio accounting and bookkeeping services. The salaries of all
officers of the Fund and of all Directors who are "affiliated persons" of the
Fund or of the Advisor, and all personnel of the Fund or of the Advisor
performing services relating to research, statistical and investment
activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Fund pays a fee which
is calculated as a percentage of the average daily net assets at an annual
rate of 0.024%; this fee amounted to $12,038 for the year ended December 31,
1998.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate
of the Advisor, acts as distributor for the Fund's shares. The services of
Manning & Napier Investor Services, Inc. are provided at no additional cost to
the Fund.
The compensation of the non-affiliated Directors totaled $6,700 for the year
ended December 31, 1998.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$15,763,348 and $1,275,064, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of New York Tax Exempt Series were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Year For the Year
Ended 12/31/98 Ended 12/31/97
--------------- ---------------
Shares Amount Shares Amount
--------------- ------------ --------------- ------------
Sold 1,763,211 $18,531,432 880,742 $ 8,945,358
Reinvested 191,072 2,000,958 171,409 1,740,404
Repurchased (577,357) (6,039,258) (389,781) (3,971,314)
--------------- ------------ --------------- ------------
Total 1,376,926 $14,493,132 662,370 $ 6,714,448
=============== ============ =============== ============
</TABLE>
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options and
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. No such
investments were held by the Fund on December 31, 1998.
17
<PAGE>
Notes to Financial Statements
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of
New York and its political subdivisions, agencies, and public authorities
to obtain funds for various public purposes. The Fund is more susceptible to
factors adversely affecting issues of New York municipal securities than is a
municipal bond fund that is not concentrated in these issues to the same
extent.
18
<PAGE>
Independent Accountants Report
To the Shareholders and the Board of Directors of
Exeter Fund, Inc._ New York Tax Exempt Series:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Exeter Fund,
Inc. (formerly Manning & Napier Fund, Inc.) _ New York Tax Exempt Series at
December 31, 1998, the results of its operations, the changes in its net
assets, and its financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
19
<PAGE>
<PAGE>
EXETER FUND, INC.
OHIO TAX EXEMPT SERIES
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
DEAR SHAREHOLDERS:
If you step back and think about it, domestic fixed income portfolio
management is primarily an economic exercise. With the growth of global trade,
the ability of electronic commerce to connect geographically diverse regions,
and the development of highly efficient, fully integrated financial markets,
the world has shrunk in an economic sense. That means that bond managers,
whether they focus on taxable or tax-exempt securities, can no longer rely
strictly on a domestic economic perspective. They must incorporate the global
factors that impact domestic interest rates into their investment process.
The logical question that arises is what can international events possibly
have to do with municipal bonds issued by state and local governments? The
answer is that interest rates across all sectors, including munis, key off of
U.S. Treasury interest rates. The relative attractiveness of municipal bonds
depends upon their relationship to U.S. Treasury rates. That is why they are
often quoted as a percentage of U.S. Treasury yields.
With that in mind, we would like to discuss some of the global events that
have impacted the U.S. fixed income markets during the second half of 1998.
The international event that triggered the greatest response occurred in
August of last year when Russia effectively defaulted on its internal debt,
and the world concluded that the Russian economy was about to implode. That
triggered an almost universal reassessment of investors risk tolerances, and
what followed was an overall flight to quality.
One of the primary beneficiaries of this was the U.S. fixed income markets.
However, not all sectors of the market benefited equally. The vast majority of
the money flowed into the U.S. Treasury marketplace, causing their yields to
move down much faster than all other fixed income sectors, including munis.
The disparity became so great that there were times at the end of the third
quarter and the start of the fourth, that the yields for long munis were
higher than the yields for 30-year U.S. Treasury bonds.
Interestingly, longer-term U.S. Treasuries performed the best at first.
Shorter-term U.S. Treasury securities are much more dependent on the actions
of theFederal Reserve (the "Fed") and the Fed did not cut short-term rates
until thebeginning of October. The Fed's focus was a touch different. It
was more concerned with the growing credit crunch conditions that were
associated with the problems in Russia, the spread of the Asian contagion
to Latin America, and the collapse of a number of high-profile hedge funds.
The problems at the hedge funds were due to over-leverage during a period
when emerging market securities, and most non-Treasury securities, were
under duress. The combination of these events and the defaults they
engendered caused banks to reassess their lending standards. As a
result, banks reigned in their standards, and made credit a touch more
difficult to get. That concerned the Fed, and it cut short-term interest rates
on three separate occasions.
By the end of October, U.S. Treasury interest rates were down more than 100
basis points from the beginning of the year. The declines in muni yields were
much less pronounced. Shorter-term muni rates had fallen by about 50 basis
points (0.50%), while longer-term munis only experienced declines in the
neighborhood of 25 basis points(0.25%) .
The actions of the Fed helped alleviate the concerns of the financial markets
and the flight to quality that drove U.S. Treasury rates so low reversed
itself somewhat. This caused U.S. Treasury rates to rise modestly during the
last two months of the year, while most other fixed income sectors including
munis held their ground.
1
<PAGE>
Management Discussion and Analysis (continued)
The performance of the Ohio Tax Exempt Series reflects the decline in
municipal interest rates as it earned its coupon and generated modest, yet
unrealized capital gains. The Ohio Tax Exempt series returned 5.35% over the
last 12 months, a touch lower than its comparable benchmark, the Merrill Lynch
Intermediate Municipal Index which returned 6.27% for the year, but that
return does not account for fees. Furthermore, the index includes higher
yielding, lower rated securities (i.e. securities rated triple-B) which our
funds at this time do not.
It has been an interesting year in the financial markets with global events
dictating how the domestic fixed income markets, including munis, have
performed. In some cases, interesting has meant "troubling" (i.e. emerging
markets) while in others, it has meant joyous (i.e. long U.S. Treasury bonds).
Going forward investors should expect their managers to rely upon an
increasingly global focus. Failure to do so can be expensive.
As always it has been a pleasure helping you meet your investment objectives,
we look forward to helping you meet those goals in the future. We hope you and
your family have a safe and prosperous 1999.
Sincerely,
Exeter Asset Management
[graphic]
<pie chart>
Data for pie chart to follow
Portfolio Composition1 - As of 12/31/98
<TABLE>
<CAPTION>
<S> <C>
General Obligation Bonds 59%
Revenue Bonds 40%
Pre-Refunded Bonds 1%
</TABLE>
1 As a percentage of municipal securities.
[graphic]
<pie chart>
Quality Ratings2 - As of 12/31/98
Data for pie chart to follow
<TABLE>
<CAPTION>
<S> <C>
Aaa 89%
Aa 9%
A 2%
</TABLE>
2 Using Moodys Ratings, as a percentage of municipal securities (unaudited).
2
<PAGE>
Performance Update as of December 31, 1998
Exteter Fund, Inc. Ohio Tax Exempt Series
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 10,535 5.35% 5.35%
Inception 2 $ 12,882 28.82% 5.32%
</TABLE>
Merrill Lynch Intermediate Municipal Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 10,627 6.27% 6.27%
Inception 2 $ 13,183 31.83% 5.82%
</TABLE>
The value of a $10,000 investment in the
Exeter Fund, Inc. - Ohio
Tax Exempt Series from its inception
(2/14/94) to present (12/31/98) as
compared to the Merrill Lynch Intermediate
Municipal Index.1
[graphic]
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Exeter Fund, Inc. Merrill Lynch Intermediate
Date Ohio Tax Exempt Series Municipal Index
01/17/94 $10,000 $10,000
12/31/94 9,377 9,709
12/31/95 10,985 11,009
12/31/96 11,331 11,520
12/31/97 12,228 12,406
12/31/98 12,882 13,183
</TABLE>
1 The unmanaged Merrill Lynch Intermediate Municipal Index is a
market value weighted measure of approximately 116 municipal
bonds issued across the United States. The Index is comprised of
investment grade securities. Index returns assume reinvestment of
coupons and, unlike Fund returns, do not reflect any fees or
expenses.
