December 29, 1999
To Shareholders of the following Series of the Exeter Fund:
Defensive Series
Blended Asset Series I
Blended Asset Series II
Maximum Horizon Series
Flexible Yield Series I, II, and III
Tax Managed 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 October 31, 1999. The reports
include information about the Series' performance as well as portfolio listings
as of that date.
Please contact our Fund Services department at 1-800-466-3863 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>
Exeter Fund, Inc.
Defensive Series
Annual Report
October, 31, 1999
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
DEAR SHAREHOLDERS:
In managing the Defensive Series, we place a dominant emphasis on minimizing
volatility over an intermediate time horizon. In pursuit of this goal, the
Series maintains a conservative position with a large amount invested in
intermediate-term fixed income securities. This particular strategy limits the
portfolio's weight in stocks, especially in the face of a generally overvalued
U.S. stock market. Although the Series has continued to post positive returns,
it has not been immune to the adverse bond market environment.
The bond market continued to struggle over the last six months, but steadied a
bit more recently. However, with long-term U.S. Treasury bond yields rising by
over 100 basis points (1.00%) in the last year, the bond market's negative
returns over the period have influenced the returns of this Series. In light of
this rising interest rate environment and growing uncertainty regarding the
future performance of the economy and corporate earnings, the Series has
withstood this recent volatility well as a result of its focus on
short-to-intermediate term maturity fixed income securities. With less interest
rate sensitivity, these securities have tended to moderate some of the impact
that rising yields had on long-term bonds.
While the bond market appears to have stabilized, the risk in the U.S. stock
market continues to build. Rising energy prices and tight labor markets are two
of the factors that are forcing costs to go up in a number of industries this
year. With costs rising and most companies lacking true pricing power, the
inevitable result is a margin squeeze. Add to that the impact of the recent
rise in interest rates and the result is likely to be a difficult environment
for high valuation (e.g., high price-to-earnings ratio) stocks. Given this
environment, we have continued with our current focus on stocks with lower
valuations, which we believe positions the equity portion of the portfolio well
for the future. Likewise, we believe that our focus on high quality bonds and
well-positioned companies around the globe provides an appropriate balance
between the goals of long-term capital appreciation and avoidance of
year-to-year volatility.
As always, we appreciate the opportunity to serve you.
Sincerely,
EXETER ASSET MANAGEMENT
<GRAPHIC>
<PIE CHART>
Data for pie chart to follow:
Asset Allocation - As of 10/31/99
Stocks - 17%
Bonds - 80%
Cash, equivalents, and other assets, less liabilities - 3%
1
<PAGE>
PERFORMANCE UPDATE AS OF OCTOBER 31, 1999
Exeter Fund, Inc. - Defensive Series
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<C> <S> <C> <C>
One Year $10,175 1.75% 1.75%
Inception 1 $12,371 23.71% 5.46%
</TABLE>
Lehman Brothers Intermediate Bond Index
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<C> <S> <C> <C>
One Year $10,099 0.99% 0.99%
Inception 1 $12,533 25.33% 5.80%
</TABLE>
15-85 Blended Index
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<C> <S> <C> <C>
One Year $10,448 4.48% 4.48%
Inception 1 $13,999 39.99% 8.77%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - Defensive
Series from its inception (11/1/95) to present (10/31/99) as compared to the
Lehman Brothers Intermediate Bond Index and a 15-85 Blended Index. 2
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
Exeter Fund, Inc. Lehman Brothers Intermediate
Date Defensive Series Bond Index 15-85 Blended Index
<S> <C> <C> <C>
11/01/1995 10,000 10,000 10,000
10/31/1996 10,494 10,581 10,847
10/31/1997 11,411 11,374 12,052
10/31/1998 12,157 12,411 13,398
10/31/1999 12,371 12,533 13,999
</TABLE>
1 Performance numbers for the Series and Indices are calculated from November
1,1995, the Series' inception date. The Fund's performance is historical and
may not be indicative of future results.
2 The Lehman Brothers Intermediate Bond Index is a market value weighted measure
of approximately 3,300 corporate and government securities. The index is
comprised of investment grade securities with maturities greater than one year
but less than ten years. The 15-85 Blended Index is 15% Standard & Poor's
(S&P) 500 Total Return Index and 85% Lehman Brothers Intermediate Bond Index.
The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure
of 500 widely held common stocks listed on the New York Stock Exchange, American
Stock Exchange, and Over-the-Counter market. Both Indices returns assume
reinvestment of income and, unlike Fund returns, do not reflect any fees or
expenses.
2
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------- ---------
COMMON STOCK - 16.94%
<S> <C> <C>
AGRICULTURAL PRODUCTION - 0.08%
Sylvan, Inc.* . . . . . . . . . . . . . . . . . . . 375 $ 3,656
---------
APPAREL - 0.71%
Adidas - Salomon AG (Germany) (Note 7). . . . . . . 450 33,114
Novel Denim Holdings Ltd.*. . . . . . . . . . . . . 250 1,266
-------
34,380
-------
BUSINESS SERVICES - 0.43%
National Data Corp. . . . . . . . . . . . . . . . . 875 21,000
---------
CHEMICAL & ALLIED PRODUCTS - 2.40%
BIOLOGICAL PRODUCTS - 0.76%
Cypress Bioscience, Inc.* . . . . . . . . . . . . 2,925 6,581
PathoGenesis Corp.*. . . . . . . . . . . . . . . 100 1,500
Sigma-Aldrich Corp. . . . . . . . . . . . . . . . 1,000 28,500
-------
36,581
-------
PHARMACEUTICAL PREPARATIONS - 1.64%
Mylan Laboratories, Inc.. . . . . . . . . . . . . 2,000 35,875
Teva Pharmaceutical Industries Ltd.- ADR (Note 7) 900 43,537
-------
79,412
-------
115,993
-------
CRUDE PETROLEUM & NATURAL GAS - 2.21%
Gulf Canada Resources Ltd.- ADR* (Note 7) . . . . . 13,575 53,452
Petroleo Brasileiro S.A. (Petrobras) -
ADR (Note 7) . . . . . . . . . . . . . . . . . . 3,275 52,345
Stolt Comex Seaway, S.A.* (Note 7). . . . . . . . . 75 802
---------
106,599
---------
DIAMONDS - 0.39%
De Beers Consolidated Mines - ADR (Note 7). . . . . 700 18,944
---------
ELECTRONICS & ELECTRICAL EQUIPMENT - 0.04%
The Carbide/Graphite Group, Inc.* . . . . . . . . . 300 2,100
---------
FOOD & KINDRED PRODUCTS - 1.62%
Bestfoods . . . . . . . . . . . . . . . . . . . . . 600 35,250
Unilver plc -ADR (Note 7) . . . . . . . . . . . . . 1,160 43,138
-------
78,388
-------
GLASS PRODUCTS - 0.15%
Libbey, Inc.. . . . . . . . . . . . . . . . . . . . 275 7,288
---------
HEALTH SERVICES - 0.55%
Manor Care, Inc.* . . . . . . . . . . . . . . . . . 1,700 26,775
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------ ---------
<S> <C> <C>
HOLDING COMPANIES - PUBLISHING - 0.53%
Reed International plc - ADR (Note 7) . . . . . 1,100 $ 25,300
---------
INDUSTRIAL & COMMERCIAL MACHINERY - 0.58%
Compaq Computer Corp. . . . . . . . . . . . . . 1,200 22,800
NN Ball & Roller, Inc.. . . . . . . . . . . . . 800 5,300
---------
28,100
---------
MOTION PICTURE PRODUCTION - 0.63%
News Corp. Ltd. - ADR (Note 7). . . . . . . . . 1,100 30,319
---------
PAPER & ALLIED PRODUCTS - 0.64%
International Paper Co. . . . . . . . . . . . . 550 28,944
Smurfit-Stone Container Corp.*. . . . . . . . . 99 2,141
---------
31,085
---------
PRIMARY METAL INDUSTRIES - 0.12%
Intermet Corp.. . . . . . . . . . . . . . . . . 50 506
Texas Industries, Inc.. . . . . . . . . . . . . 150 5,372
---------
5,878
---------
REFUSE SYSTEMS - 0.06%
Newpark Resources, Inc.*. . . . . . . . . . . . 450 2,897
---------
RETAIL - SPECIALTY STORES - 0.04%
Hancock Fabrics, Inc. . . . . . . . . . . . . . 475 1,959
---------
SOFTWARE - 0.02%
MAPICS, Inc.* . . . . . . . . . . . . . . . . . 125 1,062
---------
TECHNICAL INSTRUMENTS & SUPPLIES - 1.89%
Eastman Kodak Co. . . . . . . . . . . . . . . . 850 58,597
Millipore Corp. . . . . . . . . . . . . . . . . 1,025 32,672
---------
91,269
---------
TELECOMMUNICATION SERVICES- 1.11%
Grupo Radio Centro S.A. de C.V. - ADR (Note 7). 100 469
ProSieben Media AG (Germany) (Note 7) . . . . . 25 1,029
Sinclair Broadcast Group, Inc.* . . . . . . . . 125 1,250
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR (Note 7) . . . . . . . . . . . . . . . . 655 31
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR PFD (Note 7) . . . . . . . . . . . . . . 655 51,008
--------
53,787
--------
TESTING LABORATORIES - 0.08%
Paradigm Geophysical Ltd.*. . . . . . . . . . . 700 3,762
---------
TEXTILE MILL PRODUCTS - 0.11%
Albany International Corp. - Class A. . . . . . 351 5,331
---------
</TABLE>
The accompanying notes are integral part of the financial statements.
4
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
SHARES/PRINCIPAL VALUE
AMOUNT (NOTE 2)
----------------- ---------
<S> <C> <C>
TRANSPORTATION - 2.55%
RAILROAD - 2.44%
Burlington Northern Santa Fe Corp. . . . 1,400 $ 44,625
Canadian National Railway - ADR (Note 7) 2,400 73,200
----------
117,825
----------
WATER - 0.11%
Trico Marine Services, Inc.* . . . . . . 775 5,377
---------
123,202
---------
TOTAL COMMON STOCK
(Identified Cost $866,172). . . . . . . 819,074
----------
U.S. TREASURY SECURITIES - 68.59%
U.S. TREASURY BONDS - 9.58%
U.S. Treasury Bond, 7.25%, 8/15/2022 . . . $ 150,000 163,641
U.S. Treasury Bond, 7.50%, 11/15/2024. . . 20,000 22,625
U.S. Treasury Bond, 6.875%, 8/15/2025. . . 210,000 221,681
U.S. Treasury Bond, 6.50%, 11/15/2026. . . 55,000 55,619
---------
TOTAL U.S. TREASURY BONDS
(Identified Cost $472,814). . . . . . . 463,566
---------
U.S. TREASURY NOTES - 59.01%
U.S. Treasury Note, 6.125%, 9/30/2000. . . 560,000 562,625
U.S. Treasury Note, 5.625%, 2/28/2001. . . 60,000 59,925
U.S. Treasury Note, 6.375%, 9/30/2001. . . 25,000 25,242
U.S. Treasury Note, 7.50%, 11/15/2001. . . 50,000 51,562
U.S. Treasury Note, 6.25%, 6/30/2002 . . . 150,000 151,266
U.S. Treasury Note, 5.875%, 9/30/2002. . . 275,000 274,828
U.S. Treasury Note, 6.25%, 2/15/2003 . . . 215,000 216,881
U.S. Treasury Note, 5.875%, 2/15/2004. . . 75,000 74,789
U.S. Treasury Note, 7.25%, 8/15/2004 . . . 65,000 68,189
U.S. Treasury Bond, 6.50%, 5/15/2005 . . . 625,000 636,133
U.S. Treasury Note, 6.125%, 8/15/2007. . . 5,000 4,981
U.S. Treasury Note, 5.50%, 2/15/2008 . . . 240,000 230,325
U.S. Treasury Note, 4.75%, 11/15/2008. . . 550,000 497,406
---------
TOTAL U.S. TREASURY NOTES
(Identified Cost $2,866,456). . . . . . 2,854,152
----------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $3,339,270). . . . . . 3,317,718
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
SHARES/PRINCIPAL VALUE
AMOUNT (NOTE 2)
----------------- ---------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES - 10.94%
MORTGAGE BACKED SECURITIES
GNMA, Pool #365225, 9.00%, 11/15/2024. $ 20,120 $ 21,168
GNMA, Pool #398655, 6.50%, 5/15/2026 . 39,772 38,025
GNMA, Pool #473373, 9.00%, 2/15/2027 . 9,525 10,021
GNMA, Pool #452826, 9.00%, 1/15/2028 . 137,984 145,166
GNMA, Pool #460820, 6.00%, 6/15/2028 . 93,256 86,556
GNMA, Pool #458983, 6.00%, 1/15/2029 . 245,935 228,266
---------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $533,579). . . . . 529,202
---------
SHORT-TERM INVESTMENTS - 2.39%
Dreyfus Treasury Cash Management Fund
(Identified Cost $115,514) . . . . . . 115,514 115,514
---------
TOTAL INVESTMENTS - 98.86%
(Identified Cost $4,854,535). . . . 4,781,508
OTHER ASSETS, LESS LIABILITIES - 1.14% 55,250
---------
NET ASSETS - 100%. . . . . . . . . . . $4,836,758
==========
</TABLE>
* Non-income producing security
Federal Tax Information:
At October 31, 1999, the net unrealized depreciation based on identified cost
for federal income tax purposes of $4,865,692 was as follows:
Unrealized appreciation $56,294
Unrealized depreciation (140,478)
---------
UNREALIZED DEPRECIATION - NET $(84,184)
=========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, 1999
ASSETS:
<S> <C>
Investments, at value (identified cost $4,854,535)(Note 2) $4,781,508
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,876
Interest receivable. . . . . . . . . . . . . . . . . . . . 59,378
Receivable for securities sold . . . . . . . . . . . . . . 3,309
Receivable for fund shares sold. . . . . . . . . . . . . . 468
Dividends receivable . . . . . . . . . . . . . . . . . . . 191
-----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . 4,852,730
-----------
LIABILITIES:
Accrued directors' fees (Note 3) . . . . . . . . . . . . . 2,117
Transfer agent fees payable (Note 3) . . . . . . . . . . . 97
Audit fee payable. . . . . . . . . . . . . . . . . . . . . 9,252
Payable for securities purchased . . . . . . . . . . . . . 1,201
Other payables and accrued expenses. . . . . . . . . . . . 3,305
-----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . 15,972
-----------
NET ASSETS FOR 455,382 SHARES OUTSTANDING. . . . . . . . . $4,836,758
===========
NET ASSETS CONSIST OF:
Capital stock. . . . . . . . . . . . . . . . . . . . . . . $ 4,554
Additional paid-in-capital . . . . . . . . . . . . . . . . 4,756,420
Undistributed net investment income. . . . . . . . . . . . 117,154
Accumulated net realized gain on investments . . . . . . . 31,657
Net unrealized depreciation on investments . . . . . . . . (73,027)
-----------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . . . . . $4,836,758
===========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($4,836,758/455,382 shares) . . . . . . . . . . . . . . $ 10.62
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME:
<S> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 277,924
Dividends (net of foreign tax withheld, $1,047). . . . . 15,215
----------
Total Investment Income. . . . . . . . . . . . . . . . . 293,139
----------
EXPENSES:
Management fees (Note 3) . . . . . . . . . . . . . . . . 46,160
Directors' fees (Note 3) . . . . . . . . . . . . . . . . 7,201
Transfer agent fees (Note 3) . . . . . . . . . . . . . . 1,385
Registration and filing fees . . . . . . . . . . . . . . 14,200
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . 9,919
Custodian fee. . . . . . . . . . . . . . . . . . . . . . 5,401
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 6,107
----------
Total Expenses . . . . . . . . . . . . . . . . . . . . . 90,373
Less Reduction of Expenses (Note 3). . . . . . . . . . . (32,652)
----------
Net Expenses . . . . . . . . . . . . . . . . . . . . . . 57,721
----------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . 235,418
----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments (identified cost basis) 39,396
Net change in unrealized depreciation on investments . . (154,121)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS. . . . . . . . . . . . . . . . . . . . (114,725)
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ 120,693
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
10/31/99 10/31/98
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment income . . . . . . . . . . . . . . . . $ 235,418 $ 159,505
Net realized gain on investments. . . . . . . . . . . 39,396 13,980
Net change in unrealized appreciation on investments. (154,121) 55,114
------------ ------------
Net increase from operations. . . . . . . . . . . . . 120,693 228,599
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income. . . . . . . . . . . . . . (212,396) (91,449)
From net realized gain on investments . . . . . . . . (20,762) (34,079)
------------ ------------
Total distribution to shareholders. . . . . . . . . . (233,158) (125,528)
------------ ------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase (decrease) from capital share
transactions (Note 5). . . . . . . . . . . . . . . (783,936) 3,866,052
------------ ------------
Net increase (decrease) in net assets . . . . . . . . (896,401) 3,969,123
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . 5,733,159 1,764,036
------------ ------------
END OF YEAR (including undistributed net investment
income of $117,154 and $99,985, respectively) . . . . $ 4,836,758 $ 5,733,159
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96
---------- ---------- ---------- ----------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD. . . $ 10.85 $ 10.71 $ 10.29 $ 10.00
---------- ---------- ---------- ----------
Income from investment operations:
Net investment income*. . . . . . . . . 0.462 0.347 0.426 0.349
Net realized and unrealized gain on
investments . . . . . . . . . . . . . . (0.275) 0.327 0.447 0.137
---------- ---------- ---------- ----------
Total from investment operations . . . . . 0.187 0.674 0.873 0.486
---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income. . . . . . . (0.380) (0.352) (0.385) (0.196)
From net realized gain on investments . (0.037) (0.182) (0.068) --
---------- ---------- ---------- ----------
Total distribution, to shareholders. . . . (0.417) (0.534) (0.453) (0.196)
---------- ---------- ---------- ----------
NET ASSET VALUE - END OF PERIOD. . . . . . $ 10.62 $ 10.85 $ 10.71 $ 10.29
========== ========== ========== ==========
Total return1. . . . . . . . . . . . . . . 1.75% 6.54% 8.74% 4.94%
Ratios (to average net assets) /
Supplemental Data:
Expenses*. . . . . . . . . . . . . . . 1.00% 1.00% 1.00% 1.00%
Net investment income* . . . . . . . . 4.08% 4.20% 4.45% 4.26%
Portfolio turnover . . . . . . . . . . . . 33% 15% 60% 30%
NET ASSETS - END OF PERIOD (000's omitted) $ 4,837 $ 5,733 $ 1,764 $ 745
========== ========== ========== ==========
</TABLE>
*The investment advisor did not impose all or a portion of its management fee in
some periods and paid a portion of the Series' expenses. If these expenses had
been incurred by the Series, and had 1996 expenses been limited to that allowed
by state securities law, the net investment income per share and the ratios
would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net investment income . . . . . $0.397 $0.287 $0.274 $0.226
Ratios (to average net assets):
Expenses . . . . . . . . . . 1.57% 1.73% 2.59% 2.50%
Net investment income. . . . 3.51% 3.47% 2.86% 2.76%
</TABLE>
1 Represents 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
Defensive Series (the "Series") is a no-load diversified series of Exeter Fund,
Inc. (the "Fund"). The Fund is organized in Maryland and is registered under
the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Series 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.
The total authorized capital stock of the Fund consists of 1.7 billion shares of
common stock each having a par value of $0.01. As of October 31, 1999, 1,550
million shares have been designated in total among 31 series, of which 37.5
million have been designated as Defensive 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 traded most extensively.
Securities not traded on valuation date or securities not listed on an exchange
are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities, will
normally be valued on the basis of evaluated bid prices 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 the Advisor under procedures established by and under the general supervision
and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty 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 Fund can be attributed to a specific series. Expenses
which cannot be directly attributed are apportioned among the series in the
Fund.
FEDERAL INCOME TAXES
The Series' policy is to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. The Series is not subject to
federal income or excise tax to the extent that the Series 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 Series uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made semi-annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Series.
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, character
reclassification between net income and net gains, or other tax adjustments. As
a result, net investment income (loss) and net investment gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Series may
periodically make reclassifications among its capital accounts without impacting
the Series' net asset value.
For the year ended October 31, 1999, the Series distributed $8,586 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier Advisors,
Inc., DBA Exeter Asset Management (the "Advisor"), for which the Series pays the
Advisor a fee, computed daily and payable monthly, at an annual rate of 0.80% of
the Series' average daily net assets. The fee amounted to $46,160 for the year
ended October 31, 1999.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Series with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise maintain
the Series' organization. The Advisor also provides the Fund with necessary
office space and portfolio accounting and bookkeeping services. The salaries of
all officers of the Fund and of all Directors who are "affiliated persons" of
the Fund or of the Advisor, and all personnel of the Fund or of the Advisor
performing services relating to research, statistical and investment activities
are paid by the Advisor.
The Advisor has voluntarily agreed to waive its fee and, if necessary, pay other
expenses of the Series in order to maintain total expenses for the Series at no
more than 1.0% of average daily net assets each year. Accordingly, the Advisor
waived fees of $32,652 for the year ended October 31, 1999, which is reflected
as a reduction of expenses on the Statement of Operations. The fee waiver and
assumption of expenses by the Advisor is voluntary and may be terminated at any
time.
The Advisor also acts as the transfer, dividend paying and shareholder servicing
agent for the Fund. For these services, the Series 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 $1,385 for the year ended October 31, 1999.
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 Series.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The compensation of the non-affiliated Directors totaled $7,201 for the year
ended October 31, 1999.
4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1999, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$597,528 and $749,582, respectively. Purchases and sales of United States
Government securities, other than short-term securities, were $1,184,738 and
$1,828,272, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Defensive Series Class A Common Stock were:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED 10/31/99 ENDED 10/31/98
Shares Amount Shares Amount
--------------- ---------------- -------- -----------
<S> <C> <C> <C> <C>
Sold. . . . 149,871 $ 1,614,006 442,590 $4,709,666
Reinvested. 21,934 233,158 12,005 125,528
Repurchased (245,016) (2,631,100) (90,651) (969,142)
--------------- ---------------- -------- -----------
Net change. (73,211) $ (783,936) 363,944 $3,866,052
=============== ================ ======== ===========
</TABLE>
The Advisor owned 20,825 shares on October 31, 1999 and 35,663 shares on October
31, 1998.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options,
forward foreign currency exchange contracts, and futures contracts and may
involve, to a varying degree, elements of risk in excess of the amounts
recognized for financial statement purposes. No such investments were held by
the Series on Octobedr 31, 1999.
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
securities of domestic companies and the United States Government. These risks
include revaluation of currencies and potential adverse political and economic
developments. Moreover, securities of foreign companies and foreign governments
may be less liquid and their prices more volatile than those of securities of
comparable domestic companies and the United States Government.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Exeter Fund, Inc. - Defensive
Series:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, 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.- Defensive
Series (the "Series") at October 31, 1999, and the results of its operations,
changes in net assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Series management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit 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
audit, which included confirmation of securities at October 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above. The financial statements of the Series as of
October 31, 1998 and for the periods then ended, as indicated therein, were
audited by other independent accountants whose report dated December 4, 1998
expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 3, 1999
14
<PAGE>
OTHER INFORMATION (UNAUDITED)
CHANGE OF ACCOUNTANTS
On July 15, 1999, the Fund dismissed Deloitte & Touche LLP ("D&T") as the Fund's
independent auditors by action of the Fund's Board of Directors upon the
recommendation of the Audit Committee of the Board. D&T's reports of the funds
financial statements for the fiscal years ended October 31, 1998 and 1997,
contained no adverse opinion or disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, (i) there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of D&T, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report on the Fund's financials statements for such years, and (ii) there
were no "reportable events" of the kind described in Item 304(a)(1)(v) of
Regulations S-K under the Securities Exchange Act of 1934, as amended.
On July 15, 1999, the Fund by action of its Board of Directors upon the
recommendation of the Audit Committee of the Board engaged
PricewaterhouseCoopers ("PwC") as the independent auditors to audit the Fund's
financial statements for the fiscal year ending October 31, 1999. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, neither the Fund nor
anyone on its behalf has consulted PwC on items which (i) concerned the
application of accounting principles to a specified transaction, whether
completed or proposed, or the type of audit opinion that might be rendered on
the Fund's financial statements or (ii) concerned the subject of a disagreement
(as defined in paragraph (a)(a)(iv) of Item 304 of Regulation S-X) or reportable
event (as described in paragraph (a)(1)(v) of said Item 304).
15
<PAGE>
<PAGE>
<PAGE>
Exeter Fund, Inc.
Blended Asset Series I
Annual Report
October 31, 1999
<PAGE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
DEAR SHAREHOLDERS:
In managing the Blended Asset Series I, we place emphasis on minimizing
volatility as well as providing growth. In order to reduce volatility over an
intermediate time horizon, the Series maintains a conservative position with a
large amount invested in fixed income securities. This particular strategy has
forced us to shy away from significant exposure to stocks in response to the
overvaluation that has been seen throughout the U.S. stock market over the past
few years. Although interest rates have leveled off recently, long-term U.S.
Treasury bond yields have risen by over 100 basis points (1.00%) in the last
year. Couple that with high market valuations, and we have a very challenging
environment in which to invest. In light of this rising interest rate
environment and growing uncertainty regarding the future performance of the
economy and corporate earnings, the Series has withstood this recent volatility
well. This resilience is largely a result of the portfolio's approximately 21%
weight to foreign stocks.
While the bond market appears to have stabilized, the risk in the U.S. stock
market continues to build. Rising energy prices and tight labor markets are two
of the factors that are forcing costs to go up in a number of industries this
year. With costs rising and most companies lacking true pricing power, the
inevitable result is a margin squeeze. Add to that the impact of the recent
rise in interest rates and the result is likely to be a difficult environment
for high valuation (e.g., high price-to-earnings ratio) stocks. Given this
environment, we have continued with our current focus on stocks with lower
valuations, which we believe positions the portfolio well for the future.
Likewise, we believe that our focus on high quality bonds and well-positioned
companies around the globe provides an appropriate balance between the goals of
long-term capital appreciation and avoidance of year-to-year volatility.
As always, we appreciate the opportunity to serve you.
Sincerely,
EXETER ASSET MANAGEMENT
<GRAPHIC>
<PIE CHART>
Data for pie chart to follow:
Asset Allocation - As of 10/31/99
Stocks - 43%
Bonds - 55%
Cash, equivalents, and other assets, less liabilities - 2%
1
<PAGE>
PERFORMANCE UPDATE AS OF OCTOBER 31, 1999
Exeter Fund, Inc. - Blended Asset Series I
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $10,432 4.32% 4.32%
Five Year $16,093 60.93% 9.98%
Inception 1 $16,048 60.48% 8.02%
</TABLE>
Lehman Brothers Intermediate Bond Index
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $10,099 0.99% 0.99%
Five Year $14,105 41.05% 7.12%
Inception 1 $13,891 38.91% 5.51%
</TABLE>
30 - 70 Blended Index
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<S> <C> <C> <C>
One Year $10,805 8.05% 8.05%
Five Year $17,967 79.67% 12.43%
Inception 1 $18,300 83.00% 10.36%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - Blended
Asset Series I from its inception (9/15/93)to present (10/31/99) as compared to
the Lehman Brothers Intermediate Bond Index and a 30-70 Blended Index. 2
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
Exeter Fund, Inc. Lehman Brothers 30-70 Blended
Date Blended Asset Series I Intermediate Bond Index Index
<S> <C> <C> <C>
09/15/1993 10,000 10,000 10,000
12/31/1993 10,092 10,032 10,081
12/31/1994 10,012 9,838 9,986
12/31/1995 12,123 11,347 12,151
10/31/1996 12,806 11,728 13,040
10/31/1997 14,472 12,606 14,965
10/31/1998 15,383 13,755 16,937
10/31/1999 16,048 13,891 18,300
</TABLE>
1 Performance numbers for the Series and Indices are calculated from
September 15, 1993, the Series' inception date. The Series' performance is
historical and may not be indicative of future results.
2 The Lehman Brothers Intermediate Bond Index is a market value weighted
measure of approximately 3,300 corporate and government securities. The
Index is comprised of investment grade securities with maturities greater than
one year but less than ten years. The 30-70 Blended Index is 30% Standard &
Poor's (S&P) 500 Total Return Index and 70% Lehman Brothers Intermediate Bond
Index. The S&P 500 Total Return Index is an unmanaged capitalization-weighted
measure of 500 widely held common stocks listed on the New York Stock Exchange,
American Stocks Exchange, and Over-the-Counter market. Both Indices' returns
assume reinvestment of income and, unlike Series returns, do not reflect any
fees or expenses.
2
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- ---------
COMMON STOCK - 42.54%
<S> <C> <C>
AGRICULTURAL PRODUCTION - 0.05%
Sylvan, Inc.* . . . . . . . . . . . . . . . . . . . . 1,250 $ 12,187
---------
APPAREL - 1.88%
Adidas-Salomon AG (Germany) (Note 7). . . . . . . . . 6,700 493,028
Novel Denim Holdings Ltd* . . . . . . . . . . . . . . 1,225 6,202
---------
499,230
---------
BUSINESS SERVICES - 1.22%
National Data Corp. 13,425 322,200
---------
CHEMICAL & ALLIED PRODUCTS - 6.88%
BIOLOGICAL PRODUCTS - 1.95%
Cypress Bioscience, Inc.*. . . . . . . . . . . . . 11,000 24,750
PathoGenesies Corp.* . . . . . . . . . . . . . . . 1,200 18,000
Sigma-Aldrich Corp.. . . . . . . . . . . . . . . . 16,675 475,237
---------
517,987
---------
PHARMACEUTICAL PREPARATIONS - 3.69%
Mylan Laboratories, Inc. . . . . . . . . . . . . . 27,250 488,797
Orion-Yhtyma Oyj - B Shares (Finland) (Note 7) . . 630 15,021
Teva Pharmaceutical Industries Ltd. - ADR (Note 7) 9,825 475,284
---------
979,102
---------
PLASTIC MATERIALS - 1.24%
Eastman Chemical Co.. . . . . . . . . . . . . . . . 8,550 329,709
---------
1,826,798
---------
COMPUTER SERVICES - 1.04%
PROGRAMMING - 0.05%
Comptek Research, Inc.* . . . . . . . . . . . . . 1,400 14,350
---------
SOFTWARE - 0.99%
J.D. Edwards & Co.*. . . . . . . . . . . . . . . . 10,400 248,950
MAPICS, Inc* . . . . . . . . . . . . . . . . . . . 1,600 13,600
---------
262,550
---------
276,900
---------
CRUDE PETROLEUM & NATURAL GAS - 6.01%
Gulf Canada Resources, Ltd - ADR* (Note 7). . . . . . 169,150 666,028
Noble Affiliates, Inc.. . . . . . . . . . . . . . . . 50 1,266
Petroleo Brasileiro SA (Petrobras) - ADR (Note 7) . . 57,175 913,845
Stolt Comex Seaway SA* (Note 7) . . . . . . . . . . . 1,100 11,756
---------
1,592,895
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- ---------
<S> <C> <C>
ELECTRONICS & ELECTRICAL EQUIPMENT - 0.03%
The Carbide/Graphite Group, Inc.*. . . . . 975 $ 6,825
---------
FOOD & KINDRED PRODUCTS - 4.40%
Bestfoods. . . . . . . . . . . . . . . . . 9,600 564,000
Unilever plc - ADR (Note 7). . . . . . . . 16,232 603,628
---------
1,167,628
---------
GLASS PRODUCTS - 0.05%
Libbey, Inc. . . . . . . . . . . . . . . . 500 13,250
---------
HEALTH SERVICES - 1.37%
Manor Care, Inc* . . . . . . . . . . . . . 23,000 362,250
---------
HOLDING COMPANIES - PUBLISHING - 1.39%
Reed International plc - ADR (Note 7). . . 16,000 368,000
---------
INDUSTRIAL & COMMERCIAL MACHINERY - 1.29%
Compaq Computer Corp.. . . . . . . . . . . 17,500 332,500
NN Ball & Roller, Inc. . . . . . . . . . . 1,350 8,944
---------
341,444
---------
MOTION PICTURE PRODUCTION - 1.59%
News Corp Ltd. - ADR (Note 7). . . . . . . 15,300 421,706
---------
PAPER & ALLIED PRODUCTS - 1.79%
International Paper Co.. . . . . . . . . . 8,300 436,787
Smurift-Stone Container Corp.* . . . . . . 1,782 38,536
---------
475,323
---------
PRIMARY METAL INDUSTRIES - 0.13%
Intermet Corp. . . . . . . . . . . . . . . 550 5,569
Texas Industries, Inc. . . . . . . . . . . 800 28,650
---------
34,219
---------
REFUSE SYSTEMS - 0.04%
Newpark Resources, Inc.* . . . . . . . . . 1,500 9,656
---------
RETAIL SPECIALTY STORES - 0.01%
Hancock Fabrics, Inc.. . . . . . . . . . . 825 3,403
---------
TECHNICAL INSTRUMENTS & SUPPLIES - 4.72%
Eastman Kodak Co.. . . . . . . . . . . . . 11,125 766,930
Millipore Corp.. . . . . . . . . . . . . . 15,200 484,500
---------
1,251,430
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT/SHARES (NOTE 2)
-------------- -----------
<S> <C> <C>
TELECOMMUNICATION SERVICES - 2.88%
Grupo Radio Centro S.A.de C.V. - ADR (Note 7) . 1,300 $ 6,094
ProSieben Media AG (Germany) (Note 7) . . . . . 350 14,401
Sinclair Broadcast Group, Inc.* . . . . . . . . 1,600 16,000
Telecomunicacoes Brasileiras
S.A. (Telebras ) - ADR PFD (Note 7). . . . 9,360 728,910
Telecomunicacoes Brasileiras
S.A. (Telebras) - ADR (Note 7). . . . . . . 9,310 437
----------
765,842
----------
TESTING LABORATORIES - 0.05%
Paradigm Geophysical Ltd.*. . . . . . . . . . . 2,350 12,631
-------
TEXTILE MILL PRODUCTS - 0.07%
Albany International Corp. - Class A. . . . . . 1,204 18,286
-------
TRANSPORTATION- 5.65%
RAILROAD - 5.58%
Burlington Northern Santa Fe Corp. . . . . . 20,400 650,250
Canadian National Railway Co. - ADR (Note 7) 26,700 814,350
Genesee & Wyoming, Inc.* . . . . . . . . . . 1,300 15,031
----------
1,479,631
----------
WATER - 0.07%
Trico Marine Services, Inc.* . . . . . . . . 2,575 17,864
----------
1,497,495
----------
TOTAL COMMON STOCK
(Identified Cost $11,658,510) . . . . . . . . . 11,279,598
----------
U.S. TREASURY SECURITIES - 54.90%
U.S. TREASURY BONDS - 23.89%
U.S. Treasury Bond, 9.875%, 11/15/2015 . . . $ 20,000 26,637
U.S. Treasury Bond, 7.250%, 5/15/2016. . . . 45,000 48,502
U.S. Treasury Bond, 8.750%, 5/15/2017. . . . 40,000 49,313
U.S. Treasury Bond, 8.750%, 5/15/2020. . . . 365,000 456,706
U.S. Treasury Bond, 7.250%, 8/15/2022. . . . 1,690,000 1,843,685
U.S. Treasury Bond, 7.500%, 11/15/2024 . . . 3,315,000 3,750,094
U.S. Treasury Bond, 6.875%, 8/15/2025. . . . 10,000 10,556
U.S. Treasury Bond, 6.500%, 11/15/2026 . . . 135,000 136,519
U.S. Treasury Bond, 5.500%, 8/15/2028. . . . 15,000 13,331
----------
TOTAL U.S. TREASURY BONDS
(Identified Cost $6,187,672) . . . . . . . . 6,335,343
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT/SHARES (NOTE 2)
-------------- ----------
<S> <C> <C>
U.S. TREASURY NOTES - 31.01%
U.S. Treasury Note, 6.250%, 4/30/2001 . 2,000,000 2,013,750
U.S. Treasury Note, 6.625%, 7/31/2001 . 3,485,000 3,530,741
U.S. Treasury Note, 6.625%, 3/31/2002 . 10,000 10,166
U.S. Treasury Note, 6.250%, 6/30/2002 . 185,000 186,561
U.S. Treasury Note, 5.875%, 9/30/2002 . 1,275,000 1,274,203
U.S. Treasury Note, 5.500%, 3/31/2003 . 45,000 44,381
U.S. Treasury Note, 6.500%, 5/15/2005 . 355,000 361,324
U.S. Treasury Note, 5.375%, 6/30/2003 . 750,000 735,937
U.S. Treasury Note, 4.250%, 11/15/2003. 60,000 56,325
U.S. Treasury Note, 5.250%, 5/15/2004 . 10,000 9,712
----------
TOTAL U.S. TREASURY NOTES
(Identified Cost $8,271,143). . . . . . 8,223,100
----------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $14,458,815) . . . . . 14,558,443
----------
U.S. GOVERNMENT AGENCIES - 0.33%