2 The Fund and Index performance numbers are calculated from
February 14, 1994, the Fund's inception date. The Fund's
performance is historical and may not be indicative of future results
3
<PAGE>
Investment Portfolio- December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Principal Value
Rating* Amount (Note 2)
(unaudited)
OHIO MUNICIPAL SECURITIES - 97.21%
Akron Bath Copley Joint Twnshp. Childrens Hos. Med. Ctr.,
Revenue Bond, 7.45%, 11/15/2020 Aaa $ 50,000 $ 54,613
Akron Limited Tax, G.O. Bond, 4.10%, 12/1/2001 Aaa 65,000 66,017
Akron Waterworks, Revenue Management Bond, 5.70%,
3/1/2007 Aaa 100,000 109,032
Allen County, G.O. Bond, 5.30%, 12/1/2007 Aaa 100,000 105,787
Amherst Police & Jail Facility, G.O. Bond, 5.375%, Aaa 50,000 52,912
12/1/2012
Avon Lake, G.O. Bond, 5.70%, 12/1/2006 A 60,000 64,741
Avon Lake, G.O. Bond, 6.00%, 12/1/2009 A 40,000 43,302
Barberton City School District, G.O. Bond, 5.125%, 11/1/2022 Aaa 500,000 499,620
Bedford Heights, G.O. Bond, Series A, 5.65%, 12/1/2014 Aaa 60,000 66,772
Belmont County, G.O. Bond, 5.15%, 12/1/2010 Aaa 100,000 104,624
Brecksville-Broadview Heights City School District, G.O.
Bond, 5.25%, 12/1/2021 Aaa 115,000 117,222
Canton City School District, G.O. Bond, 5.85%, 12/1/2007 Aaa 40,000 44,771
Chagrin Falls Exempt Village School District, G.O. Bond,
5.55%, 12/1/2022 Aa3 100,000 104,893
Cincinnati, G.O. Bond, 4.60%, 12/1/2003 Aal 50,000 51,918
Cleveland City School District, G.O. Bond, 5.875%, Aaa 125,000 135,384
12/1/2011
Cleveland Public Power Systems Ref., G.O. Bond, 5.00%, Aaa 500,000 494,245
11/15/2024
Cleveland Waterworks Revenue Ref. & Impt. - First Meeting,
Revenue Bond, Series H, 5.50%, 1/1/2010 Aaa 170,000 184,744
Cleveland Waterworks, Revenue Bond, First Meeting, Series G,
5.50%, 1/1/2013 Aaa 100,000 109,649
Cleveland Waterworks Ref & Impt., Revenue Bond, Series I, Aaa 265,000 262,596
5.00% ,1/1/2028
Columbus, G.O. Bond, Series 1, 5.25%, 9/15/2018 Aaa 195,000 199,740
Columbus Sewer Improvement Number 28, G.O. Bond,
6.00%, 5/1/2011 Aaa 155,000 171,242
Columbus, G.O. Bond, Series 1, 4.625%, 6/15/2018 Aaa 200,000 193,392
Columbus, G.O. Bond, Series D, 5.50%, 9/15/2008 Aaa 50,000 54,217
Crawford County, G.O. Bond, 6.75%, 12/1/2019 Aaa 175,000 200,912
Cuyahoga Falls, G.O. Bond, 7.20%, 12/1/2010 N/R 75,000 79,259
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Investment Portfolio- December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Principal Value
Rating* Amount (Note 2)
(unaudited)
OHIO MUNICIPAL SECURITIES (continued)
Delaware City School Distrcit, G.O. Bond., 5.00%, 12/01/2025 Aaa $ 450,000 $446,036
Delaware City School District, Construction & Impt., G.O.
Bond, Series B, 5.20%, 12/1/2016 Aaa 100,000 102,403
Dublin City School District, G.O. Bond, 5.00%, 12/1/2019 Aaa 300,000 298,830
Erie County Revenue Ref & Impt., G.O. Bond, 4.75%, 10/1/2019 Aaa 175,000 168,940
Fairfield County Hospital Impt., Lancaster-Fairfield Community Aaa 50,000 54,879
Hospital, Revenue Bond, 7.00%, 6/15/2012
Findlay Water, Revenue Bond, 5.45%, 11/1/2008 Aaa 100,000 106,152
Franklin County, G.O. Bond, 4.95%, 12/1/2004 Aaa 50,000 52,971
Franklin County, G.O. Bond, 5.50%, 12/1/2013
Gahanna-Jefferson City School District, G.O. Bond, 4.75%, Aaa 100,000 107,551
12/1/1999 Aaa 50,000 50,788
Greene County Sewer System, Revenue Bond, 5.50%,
12/1/2018 Aaa 30,000 $ 31,294
Hamilton County Sewer System Ref. & Impt. - Metro Sewer
District, Revenue Bond, Series A, 5.00%, 12/1/2014 Aaa 125,000 126,411
Hilliard School District, G.O. Bond, 6.35%, 12/1/2003 Aaa 60,000 66,692
Hilliard School District, G.O. Bond, Series A, 5.00%, 12/1/2020 Aaa 225,000 224,397
Indian Lake Local School District Construction & Impt.,
G.O. Bond, 5.375%, 12/1/2023 Aaa 220,000 226,824
Kettering City School District School Impt., G.O. Bond,
5.30%, 12/1/2014 Aaa 125,000 130,334
Kettering City School District, G.O. Bond, 4.85%, 12/1/2006 Aaa 40,000 42,098
Kettering City School District, G.O. Bond, 5.25%, 12/1/2022 Aaa 60,000 60,968
Kings Local School District, G.O. Bond, 5.50%, 12/1/2021 Aaa 115,000 119,685
Lakewood City School District, G.O. Bond, 5.55%, A1 100,000 105,086
12/1/2013
Lakota Local School District, G.O. Bond, 5.75%, 12/1/2006 Aaa 50,000 54,930
Lakota Local School District, G.O. Bond, 7.00%, 12/1/2008 Aaa 100,000 122,606
Mahoning County, G.O. Bond, 5.70%, 12/1/2009 Aaa 150,000 163,191
Mason City School District, G.O. Bond, 5.00%, 12/1/2007 Aaa 120,000 126,016
Mentor, G.O. Bond, 5.25%, 12/01/2017 Aa3 100,000 102,798
Montgomery County, G.O. Bond, 5.30%, 9/1/2007 Aa3 65,000 68,780
Montgomery County, Moraine-Beaver Creek Sewers, Revenue
Bond, 5.60%, 9/1/2011 Aaa 100,000 107,013
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Principal Value
Rating* Amount (Note 2)
(unaudited)
OHIO MUNICIPAL SECURITIES (continued)
North Canton City School Ref., G.O. Bond, 5.00%, 12/1/2019 Aaa $ 400,000 $399,984
North Olmstead, G.O. Bond, 6.20%, 12/1/2011 Aaa 200,000 231,106
North Olmstead, G.O. Bond, 5.00%, 12/1/2016 Aaa 125,000 126,475
Northwood Local School District, G.O. Bond, 5.55%, 12/1/2006 Aaa 65,000 71,508
Northwood Local School District, G.O. Bond, 6.20%, 12/1/2013 Aaa 40,000 44,893
Ohio, G.O. Bond, 6.50%, 8/1/2011 Aal 50,000 54,001
Ohio Building Authority, Local Jail Grant, Revenue Bond,
Series A, 4.65%, 10/1/2005 Aaa 50,000 51,918
Ohio Building Authority, State Facilities - Administration
Building, Revenue Bond, 5.50%, 10/1/2005 Aaa 50,000 54,411
Ohio Higher Education Facility, University of Dayton Aaa 100,000 107,150
Project, Revenue Bond, 5.80%, 12/1/2019
Ohio Public Facilities, Higher Education, Revenue Bond,
Series II-A, 4.25%, 12/1/2002 Aaa 50,000 $ 50,975
Ohio State Infrastructure Improvement, G.O. Bond, 5.20%,
8/1/2010 Aal 250,000 267,593
Ohio State Turnpike, Revenue Bond, Series A, 5.40%,
2/15/2009 Aaa 250,000 271,185
Ohio State Turnpike, Revenue Bond, Series A, 5.70%,
2/15/2017 Aaa 125,000 139,838
Ohio State Water Development Authority Ref. & Impt. -
Pure Water, Revenue Bond, 5.75%, 12/1/2005 Aaa 60,000 64,756
Ohio State Water Development Authority Pure Water,
Revenue Bond, Series I, 6.00%, 12/1/2016 Aaa 40,000 45,339
Ohio State Water Development Authority, Pollution Control
Facility, Revenue Bond, 5.25%, 12/1/2014 Aaa 100,000 103,736
Ohio State Water Development Authority, Revenue Bond,
5.125%, 12/01/2023 Aaa 300,000 299,778
Ontario Local School District, G.O. Bond, 5.00%, 12/1/2023 Aaa 500,000 495,755
Ottawa County, G.O. Bond, 5.45%, 9/1/2006 Aaa 30,000 32,592
Pickerington Local School District Construction & Impt.,
G.O. Bond, 5.375%, 12/1/2019 Aaa 150,000 154,325
Pickerington Water Systems Improvements, G.O. Bond,
5.85%, 12/1/2013 Aaa 50,000 54,930
</TABLE>
The accompanying notes are an integral part of the financial statemtents.