MORTGAGE BACKED SECURITIES - 0.20%
GNMA, Pool #174225, 9.50%, 8/15/2016. . 878 942
GNMA, Pool #286310, 9.00%, 2/15/2020. . 14,100 14,834
GNMA, Pool #288873, 9.50%, 8/15/2020. . 2,036 2,184
GNMA, Pool #385753, 9.00%, 7/15/2024. . 32,140 33,813
----------
TOTAL MORTGAGED BACKED SECURITIES
(Identified Cost $51,092). . . . . . . 51,773
----------
OTHER AGENCIES - 0.13%
Federal National Mortgage Association
Note, 5.625% 3/15/2001 . . . . . . . 10,000 9,939
Federal National Mortgage Association
Note, 5.75% 2/15/2008. . . . . . . . 25,000 23,559
----------
TOTAL OTHER AGENCIES
(Identified Cost $35,461). . . . . . . 33,498
----------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $86,553) . . . . . . . 85,271
----------
SHORT-TERM INVESTMENTS - 1.08%
Dreyfus Treasury Cash Management Fund
(Identified Cost $287,042). . . . . . . 287,042 287,042
----------
TOTAL INVESTMENTS - 98.85%
(Identified Cost $26,490,920) . . . . . 26,210,354
OTHER ASSETS, LESS LIABILITIES - 1.15% . . 304,823
----------
NET ASSETS - 100%. . . . . . . . . . . . . $26,515,177
==========
</TABLE>
*Non-income producing security
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
FEDERAL TAX INFORMATION:
At October 31, 1999, the net unrealized depreciation based on identified cost
for
federal income tax purposes of $26,568,464 was as follows:
Unrealized appreciation $ 1,076,456
Unrealized depreciation (1,434,566)
-----------
UNREALIZED DEPRECIATION - NET ($358,110)
==========
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, 1999
ASSETS:
<S> <C>
Investments, at value (identified cost $26,490,920)(Note 2) $26,210,354
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,182
Interest receivable . . . . . . . . . . . . . . . . . . . . 322,312
Receivable for securities sold. . . . . . . . . . . . . . . 18,384
Receivable for fund shares sold . . . . . . . . . . . . . . 10,206
Dividends receivable. . . . . . . . . . . . . . . . . . . . 2,641
------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 26,585,079
------------
LIABILITIES:
Accrued management fees (Note 3). . . . . . . . . . . . . . 26,946
Accrued directors' fees (Note 3). . . . . . . . . . . . . . 2,117
Transfer agent fees payable (Note 3). . . . . . . . . . . . 541
Payable for securities purchased. . . . . . . . . . . . . . 15,842
Audit fee payable . . . . . . . . . . . . . . . . . . . . . 15,006
Payable for fund shares repurchased . . . . . . . . . . . . 3,560
Other payables and accrued expenses . . . . . . . . . . . . 5,890
------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . 69,902
------------
NET ASSETS FOR 2,395,134 SHARES OUTSTANDING . . . . . . . . $26,515,177
============
NET ASSETS CONSIST OF:
Capital stock . . . . . . . . . . . . . . . . . . . . . . . $ 23,952
Additional paid-in-capital. . . . . . . . . . . . . . . . . 25,737,683
Undistributed net investment income . . . . . . . . . . . . 526,915
Accumulated net realized gain on investments. . . . . . . . 507,200
Net unrealized depreciation on investments. . . . . . . . . (280,573)
------------
TOTAL NET ASSETS. . . . . . . . . . . . . . . . . . . . . . $26,515,177
============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($26,515,177/2,395,134 shares) . . . . . . . . . . . . . $ 11.07
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME:
<S> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . $1,148,625
Dividends (net of foreign tax withheld, $15,749) . . . . 232,930
-----------
Total Investment Income. . . . . . . . . . . . . . . . . 1,381,555
-----------
EXPENSES:
Management fees (Note 3) . . . . . . . . . . . . . . . . 322,226
Directors' fees (Note 3) . . . . . . . . . . . . . . . . 7,201
Transfer agent fees (Note 3) . . . . . . . . . . . . . . 7,733
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . 17,251
Custodian fee. . . . . . . . . . . . . . . . . . . . . . 16,950
Registration and filing fees. . . . . . . . . . . . . . 13,352
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 11,000
-----------
Total Expenses . . . . . . . . . . . . . . . . . . . . . 395,713
Less Reduction of Expenses (Note 3). . . . . . . . . . . (9,043)
-----------
Net Expenses . . . . . . . . . . . . . . . . . . . . . . 386,670
-----------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . 994,885
-----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments (identified cost basis)
and other assets . . . . . . . . . . . . . . . . . 588,481
Net change in unrealized depreciation on investments
and other assets . . . . . . . . . . . . . . . . . . 22,061
-----------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS. . . . . . . . . . . . . . . . . . . . 610,542
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $1,605,427
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
10/31/99 10/31/98
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment income . . . . . . . . . . . . . . . . $ 994,885 $ 916,188
Net realized gain on investments. . . . . . . . . . . 588,481 1,773,717
Net change in unrealized appreciation on investments. 22,061 (1,033,391)
------------ ------------
Net increase from operations. . . . . . . . . . . . . 1,605,427 1,656,514
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income. . . . . . . . . . . . . . (970,289) (693,293)
From net realized gain on investments . . . . . . . . (1,849,031) (1,427,315)
------------ ------------
Total distributions to shareholders . . . . . . . . . (2,819,320) (2,120,608)
------------ ------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase (decrease) from capital share
transactions (Note 5). . . . . . . . . . . . . . . (4,562,147) 10,824,821
------------ ------------
Net increase (decrease) in net assets . . . . . . . . (5,776,040) 10,360,727
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . 32,291,217 21,930,490
------------ ------------
END OF YEAR (including undistributed net investment
income of $526,915 and $502,925, respectively). . . . $26,515,177 $32,291,217
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE
FOR THE FOR THE FOR THE TEN FOR THE FOR THE
YEAR YEAR YEAR MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 12/31/95 12/31/94
---------- ---------- ---------- ---------- ---------- ----------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD . . $ 11.59 $ 11.97 $ 11.20 $ 10.72 $ 9.72 $ 10.05
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income*. . . . . . . . . 0.383 0.357 0.390 0.293 0.342 0.200
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . 0.217 0.349 1.010 0.307 1.698 (0.280)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations . . . . . 0.600 0.706 1.400 0.600 2.040 (0.080)
---------- ---------- ---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income. . . . . . . (0.344) (0.328) (0.442) (0.092) (0.342) (0.203)
In excess of net investment income. . . - - - (0.005) -
From net realized gain on investments . (0.776) (0.758) (0.188) (0.028) (0.693) (0.040)
In excess of net realized gain on
Investments . . . . . . . . . . . . . . - - - - - (0.007)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions to shareholders. . . . (1.120) (1.086) (0.630) (0.120) (1.040) (0.250)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE - END OF PERIOD. . . . . . $ 11.07 $ 11.59 $ 11.97 $ 11.20 $ 10.72 $ 9.72
========== ========== ========== ========== ========== ==========
Total return 1 . . . . . . . . . . . . . . 4.32% 6.29% 13.01% 5.64% 21.08% (0.80%)
Ratios (to average net assets) /
Supplemental Data:
Expenses * . . . . . . . . . . . . . . 1.20% 1.20% 1.20% 1.20%2 1.20% 1.20%
Net investment income *. . . . . . . . 3.09% 3.25% 3.39% 3.69%2 3.64% 3.40%
Portfolio turnover . . . . . . . . . . . . 45% 60% 50% 85% 72% 45%
NET ASSETS - END OF PERIOD (000'S OMITTED) $ 26,515 $ 32,291 $ 21,930 $ 17,794 $ 9,518 $ 4,519
========== ========== ========== ========== ========== ==========
</TABLE>
*The investment advisor did not impose all or a portion of its management fee
and in some periods paid a portion of the Series' expenses. If these expenses
had been incurred by the Series, and had 1994 and 1993 expenses been limited to
that allowed by state securities law, the net investment income per share and
the ratios would be as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net investment income $0.379 $0.354 $0.385 $0.284 $0.311 $0.124
Ratios (to average net assets):
Expenses 1.23% 1.23% 1.24% 1.31%2 1.53% 2.50%
Net investment income 3.06% 3.22% 3.35% 3.58%2 3.31% 2.10%
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Blended Asset Series I (the "Series") is a no-load diversified series of Exeter
Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Series 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.
The total authorized capital stock of the Fund consists of 1.7 billion shares of
common stock each having a par value of $0.01. As of October 31, 1999, 1,550
million shares have been designated in total among 31 series, of which 37.5
million have been designated as Blended Asset Series I 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 traded most extensively.
Securities not traded on valuation date or securities not listed on an exchange
are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities, will
normally be valued on the basis of evaluated bid prices 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 the Advisor under procedures established by and under the general supervision
and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty 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 Fund can be attributed to a specific series. Expenses,
which cannot be directly attributed, are apportioned among the series in the
Fund.
FEDERAL INCOME TAXES
The Series' policy is to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. The Series is not subject to
federal income or excise tax to the extent that the Series 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 Series uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made semi-annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Series.
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, character
reclassification between net income and net gains, or other tax adjustments. As
a result, net investment income (loss) and net investment gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Series may
periodically make reclassifications among its capital accounts without impacting
the Series' net asset value.
For the year ended October 31, 1999, the Series distributed $620,456 of
long-term capital gains.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Series are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis: a)
investment securities, other assets and liabilities are converted to U.S.
dollars based upon current exchange rates; and b) purchases and sales of
securities and income and expenses are converted into U.S. dollars based upon
the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are recorded
for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investments that result from fluctuations in foreign currency exchange rates is
not separately stated.
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Series has an investment advisory agreement with Manning & Napier
Advisors, Inc., DBA Exeter Asset Management (the "Advisor"), for which the
Series pays the Advisor a fee, computed daily and payable monthly, at an annual
rate of 1.0% of the Series' average daily net assets. The fee amounted to
$322,226 for the year ended October 31, 1999.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel
of the Advisor provide the Series with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise maintain
the Series' organization. The Advisor also provides the Fund with necessary
office space and portfolio accounting and bookkeeping services. The salaries of
all officers of the Fund and of all Directors who are "affiliated persons" of
the Fund or of the Advisor, and all personnel of the Fund or of the Advisor
performing services relating to research, statistical and investment activities
are paid by the Advisor.
The Advisor has voluntarily agreed to waive its fee and, if necessary, pay other
expenses of the Series in order to maintain total expenses for the Series at no
more than 1.20% of average daily
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
net assets each year. Accordingly, the Advisor waived fees of $9,043 for the
year ended October 31, 1999, which is reflected as a reduction of expenses on
the Statement of Operations. The fee waiver and assumption of expenses by the
Advisor is voluntary and may be terminated at any time.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Series 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 $7,733 for the year ended October 31, 1999.
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 $7,201 for the
year ended October 31, 1999.
4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1999, purchases and sales of securities,
other than United States Government securities and short-term securities, were
$7,803,305 and $11,636,633, respectively. Purchases and sales of United States
Government securities, other than short-term securities, were $5,649,612 and
$7,199,463, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Blended Asset Series I Class A Common Stock
were:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED 10/31/99 ENDED 10/31/98
--------------- ----------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
--------------- ---------------- ---------- ------------
Sold. . . . 724,072 $ 8,171,386 1,438,207 $16,430,050
Reinvested. 255,829 2,797,421 187,108 2,098,928
Repurchased (1,370,353) (15,530,954) (671,472) (7,704,157)
--------------- ---------------- ---------- ------------
Net change. (390,452) ($4,562,147) 953,843 $10,824,821
=============== ================ ========== ============
</TABLE>
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options,
forward foreign currency exchange contracts, and futures contracts and may
involve, to a varying degree, elements of risk in excess of the amounts
recognized for financial statement purposes. No such investments were held by
the Series on October 31, 1999.
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
securities of domestic companies and the United States Government. These risks
include revaluation of currencies and future adverse political and economic
developments. Moreover, securities of foreign companies and foreign governments
may be less liquid and their prices more volatile than those of securities of
comparable domestic companies and the United States Government.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Exeter Fund,
Inc. - Blended Asset Series I:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, 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.- Blended
Asset Series I (the "Series") at October 31, 1999, and the results of its
operations, changes in net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Series' management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit 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 audit, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above. The financial statements of the Series as
of October 31, 1998 and for the periods then ended, as indicated therein, were
audited by other independent accountants whose report dated December 4, 1998
expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 3, 1999
15
<PAGE>
OTHER INFORMATION (UNAUDITED)
CHANGE OF ACCOUNTANTS
On July 15, 1999, the Fund dismissed Deloitte & Touche LLP ("D&T") as the Fund's
independent auditors by action of the Fund's Board of Directors upon the
recommendation of the Audit Committee of the Board. D&T's reports of the funds
financial statements for the fiscal years ended October 31, 1998 and 1997,
contained no adverse opinion or disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, (i) there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of D&T, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report on the Fund's financials statements for such years, and (ii) there
were no "reportable events" of the kind described in Item 304(a)(1)(v) of
Regulations S-K under the Securities Exchange Act of 1934, as amended.
On July 15, 1999, the Fund by action of its Board of Directors upon the
recommendation of the Audit Committee of the Board engaged
PricewaterhouseCoopers ("PwC") as the independent auditors to audit the Fund's
financial statements for the fiscal year ending October 31, 1999. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, neither the Fund nor
anyone on its behalf has consulted PwC on items which (i) concerned the
application of accounting principles to a specified transaction, whether
completed or proposed, or the type of audit opinion that might be rendered on
the Fund's financial statements or (ii) concerned the subject of a disagreement
(as defined in paragraph (a)(a)(iv) of Item 304 of Regulation S-X) or reportable
event (as described in paragraph (a)(1)(v) of said Item 304).
16
<PAGE>
<PAGE>
<PAGE>
Exeter Fund, Inc.
Blended Asset Series II
Annual Report
October 31, 1999
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
DEAR SHAREHOLDERS:
The Blended Asset Series II has provided shareholders with solid returns over
the past year through October 31, 1999, despite the effects of an unfavorable
bond market.
The bond market continued to struggle over the last six months, but steadied a
bit more recently. However, with long-term U.S. Treasury bond yields rising by
over 100 basis points (1.00%) in the last year, the bond market's negative
returns have influenced the returns of the Series over the period. In light of
this rising interest rate environment and growing uncertainty regarding the
future performance of the economy and corporate earnings, the Series has
withstood this recent volatility well. This performance is a result of the
portfolio's approximately 27% weighting in foreign stocks, gains achieved in the
oil service sector, and several well-positioned technology stocks.
The risk in the U.S. stock market continues to build. Rising energy prices and
tight labor markets are two of the factors that are forcing costs to go up in a
number of industries this year. With costs rising and most companies lacking
true pricing power, the inevitable result is a margin squeeze. Add to that the
impact of rising interest rates and the result is likely to be a difficult
environment for high valuation (e.g., high price-to-earnings ratio) stocks.
Given this environment, we have continued with our current focus on stocks with
lower valuations, which we believe positions the portfolio well for the future.
Likewise, in an effort to protect the portfolio from almost certain earnings
disappointments being experienced broadly in the U.S., we have maintained a
focus on companies with strong strategic positioning in their industry and/or
industries near the bottom of their supply/demand cycles. Finally, we continue
to maintain our bias towards extremely high quality bonds to avoid credit
quality deterioration as the economy slows from its extended period of high
growth.
As always, we appreciate the opportunity to serve you.
Sincerely,
EXETER ASSET MANAGEMENT
<graphic>
<pie chart>
Data for pie chart to follow:
Asset Allocation - As of 10/31/99
Stocks - 58%
Bonds - 40%
Cash, equivalents, and other assets, less liabilities - 2%
1
<PAGE>
PERFORMANCE UPDATE AS OF OCTOBER 31, 1999
Exeter Fund, Inc. - Blended Asset Series II
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through. Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
One Year $11,046 10.46% 10.46%
Five Year $19,224 92.24% 13.96%
Inception 1 $19,824 98.24% 11.96%
</TABLE>
50-50 Blended Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through. Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
One Year $11,266 12.66% 12.66%
Five Year $21,849 118.49% 16.91%
Inception 1 $21,996 119.96% 13.90%
</TABLE>
Merrill Lynch Corporate/Government Bond Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through. Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
One Year $ 9,926 -0.74% -0.74%
Five Year $14,586 45.86% 7.84%
Inception 1 $13,871 38.71% 5.55%
</TABLE>
Exeter Fund, Inc. - Blended Asset Series II from its inception (10/12/93) to
present (10/31/99) as compared to the Lehman Brothers Intermediate Bond Index
Merrill Lunch Corporate/Government Bond Index
and a 50-50 Blended Index. 2
<GRAPHIC>
<LINE CHART>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Exeter Fund, Inc. 50-50 Blended Merrill Lynch Corporate/
Date. . . . . . . . Blended Asset Series II Index Government Bond Index
10/12/1993 10,000 10,000 10,000
12/31/1993 9,982 10,056 9,883
12/31/1994 10,333 9,978 9,561
12/31/1995 13,707 12,743 11,383
10/31/1996 15,078 13,978 11,625
10/31/1997 18,047 16,832 12,666
10/31/1998 17,947 19,525 13,975
10/31/1999 19,824 21,996 13,871
</TABLE>
1 Performance numbers for the Fund and Indices are calculated from October 12,
1993, the Fund's inception date. The Fund's performance is historical and may
not be indicative of future results.
2 The 50-50 Blended Index is 50% Standard & Poor's (S&P) 500 Total Return Index
and 50% Lehman Brothers Aggregate Bond Index. The S&P
500 Total Return Index is an unmanaged capitalization-weighted measure of 500
widely held common stocks listed on the New York Stock Exchange, American Stock
Exchange, and Over-the-Counter market. The Lehman Brothers Aggregate Bond Index
is a market value weighted measure of approximately 5,500 corporate, government,
and mortgage backed securities. The Index is comprised of investment grade
securities with maturities greater than one year. The Merrill Lynch Corporate/
Government Bond Index is comprised of approximately 4,500 investment grade
corporate and government securities with maturities greater than
one year. The Indices returns assume reinvestment of income and, unlike
Fund returns, do not reflect any fees or expenses.
2
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- -----------
COMMON STOCK - 58.20%
<S> <C> <C>
AGRICULTURAL PRODUCTION - 0.04%
Sylvan, Inc.*. . . . . . . . . . . . . . . . . . . 2,400 $ 23,400
-----------
APPAREL - 2.14%
Adidas-Salomon AG (Germany) (Note 7) . . . . . . . 18,800 1,383,421
Novel Denim Holdings Ltd.* (Note 7). . . . . . . . 2,400 12,150
-----------
1,395,571
-----------
BUSINESS SERVICES - 1.73%
National Data Corp.. . . . . . . . . . . . . . . . 47,050 1,129,200
-----------
CHEMICAL & ALLIED PRODUCTS - 9.20%
BIOLOGICAL PRODUCTS - 2.16%
Cypress Bioscience, Inc.*. . . . . . . . . . . 23,000 51,750
PathoGenesis Corp.*. . . . . . . . . . . . . . 4,100 61,500
Sigma-Aldrich Corp.. . . . . . . . . . . . . . 45,400 1,293,900
-----------
1,407,150
-----------
PHARMACEUTICAL PREPARATIONS - 5.14%
Mylan Laboratories, Inc. . . . . . . . . . . . 76,900 1,379,394
Orion-Yhtyma Oyi - B Shares (Finland) (Note 7) 2,320 55,316
Teva Pharmaceutical Industries Ltd. - ADR
(Note 7) . . . . . . . . . . . . . . . . . . . 39,650 1,918,069
-----------
3,352,779
-----------
PLASTIC MATERIALS - 1.90%
Eastman Chemical Co. . . . . . . . . . . . . . 32,100 1,237,856
-----------
5,997,785
----------
CRUDE PETROLEUM & NATURAL GAS - 7.11%
Gulf Canada Resources Ltd. - ADR* (Note 7) . . . . 376,800 1,483,650
Noble Affiliates, Inc. . . . . . . . . . . . . . . 21,200 536,625
Petroleo Brasileiro S.A. (Petrobras) -
ADR (Note 7) . . . . . . . . . . . . . . . . . 161,450 2,580,504
Stolt Comex Seaway, S.A.* (Note 7) . . . . . . . . 3,400 36,338
-----------
4,637,117
-----------
DIAMONDS - 1.80%
De Beers Consolidated Mines - ADR (Note 7) . . . . 43,470 1,176,406
-----------
ELECTRONICS & ELECTRICAL EQUIPMENT - 0.02%
The Carbide/Graphite Group, Inc.*. . . . . . . . . 1,900 13,300
-----------
FOOD & KINDRED PRODUCTS - 5.37%
Bestfoods. . . . . . . . . . . . . . . . . . . . . 27,300 1,603,875
Unilever plc - ADR (Note 7). . . . . . . . . . . . 50,982 1,895,893
-----------
3,499,768
-----------
GLASS PRODUCTS - 0.06%
Libbey, Inc. . . . . . . . . . . . . . . . . . . . 1,400 37,100
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
---------- ------------
<S> <C> <C>
HEALTH SERVICES - 1.97%
Manor Care, Inc.*. . . . . . . . . . . . . 81,500 $ 1,283,625
------------
HOLDING COMPANIES - PUBLISHING - 1.65%
Reed International plc - ADR (Note 7). . . 46,800 1,076,400
------------
INDUSTRIAL & COMMERCIAL MACHINERY - 3.33 %
Baker Hughes, Inc. . . . . . . . . . . . . 37,300 1,042,069
Compaq Computer Corp.. . . . . . . . . . . 57,500 1,092,500
NN Ball & Roller, Inc. . . . . . . . . . . 5,425 35,941
------------
2,170,510
-----------
MOTION PICTURE PRODUCTION - 2.15%
News Corp Ltd. - ADR (Note 7). . . . . . . 50,900 1,402,931
------------
PAPER & ALLIED PRODUCTS - 3.94%
International Paper Co.. . . . . . . . . . 27,800 1,462,975
Kimberly-Clark Corp. . . . . . . . . . . . 16,300 1,028,9378
Smurfit-Stone Container Corp.* . . . . . . 3,564 77,072
------------
2,568,9845
------------
PRIMARY METAL INDUSTRIES - 0.16%
Intermet Corp. . . . . . . . . . . . . . . 1,875 18,984
Texas Industries, Inc. . . . . . . . . . . 2,400 85,950
----------
104,934
----------
REFUSE SYSTEMS - 0.03%
Newpark Resources, Inc.* . . . . . . . . . 3,400 21,8878
------------
RETAIL SPECIALTY STORES - 0.01%
Hancock Fabrics, Inc.. . . . . . . . . . . 2,275 9,384
------------
SOFTWARE - 0.86%
J.D. Edwards & Co.*. . . . . . . . . . . . 21,600 517,050
MAPICS, Inc.*. . . . . . . . . . . . . . . 5,300 45,050
----------
562,100
----------
TECHNICAL INSTRUMENTS & SUPPLIES - 7.02%
Eastman Kodak Co.. . . . . . . . . . . . . 50,425 3,476,173
Millipore Corp.. . . . . . . . . . . . . . 34,575 1,102,078
------------
4,578,251
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT//SHARES (NOTE 2)
--------------- -----------
<S> <C> <C>
TELECOMMUNICATION SERVICES -3.21%
Grupo Radio Centro S.A. de C.V. - ADR (Note 7) . 4,000 $ 18,750
ProSieben Media AG (Germany) (Note 7). . . . . . 1,100 45,259
Sinclair Broadcast Group, Inc.*. . . . . . . . . 4,800 48,800
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR PFD (Note 7). . . . . . . . . . . . . . 25,465 1,983,087
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR (Note 7) . . . . . . . . . . . . . . . . 25,465 1,194
-----------
2,096,290
-----------
TESTING LABORATORIES - 0.04%
Paradigm Geophysical Ltd.* . . . . . . . . . . . 4,500 24,188
-----------
TEXTILE MILL PRODUCTS - 0.06%
Albany International Corp. - Class A . . . . . . 2,393 36,344
-----------
TRANSPORTATION - 6.30%
RAILROAD - 6.24%
Burlington Northern Santa Fe Corp. . . . . . 45,600 1,453,500
Canadian National Railway Co. - ADR (Note 7) 84,300 2,571,150
Genesee & Wyoming, Inc.* . . . . . . . . . . 3,900 45,094
-----------
4,069,744
-----------
WATER - 0.06%
Trico Marine Services, Inc.* . . . . . . . . 5,600 38,850
-----------
4,108,594
-----------
TOTAL COMMON STOCK
(Identified Cost $39,950,923). . . . . . . . . . 37,954,069
------------
U.S. TREASURY SECURITIES - 39.00%
U.S. TREASURY BONDS - 21.27%
U.S. Treasury Bond, 7.25%, 8/15/2022 . . . . . . $ 280,000 305,463
U.S. Treasury Bond, 7.50%, 11/15/2024. . . . . . 2,325,000 2,630,156
U.S. Treasury Bond, 6.875%, 8/15/2025. . . . . . 6,230,000 6,576,544
U.S. Treasury Bond, 6.50%, 11/15/2026. . . . . . 440,000 444,950
U.S. Treasury Bond, 5.50%, 8/15/2028 . . . . . . 4,400,000 3,910,500
-----------
TOTAL U.S. TREASURY BONDS
(Identified Cost $13,497,279) . . . . . . . . 13,867,613
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT/SHARES (NOTE 2)
-------------- -----------
<S> <C> <C>
U.S. TREASURY NOTES - 17.73%
U.S. Treasury Note, 5.50%, 3/31/2003 . $ 1,510,000 $1,489,237
U.S. Treasury Note, 5.375%, 6/30/2003. 130,000 127,563
U.S. Treasury Note, 4.25%, 11/15/2003. 6,410,000 6,017,388
U.S. Treasury Note, 4.75%, 2/15/2004 . 4,000,000 3,817,500
U.S. Treasury Note, 6.50%, 5/15/2005 . 105,000 106,870
-----------
TOTAL U.S. TREASURY NOTES
(Identified Cost $11,993,829) . . . 11,558,558
------------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $25,491,108) . . . 25,426,171
------------
U.S. GOVERNMENT AGENCIES - 0.51%
Federal National Mortgage Association
Note, 5.25%, 1/15/2003. . . . . . . 165,000 159,860
Federal National Mortgage Association
Note, 5.75%, 2/15/2008. . . . . . . 185,000 174,335
-----------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $351,033). . . . . 334,195
-----------
SHORT-TERM INVESTMENTS - 0.93%
Dreyfus Treasury Cash Management Fund
(Identified Cost $603,891). . . . . . 603,891 603,891
-----------
TOTAL INVESTMENTS - 98.64%
(Identified Cost $66,396,995) . . . 64,318,326
OTHER ASSETS, LESS LIABILITIES - 1.36% 886,420
------------
NET ASSETS - 100%. . . . . . . . . . . $ 65,204,746
==============
</TABLE>
*Non-income producing security
FEDERAL TAX INFORMATION:
At October 31, 1999, the net unrealized depreciation based on identified cost
for federal income tax purposes of $66,590,274 was as follows:
Unrealized appreciation $2,667,875
Unrealized depreciation (4,939,823)
-----------
UNREALIZED DEPRECIATION - NET ($2,271,948)
============
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, 1999
ASSETS:
<S> <C>
Investments, at value (identified cost $66,396,955)(Note 2) $64,318,326
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,516
Receivable for securities sold. . . . . . . . . . . . . . . 633,825
Interest receivable . . . . . . . . . . . . . . . . . . . . 423,857
Receivable for fund shares sold . . . . . . . . . . . . . . 16,022
Dividends receivable. . . . . . . . . . . . . . . . . . . . 11,501
------------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 65,454,047
------------
LIABILITIES:
Accrued management fees (Note 3). . . . . . . . . . . . . . 725
Accrued directors' fees (Note 3). . . . . . . . . . . . . . 2,117
Transfer agent fees payable (Note 3). . . . . . . . . . . . 41
Payable for fund shares repurchased . . . . . . . . . . . . 178,875
Payable for securities purchased. . . . . . . . . . . . . . 47,525
Audit fee payable . . . . . . . . . . . . . . . . . . . . . 11,446
Other payables and accrued expenses . . . . . . . . . . . . 8,572
------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . 249,301
------------
NET ASSETS FOR 5,117,865 SHARES OUTSTANDING . . . . . . . . $65,204,746
============
NET ASSETS CONSIST OF:
Capital stock . . . . . . . . . . . . . . . . . . . . . . . $ 51,179
Additional paid-in-capital. . . . . . . . . . . . . . . . . 63,110,535
Undistributed net investment income . . . . . . . . . . . . 873,829
Accumulated net realized gain on investments. . . . . . . . 3,247,854
Net unrealized depreciation on investments. . . . . . . . . (2,078,651)
------------
TOTAL NET ASSETS. . . . . . . . . . . . . . . . . . . . . . $65,204,746
============
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($65,204,746/5,117,865 shares) . . . . . . . . . . . . . $ 12.74
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME:
<S> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,759,179
Dividends (net of foreign taxes withheld, $49,221) . . . . . . . . . . . . 769,604
----------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . 2,528,783
----------
EXPENSES:
Management fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . 704,085
Directors' fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . 7,201
Transfer Agent fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . 16,898
Custodian fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,498
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,631
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,222
----------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812,535
----------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,716,248
----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments (identified cost basis) and other assets. 3,482,912
Net change in unrealized appreciation on investments and other assets. . . 1,892,935
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS. . . . . . . . . . . . . . 5,375,847
----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,092,095
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR YEAR
ENDED ENDED
10/31/99 10/31/98
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment income . . . . . . . . . . . . . . . . $ 1,716,248 $ 1,552,087
Net realized gain on investments. . . . . . . . . . . 3,482,912 3,960,798
Net change in unrealized appreciation on investments. 1,892,935 (6,481,268)
------------ ------------
NET INCREASE (DECREASE) FROM OPERATIONS . . . . . . . 7,092,095 (968,383)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income. . . . . . . . . . . . . . (1,640,967) (1,191,632)
From net realized gain on investments . . . . . . . . (4,195,324) (6,231,121)
------------ ------------
Total distributions to shareholders . . . . . . . . . (5,836,291) (7,422,753)
------------ ------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase (decrease) from capital
share transactions (Note 5). . . . . . . . . . . . (2,024,080) 23,441,792
------------ ------------
Net increase (decrease) in net assets . . . . . . . . (768,276) 15,050,656
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . 65,973,022 50,922,366
------------ ------------
END OF YEAR (including undistributed net investment
income of $873,829 and $798,686, respectively) . . $65,204,746 $65,973,022
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE TEN FOR THE FOR THE
YEAR YEAR YEAR MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 12/31/95 12/31/94
---------- ---------- ---------- ---------- ---------- ----------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD. . . . . . . . $ 12.60 $ 14.69 $ 13.04 $ 11.95 $ 10.12 $ 9.98
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations:
Net investment income . . . . . . . . . . . . . . 0.326 0.312 0.325 0.227* 0.238* 0.108*
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 0.920 (0.385) 2.130 0.963 3.052 0.243
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations . . . . . . . . . . 1.246 (0.073) 2.455 1.190 3.290 0.351
---------- ---------- ---------- ---------- ---------- ----------
Less distributions to shareholders:
From net investment income. . . . . . . . . . . . (0.308) (0.286) (0.393) (0.040) (0.237) (0.119)
From net realized gain on investments . . . . . . (0.798) (1.731) (0.412) (0.060) (1.223) (0.092)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions to shareholders. . . . . . . . . (1.106) (2.017) (0.805) (0.100) (1.460) (0.211)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE - END OF PERIOD. . . . . . . . . . . $ 12.74 $ 12.60 $ 14.69 $ 13.04 $ 11.95 $ 10.12
========== ========== ========== ========== ========== ==========
Total return1. . . . . . . . . . . . . . . . . . . . 10.46% (0.56%) 19.69% 10.01% 32.64% 3.52%
Ratios (to average net assets) / Supplemental Data:
Expenses . . . . . . . . . . . . . . . . . . . . 1.15% 1.15% 1.15% 1.20%2* 1.20%* 1.20%*
Net investment income. . . . . . . . . . . . . . 2.44% 2.45% 2.45% 2.51%2* 2.53%* 2.12%*
Portfolio turnover . . . . . . . . . . . . . . . . . 78% 61% 63% 57% 63% 19%
NET ASSETS - END OF PERIOD
(000's omitted) . . . . . . . . . . . . . . . . . . $ 65,205 $ 65,973 $ 50,922 $ 32,999 $ 20,519 $ 7,214
========== ========== ========== ========== ========== ==========
</TABLE>
* The investment advisor did not impose all or a portion of its management fee
and in some periods paid a portion of the Series' expenses. If these expenses
had been incurred by the series and had 1993 expenses been limited to that
allowed by state securities law, the net investment income per share and the
ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net investment income . . . . . N/A N/A N/A $ 0.225 $0.226 $0.051
Ratios (to average net assets):
Expenses . . . . . . . . . . N/A N/A N/A 1.22%2 1.33% 2.31%
Net investment income. . . . N/A N/A N/A 2.49%2 2.40% 1.01%
</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
Blended Asset Series II (the "Series") is a no-load diversified series of Exeter
Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Series 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.