6
<PAGE>
Investment Portfolio - December 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Principal Value
Rating* Amount (Note 2)
(unaudited)
OHIO MUNICIPAL SECURITIES (continued)
Reynoldsburg City School District, G.O. Bond, 6.55%,
12/1/2017 Aaa $ 175,000 $ 196,123
Rocky River City School District, G.O. Bond, Series A,
6.90%, 12/1/2011 Aa2 50,000 54,198
Rural Lorain Water Authority Ref. & Impt., Revenue Bond,
5.30%, 10/1/2012 Aaa 110,000 116,247
South-Western City School District, Franklin & Pickway
Counties, G.O. Bond, 4.80%, 12/1/2006 Aaa 100,000 104,188
Stark County, G.O. Bond, 5.70%, 11/15/2017 Aaa 100,000 105,791
Summit County, G.O. Bond, 5.75%, 12/1/2008 Aaa 175,000 191,338
Toledo Sewer System, Revenue Bond, 6.35%, 11/15/2017 Aaa 185,000 208,945
Toledo, G.O. Bond, 5.95%, 12/1/2015 Aaa 175,000 192,801
Trumbull County, G.O. Bond, 6.20%, 12/1/2014 Aaa 100,000 111,953
Warren, G.O. Bond, 5.20%, 11/15/2013 Aaa 50,000 53,675
Warren County Waterworks, Revenue Bond, 6.00%, 12/1/2014 Aaa 100,000 110,132
Warren County Waterworks, Revenue Bond, 5.45%, 12/1/2015 Aaa 140,000 145,789
Warren County Waterworks, Revenue Bond, 5.00%, 11/1/2022 Aaa 250,000 247,920
Westlake Ref. & Impt., G.O. Bond, 5.50%, 12/1/2020 Aal 295,000 309,635
Wood County, G.O. Bond, 5.40%, 12/1/2013 Aa3 50,000 52,587
Youngstown, G.O. Bond, 6.125%, 12/1/2014 Aaa 50,000 55,782
------------
TOTAL MUNICIPAL SECURITIES
(Identified Cost $11,597,885) 12,218,619
------------
SHORT-TERM INVESTMENTS - 1.89%
Dreyfus Municipal Reserves
(Identified Cost $236,176) 236,176 236,176
------------
TOTAL INVESTMENTS - 99.10%
(Identified Cost $11,834,061) 12,454,795
OTHER ASSETS, LESS LIABILITIES - 0.90% 114,491
------------
NET ASSETS - 100% $12,569,286
============
</TABLE>
Key -
G.O. Bond - General Obligation Bond
Hos. - Hospital
Med. Ctr. - Medical Center
Impt. - Improvement
Ref. - Refunding
*Credit Ratings from Moodys (unaudited)
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Federal Tax Information:
At December 31, 1998 the net unrealized appreciation (based on identified cost
for federal income tax purposes of $11,834,061) was as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $659,176
Unrealized depreciation (38,442)
---------
UNREALIZED APPRECIATION - NET $620,734
=========
</TABLE>
The accompanying notes are an integral part of the financial statemtents.
8
<PAGE>
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31, 1998
ASSETS:
Investments, at value (identified cost $11,834,061)(Note 2) $12,454,795
Interest receivable 90,607
Receivable for fund shares sold 46,700
------------
TOTAL ASSETS 12,592,102
------------
LIABILITIES:
Accrued management fee (Note 3) 5,320
Accrued Directors' fees (Note 3) 3,279
Transfer agent fees payable (Note 3) 255
Audit fee payable 12,508
Other payables and accrued expenses 1,454
------------
TOTAL LIABILITIES 22,816
------------
NET ASSETS FOR 1,179,070 SHARES OUTSTANDING $12,569,286
============
NET ASSETS CONSIST OF:
Capital stock $ 11,790
Additional paid-in-capital 11,921,229
Undistributed net investment income 15,886
Accumulated net realized loss on investments (353)
Net unrealized appreciation on investments 620,734
------------
TOTAL NET ASSETS $12,569,286
============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($12,569,286/1,179,070 shares) $ 10.66
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
Statement of Operations
<TABLE>
<CAPTION>
<S> <C>
For the Year Ended December 31, 1998
INVESTMENT INCOME:
Interest $494,263
--------
EXPENSES:
Management fee (Note 3) 50,474
Directors' fees (Note 3) 6,700
Transfer agent fees (Note 3) 2,423
Audit fee 12,600
Custodian fee 3,000
Miscellaneous 4,969
--------
Total Expenses 80,166
--------
NET INVESTMENT INCOME 414,097
--------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments (identified cost basis) 426
Net change in unrealized appreciation on investments 85,980
--------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 86,406
--------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $500,503
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
<S> <C> <C>
For the Year For the Year
Ended 12/31/98 Ended 12/31/97
---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 414,097 $ 380,786
Net realized gain (loss) on investments 426 (779)
Net change in unrealized appreciation on investments 85,980 296,013
---------------- ----------------
Net increase from operations 500,503 676,020
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (Note 2):
From net investment income (405,764) (375,341)
---------------- ----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase from capital share transactions (Note 5) 3,168,569 1,307,744
---------------- ----------------
Net increase in net assets 3,263,308 1,608,423
NET ASSETS:
Beginning of year 9,305,978 7,697,555
---------------- ----------------
End of year (including undistributed net investment
income of $15,886 and $7,553, respectively) $ 12,569,286 $ 9,305,978
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C>
For the
Years Ended
12/31/98 12/31/97
------------- ----------
Per share data (for a share outstanding
throughout each period):
Net asset value - Beginning of period $ 10.53 $ 10.18
------------- ----------
Income from investment operations:
Net investment income* 0.430 0.446
Net realized and unrealized gain (loss)
on investments 0.125 0.344
------------- ----------
Total from investment operations 0.555 0.790
------------- ----------
Less distributions to shareholders:
From net investment income (0.425) (0.440)
From net realized gain on investments -- --
------------- ----------
Total distributions to shareholders (0.425) (0.440)
------------- ----------
Net asset value - End of period $ 10.66 $ 10.53
============= ==========
Total return 1 5.35% 7.92%
Ratios of expenses (to average net assets) /
Supplemental Data:
Expenses* 0.79% 0.79%
Net investment income* 4.10% 4.37%
Portfolio turnover 5% 12%
Net assets - End of period (000's omitted) $ 12,569 $ 9,306
============= ==========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Period
2/14/94
(commencement
of operations)
12/31/96 12/31/95 to 12/31/94
---------- ---------- ----------------
Per share data (for a share outstanding
throughout each period):
Net asset value - Beginning of period $ 10.31 $ 9.18 $ 10.00
---------- ---------- ----------------
Income from investment operations:
Net investment income* .439 0.419 0.205
Net realized and unrealized gain (loss)
on investments (0.129) 1.136 (0.828)
---------- ---------- ----------------
Total from investment operations 0.310 1.555 (0.623)
---------- ---------- ----------------
Less distributions to shareholders:
From net investment income (0.438) (0.425) (0.197)
From net realized gain on investments (0.002) -- --
---------- ---------- ----------------
Total distributions to shareholders (0.440) (0.425) (0.197)
---------- ---------- ----------------
Net asset value - End of period $ 10.18 $ 10.31 $ 9.18
========== ========== ================
Total return 1 3.16% 17.14% (6.23)%
Ratios to average net assets
Supplemental Data:
Expenses* 0.85% 0.85% 0.85%2
Net investment income* 4.40% 4.50% 4.03%2
Portfolio turnover 2% 1% 2%
Net assets - End of period (000's omitted) $ 7,698 $ 6,144 $ 3,901
========== ========== ================
</TABLE>
* The investment advisor did not impose all or a portion of its management fee
and in some periods paid a portion of the Fund's expenses. If these expenses
had been incurred by the Fund, the net investment income per share and the
ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
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
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
Notes to Financial Statements
1. ORGANIZATION
Ohio Tax Exempt Series (the "Fund") is a no-load diversified series of Exeter
Fund, Inc. (the "Corporation"), formerly known as Manning & Napier Fund, Inc.