The total authorized capital stock of the Fund consists of 1.7 billion shares of
common stock each having a par value of $0.01. As of October 31, 1999, 1,550
million shares have been designated in total among 31 series, of which 37.5
million have been designated as Blended Asset Series II 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 traded most extensively.
Securities not traded on valuation date or securities not listed on an exchange
are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities, will
normally be valued on the basis of evaluated bid prices 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 the Advisor under procedures established by and under the general supervision
and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty 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 Fund can be attributed to a specific series. Expenses
which cannot be directly attributed are apportioned among the series in the
Fund.
FEDERAL INCOME TAXES
The Series' policy is to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. The Series is not subject to
federal income or excise tax to the extent the Series 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 Series uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made semi-annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Series.
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, character
reclassification between net income and net gains, or other tax adjustments. As
a result, net investment income (loss) and net investment gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Series may
periodically make reclassifications among its capital accounts without impacting
the Series' net asset value.
For the year ended October 31, 1999, the Series distributed $1,738,288 of
long-term capital gains.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Series are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis: a)
investment securities, other assets and liabilities are converted to U.S.
dollars based upon current exchange rates; and b) purchases and sales of
securities and income and expenses are converted into U.S. dollars based upon
the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are recorded
for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investments that result from fluctuations in foreign currency exchange rates is
not separately stated.
OTHER
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier Advisors,
Inc., DBA Exeter Asset Management (the "Advisor"), for which the Series pays the
Advisor a fee, computed daily and payable monthly, at an annual rate of 1.0% of
the Series' average daily net assets. The fee amounted to $704,085 for the year
ended October 31, 1999.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Series with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise maintain
the Series' 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.
12
<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 Series 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 $16,898 for the year ended October 31, 1999.
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 Series.
The compensation of the non-affiliated Directors totaled $7,201 for the year
ended October 31, 1999.
4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1999, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$32,562,782 and $38,276,479, respectively. Purchases and sales of United States
Government securities, other than short-term securities, were $18,651,885 and
$16,730,758, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Blended Asset Series II Class A Common Stock were:
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
10/31/99 10/31/98
----------- -------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
----------- ----------- ----------- ----------
Sold. . . . 1,929,179 $ 24,742,814 2,076,628 $ 27,526,886
Reinvested. 479,972 5,789,528 579,237 7,393,436
Repurchased (2,526,247) (32,556,422) (887,579) (11,478,530)
----------- ------------- ---------- -------------
Net change. (117,096) $ (2,024,080) 1,768,286 $ 23,441,792
=========== ============= ========== =============
</TABLE>
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options,
forward foreign currency exchange contracts, and futures contracts and may
involve, to a varying degree, elements of risk in excess of the amounts
recognized for financial statement purposes. No such investments were held by
the Series on October 31, 1999.
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
securities of domestic companies and the United States Government. These risks
include revaluation of currencies and future adverse political and economic
developments. Moreover, securities of foreign companies and foreign governments
and their markets may be less liquid and their prices more volatile than those
of securities of comparable domestic companies and the United States Government.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Exeter Fund,
Inc. - Blended Asset Series II:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, 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.- Blended
Asset Series II (the "Series") at October 31, 1999, and the results of its
operations, changes in net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Series' management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit 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 audit, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above. The financial statements of the Series as
of October 31, 1998 and for the periods then ended, as indicated therein, were
audited by other independent accountants whose report dated December 4, 1998
expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 3, 1999
14
<PAGE>
OTHER INFORMATION (UNAUDITED)
CHANGE OF ACCOUNTANTS
On July 15, 1999, the Fund dismissed Deloitte & Touche LLP ("D&T") as the Fund's
independent auditors by action of the Fund's Board of Directors upon the
recommendation of the Audit Committee of the Board. D&T's reports of the funds
financial statements for the fiscal years ended October 31, 1998 and 1997,
contained no adverse opinion or disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, (i) there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of D&T, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report on the Fund's financials statements for such years, and (ii) there
were no "reportable events" of the kind described in Item 304(a)(1)(v) of
Regulations S-K under the Securities Exchange Act of 1934, as amended.
On July 15, 1999, the Fund by action of its Board of Directors upon the
recommendation of the Audit Committee of the Board engaged
PricewaterhouseCoopers ("PwC") as the independent auditors to audit the Fund's
financial statements for the fiscal year ending October 31, 1999. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, neither the Fund nor
anyone on its behalf has consulted PwC on items which (i) concerned the
application of accounting principles to a specified transaction, whether
completed or proposed, or the type of audit opinion that might be rendered on
the Fund's financial statements or (ii) concerned the subject of a disagreement
(as defined in paragraph (a)(a)(iv) of Item 304 of Regulation S-X) or reportable
event (as described in paragraph (a)(1)(v) of said Item 304).
15
<PAGE>
<PAGE>
Exeter Fund, Inc.
Maximum Horizon Series
Annual Report
October 31, 1999
<PAGE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
DEAR SHAREHOLDERS:
The Maximum Horizon Series has provided shareholders with strong returns over
the past year through October 31, 1999, while remaining focused on attractively
valued domestic and foreign stocks.
The U.S. markets have been anything but stable over the last six months, with
peaks and valleys reflecting growing uncertainty regarding the future
performance of the economy and corporate earnings. While stocks rose broadly
earlier this year and relatively undervalued sectors improved, the third quarter
experienced almost exactly the opposite with negative returns across most
sectors of the U.S. equity market. The Series has withstood this recent
volatility well, as a result of the portfolio's approximately 32% weighting in
foreign stocks, gains achieved in the oil service sector, and several
well-positioned technology stocks.
We believe the risk in the U.S. stock market continues to build. Rising energy
prices and tight labor markets are two of the factors that are forcing costs to
go up in a number of industries this year. With costs rising and most companies
lacking true pricing power, the inevitable result is a margin squeeze. Add to
that the impact of rising interest rates and the result is likely to be a
difficult environment for high valuation (e.g., high price-to-earnings ratio)
stocks. Given this environment, we have continued with our current focus on
stocks with lower valuations, which we believe positions the portfolio well for
the future. Likewise, in an effort to protect the portfolio from almost certain
earnings disappointments being experienced broadly in the U.S., we have
maintained a focus on companies with strong strategic positioning in their
industry and/or industries near the bottom of their supply/demand cycles.
As has been the case over the past year, general overvaluation in U.S. large cap
and Internet stocks is still a major concern. Not only have stock prices risen
much faster than the actual economic value of the corresponding companies, but
also the growth in economic value has often been based more on one-time events
rather than on the actual long-term performance of those companies. In
response, we have continued to look toward strengthening foreign markets to
provide a way to offset an overvalued domestic market, and we also seek specific
undervalued domestic stocks to improve the possibility of swift recovery in an
otherwise tumultuous market environment.
As always, we appreciate the opportunity to serve you.
Sincerely,
EXETER ASSET MANAGEMENT
<graphic>
<pie chart>
Data for pie chart to follow:
Stocks - 91%
Bonds - 5%
Cash, equivalents, and other assets, less liabilities - 4%
1
<PAGE>
PERFORMANCE UPDATE AS OF OCTOBER 31, 1999
Exeter Fund, Inc. - Maximum Horizon Series
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<C> <S> <C> <C>
One Year $12,634 26.34% 26.34%
Inception 1 $17,345 73.45% 14.75%
</TABLE>
Standard & Poor's 500 Total Return Index
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<C> <S> <C> <C>
One Year $12,566 25.66% 25.66%
Inception 1 $25,127 151.27% 25.88%
</TABLE>
Value Line Index
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<C> <S> <C> <C>
One Year $10,153 1.53% 1.53%
Inception 1 $13,001 30.01% 6.78%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - Maximum
Horizon Series from its inception (11/1/95) to present (10/31/99) as compared to
the Standard & Poor's (S&P) 500 Total Return Index and the Value Line Index. 2
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Exeter Fund, Inc. Standard & Poor's 500
Date . . . Maximum Horizon Series Total Return Index Value Line Index
11/01/1995 10,000 10,000 10,000
10/31/1996 11,521 12,408 11,198
10/31/1997 14,604 16,392 13,998
10/31/1998 13,730 19,996 12,805
10/31/1999 17,345 25,127 13,001
</TABLE>
1 The Fund and Index performance are calculated from November 1, 1995, the
Fund's inception date. The Fund's performance is historical and may not be
indicative of future results.
2 The Standard & Poor's (S&P) 500 Total Return Index is an unmanaged
capitalization-weighted measure of approximately 500 widely held common
stocks listed on the New York Stock Exchange, American Stock Exchange, and
Over-the-Counter market. The Index returns assume reinvestment of income and,
unlike Fund returns, does not reflect any fees or expenses. The Value Line Index
is an unmanaged index that consists of approximately 1700 securities that are
traded on the New York Stock Exchange, the NASDAQ Stock Market, and the
American Stock Exchange. The Index returns are based on a geometric average of
relative price changes of the component stocks and does not include income, and
unlike Fund returns, does not reflect any fees or expenses.
2
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- -----------
COMMON STOCK - 91.41%
<S> <C> <C>
AGRICULTURAL PRODUCTION - 0.06%
Sylvan, Inc.* . . . . . . . . . . . . . . . . . . . . . 1,325 $ 12,919
-----------
APPAREL - 2.84%
Adidas - Solomon AG (Germany) (Note 7). . . . . . . . . 8,200 603,407
Novel Denim Holdings Ltd.*. . . . . . . . . . . . . . . 1,300 6,581
-----------
609,988
-----------
BUSINESS SERVICES - 2.42%
National Data Corp. . . . . . . . . . . . . . . . . . . 21,700 520,800
-----------
CHEMICAL & ALLIED PRODUCTS - 12.53%
BIOLOGICAL PRODUCTS - 3.09%
Cypress Bioscience, Inc.*. . . . . . . . . . . . . . 12,000 27,000
PathoGenesis Corp.*. . . . . . . . . . . . . . . . . 2,200 33,000
Sigma-Aldrich Corp.. . . . . . . . . . . . . . . . . 21,200 604,200
-----------
664,200
-----------
PHARMACEUTICAL PREPARATIONS - 7.90%
Celltech Chiroscience plc* (United Kingdom) (Note 7) 69,900 523,120
Mylan Laboratories, Inc. . . . . . . . . . . . . . . 38,600 692,388
Orion-Yhtyma Oyj - B Shares (Finland) (Note 7) . . . 700 16,690
Teva Pharmaceutical Industries Ltd. - ADR (Note 7) . 9,650 466,819
-----------
1,699,017
-----------
PLASTIC MATERIALS - 1.54%
Eastman Chemical Co. . . . . . . . . . . . . . . . . 8,575 330,673
-----------
2,693,890
-----------
COMPUTER SERVICES - 13.85%
PROGRAMMING - 0.11%
Comptek Research, Inc.*. . . . . . . . . . . . . . . 2,400 24,600
-----------
SOFTWARE - 13.74%
Computer Associates International, Inc.* . . . . . . 20,025 1,131,413
J.D. Edwards & Co.*. . . . . . . . . . . . . . . . . 41,900 1,002,981
MAPICS, Inc.*. . . . . . . . . . . . . . . . . . . . 2,700 22,950
Oracle Corp.*. . . . . . . . . . . . . . . . . . . . 16,800 799,050
-----------
2,956,394
-----------
2,980,994
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- -----------
<S> <C> <C>
CRUDE PETROLEUM & NATURAL GAS - 7.18%
Gulf Canada Resources Ltd. - ADR* (Note 7) . . . . 135,200 $ 532,350
Noble Affiliates, Inc. . . . . . . . . . . . . . . 6,150 155,672
Petroleo Brasileiro S.A. (Petrobras) -ADR (Note 7) 52,325 836,326
Stolt Comex Seaway, SA* (Note 7) . . . . . . . . . 1,900 20,306
-----------
1,544,654
-----------
DIAMONDS - 1.01%
De Beers Consolidated Mines - ADR (Note 7) . . . . 8,045 217,718
-----------
ELECTRONICS & ELECTRICAL EQUIPMENT - 0.03%
The Carbide/Graphite Group, Inc.*. . . . . . . . . 1,050 7,350
-----------
FOOD & BEVERAGES - 7.64%
Bestfoods. . . . . . . . . . . . . . . . . . . . . 19,000 1,116,250
Unilever plc - ADR (Note 7). . . . . . . . . . . . 14,196 527,914
-----------
1,644,164
-----------
GLASS PRODUCTS - 0.04%
Libbey, Inc. . . . . . . . . . . . . . . . . . . . 300 7,950
-----------
HEALTH SERVICES - 1.93%
Manor Care, Inc.*. . . . . . . . . . . . . . . . . 26,300 414,225
-----------
HOLDING COMPANIES - PUBLISHING - 2.32%
Reed International plc - ADR (Note 7). . . . . . . 21,700 499,100
-----------
INDUSTRIAL & COMMERCIAL MACHINERY - 3.68%
Baker Hughes, Inc. . . . . . . . . . . . . . . . . 12,000 335,250
Compaq Computer Corp . . . . . . . . . . . . . . . 23,200 440,800
NN Ball & Roller, Inc. . . . . . . . . . . . . . . 2,375 15,734
-----------
791,784
-----------
MOTION PICTURE PRODUCTION - 2.93%
News Corp Ltd. - ADR (Note 7). . . . . . . . . . . 22,900 631,181
-----------
PAPER & ALLIED PRODUCTS - 11.45%
Aracruz Celulose S.A. - ADR (Note 7) . . . . . . . 27,950 572,975
Fort James Corp. . . . . . . . . . . . . . . . . . 13,200 347,325
International Paper Co.. . . . . . . . . . . . . . 13,800 726,225
Kimberly-Clark Corp. . . . . . . . . . . . . . . . 12,275 774,859
Smurfit-Stone Container Corp.* . . . . . . . . . . 1,905 41,196
-----------
2,462,580
-----------
PRIMARY METAL INDUSTRIES - 0.26%
Intermet Corp. . . . . . . . . . . . . . . . . . . 950 9,619
Texas Industries, Inc. . . . . . . . . . . . . . . 1,300 46,556
-----------
56,175
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
SHARES/PRINCIPAL VALUE
AMOUNT (NOTE 2)
----------------- ----------
<S> <C> <C>
REFUSE SYSTEMS - 0.05%
Newpark Resources, Inc.*. . . . . . . . . . . . 1,625 $10,461
----------
RESTAURANTS - 3.68%
McDonald's Corp.. . . . . . . . . . . . . . . . 19,170 790,762
----------
RETAIL SPECIALTY STORES - 0.03%
Hancock Fabrics, Inc. . . . . . . . . . . . . . 1,725 7,116
----------
TECHNICAL INSTRUMENTS & SUPPLIES - 7.40%
Eastman Kodak Co. . . . . . . . . . . . . . . . 17,840 1,229,845
Millipore Corp. . . . . . . . . . . . . . . . . 11,375 362,578
----------
1,592,423
-----------
TELECOMMUNICATION SERVICES - 3.23%
Grupo Radio Centro S.A. de C.V. - ADR (Note 7). 2,200 10,313
ProSieben Media AG (Germany) (Note 7) . . . . . 600 24,687
Sinclair Broadcast Group, Inc.* . . . . . . . . 2,600 26,000
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR PFD (Note 7) . . . . . . . . . . . . . . 8,125 632,734
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR (Note 7) . . . . . . . . . . . . . . . . 8,275 388
----------
694,122
----------
TESTING LABORATORIES - 0.06%
Paradigm Geophysical Ltd.*. . . . . . . . . . . 2,525 13,572
----------
TEXTILE MILL PRODUCTS - 0.09%
Albany International Corp. - Class A. . . . . . 1,285 19,516
----------
TRANSPORTATION - 6.70%
RAILROAD - 6.62%
Burlington Northern Santa Fe Corp. . . . . . 21,200 675,750
Canadian National Railway Co. - ADR (Note 7) 24,550 748,775
-----------
1,424,525
-----------
WATER - 0.08%
Trico Marine Services, Inc.* . . . . . . . . 2,600 18,038
-----------
1,442,563
-----------
TOTAL COMMON STOCK
(Identified Cost $19,368,495). . . . . . . . 19,666,007
-------------
U.S. TREASURY SECURITIES - 5.05%
U.S. Treasury Bond, 6.875%, 8/15/2025. . . . . $ 210,000 221,681
U.S. Treasury Bond, 6.50%, 11/15/2026 . . . . . 855,000 864,619
----------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $1,151,615) . . . . . . . 1,086,300
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
----------- ---------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 1.90%
Dreyfus Treasury Cash Management Fund
(Identified Cost $409,267). . . . . 409,267 $409,267
---------
TOTAL INVESTMENTS - 98.36%
(Identified Cost $20,929,377) . . . 21,161,574
OTHER ASSETS, LESS LIABILITIES - 1.64% 353,133
-----------
NET ASSETS - 100%. . . . . . . . . . . $21,514,707
===========
</TABLE>
*Non-income producing security
Federal Tax Information:
At October 31, 1999, the net unrealized appreciation based on identified cost
for federal income tax purposes of $20,957,360 was as follows:
Unrealized appreciation $2,110,545
Unrealized depreciation (1,906,331)
-----------
UNREALIZED APPRECIATION - NET $204,214
========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, 1999
ASSETS:
<S> <C>
Investments, at value (identified cost $20,929,377)(Note 2) $21,161,574
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,829
Receivable for securities sold. . . . . . . . . . . . . . . 311,332
Interest receivable . . . . . . . . . . . . . . . . . . . . 28,733
Receivable for fund shares sold . . . . . . . . . . . . . . 7,308
Dividends receivable. . . . . . . . . . . . . . . . . . . . 4,091
-----------
TOTAL ASSETS. . . . . . . . . . . . . . . . . . . . . . . . 21,584,867
-----------
LIABILITIES:
Accrued management fees (Note 3). . . . . . . . . . . . . . 27,903
Accrued directors' fees (Note 3). . . . . . . . . . . . . . 2,118
Transfer agent fees payable (Note 3). . . . . . . . . . . . 431
Payable for securities purchased. . . . . . . . . . . . . . 24,986
Audit fee payable . . . . . . . . . . . . . . . . . . . . . 10,418
Other payables and accrued expenses . . . . . . . . . . . . 4,304
-----------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . 70,160
-----------
NET ASSETS FOR 1,501,724 SHARES OUTSTANDING . . . . . . . . $21,514,707
===========
NET ASSETS CONSIST OF:
Capital stock . . . . . . . . . . . . . . . . . . . . . . . $ 15,017