The Corporation is organized in Maryland and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company.
Shares of the Fund are offered to investors, employees and clients of Manning
& Napier Advisors, Inc. (the "Advisor") and its affiliates. The total
authorized capital stock of the Corporation consists of one billion shares of
common stock each having a par value of $0.01. As of December 31, 1998, 940
million shares have been designated in total among 19 series, of which 50
million have been designated as Ohio Tax Exempt Series Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Municipal securities will normally be valued on the basis of market valuations
provided by an independent pricing service (the "Service"). The Service
utilizes the latest price quotations and a matrix system (which considers such
factors as security prices of similar securities, yields, maturities, and
ratings). The Service has been approved by the Funds Board of Directors.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by the Advisor under procedures approved by and under the general
supervision of the Funds Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is
not subject to federal income or excise tax to the extent the Fund
distributes to shareholders each year its taxable income,
including any net realized gains on investments in accordance with
requirements of the Internal Revenue Code. Accordingly, no provision
for federal income tax or excise tax has been made in the financial
statements.
13
<PAGE>
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES(continued)
FEDERAL INCOME TAXES(continued)
At December 31, 1998, the Fund, for federal income tax purposes, had
a capital loss carry forward of $353 that will expire December 31, 2005.
The Fund uses the identified cost method for determining realized gain
or loss on investments for both financial statement and federal
income tax reporting purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of tax exempt income are made quarterly.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are made annually. An additional distribution may be necessary
to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses or character reclassification between net
income and net gains. As a result, net investment income (loss) and net
investment gain (loss) on investment transactions for a reporting period may
differ significantly from distributions to shareholders during such period.
As a result, the Fund may periodically make reclassifications among its
capital accounts without impacting the Fund's net asset value.
The fund hereby designates 100% of its ordinary distributions as tax-
exempt dividends for the year ended December 31, 1998.
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of the revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which the
Fund pays a fee, computed daily and payable monthly, at an annual rate of
0.50% of the Fund's average daily net assets. The fee amounted to $50,474 for
the year ended December 31, 1998.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Fund with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise
maintain the Fund's organization. The Advisor also provides the Fund with
necessary office space and portfolio accounting and bookkeeping services. The
salaries of all officers of the Fund and of all Directors who are "affiliated
persons" of the Fund or of the Advisor, and all personnel of the Fund or of
the Advisor performing services relating to research, statistical and
investment activities are paid by the Advisor.
14
<PAGE>
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (continued)
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Fund pays a fee which
is calculated as a percentage of the average daily net assets at an annual
rate of 0.024%; this fee amounted to $2,423 for the year ended December 31,
1998.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate
of the Advisor, acts as distributor for the Fund's shares. The services of
Manning & Napier Investor Services, Inc. are provided at no additional cost to
the Fund.
The compensation of the non-affiliated Directors totaled $6,700 for the year
ended December 31, 1998.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$3,673,251 and $449,392, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Ohio Tax Exempt Series were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Year For the Year
Ended 12/31/98 Ended 12/31/97
--------------- ----------------
Shares Amount Shares Amount
--------------- ----------- ---------------- ------------
Sold 406,999 $4,339,586 312,374 $ 3,225,466
Reinvested 36,480 393,729 34,046 351,939
Repurchased (148,132) (1,564,746) (219,088) (2,269,661)
---------------- ----------- ---------------- ------------
Total 295,347 $3,168,569 127,332 $ 1,307,744
================ =========== ================ ============
</TABLE>
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options and
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. No such
investments were held by the Fund on December 31, 1998.
15
<PAGE>
Notes to Financial Statements
7. CONCENTRATION OF CREDIT
The Fund primarily invests in debt obligations issued by the State of Ohio
and its political subdivisions, agencies, and public authorities to
obtain funds for various public purposes. The Fund is more susceptible to
factors adversely affecting issues of Ohio municipal securities than is a
municipal bond fund that is not concentrated in these issues to the same
extent.
16
<PAGE>
Independent Accountants Report
TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF
EXETER FUND, INC.- OHIO TAX EXEMPT SERIES:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Exeter Fund,
Inc. (formerly Manning & Napier Fund, Inc.) - Ohio Tax Exempt Series at
December 31, 1998, the results of its operations, the changes in its net
assets, and its financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
17
<PAGE>
<PAGE>
EXETER FUND, INC.
DIVERSIFIED TAX EXEMPT SERIES
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
DEAR SHAREHOLDERS:
If you step back and think about it, domestic fixed income portfolio
management is primarily an economic exercise. With the growth of global trade,
the ability of electronic commerce to connect geographically diverse regions,
and the development of highly efficient, fully integrated financial markets,
the world has shrunk in an economic sense. That means that bond managers,
whether they focus on taxable or tax-exempt securities, can no longer rely
strictly on a domestic economic perspective. They must incorporate the global
factors that impact domestic interest rates into their investment process.
The logical question that arises is what can international events possibly
have to do with municipal bonds issued by state and local governments? The
answer is that interest rates across all sectors, including munis, key off of
U.S. Treasury interest rates. The relative attractiveness of municipal bonds
depends upon their relationship to U.S. Treasury rates. That is why they are
often quoted as a percentage of U.S. Treasury yields.
With that in mind, we would like to discuss some of the global events that
have impacted the U.S. fixed income markets during the second half of 1998.
The international event that triggered the greatest response occurred in
August of last year when Russia effectively defaulted on its internal debt,
and the world concluded that the Russian economy was about to implode. That
triggered an almost universal reassessment of investors' risk tolerances, and
what followed was an overall flight to quality.
One of the primary beneficiaries of this was the U.S. fixed income markets.
However, not all sectors of the market benefited equally. The vast majority of
the money flowed into the U.S. Treasury marketplace, causing their yields to
move down much faster than all other fixed income sectors, including munis.
The disparity became so great that there were times at the end of the third
quarter and the start of the fourth, that the yields for long munis were
higher than the yields for 30-year U.S. Treasury bonds.
Interestingly, longer-term U.S. Treasuries performed the best at first.
Shorter-term U.S. Treasury securities are much more dependent on the actions
of the Federal Reserve (the "Fed") and the Fed did not cut short-term rates
until the beginning of October. The Feds focus was a touch different. It was
more concerned with the growing credit crunch conditions that were associated
with the problems in Russia, the spread of the Asian contagion to Latin
America, and the collapse of a number of high-profile hedge funds. The
problems at the hedge funds were due to over-leverage during a period
when emerging market securities, and most non-Treasury securities, were
under duress. The combination of these events and the defaults they
engendered caused banks to reassess their lending standards. As a result,
banks reigned in their standards, and made credit a touch more difficult
to get. That concerned the Fed, and it cut short-term interest rates on three
separate occasions.
By the end of October, U.S. Treasury interest rates were down more than 100
basis points from the beginning of the year. The declines in muni yields were
much less pronounced. Shorter-term muni rates had fallen by about 50 basis
points (0.50%), while longer-term munis only experienced declines in the
neighborhood of 25 basis points (0.25%).
The actions of the Fed helped alleviate the concerns of the financial markets
and the flight to quality that drove U.S. Treasury rates so low reversed
itself somewhat. This caused U.S. Treasury rates to rise modestly during the
last two months of the year, while most other fixed income sectors including
munis held their ground.
1
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
The performance of the Diversified Tax-Exempt series reflects the decline in
municipal interest rates as it earned its coupon and generated modest, yet
unrealized capital gains. The Diversified series posted a 5.49% return in
1998, a touch lower than its comparable benchmark, the Merrill Lynch
Intermediate Municipal Index which returned 6.27% for the year, but that
return does not account for fees. Furthermore, the index includes higher
yielding, lower rated securities (i.e. securities rated triple-B) which our
funds at this time do not.
It has been an interesting year in the financial markets with global events
dictating how the domestic fixed income markets, including munis, have
performed. In some cases, interesting has meant "troubling" (i.e. emerging
markets) while in others, it has meant "joyous" (i.e. long U.S.
Treasury bonds). Going forward investors should expect their managers
to rely upon an increasingly global focus. Failure to do so can be expensive.
As always it has been a pleasure helping you meet your investment objectives,
and we look forward to helping you meet those goals in the future. We hope you
and your family have a safe and prosperous 1999.
Sincerely,
Exeter Asset Management
[graphic]
<pie chart>
Data for pie chart to follow:
Portfolio Composition1 -As of 12/31/98
<TABLE>
<CAPTION>
<S> <C>
General Obligation Bonds - 75%
Revenue Bonds - 24%
Pre-Refunded Bonds - 1%
</TABLE>
1 As a percentage of municipal securities
[graphic]
<pie chart>
Data for pie chart to follow:
Quality Ratings2 - As of 12/31/98
<TABLE>
<CAPTION>
<S> <C>
Aaa - 80%
Aa - 15%
A - 5%
</TABLE>
2 Using Moody's Ratings, as a percentage of municipal securities
(unauditied).
2
<PAGE>
PERFORMANCE UPDATE AS OF DECEMBER 31, 1998
Exeter Fund, Inc. Diversified Tax Exempt Series
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 10,549 5.49% 5.49%
Inception 2 $ 12,944 29.44% 5.43%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - Diversified Tax
Exempt Series from its inception (2/14/94) to present (12/31/98) as compared
to the Merrill Lynch Intermediate Municipal Index.1
Merril Lynch Intermediate Municipal Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
12/31/98 Investment Cumulative Annual
One Year $ 10,627 6.27% 6.27%
Inception 2 $ 13,183 31.83% 5.82%
</TABLE>
[graphic]
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Exeter Fund, Inc. Merrill Lynch
Diversified Tax Eexmpt Intermediate Municipal
Date Series Index
01/17/94 $ 10,000 $ 10,000
12/31/94 9,461 9,709
12/31/95 11,003 11,009
12/31/96 11,370 11,520
12/31/97 12,270 12,406
12/31/98 12,944 13,183
</TABLE>
1 The unmanaged Merrill Lynch Intermediate Municipal Index is a
market value weighted measure of approximately 116 municipal
bonds issued across the United States. The Index is comprised of
investment grade securities. Index returns assume reinvestment of
coupons and, unlike Fund returns, do not reflect any fees or
expenses.
2 The Fund and Index performance numbers are calculated from
February 14, 1994, the Fund's inception date. The Fund's
performance is historical and may not be indicative of future results.
3
<PAGE>
INVESTMENT PORTFOLIO - DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Rating* Principal Value
(unaudited) Amount (Note 2)
--------------- ----------
MUNICIPAL SECURITIES - 96.42%
ALABAMA - 1.46%
Bessemer Government Utility Service Water Supply, Revenue Bond, 5.20%, 6/01/2024 Aaa $ 500,000 $ 505,990
-----------
ALASKA - 0.94%
Anchorage, G.O. Bond, 6.10%, 8/1/2004 Aaa 300,000 323,841
-----------
ARIZONA - 1.37%
Central Arizona Water Conservation District, Revenue Bond,
4.70%, 5/1/2004 Aaa 200,000 208,244
Maricopa County School District No. 097 Deer Valley, G.O.
Bond, Series A, 5.20%, 7/1/2007 Aaa 250,000 267,035
-----------
475,279
-----------
CALIFORNIA - 3.18%
California State, G.O. Bond, 4.75%, 12/1/2028 Aa3 795,000 756,013
Wiseburn School District, G.O. Bond, Series A, 5.25%, 8/1/2016 Aaa 330,000 343,421
-----------
1,099,434
-----------
COLORADO - 0.53%
El Paso County School District No. 020, G.O. Bond, Series A,
6.20%, 12/15/2007 Aaa 160,000 183,973
-----------
DELAWARE - 0.60%
Wilmington, G.O. Bond, Series B, 5.90%, 4/1/2000 Aaa 200,000 206,474
-----------
FLORIDA - 6.81%
Dade County School District, G.O. Bond, 6.125%, 8/1/2008 Aaa 150,000 159,449
Florida State Board of Education Capital Outlay Public Ed.,
G.O. Bond, Series A, 5.00%, 6/1/2027 Aa2 750,000 742,110
Florida State Board of Education Capital Outlay Public Ed.,
G.O. Bond, Series C, 5.60%, 6/1/2025 Aaa 135,000 142,011
Florida State Dept. of Environmental Preservation 2000, Revenue
Bond, Series A, 4.50%, 7/1/2003 Aaa 200,000 205,740
Florida State Senior Lien - Jacksonville Trans, G.O. Bond,
5.00%, 7/1/2027 Aa2 710,000 702,552
Hillsborough County Capital Improvement Program, Revenue
Bond, 5.125%, 7/1/2022 Aaa 400,000 400,744
-----------
2,352,606
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
INVESTMENT PORTFOLIO - DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Rating* Principal Value
(unaudited) Amount (Note 2)
--------------- ---------- -----------
GEORGIA - 3.01%
Atlanta, G. O. Bond, 5.60%, 12/1/2018 Aa3 $ 350,000 $ 372,582
Georgia, G.O. Bond, Series B, 5.65%, 3/1/2012 Aaa 200,000 224,302
Rockdale County Water & Sewer Authority, Revenue Bond,
5.00%, 7/1/2022 Aaa 450,000 444,488
-----------
1,041,372
-----------
HAWAII - 0.84%
Hawaii, G.O. Bond, Series CH, 6.00%, 11/1/2007 A1 260,000 292,040
-----------
IDAHO - 0.31%
Ada & Canyon Counties Joint School District No. 2