Additional paid-in-capital. . . . . . . . . . . . . . . . . 19,141,091
Undistributed net investment income . . . . . . . . . . . . 52,108
Accumulated net realized gain on investments. . . . . . . . 2,074,302
Net unrealized appreciation on investments. . . . . . . . . 232,189
-----------
TOTAL NET ASSETS. . . . . . . . . . . . . . . . . . . . . . $21,514,707
===========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($21,514,707/1,501,724 shares) . . . . . . . . . . . . . $ 14.33
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME:
<S> <C>
Dividends (net of foreign tax withheld, $16,873) . . . . . . . . . . . . . $ 303,165
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,707
-----------
Total Investment Income. . . . . . . . . . . . . . . . . . . . . . . . . . 467,872
-----------
EXPENSES:
Management fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . 219,497
Directors' fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . 7,201
Transfer agent fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . . 5,268
Registration and filing fees . . . . . . . . . . . . . . . . . . . . . . . 15,301
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,901
Custodian fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,451
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,374
-----------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279,993
Less Reduction of Expenses (Note 3). . . . . . . . . . . . . . . . . . . . (16,594)
-----------
Net Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263,399
-----------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . 204,473
-----------
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS:
Net realized gain on investments (identified cost basis) and other assets. 2,187,613
Net change in unrealized appreciation on investments and other assets. . . 2,706,385
-----------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,893,998
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,098,471
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
YEAR FOR THE
ENDED YEAR ENDED
10/31/99 10/31/98
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment income . . . . . . . . . . . . . . . . $ 204,473 $ 195,692
Net realized gain on investments. . . . . . . . . . . 2,187,613 983,037
Net change in unrealized appreciation on investments. 2,706,385 (2,448,394)
------------ ------------
Net increase (decrease) from operations. . . . . . . 5,098,471 (1,269,665)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income. . . . . . . . . . . . . . (344,505) (141,415)
From net realized gain on investments . . . . . . . . (911,021) (1,010,011)
------------ ------------
Total distributions to shareholders . . . . . . . . . (1,255,526) (1,151,426)
------------ ------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net increase (decrease) from capital share
transactions (Note 5). . . . . . . . . . . . . . . (1,032,795) 11,273,954
------------ ------------
Net increase in net assets. . . . . . . . . . . . . . 2,810,150 8,852,863
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . 18,704,557 9,851,694
------------ ------------
END OF YEAR (including undistributed net
investment income of $52,108 and $107,296,
respectively). . . . . . . . . . . . . . . . . . . . $21,514,707 $18,704,557
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96
-------------- -------------- -------------- --------------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD. . . $ 12.10 $ 14.24 $ 11.38 $ 10.00
-------------- -------------- -------------- --------------
Income from investment operations:
Net investment income*. . . . . . . . . 0.181 0.134 0.101 0.155
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . 3.056 (0.935) 2.919 1.356
-------------- -------------- -------------- --------------
Total from investment operations . . . . . 3.237 (0.801) 3.020 1.511
-------------- -------------- -------------- --------------
Less distributions to shareholders:
From net investment income . . . . . . . (0.215) (0.123) (0.082) (0.131)
From net realized gain on investments. . (0.792) (1.216) (0.078) --
-------------- -------------- -------------- --------------
Total distributions to shareholders. . . . (1.007) (1.339) (0.160) (0.131)
-------------- -------------- -------------- --------------
NET ASSET VALUE - END OF PERIOD. . . . . . $ 14.33 $ 12.10 $ 14.24 $ 11.38
============== ============== ============== ==============
Total return1. . . . . . . . . . . . . . . 26.34% (5.99%) 26.77% 15.21%
Ratios (to average net assets) /
Supplemental Data:
Expenses*. . . . . . . . . . . . . . . 1.20% 1.20% 1.20% 1.20%
Net investment income* . . . . . . . . 0.93% 1.25% 0.94% 1.71%
Portfolio turnover . . . . . . . . . . . . 96% 60% 115% 95%
NET ASSETS - END OF PERIOD
(000's omitted). . . . . . . . . . . . . . $ 21,515 $ 18,705 $ 9,852 $ 1,574
============== ============== ============== ==============
</TABLE>
* The investment advisor did not impose all or a portion of its management fee
and in some periods
paid a portion of the Series' expenses. If these expenses had been incurred by
the Series, and had
1996 expenses been limited to that allowed by state securities law, the net
investment income per share and the ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net investment income . . . . . $0.165 $0.121 $0.063 $0.037
Ratios (to average net assets):
Expenses . . . . . . . . . . 1.28% 1.32% 1.55% 2.50%
Net investment income. . . . 0.85% 1.13% 0.59% 0.41%
</TABLE>
1 Represents 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
Maximum Horizon Series (the "Series") is a no-load diversified series of Exeter
Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Series 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.
The total authorized capital stock of the Fund consists of 1.7 billion shares of
common stock each having a par value of $0.01. As of October 31, 1999, 1,550
million shares have been designated in total among 31 series, of which 75
million have been designated as Maximum Horizon 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 traded most extensively.
Securities not traded on valuation date or securities not listed on an exchange
are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities, will
normally be valued on the basis of evaluated bid prices 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 the Advisor under procedures established by and under the general supervision
and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty 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 Fund can be attributed to a specific series. Expenses
which cannot be directly attributed are apportioned among the series in the
Fund.
FEDERAL INCOME TAXES
The Series' policy is to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. The Series is not subject to
federal income or excise tax to the extent the Series 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 Series uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made semi-annually.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Series.
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, character
reclassification between net income and net gains, or other tax adjustments. As
a result, net investment income (loss) and net investment gain (loss) on
investment transactions for a reporting period may differ significantly from
distributions to shareholders during such period. As a result, the Series may
periodically make reclassifications among its capital accounts without impacting
the Series' net asset value.
For the year ended October 31, 1999, the Series distributed $230,990 of
long-term capital gains.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Series are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis: a)
investment securities, other assets and liabilities are converted to U.S.
dollars based upon current exchange rates; and b) purchases and sales of
securities and income and expenses are converted into U.S. dollars based upon
the currency exchange rates prevailing on the respective dates of such
transactions.
Gains and losses attributable to foreign currency exchange rates are recorded
for financial statement purposes as net realized gains and losses on
investments. The portion of both realized and unrealized gains and losses on
investments that result from fluctuations in foreign currency exchange rates is
not separately stated.
OTHER
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier Advisors,
Inc., DBA Exeter Asset Management (the "Advisor"), for which the Series pays the
Advisor a fee, computed daily and payable monthly, at an annual rate of 1.0% of
the Series' average daily net assets. The fee amounted to $219,497 for the year
ended October 31, 1999.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Series with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise maintain
the Series' 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.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The Advisor has voluntarily agreed to waive its fee and, if necessary, pay other
expenses of the Series in order to maintain total expenses for the Series at no
more than 1.20% of average daily net assets each year. Accordingly, the Advisor
waived fees of $16,594 for the year ended October 31, 1999, which is reflected
as a reduction of expenses on the Statement of Operations. The fee waiver and
assumption of expenses by the Advisor is voluntary and may be terminated at any
time.
The Advisor also acts as the transfer, dividend paying and shareholder servicing
agent for the Fund. For these services, the Series 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 $5,268 for the year ended October 31, 1999.
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 Series.
The compensation of the non-affiliated Directors totaled $7,201 for the year
ended October 31, 1999.
4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1999, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$16,267,086 and $17,540,912 respectively. Purchases and sales of United States
Government securities, other than short-term securities, were $3,281,938 and
$3,204,991, respectively.
5. CAPITAL STOCK TRANSACTIONS
TRANSACTIONS IN SHARES OF MAXIMUM HORIZON SERIES CLASS A COMMON STOCK WERE:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED 10/31/99 ENDED 10/31/98
--------------- ----------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
--------------- ---------------- ---------- ------------
Sold. . . . 498,281 6,719,574 1,001,792 13,203,479
Reinvested. 105,342 1,255,526 90,611 1,148,470
Repurchased (648,323) (9,007,895) (237,720) (3,077,995)
--------------- ---------------- ---------- ------------
Net change. (44,700) $ (1,032,795) 854,683 $11,273,954
=============== ================ ========== ============
</TABLE>
The Advisor owned 15,130 shares on October 31, 1999 and 14,184 shares on October
31, 1998.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the
normal course of its investing activities to assist in managing exposure to
various market risks. These financial instruments include written options,
forward foreign currency exchange contracts, and futures contracts and may
involve, to a varying degree, elements of risk in excess of the amounts
recognized for financial statement purposes. No such investments were held by
the Series on October 31, 1999.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves
special risks and considerations not typically associated with investing in
securities of domestic companies and the United States Government. These risks
include revaluation of currencies and future adverse political and economic
developments. Moreover, securities of foreign companies and foreign governments
may be less liquid and their prices more volatile than those of securities of
comparable domestic companies and the United States Government.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Exeter Fund, Inc.
- - Maximum Horizon Series:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, 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.- Maximum
Horizon Series (the "Series") at October 31, 1999, and the results of its
operations, changes in net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Series' management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit 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 audit, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above. The financial statements of the Series as
of October 31, 1998 and for the periods then ended, as indicated therein, were
audited by other independent accountants whose report dated December 4, 1998
expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 3, 1999
15
<PAGE>
OTHER INFORMATION (UNAUDITED)
CHANGE OF ACCOUNTANTS
On July 15, 1999, the Fund dismissed Deloitte & Touche LLP ("D&T") as the Fund's
independent auditors by action of the Fund's Board of Directors upon the
recommendation of the Audit Committee of the Board. D&T's reports of the funds
financial statements for the fiscal years ended October 31, 1998 and 1997,
contained no adverse opinion or disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, (i) there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of D&T, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report on the Fund's financials statements for such years, and (ii) there
were no "reportable events" of the kind described in Item 304(a)(1)(v) of
Regulations S-K under the Securities Exchange Act of 1934, as amended.
On July 15, 1999, the Fund by action of its Board of Directors upon the
recommendation of the Audit Committee of the Board engaged
PricewaterhouseCoopers ("PwC") as the independent auditors to audit the Fund's
financial statements for the fiscal year ending October 31, 1999. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, neither the Fund nor
anyone on its behalf has consulted PwC on items which (i) concerned the
application of accounting principles to a specified transaction, whether
completed or proposed, or the type of audit opinion that might be rendered on
the Fund's financial statements or (ii) concerned the subject of a disagreement
(as defined in paragraph (a)(a)(iv) of Item 304 of Regulation S-X) or reportable
event (as described in paragraph (a)(1)(v) of said Item 304).
16
<PAGE>
<PAGE>
<PAGE>
Exeter Fund, Inc.
Flexible Yield Series I
Annual Report
October 31, 1999
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
DEAR SHAREHOLDERS:
When one is younger and blissfully unaware of the many risks that exist in the
world, worries are rare. As one grows older and setbacks occur, the list of
worries grows. Youthful optimism is replaced by cautious optimism, and it
becomes progressively easier to see the glass as half-empty rather than
half-full. It can be argued that the bond market "matures" in a similar fashion.
Early in the cycle when rates are falling, risks are quickly discounted and bad
news is easily explained away. The market has few worries. As the situation
changes and interest rates start to turn up, the list of worries grows. At some
point, psychology turns and the market finds something negative in almost every
release, which in turn drives interest rates even higher.
Over the last six months, the psychology of the bond market has been especially
negative; as far as the market was concerned, the glass was consistently
half-empty. The pessimism permeated the market's perception of wages, it
permeated the market's take on the state of the dollar, and it has colored the
market's opinion regarding future trends in inflation.
WAGES The overriding concern of the bond market has been a historically low
unemployment rate and a fear that it would translate into higher wages, which in
turn would trigger higher prices. While that was, and still is, a legitimate
concern, there were/are extenuating circumstances. Given a general lack of
pricing power due to an increasingly competitive global marketplace, firms
recognize that productivity and efficiency gains are the keys to success. That
has triggered two ongoing events. The first is an exceptional level of business
investment, especially in computer technology, which has lowered the number of
workers needed to complete a given task (creating strong productivity gains).
The second is a remarkable number of mergers (creating solid efficiency gains).
Both have offset the low unemployment rate, as evidenced by the moderating year
over year increases in the Employment Cost Index and the average hourly earnings
figures.
DOLLAR The dollar has weakened versus the Japanese yen, but the situation
relative to the euro has been a bit different. From the time the euro was
introduced at the start of this year through July, the euro did nothing but
depreciate versus the dollar. After a slight up-tick late in the summer and
early in the fall, the euro once again lost value relative to the dollar as
October came to a close. The up-tick spooked the market, and discussions
regarding an unsustainable current account deficit, which would cause the value
of the dollar to fall even further and ultimately result in higher U.S. interest
rates, were widespread. A less pessimistic view is that what has been happening
to exchange rates had more to do with the Japanese yen than it did with the U.S.
dollar.
INFLATION There is very little disagreement that inflation as measured by the
CPI will be higher in 1999 than it was in 1998. Last year declining commodity
prices held down inflation; this year rising oil prices have pushed inflation
up. Year to year fluctuations will remain the norm. The bigger question is what
should one expect over the next three to five years? Manning & Napier is of the
opinion that inflation is much more likely to average around 2% than it is to
return to the elevated levels of the 1970's and 1980's. That opinion is driven
by the intense competition that a global economy creates, a central bank which
recognizes the importance of being an inflation fighter first and pump primer
second (i.e. raising short rates before inflation emerges), and the amazing
technological changes (i.e. computerization and the Internet) that are
inherently disinflationary.
1
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
The reality is that the pessimism of the last six months translated into higher
rates. Short-term rates increased by 60 or 70 basis points (0.60% to 0.70%).
Longer-term rates were up more than 50 basis points (0.50%). Rising interest
rates have a negative effect on bond returns, and that effect is stronger for
bonds with longer maturities. Because the Flexible Yield Series I was invested
in bonds with a slightly longer average maturity than its benchmark, its returns
were more strongly affected by the increase than those of the benchmark.
As always, we appreciate the opportunity to serve you.
Sincerely,
EXETER ASSET MANAGEMENT
<GRAPHIC>
<PIE CHART>
Data for pie charts to follow:
Effective Maturity - As of 10/31/99
Less than 1 Year - 11%
1 - 2 Years - 21%
2 - 3 Years - 27%
3 - 4 Years - 30%
More than 4 Years - 11%
Portfolio Composition - As of 10/31/99
U.S. Treasury Securities - 69%
U.S. Government Agencies - 21%
Cash, equivalents, and other assets, less liabilities - 10%
2
<PAGE>
PERFORMANCE UPDATE AS OF OCTOBER 31, 1999
Exeter Fund, Inc. - Flexible Yield Series I
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<C> <S> <C> <C>
One Year $10,061 0.61% 0.61%
Five Year $13,105 31.05% 5.55%
Inception 1 $13,014 30.14% 4.72%
</TABLE>
Merrill Lynch U.S. Treasury Short-Term Index
<TABLE>
<CAPTION>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
<C> <S> <C> <C>
One Year $10,299 2.99% 2.99%
Five Year $13,629 36.29% 6.39%
Inception 1 $13,700 37.00% 5.67%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - Flexible Yield
Series I from its inception (2/15/94) to present (10/31/99) as compared to the
Merrill Lynch U.S. Treasury Short-Term Index.2
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Exeter Fund, Inc. Merrill Lynch U.S.
Date Flexible Yield Series I Treasury Short-term Index
02/15/94 10,000 10,000
12/31/94 9,924 10,030
12/31/95 10,995 11,133
10/31/96 11,441 11,598
10/31/97 12,025 12,350
10/31/98 12,935 13,302
10/31/99 13,014 13,700
</TABLE>
1 The Series and Index performance are calculated from February 15, 1994, the
Series' inception date. The Series' performance is historical and may not be
indicative of future results.
2 The Merrill Lynch U.S. Treasury Short-Term Index is a market value weighted
measure of approximately 50 U.S. Treasury Securities. The Index is comprised of
U.S. Treasury securities with maturities greater than one year but less than
three years. The Index returns assume reinvestment of coupons and, unlike
Series returns, do not reflect any fees or expenses.
3
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT/SHARES (NOTE 2)
------------------ ---------
U.S. TREASURY SECURITIES - 69.34%
<S> <C> <C>
U.S.Treasury Note, 5.625%, 12/31/1999. . . . . . $ 20,000 $ 20,012
U.S.Treasury Note, 6.875%, 3/31/2000 . . . . . . 30,000 30,206
U.S.Treasury Note, 6.75%, 4/30/2000. . . . . . . 20,000 20,138
U.S.Treasury Note, 4.625%, 12/31/2000. . . . . . 80,000 79,050
U.S.Treasury Note, 6.25%, 4/30/2001. . . . . . . 15,000 15,103
U.S.Treasury Note, 5.625%, 5/15/2001 . . . . . . 20,000 19,956
U.S.Treasury Note, 6.625%, 6/30/2001 . . . . . . 40,000 40,513
U.S.Treasury Note, 6.375%, 9/30/2001 . . . . . . 50,000 50,484
U.S.Treasury Note, 6.25%, 10/31/2001 . . . . . . 80,000 80,625
U.S.Treasury Note, 6.125%, 12/31/2001. . . . . . 65,000 65,325
U.S.Treasury Note, 6.25%, 1/31/2002. . . . . . . 40,000 40,325
U.S.Treasury Note, 6.25%, 6/30/2002. . . . . . . 15,000 15,127
U.S.Treasury Note, 6.00%, 7/31/2002. . . . . . . 40,000 40,125
U.S.Treasury Note, 5.875%, 9/30/2002 . . . . . . 50,000 49,969
U.S.Treasury Note, 5.625%, 12/31/2002. . . . . . 140,000 138,775
U.S.Treasury Note, 5.50%, 1/31/2003. . . . . . . 65,000 64,167
U.S.Treasury Note, 5.50%, 3/31/2003. . . . . . . 25,000 24,656
U.S.Treasury Note, 5.375%, 6/30/2003 . . . . . . 175,000 171,719
---------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $991,256). . . . . . . . . . 966,275
---------
U.S. GOVERNMENT AGENCIES - 21.01%
Federal Home Loan Mortgage Corp. Discount Note,
5.75%, 6/15/2001 75,000 74,624
Federal Home Loan Mortgage Corp. Discount Note,
4.75%, 12/14/2001 75,000 72,952
Federal National Mortgage Assoc. Discount Note,
5.875%, 4/23/2004 75,000 72,612
Federal National Mortgage Assoc. Discount Note,
5.625%, 5/14/2004 75,000 72,664
--------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $295,078). . . . . . . . . . 292,852
---------
SHORT-TERM INVESTMENTS - 8.72%
U.S. Treasury Bill, 11/12/1999 . . . . . . . . . 25,000 24,968
U.S. Treasury Bill, 3/2/2000 . . . . . . . . . . 50,000 49,237
Dreyfus Treasury Cash Management Fund. . . . . . 47,300 47,300
---------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $121,505). . . . . . . . . . 121,505
---------
TOTAL INVESTMENTS - 99.07%
(Identified Cost $1,407,839). . . . . . . . . 1,380,632
OTHER ASSETS, LESS LIABILITIES - 0.93% . . . . . 12,912
-----------
NET ASSETS - 100%. . . . . . . . . . . . . . . . $1,393,544
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
FEDERAL TAX INFORMATION:
At October 31, 1999, the net unrealized depreciation based on identified cost
for federal income tax purposes of $1,409,597 was as follows:
Unrealized appreciation $1,106
Unrealized depreciation (30,071)
---------
UNREALIZED DEPRECIATION - NET ($28,965)
==========
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, 1999
ASSETS:
<S> <C>
Investments, at value (identified cost $1,407,839)(Note 2) $1,380,632
Interest receivable. . . . . . . . . . . . . . . . . . . . 22,319
Receivable from investment advisor (Note 3). . . . . . . . 18,211
-----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . 1,421,162
-----------
LIABILITIES:
Accrued directors' fees (Note 3) . . . . . . . . . . . . . 7,241
Transfer agent fees payable (Note 3) . . . . . . . . . . . 335
Audit fee payable. . . . . . . . . . . . . . . . . . . . . 9,245
Other payables and accrued expenses. . . . . . . . . . . . 10,797
-----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . 27,618
-----------
NET ASSETS FOR 136,704 SHARES OUTSTANDING. . . . . . . . . $1,393,544
===========
NET ASSETS CONSIST OF:
Capital stock. . . . . . . . . . . . . . . . . . . . . . . $ 1,367
Additional paid-in-capital . . . . . . . . . . . . . . . . 1,417,085
Undistributed net investment income. . . . . . . . . . . . 11,784
Accumulated net realized loss on investments . . . . . . . (9,485)
Net unrealized depreciation on investments . . . . . . . . (27,207)
-----------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . . . . . $1,393,544
===========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($1,393,544/136,704 shares). . . . . . . . . . . . . . . . $ 10.19
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME:
<S> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 68,062
---------
EXPENSES:
Management fee (Note 3). . . . . . . . . . . . . . . . . 4,873
Directors' fees (Note 3) . . . . . . . . . . . . . . . . 7,201
Transfer agent fees (Note 3) . . . . . . . . . . . . . . 334
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . 10,460
Legal fees . . . . . . . . . . . . . . . . . . . . . . . 4,972
Registration and filing fees . . . . . . . . . . . . . . 2,849
Custodian fee. . . . . . . . . . . . . . . . . . . . . . 1,250
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 891
---------
Total Expenses . . . . . . . . . . . . . . . . . . . . . 32,830
Less Reduction of Expenses (Note 3). . . . . . . . . . . (23,084)
---------
Net Expenses . . . . . . . . . . . . . . . . . . . . . . 9,746
---------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . 58,316
---------
REALIZED AND UNREALIZED LOSS
ON INVESTMENTS:
Net realized loss on investments (identified cost basis) (8,740)
Net change in unrealized appreciation (depreciation)
on investments. . . . . . . . . . . . . . . . . . . . . (41,220)
---------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS. . . . . . . . . . . . . . . . . . . . (49,960)
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ 8,356
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
10/31/99 10/31/98
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment income . . . . . . . . . . $ 58,316 $ 29,614
Net realized gain (loss) on investments . (8,740) 5,788
Net change in unrealized appreciation
(depreciation) on investments. . . . . (41,220) 6,173
------------ ------------
Net increase from operations. . . . . . . 8,356 41,575
------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS (NOTE 2):
From net investment income. . . . . . . . (54,613) (32,409)
From net realized gain on investments . . (3,806) --
------------ ------------
Total distributions to shareholders . . . (58,419) (32,409)
------------ ------------
CAPITAL STOCK ISSUED AND
REPURCHASED:
Net increase from capital
share transactions (Note 5). . . . . . . 299,738 484,871
------------ ------------
Net increase in net assets. . . . . . . . 249,675 494,037
NET ASSETS:
Beginning of year . . . . . . . . . . . . 1,143,869 649,832
------------ ------------
END OF YEAR (including undistributed net
investment income of $11,784 and $8,180,
respectively) . . . . . . . . . . . . . . $ 1,393,544 $ 1,143,869
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE
FOR PERIOD
FOR THE FOR THE FOR THE THE TEN FOR THE 2/15/94
YEAR YEAR YEAR MONTHS YEAR (COMMENCEMENT
ENDED ENDED ENDED ENDED ENDED OF OPERATIONS)
10/31/99 10/31/98 10/31/97 10/31/96 12/31/95 TO 12/31/94
---------- ---------- ------------- ---------- --------------- -------------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD . . $ 10.58 $ 10.39 $ 10.27 $ 10.26 $ 9.69 $ 10.00
---------- ---------- ------------- ---------- --------------- -------------
Income from investment operations:
Net investment income*. . . . . . . . . 0.427 0.468 0.505 0.411 0.464 0.241
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . (0.367) 0.289 0.099 (0.101) 0.566 (0.317)
---------- ---------- ------------- ---------- --------------- -------------
Total from investment operations . . . . . 0.060 0.757 0.604 0.310 1.030 (0.076)
---------- ---------- ------------- ---------- --------------- -------------
Less distributions to shareholders:
From net investment income. . . . . . . (0.417) (0.567) (0.456) (0.300) (0.460) (0.234)
From net realized gain on investments . (0.033) -- (0.028) -- -- --
Total distributions to shareholders. . . . (0.450) (0.567) (0.484) (0.300) (0.460) (0.234)
---------- ---------- ------------- ---------- --------------- -------------
NET ASSET VALUE - END OF PERIOD. . . . . . $ 10.19 $ 10.58 $ 10.39 $ 10.27 $ 10.26 $ 9.69
========== ========== ============= ========== =============== =============
Total return 1 . . . . . . . . . . . . . . 0.61% 7.57% 6.07% 3.11% 10.79% (0.76)%
Ratios (to average net assets) /
Supplemental Data:
Expenses*. . . . . . . . . . . . . . . 0.70% 0.70% 0.70% 0.70%2 0.70% 0.70%2
Net investment income* . . . . . . . . 4.19% 5.04% 5.29% 5.25%2 4.99% 4.41%2
Portfolio turnover . . . . . . . . . . . . 56% 53% 77% 36% 60% 38%
NET ASSETS - END OF PERIOD
(000's omitted) . . . . . . . . . . . . . $ 1,394 $ 1,144 $ 650 $ 493 $ 256 $ 231
========== ========== ============= ========== =============== =============
</TABLE>
* The investment advisor did not impose its management fee and paid a portion of
the Series' expenses. If these expenses had been incurred by the Series, and
had 1994, 1995, and 1996 expenses been limited to that allowed by state
securities law, the net investment income per share and the ratios would have
been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net investment income . . . . . $0.258 $0.116 $0.206 $ 0.270 $0.297 $ 0.143
Ratios (to average net assets):
Expenses. . . . . . . . . . 2.36% 4.49% 3.83% 2.50%2 2.50% 2.50%2
Net investment income . . . 2.53% 1.25% 2.16% 3.45%2 3.19% 2.61%2
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Flexible Yield Series I (the "Series") is a no-load diversified series of Exeter
Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Series 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.
The total authorized capital stock of the Fund consists of 1.7 billion
shares of common stock each having a par value of $0.01. As of October 31,
1999, 1,550 million shares have been designated in total among 31 series, of
which 37.5 million have been designated as Flexible Yield Series I Class A
Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities listed on an exchange are valued at the latest quoted
sales price of the exchange on which the security is traded most extensively.
Securities not traded on valuation date or securities not listed on an exchange
are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities,
will normally be valued on the basis of evaluated bid prices 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 the Advisor under procedures established by and under the general
supervision and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty 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 Fund can be attributed to a specific series. Expenses
which cannot be directly attributed are apportioned among the series in the
Fund.
FEDERAL INCOME TAXES
The Series' policy is to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies. The Series is not subject to
federal income or excise tax to the extent the Series 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 Series uses the identified cost method for determining realized gain or
loss on investments for both financial statement and federal income tax
reporting purposes.
At October 31, 1999, the Series, for federal income tax purposes, had a
capital loss carryforward of $7,727, which will expire on October 31, 2007.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made quarterly.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Series.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a result
of deferral of certain losses, character reclassification between net income and
net gains, or other required tax adjustments. As a result, net investment
income (loss) and net investment gain (loss) on investment transactions for a
reporting period may differ significantly from distributions to shareholders
during such period. As a result, the Series may periodically make
reclassifications among its capital accounts without impacting the Series' net
asset value.
For the year ended October 31, 1999, the Series distributed $3,569 of
long-term capital gains.
OTHER
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier
Advisors, Inc., DBA Exeter Asset Management (the "Advisor"), for which the
Series pays the Advisor a fee, computed daily and payable monthly, at an annual
rate of 0.35% of the Series' average daily net assets. The fee amounted to
$4,873 for the year ended October 31, 1999.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel
of the Advisor provide the Series with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise maintain
the Series' organization. The Advisor also provides the Fund with necessary
office space and portfolio accounting and bookkeeping services. The salaries of
all officers of the Fund and of all Directors who are "affiliated persons" of
the Fund or of the Advisor, and all personnel of the Fund or of the Advisor
performing services relating to research, statistical and investment activities
are paid by the Advisor.
The Advisor has voluntarily agreed to waive its fee and, if necessary, pay
other expenses of the Series in order to maintain total expenses for the Series
at no more than 0.70% of average daily net assets each year. Accordingly, the
Advisor did not impose any of its fee and paid expenses amounting to $18,211 for
the year ended October 31, 1999, which is reflected as a reduction of expenses
on the Statement of Operations. The fee waiver and assumption of expenses by
the Advisor is voluntary and may be terminated at any time.
The Advisor also acts as the transfer, dividend paying and shareholder
servicing agent for the Fund. For these services, the Series 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 $334 for the year ended October 31, 1999.
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 Series.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The compensation of the non-affiliated Directors totaled $7,201 for the
year ended October 31, 1999.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of United States Government securities, other than
short-term securities, were $970,986 and $681,484, respectively, for the year
ended October 31, 1999.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Flexible Yield Series I Class A Common Stock
were:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED 10/31/99 ENDED 10/31/98
--------------- ----------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
--------------- ---------------- -------- ------------
Sold. . . . 102,284 $ 1,064,926 139,912 $ 1,458,457
Reinvested. 5,700 58,419 3,160 32,409
Repurchased (79,406) (823,607) (97,485) (1,005,995)
Net change. 28,578 $ 299,738 45,587 $ 484,871
=============== ================ ======== ============
</TABLE>
The Advisor owned 13,549 shares on October 31, 1999 and 12,971 shares on October
31, 1998.
6. FINANCIAL INSTRUMENTS
The Series 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 Series on October 31, 1999.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
EXETER FUND, INC. - FLEXIBLE YIELD SERIES I:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, 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.- Flexible
Yield Series I (the "Series") at October 31, 1999, and the results of its
operations, changes in net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Series management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit 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 audit, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above. The financial statements of the Series as
of October 31, 1998 and for the periods then ended, as indicated therein, were
audited by other independent accountants whose report dated December 4, 1998
expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 3, 1999
13
<PAGE>
OTHER INFORMATION (UNAUDITED)
CHANGE OF ACCOUNTANTS
On July 15, 1999, the Fund dismissed Deloitte & Touche LLP ("D&T") as the Fund's
independent auditors by action of the Fund's Board of Directors upon the
recommendation of the Audit Committee of the Board. D&T's reports of the funds
financial statements for the fiscal years ended October 31, 1998 and 1997,
contained no adverse opinion or disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, (i) there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of D&T, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report on the Fund's financials statements for such years, and (ii) there
were no "reportable events" of the kind described in Item 304(a)(1)(v) of
Regulations S-K under the Securities Exchange Act of 1934, as amended.
On July 15, 1999, the Fund by action of its Board of Directors upon the
recommendation of the Audit Committee of the Board engaged
PricewaterhouseCoopers ("PwC") as the independent auditors to audit the Fund's
financial statements for the fiscal year ending October 31, 1999. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, neither the Fund nor
anyone on its behalf has consulted PwC on items which (i) concerned the
application of accounting principles to a specified transaction, whether
completed or proposed, or the type of audit opinion that might be rendered on
the Fund's financial statements or (ii) concerned the subject of a disagreement
(as defined in paragraph (a)(a)(iv) of Item 304 of Regulation S-X) or reportable
event (as described in paragraph (a)(1)(v) of said Item 304).
14
<PAGE>
<PAGE>
Exeter Fund, Inc.
Flexible Yield Series II
Annual Report
October 31, 1999
<PAGE>
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
DEAR SHAREHOLDERS:
When one is younger and blissfully unaware of the many risks that exist in the
world, worries are rare. As one grows older and setbacks occur, the list of
worries grows. Youthful optimism is replaced by cautious optimism, and it
becomes progressively easier to see the glass as half-empty rather than
half-full. It can be argued that the bond market "matures" in a similar fashion.
Early in the cycle when rates are falling, risks are quickly discounted and bad
news is easily explained away. The market has few worries. As the situation
changes and interest rates start to turn up, the list of worries grows. At some
point, psychology turns and the market finds something negative in almost every
release, which in turn drives interest rates even higher.
Over the last six months, the psychology of the bond market has been especially
negative; as far as the market was concerned, the glass was consistently
half-empty. The pessimism permeated the market's perception of wages, it
permeated the market's take on the state of the dollar, and it has colored the
market's opinion regarding future trends in inflation.