Meridian, G.O. Bond, 5.10%, 7/30/2005 Aa2 100,000 106,761
-----------
ILLINOIS - 5.28%
Aurora, G.O. Bond, 5.80%, 1/1/2012 Aaa 190,000 208,295
Chicago Schools Financial Authority, G.O. Bond, Series A,
5.00%, 6/1/2007 Aaa 200,000 209,966
Chicago, G.O. Bond, Series A, 5.875%, 1/1/2022 Aaa 100,000 108,063
Chicago, G.O. Bond, 5.25%, 1/1/2027 Aaa 250,000 252,917
Cook County, G.O. Bond, Series A, 5.00%, 11/15/2022 Aaa 750,000 735,607
Illinois, Certificate Participation, Series 1995A, 5.60%,
7/1/2010 Aaa 100,000 107,950
Rock Island County School District No. 041, Rock Island,
G.O. Bond, 5.125%, 12/1/2015 Aaa 200,000 203,352
-----------
1,826,150
-----------
INDIANA - 3.25%
Bloomington Sewer Works, Revenue Bond, 5.80%, 1/1/2011 Aaa 150,000 163,446
Lafayette Waterworks, Revenue Bond, 4.90%, 7/1/2006 Aaa 140,000 145,443
South Harrison School Building Corp., Revenue Bond,
5.125%, 1/15/2021 Aaa 820,000 814,096
-----------
1,122,985
-----------
IOWA - 1.88%
Cedar Rapids, G. O. Bond, 6.45%, 6/1/2014 Aaa 350,000 382,742
Iowa City Sewer, Revenue Bond, 5.75%, 7/1/2021 Aaa 250,000 265,490
-----------
648,232
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
INVESTMENT PORTFOLIO - DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Rating* Principal Value
(unaudited) Amount (Note 2)
--------------- ---------- -----------
KANSAS - 1.46%
Derby, Series A, G.O. Bond, 5.00%, 6/1/2015 Aaa $ 275,000 $ 278,660
Johnson County Unified School District No. 229, G.O. Bond,
Series A, 5.00%, 10/1/2014 Aa1 220,000 225,038
-----------
503,698
-----------
KENTUCKY - 1.75%
Jefferson County School District Finance Corp. School
Building, Revenue Bond, Series A, 5.00%, 2/1/2011 Aaa 300,000 312,411
Kentucky State Turnpike Authority Revitalization Projects,
Revenue Bond, 6.50%, 7/1/2008 Aaa 250,000 294,020
-----------
606,431
-----------
LOUISIANA - 0.91%
New Orleans Sewer Service, Revenue Bond, 5.25%, 6/1/2012 Aaa 300,000 315,858
-----------
MAINE - 3.04%
Hermon, G.O. Bond, 5.60%, 11/1/2013 Aaa 75,000 81,178
Kennebec Water District, Revenue Bond, 5.125%, 12/1/2021 Aaa 750,000 745,462
Portland, G.O. Bond, 6.20%, 4/1/2006 Aa1 200,000 224,848
-----------
1,051,488
-----------
MARYLAND - 2.00%
Baltimore Water Project, Revenue Bond, Series A,
5.55%, 7/1/2009 Aaa 260,000 282,695
Prince Georges County Public Improvement, G.O. Bond,
5.00%, 3/15/2014 Aaa 200,000 203,470
Washington County Public Improvement, G.O. Bond,
4.875%, 1/1/2010 Aaa 200,000 206,766
-----------
692,931
-----------
MASSACHUSETTS - 4.48%
Martha's Vineyard Regional High School District No. 100,
G.O. Bond, 6.70%, 12/15/2014 Aaa 200,000 229,234
Massachusetts Bay Transit Authority, Revenue Bond, Series B,
5.25%, 3/1/2026 Aaa 500,000 506,495
Massachusetts Municipal Electric Supply System, Revenue
Bond, Series A, 5.00%, 7/1/2017 Aaa 200,000 199,642
Massachusetts State, G.O. Bond, Series C, 5.75%, 8/1/2010 Aaa 400,000 451,840
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
INVESTMENT PORTFOLIO - DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Rating* Principal Value
(unaudited) Amount (Note 2)
--------------- ---------- -----------
MASSACHUSETTS (CONTINUED)
Massachusetts Water Resource Authority General Ref.,
Revenue Bond, Series B, 5.25%, 3/1/2013 Aaa $ 155,000 $ 161,588
-----------
1,548,799
-----------
MICHIGAN - 3.97%
Comstock Park Public Schools, G.O. Bond, 5.50%, 5/1/2011 Aaa 150,000 159,918
Dearborn School District, G.O. Bond, 5.10%, 5/1/2006 Aaa 200,000 209,070
Hudsonville Public Schools, G.O. Bond, 5.15%, 5/01/2027 Aaa 225,000 224,984
Lincoln Park School District Ref., G.O. Bond, 5.00%, 5/1/2026 Aaa 480,000 471,542
Pinckney Community Schools, G.O. Bond, 5.00%, 5/1/2014 Aaa 200,000 202,008
St. Joseph County Sewer Disposal Systems - Constantine,
G.O. Bond, 5.00%, 4/1/2012 Aaa 100,000 103,268
-----------
1,370,790
-----------
MINNESOTA - 2.11%
Minneapolis, G.O. Bond, Series B, 5.20%, 3/1/2013 Aaa 300,000 314,373
Minnesota Various Purpose, G.O. Bond, 6.60%, 8/1/1999 Aaa 200,000 204,162
Western Minnesota Municipal Power Agency, Revenue
Bond, 6.625%, 1/1/2016 Aaa 175,000 210,231
-----------
728,766
-----------
MISSISSIPPI - 0.65%
Mississippi, G.O. Bond, 6.30%, 12/1/2006 Aa3 200,000 224,822
-----------
MISSOURI - 0.75%
Missouri State Ref.- Third Street Building, G.O. Bond,
Series A, 5.125%, 8/1/2009 Aaa 250,000 258,315
-----------
Montana - 0.59%
Montana Long Range Building Project, G.O. Bond, Series A,
4.875%, 8/1/2010 Aa3 200,000 205,322
-----------
NEBRASKA - 1.61%
Douglas County School District No. 17, G.O. Bond, 5.00%,
10/1/2012 Aaa 545,000 555,093
-----------
NEVADA - 4.01%
Clark County School District, G.O. Bond,
6.00%, 6/15/2002 Aaa 100,000 107,173
Henderson Water, G.O. Bond, Series A, 5.65%,
12/1/2003 Aaa 300,000 323,508
Nevada State Project No. 42, G.O. Bond, 5.70%,
9/1/2008 Aa2 200,000 219,388
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
INVESTMENT PORTFOLIO - DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Rating Principal Value
(unaudited) Amount (Note 2)
-------------- ---------- -----------
NEVADA (CONTINUED)
Nevada State Project Nos. 66 & 67, G.O. Bond,
Series A, 5.00%, 5/15/2028 Aaa $ 750,000 $ 735,128
-----------
1,385,197
-----------
NEW HAMPSHIRE - 0.66%
New Hampshire, G.O. Bond, 6.60%, 9/1/2014 Aa2 200,000 228,668
-----------
NEW JERSEY - 2.83%
Jersey City Water, G.O. Bond, 5.50%, 3/15/2011 Aaa 225,000 245,155
New Jersey State Highway Authority, Garden State Parkway,
Revenue Bond, 5.50%, 1/1/2000 A1 200,000 204,750
North Hudson Sewer Authority, Revenue Bond, 5.25%,
8/1/2016 Aaa 250,000 258,628
West Windsor Plainsboro, G.O. Bond, 5.25%, 12/1/2004 Aaa 250,000 268,245
-----------
976,778
-----------
NEW YORK - 3.62%
Monroe County Community School Corporation First
Meeting, Revenue Bond, 5.25%, 7/1/2016 Aaa 125,000 128,278
New York State Thruway Authority, Revenue Bond,
Series A, 5.50%, 1/1/2023 Aaa 200,000 210,598
Sands Point, G.O. Bond, 6.70%, 11/15/2013 Aa2 350,000 400,061
Spencerport Central School District, G.O. Bond, 5.00%,
11/15/2012 Aaa 350,000 363,272
Westchester County, G.O. Bond, 4.75%, 11/15/2016 Aaa 150,000 149,652
-----------
1,251,861
-----------
NORTH CAROLINA - 1.29%
North Carolina State Prison Facilities, G.O. Bond, 4.80%,
3/1/2009 Aaa 200,000 207,370
Raleigh North Carolina, G.O. Bond, 4.40%, 6/1/2017 Aaa 250,000 238,030
-----------
445,400
-----------
OHIO - 3.98%
Cleveland Water & Sewer, G.O. Bond, 5.35%, 9/1/2023 Aaa 450,000 462,208
Oak Hills Local School District, G.O. Bond, 5.125%, 12/1/2025 Aaa 490,000 489,623
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
INVESTMENT PORTFOLIO - DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Rating Principal Value
(unaudited) Amount (Note 2)
-------------- ---------- -----------
OHIO (CONTINUED)
Ohio Public Facilities, Community Higher Education,
Revenue Bond, Series II-A, 4.25%, 12/1/2002 Aaa $ 200,000 $ 203,898
Summit County Various Purpose, G.O. Bond, 6.625%, 12/1/2012 Aaa 200,000 220,324
-----------
1,376,053
-----------
OKLAHOMA - 2.18%
Oklahoma State Turnpike Authority, Revenue Bond,
Series A, 5.00%, 1/1/2023 Aaa 750,000 754,695
-----------
OREGON - 0.80%
Salem Pedestrian Safety Impts., G.O. Bond, 5.50%, 5/1/2010 Aaa 255,000 274,836
-----------
PENNSYLVANIA - 4.89%
Beaver County, G.O. Bond, 5.15%, 10/01/2017 Aaa 300,000 304,749
Cambria County, G.O. Bond, Series A, 6.10%, 8/15/2016 Aaa 350,000 383,470
Pennsylvania State, G.O. Bond, Second Series, 6.00%, 7/1/2005 Aa3 90,000 100,159
Philadelphia Water & Waste, Revenue Bond, 5.60%,
8/1/2018 Aaa 150,000 157,557
Pittsburgh Water & Sewer Authority, Revenue Bond, Series C,
5.125%, 9/1/2023 Aaa 750,000 745,268
-----------
1,691,203
-----------
RHODE ISLAND - 0.95%
Rhode Island State Pre-refunded Balance, G.O. Bond,
Series A, 6.20%, 6/15/2004 Aaa 115,000 126,238
Rhode Island State Unrefunded Balance, G.O. Bond,
Series A, 6.20%, 6/15/2004 Aaa 185,000 201,815
-----------
328,053
-----------
SOUTH CAROLINA - 1.71%
South Carolina State Capital Improvement, G.O. Bond,
4.10%, 4/1/2001 Aaa 200,000 202,652
South Carolina State Highway, G.O. Bond, Series B,
5.625%, 7/1/2010 Aaa 350,000 387,527
-----------
590,179
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
INVESTMENT PORTFOLIO - DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Rating* Principal Value
(unaudited) Amount (Note 2)
--------------- ---------- -----------
SOUTH DAKOTA - 1.82%
Rapid City Area School District, G.O. Bond, 4.75%,
1/1/2018 Aaa $ 650,000 $ 630,214
-----------
TENNESSEE - 1.50%
Johnson City School Sales Tax, G.O. Bond, 6.70%,
5/1/2021 Aaa 350,000 408,870
Lawrence County, G.O. Bond, 6.60%, 3/1/2013 Aaa 100,000 109,425
-----------
518,295
-----------
TEXAS - 3.42%
Brazoria County , G.O. Bond, 4.75%, 9/1/2011 Aaa 445,000 453,023
Dallas Waterworks & Sewer, Revenue Bond, 5.625%, 4/1/2009 Aa2 200,000 211,434
North Texas Municipal Water District, Revenue Bond,
5.00%, 6/1/2012 Aaa 150,000 153,051
Southlake Waterwork & Sewer System, G.O. Bond, 5.30%,
2/15/2011 Aaa 350,000 365,127
-----------
1,182,635
-----------
UTAH - 2.24%
Alpine School District, G.O. Bond, 5.375%, 3/15/2009 Aaa 250,000 267,757
Nebo School District, G.O. Bond, 6.00%, 6/15/2018 Aaa 450,000 506,003
-----------
773,760
-----------
VIRGINIA - 1.17%
Franklin County Capital Improvement , G.O. Bond, 6.60%,
7/15/2013 Aaa 250,000 270,587
Spotsylvania County Water & Sewer Systems, Revenue
Bond, 5.25%, 6/1/2016 Aaa 130,000 134,272
-----------
404,859
-----------
WASHINGTON - 3.29%
Kitsap County School District, G.O. Bond, 6.625%,
12/1/2008 A1 350,000 389,078
Seattle, G.O. Bond, Series A, 5.75%, 1/15/2020 Aa1 230,000 242,634
Seattle Met. Municipality, G.O. Bond, 5.65%, 1/1/2020 Aa3 100,000 104,333
Washington State, G.O. Bond, Series A, 5.00%, 1/1/2023 Aa1 410,000 401,583
-----------
1,137,628
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
INVESTMENT PORTFOLIO - DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Credit Rating* Principal Value
(unaudited) Amount (Note 2)
--------------- ---------- -----------
WISCONSIN - 3.28%
East Troy School District, G.O. Bond, Series A, 4.625%,
10/1/2011 Aaa $ 400,000 $ 402,772
Merrill Public School District, G.O. Bond, 5.30%, 4/1/2013 Aaa 400,000 417,060
Wisconsin State, G.O. Bond, Series A, 5.75%, 5/1/2001 Aa2 300,000 314,706
------------
1,134,538
------------
TOTAL MUNICIPAL SECURITIES
(Identified Cost $31,904,240) 33,332,302
------------
SHORT-TERM INVESTMENTS - 2.30%
Dreyfus Municipal Reserves
(Identified Cost $794,132) 794,132 794,132
------------
TOTAL INVESTMENTS - 98.72%
(Identified Cost $32,698,372) 34,126,434
OTHER ASSETS, LESS LIABILITIES - 1.28% 443,573
------------
NET ASSETS - 100% $34,570,007
============
</TABLE>
Key -
G.O. Bond - General Obligation Bond
Met. - Metropolitan
Impt. - Improvement
Ed. - Education
Ref. - Referendum
*Credit Ratings from Moodys (unaudited)
<TABLE>
<CAPTION>
<S> <C>
FEDERAL TAX INFORMATION:
At December 31, 1998, the net unrealized appreciation (based on identified cost for
federal income tax purposes of $32,698,372) was as follows:
Unrealized appreciation $1,525,550
Unrealized depreciation (97,488)
-----------
UNREALIZED APPRECIATION - NET $1,428,062
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
DECEMBER 31, 1998
ASSETS:
Investments, at value (identified cost $32,698,372)(Note 2) $34,126,434
Interest receivable 487,633
Receivable for fund shares sold 13,350
-----------
TOTAL ASSETS 34,627,417
-----------
LIABILITIES:
Accrued management fee (Note 3) 14,394
Accrued Directors' fees (Note 3) 3,278
Transfer agent fees payable (Note 3) 691
Payable for fund shares repurchased 22,774
Audit fee payable 15,656
Other payables and accrued expenses 617
-----------
TOTAL LIABILITIES 57,410
-----------
NET ASSETS FOR 3,221,990 SHARES
OUTSTANDING $34,570,007
===========
NET ASSETS CONSIST OF:
Capital stock $ 32,220
Additional paid-in-capital 33,014,252
Undistributed net investment income 95,434
Accumulated net realized gain on investments 39
Net unrealized appreciation on investments 1,428,062
-----------
TOTAL NET ASSETS $34,570,007
===========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
($34,570,007/3,221,990 shares) $ 10.73
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
<S> <C>
FOR THE YEAR ENDED DECEMBER 31, 1998
INVESTMENT INCOME:
Interest $1,327,803
----------
EXPENSES:
Management fee (Note 3) 136,071
Directors' fees (Note 3) 6,700
Transfer agent fees (Note 3) 6,531
Audit fee 13,600
Registration and filing fees 11,927
Miscellaneous 13,259
----------
Total Expenses 188,088
----------
NET INVESTMENT INCOME 1,139,715
----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS
Net realized gain on investments (identified cost basis) 35,973
Net change in unrealized appreciation on investmenta 251,930
----------
NET REALIZED ABD UNREALIZED GAIN
ON INVESTMENTS 287,903
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $1,427,618
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
For the Year For the Year
Ended 12/31/98 Ended 12/31/97
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income $ 1,139,715 $ 853,506
Net realized gain on investments 35,973 --
Net unrealized appreciation on investments 251,930 670,358
----------------- -----------------
Net increase from operations 1,427,618 1,523,864
----------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income (1,089,090) (843,987)
From net realized gain on investments (27,563) --
----------------- -----------------
Total distributions to shareholders (1,116,653) (843,987)
----------------- -----------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase from capital share transactions (Note 5) 10,607,836 6,022,646
----------------- -----------------
Net increase in net assets 10,918,801 6,702,523
NET ASSETS:
Beginning of year 23,651,206 16,948,683
----------------- -----------------
END OF YEAR (including undistributed net investment
income of $95,434 and $44,809, respectively) $ 34,570,007 $ 23,651,206
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
For the Period
2/14/94
(commencement
For the Years Ended of operations)
12/31/98 12/31/97 12/31/96 12/31/95 to 12/31/94
---------- --------------------- ---------- ---------- ----------------
Per share data (for a share outstanding
throughout each period):
NET ASSET VALUE - BEGINNING OF PERIOD $ 10.59 $ 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
========== ===================== ========== ========== ================
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
3 The investment advisor waived a portion of its management fee. If the full
fee had been incurred by the fund, the net investment income per share would
have been $0.186, and the annualized ratios would have been as follows:
Expenses, 1.29%; Net investment income 3.27%.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Diversified Tax Exempt Series (the "Fund") is a no-load diversified series of
Exeter Fund, Inc.(the "Corporation"), formerly known as Manning & Napier Fund,
Inc. The Corporation is organized in Maryland and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company.
Shares of the Fund are offered directly to investors and to employees and
clients of Manning & Napier Advisors, Inc. (the "Advisor") and its affiliates.
The total authorized capital stock of the Corporation consists of one billion
shares of common stock each having a par value of $0.01. As of December 31,
1998, 940 million shares have been designated in total among 19 series, of
which 50 million have been designated as Diversified Tax Exempt Series Common
Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Municipal securities will normally be valued on the basis of market valuations
provided by an independent pricing service (the "Service"). The Service
utilizes the last price quotations and a matrix system (which considers such
factors as security prices of similar securities, yields, maturities, and
ratings). The Service has been approved by the Fund=s Board of Directors.
Securities for which representative valuations or prices are not available
from the Fund's pricing service are valued at fair value as determined in good
faith by the Advisor under procedures approved by and under the general
supervision of the Fund's Board of Directors.
Short-term investments that mature in sixty days or less are valued at
amortized cost, which approximates market value.
SECURITY TRANSACTIONS, INVESTMENT INCOME AND EXPENSES
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income and expenses are recorded on an accrual basis.
Most expenses of the Corporation can be attributed to a specific fund.
Expenses which cannot be directly attributed are apportioned among the funds
in the Corporation.
FEDERAL INCOME TAXES
The Fund's policy is to comply with the provisions of the Internal
Revenue Code applicable to regulated investment companies. The Fund is not
subject to federal income or excise tax to the extent the Fund distributes to
shareholders each year its taxable income, including any net realized gains on
investments in accordance with requirements of the Internal Revenue Code.
Accordingly, no provision for federal income tax or excise tax has been made
in the financial statements.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
FEDERAL INCOME TAX (CONTINUED)
The Fund uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income
tax reporting purposes.
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made
quarterly. Distributions are recorded on the ex-dividend date. Distributions
of net realized gains are made annually. An additional distribution may be
necessary to avoid taxation of the Fund.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a
result of deferral of certain losses or character reclassification between net
income and net gains. As a result, net investment income (loss) and net
investment gain (loss) on investment transactions for a reporting period may
differ significantly from distributions to shareholders during such period.
As a result, the Fund may periodically make reclassifications among its
capital accounts without impacting the Fund's net asset value.
The Fund hereby designated 100% of its ordinary distributions as tax-exempt
dividends for the year ended December 31, 1998.
For the year ended December 31, 1998, the Fund distributed $27,563 of long-term
capital gains.
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of the revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with the Advisor, for which the
Fund pays a fee, computed daily and payable monthly, at an annual rate of
0.50% of the Fund's average daily net assets. The fee amounted to $136,071
for the year ended December 31, 1998.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Fund with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise
maintain the Fund's organization. The Advisor also provides the Fund with
necessary office space and portfolio accounting and bookkeeping services. The
salaries of all officers of the Fund and of all
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH AFFILIATES (continued)
Directors who are "affiliated persons" of the Fund or of the Advisor, and
all personnel of the Fund or of the Advisor performing services relating
to research, statistical and investment activities are paid by the Advisor.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Fund pays a fee which
is calculated as a percentage of the average daily net assets at an annual
rate of 0.024%; this fee amounted to $6,531 for the year ended December 31,
1998.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate
of the Advisor, acts as distributor for the Fund's shares. The services of
Manning & Napier Investor Services, Inc. are provided at no additional cost to
the Fund.
The compensation of the non-affiliated Directors totaled $6,700 for the year
ended December 31, 1998.
4. PURCHASES AND SALES OF SECURITIES
For the year ended December 31, 1998, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$11,926,799 and $1,290,731, respectively.
55. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Diversified Tax Exempt Series were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Year For the Year
Ended 12/31/98 Ended 12/31/97
--------------- ---------------
Shares Amount Shares Amount
--------------- ------------ --------------- ------------
Sold 1,391,383 $14,935,106 643,012 $ 6,698,681
Reinvested 101,391 1,085,235 78,730 818,991
Repurchased (504,283) (5,412,505) (144,215) (1,495,026)
--------------- ------------ --------------- ------------
Total 988,491 $10,607,836 577,527 $ 6,022,646
--------------- ------------ --------------- ------------
</TABLE>
6. FINANCIAL INSTRUMENTS
The Fund may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options and
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. No such
investments were held by the Fund on December 31, 1998.
18
<PAGE>
INDEPENDENT ACCOUNTANTS REPORT
To the Shareholders and the Board of Directors of
Exeter Fund, Inc.- Diversified Tax Exempt Series:
In our opinion, the accompanying statements of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Exeter Fund,
Inc.(formerly Manning & Napier Fund, Inc.) - Diversified Tax Exempt Series at
December 31, 1998, the results of its operations, the changes in its net
assets, and its financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
19
<PAGE>
<PAGE>
[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
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[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] INTERNATIONAL SERIES
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[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] WORLD OPPORTUNITIES SERIES
[NUMBER] 19
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[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] GLOBAL FIXED INCOME SERIES
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[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] NEW YORK TAX EXEMPT
[NUMBER] 16
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[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] OHIO EXEMPT SERIES
[NUMBER] 17
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[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
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