WAGES The overriding concern of the bond market has been a historically low
unemployment rate and a fear that it would translate into higher wages, which in
turn would trigger higher prices. While that was, and still is, a legitimate
concern, there were/are extenuating circumstances. Given a general lack of
pricing power due to an increasingly competitive global marketplace, firms
recognize that productivity and efficiency gains are the keys to success. That
has triggered two ongoing events. The first is an exceptional level of business
investment, especially in computer technology, which has lowered the number of
workers needed to complete a given task (creating strong productivity gains).
The second is a remarkable number of mergers (creating solid efficiency gains).
Both have offset the low unemployment rate, as evidenced by the moderating year
over year increases in the Employment Cost Index and the average hourly earnings
figures.
DOLLAR The dollar has weakened versus the Japanese yen, but the situation
relative to the euro has been a bit different. From the time the euro was
introduced at the start of this year through July, the euro did nothing but
depreciate versus the dollar. After a slight up-tick late in the summer and
early in the fall, the euro once again lost value relative to the dollar as
October came to a close. The up-tick spooked the market, and discussions
regarding an unsustainable current account deficit, which would cause the value
of the dollar to fall even further and ultimately result in higher U.S. interest
rates, were widespread. A less pessimistic view is that what has been happening
to exchange rates had more to do with the Japanese yen than it did with the U.S.
dollar.
INFLATION There is very little disagreement that inflation as measured by the
CPI will be higher in 1999 than it was in 1998. Last year declining commodity
prices held down inflation; this year rising oil prices have pushed inflation
up. Year to year fluctuations will remain the norm. The bigger question is what
should one expect over the next three to five years? Manning & Napier is of the
opinion that inflation is much more likely to average around 2% than it is to
return to the elevated levels of the 1970's and 1980's. That opinion is driven
by the intense competition that a global economy creates, a central bank which
recognizes the importance of being an inflation fighter first and pump primer
second (i.e. raising short rates before inflation emerges), and the amazing
technological changes (i.e. computerization and the Internet) that are
inherently disinflationary.
1
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
The reality is that the pessimism of the last six months translated into higher
rates. Short-term rates increased by 60 or 70 basis points (0.60% to 0.70%).
Longer-term rates were up more than 50 basis points (0.50%). Rising interest
rates have a negative effect on bond returns, and that effect is stronger for
bonds with longer maturities. Because the Flexible Yield Series II was invested
in bonds with a slightly longer average maturity than its benchmark, its returns
were more strongly affected by the increase than those of the benchmark. In
addition, its holdings are higher quality than the benchmark, because we feel
the additional risk resulting from investments in lower quality bonds is not
compensated by the additional yield they offer.
As always, we appreciate the opportunity to serve you.
Sincerely,
EXETER ASSET MANAGEMENT
<GRAPHIC>
<PIE CHART>
Data for pie chart to follow:
Effective Maturity - As of 10/31/99
Less than 1 Year - 8%
1 -2 Years - 10%
2 - 3 Years - 21%
3 - 5 Years - 30%
5 - 7 Years - 5%
More than 7 Years - 26%
Portfolio Composition - As of 10/31/99
U.S. Treasury Securities - 76%
U.S. Government Agencies - 22%
Cash, equivalents, and other assets, less liabilities - 2%
2
<PAGE>
PERFORMANCE UPDATE AS OF OCTOBER 31, 1999
Exeter Fund, Inc. Flexible Yield Series II
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through. Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
One Year $ 9,903 -0.97% -0.97%
Five Year $13,931 39.31% 6.85%
Inception 1 $13,262 32.62% 5.07%
</TABLE>
Merrill Lynch Corporate/Government Intermediate Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
One Year $10,091 0.91% 0.91%
Five Year $14,114 41.14% 7.13%
Inception 1 $13,839 38.39% 5.85%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - Flexible Yield
Series II from its inception (2/15/94) to present (10/31/99) as compared to the
Merrill Lynch Corporate/Government Intermediate
Index. 2
<TABLE>
<CAPTION>
<S> <C> <C>
Exeter Fund, Inc. Merrill Lynch Government/
Date . . Flexible Yield Series II Corporate Intermediate Index
02/15/94 10,000 10,000
12/31/94 9,531 9,799
12/31/95 11,182 11,301
10/31/96 11,336 11,672
10/31/97 12,199 12,560
10/31/98 13,392 13,715
10/31/99 13,262 13,839
</TABLE>
1 The Fund and Index performance are calculated from February 15, 1994, the
Fund's inception date. The Fund's performance is historical and may not be
indicative of future results.
2 The Merrill Lynch Corporate/Government Intermediate Index is a market value
weighted measure of approximately 3,180 corporate and government bonds. The
Index is comprised of investment grade bonds with maturities greater than one
year but less than ten years. The Index returns assume reinvestment of coupons
and, unlike Fund returns, do not reflect any fees or expenses.
3
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT/ VALUE
SHARES (NOTE 2)
------------------ ---------
U.S. TREASURY SECURITIES - 75.52%
<S> <C> <C>
U.S. TREASURY NOTES - 73.07%
U.S. Treasury Note, 5.50%, 3/31/2000 . . . . . . . . $ 20,000 $ 20,019
U.S. Treasury Note, 6.125%, 9/30/2000. . . . . . . . 25,000 25,117
U.S. Treasury Note, 7.875%, 8/15/2001. . . . . . . . 30,000 31,031
U.S. Treasury Note, 6.25%, 10/31/2001. . . . . . . . 25,000 25,195
U.S. Treasury Note, 6.25%, 1/31/2002 . . . . . . . . 15,000 15,122
U.S. Treasury Note, 6.25%, 6/30/2002 . . . . . . . . 45,000 45,380
U.S. Treasury Note, 6.25%, 2/15/2003 . . . . . . . . 40,000 40,350
U.S. Treasury Note, 5.375%, 6/30/2003. . . . . . . . 20,000 19,625
U.S. Treasury Note, 7.25%, 5/15/2004 . . . . . . . . 100,000 104,750
U.S. Treasury Note, 5.625%, 2/15/2006. . . . . . . . 25,000 24,383
U.S Treasury Note, 5.625%, 5/15/2008 . . . . . . . . 35,000 33,764
U.S Treasury Note, 4.75%, 11/15/2008 . . . . . . . . 25,000 22,609
---------
TOTAL U.S. TREASURY NOTES
(Identified Cost $403,121). . . . . . . . . . . . . 407,345
----------
U.S. TREASURY STRIPS - 2.45%
Principal only- Interest stripped, 5/15/2009
(Identified Cost $14,849) . . . . . . . . . . . . 25,000 13,645
---------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $417,970). . . . . . . . . . . . . 420,990
----------
U.S. GOVERNMENT AGENCIES - 22.43%
Federal Home Loan Mortgage Corp., 4.75%, 12/14/2001. 55,000 53,498
Federal National Mortgage Assn., 6.50%, 4/29/2009. . 75,000 71,564
---------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $126,503). . . . . . . . . . . . 125,062
---------
SHORT-TERM INVESTMENTS - 1.41%
Dreyfus Treasury Cash Management Fund
(Identified Cost $7,845). . . . . . . . . . . . . . 7,845 7,845
---------
TOTAL INVESTMENTS - 99.36%
(Identified Cost $552,318). . . . . . . . . . . . . 553,897
OTHER ASSETS, LESS LIABILITIES - 0.64% . . . . . . . 3,544
---------
NET ASSETS - 100%. . . . . . . . . . . . . . . . . . $ 557,441
==========
</TABLE>
Federal Tax Information:
At October 31, 1999, the net unrealized appreciation based on identified cost
for federal income tax purposes of $552,318 was as follows:
Unrealized appreciation $10,122
Unrealized depreciation (8,543)
--------
UNREALIZED APPRECIATION - NET $1,579
=======
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATEMENT OF ASSETS & LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, 1999
ASSETS:
<S> <C>
Investments, at value (identified cost $552,318)(Note 2) $553,897
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Interest receivable. . . . . . . . . . . . . . . . . . . 9,735
Receivable from investment advisor (Note 3). . . . . . . 21,889
--------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . 585,541
--------
LIABILITIES:
Accrued directors' fees (Note 3) . . . . . . . . . . . . 7,241
Transfer agent fees payable (Note 3) . . . . . . . . . . 150
Audit fee payable. . . . . . . . . . . . . . . . . . . . 9,250
Other payables and accrued expenses. . . . . . . . . . . 11,459
--------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . 28,100
--------
NET ASSETS FOR 56,899 SHARES OUTSTANDING . . . . . . . . $557,441
========
NET ASSETS CONSIST OF:
Capital stock. . . . . . . . . . . . . . . . . . . . . . $ 569
Additional paid-in-capital . . . . . . . . . . . . . . . 542,799
Undistributed net investment income. . . . . . . . . . . 7,798
Accumulated net realized gain on investments . . . . . . 4,698
Net unrealized appreciation on investments . . . . . . . 1,579
--------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . . . . $557,441
========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($557,441/56,899 SHARES). . . . . . . . . . . . . . . . $ 9.80
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME:
<S> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 36,989
---------
EXPENSES:
Management fees (Note 3) . . . . . . . . . . . . . . . . 2,805
Directors' fees (Note 3) . . . . . . . . . . . . . . . . 7,201
Transfer agent fees (Note 3) . . . . . . . . . . . . . . 150
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . 9,936
Legal fees . . . . . . . . . . . . . . . . . . . . . . . 4,972
Registration and filing fees . . . . . . . . . . . . . . 3,251
Custodian fee. . . . . . . . . . . . . . . . . . . . . . 551
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 816
---------
Total Expenses . . . . . . . . . . . . . . . . . . . . . 29,682
Less Reduction of Expenses (Note 3). . . . . . . . . . . (24,694)
---------
Net Expenses . . . . . . . . . . . . . . . . . . . . . . 4,988
---------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . 32,001
---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments (identified cost basis) 5,625
Net change in unrealized appreciation on investments . . (44,376)
---------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS. . . . . . . . . . . . . . . . . . . . (38,751)
---------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ (6,750)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
10/31/99 10/31/98
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment income. . . . . . . . . . . . . . . . $ 32,001 $ 30,570
Net realized gain on investments . . . . . . . . . . 5,625 5,805
Net change in unrealized appreciation
on investments. . . . . . . . . . . . . . . . . . . (44,376) 18,765
------------ ------------
Net increase (decrease) from operations. . . . . . . (6,750) 55,140
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income . . . . . . . . . . . . . (32,631) (31,969)
From net realized gain on investments. . . . . . . . (5,048) (4,875)
------------ ------------
Total distributions to shareholders. . . . . . . . . (37,679) (36,844)
------------ ------------
CAPITAL STOCK ISSUED AND REPURCHASED:
Net decrease from capital
share transactions (Note 5) . . . . . . . . . . . (97,459) (37,191)
------------ ------------
Net decrease in net assets . . . . . . . . . . . . . (141,888) (18,895)
NET ASSETS:
Beginning of year. . . . . . . . . . . . . . . . . . 699,329 718,224
------------ ------------
END OF YEAR (including undistributed net investment
income of $7,796 and $7,807, respectively). . . . $ 557,441 $ 699,329
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
FOR THE FOR THE FOR THE TEN FOR THE 2/15/94
YEAR YEAR YEAR MONTHS YEAR (COMMENCEMENT
ENDED ENDED ENDED ENDED ENDED OF OPERATIONS) TO
10/31/99 10/31/98 10/31/97 10/31/96 12/31/95 12/31/94
---------- ---------------- ---------- ---------- ------------------- ----------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE -BEGINNING OF PERIOD. . . $ 10.50 $ 10.23 $ 10.10 $ 10.30 $ 9.27 $ 10.00
---------- ---------------- ---------- ---------- ------------------- ----------
Income from investment operations:
Net investment income*. . . . . . . . . 0.541 0.575 0.523 0.445 0.561 0.269
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . (0.642) 0.378 0.212 (0.315) 1.019 (0.738)
---------- ---------------- ---------- ---------- ------------------- ----------
Total from investment operations . . . . . (0.101) 0.953 0.735 0.130 1.580 (0.469)
---------- ---------------- ---------- ---------- ------------------- ----------
Less distributions to shareholders:
From net investment income. . . . . . . (0.522) (0.589) (0.597) (0.270) (0.550) (0.261)
From net realized gain on investments . (0.077) (0.094) (0.008) (0.060) - -
---------- ---------------- ---------- ---------- ------------------- ----------
Total distributions to shareholders. . . . (0.599) (0.683) (0.605) (0.330) (0.550) (0.261)
---------- ---------------- ---------- ---------- ------------------- ----------
NET ASSET VALUE - END OF PERIOD. . . . . . $ 9.80 $ 10.50 $ 10.23 $ 10.10 $ 10.30 $ 9.27
========== ================ ========== ========== =================== ==========
Total return 1 . . . . . . . . . . . . . . (0.97%) 9.78% 7.61% 1.38% 17.33% (4.69%)
Ratios (to average net assets) /
Supplemental Data:
Expenses*. . . . . . . . . . . . . . . 0.80% 0.80% 0.80% 0.80%2 0.80% 0.80%2
Net investment income* . . . . . . . . 5.13% 5.21% 5.46% 5.55%2 5.38% 5.40%2
Portfolio turnover . . . . . . . . . . . . 36% 31% 58% 5% 35% 0%
NET ASSETS - END OF PERIOD
(000's omitted) . . . . . . . . . . . . $ 557 $ 699 $ 718 $ 481 $ 438 $ 396
========== ================ ========== ========== =================== ==========
</TABLE>
*The investment advisor did not impose its management fee and paid a portion of
the Series' expenses.
If these expenses had been incurred by the Series, and had 1994, 1995, and
1996, expenses been limited to that allowed by state securities law, the net
investment income per share and the ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net investment income . . . . . $0.124 $0.145 $0.243 $ 0.309 $0.384 $ 0.184
Ratios (to average net assets):
Expenses . . . . . . . . . . 4.76% 4.70% 3.72% 2.50%2 2.50% 2.50%2
Net investment income. . . . 1.17% 1.31% 2.54% 3.85%2 3.68% 3.70%2
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Flexible Yield Series II (the "Series") is a no-load diversified series of
Exeter Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The Series 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.
The total authorized capital stock of the Fund consists of 1.7 billion shares of
common stock each having a par value of $0.01. As of October 31, 1999, 1,550
million shares have been designated in total among 31 series, of which 37.5
million have been designated as Flexible Yield Series II Class A Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities listed on an exchange are valued at the latest quoted sales
price of the exchange on which the security is traded most extensively.
Securities not traded on valuation date or securities not listed on an exchange
are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities, will
normally be valued on the basis of evaluated bid prices 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 the Advisor under procedures established by and under the general supervision
and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty 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 Fund can be attributed to a specific series. Expenses
which cannot be directly attributed are apportioned among the series in the
Fund.
FEDERAL INCOME TAXES
The Series' policy is to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. The Series is not subject to
federal income or excise tax to the extent the Series 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 Series uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISTRIBUTION OF INCOME AND GAINS
Distributions to shareholders of net investment income are made quarterly.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Series.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a result
of deferral of certain losses, or character reclassification between net income
and net gains, or other required tax adjustments. As a result, net investment
income (loss) and net investment gain (loss) on investment transactions for a
reporting period may differ significantly from distributions to shareholders
during such period. As a result, the Series may periodically make
reclassifications among its capital accounts without impacting the Series' net
asset value.
For the year ended October 31, 1999, the Series distributed $575 of
long-term capital gains.
OTHER
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier Advisors,
Inc., DBA Exeter Asset Management (the "Advisor"), for which the Series pays the
Advisor a fee, computed daily and payable monthly, at an annual rate of 0.45% of
the Series' average daily net assets. The fee amounted to $2,805 for the year
ended October 31, 1999.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Series with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise maintain
the Series' organization. The Advisor also provides the Fund with necessary
office space and portfolio accounting and bookkeeping services. The salaries of
all officers of the Fund and of all Directors who are "affiliated persons" of
the Fund or of the Advisor, and all personnel of the Fund or of the Advisor
performing services relating to research, statistical and investment activities
are paid by the Advisor.
The Advisor has voluntarily agreed to waive its fee and, if necessary, pay other
expenses of the Series in order to maintain total expenses for the Series at no
more than 0.80% of average daily net assets each year. Accordingly, the Advisor
did not impose any of its fee and paid expenses amounting to $21,889 for the
year ended October 31, 1999, which is reflected as a reduction of expenses on
the Statement of Operations. The fee waiver and assumption of expenses by the
Advisor is voluntary and may be terminated at any time.
The Advisor also acts as the transfer, dividend paying and shareholder servicing
agent for the Fund. For these services, the Series 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 $150 for the year ended October 31, 1999.
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 Series.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The compensation of the non-affiliated Directors totaled $7,201 for the year
ended October 31, 1999.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of United States Government securities, other than
short-term securities, were $216,567 and $278,583 respectively, for the year
ended October 31, 1999.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Flexible Yield Series II Class A Common Stock
were:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED 10/31/99 ENDED 10/31/98
--------------- ----------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
--------------- ---------------- -------- ----------
Sold. . . . 5,972 $ 60,262 21,299 $ 218,417
Reinvested. 3,760 37,679 3,668 36,844
Repurchased (19,442) (195,400) (28,563) (292,452)
--------------- ---------------- -------- ----------
Net change. (9,710) $ (97,459) (3,596) $ (37,191)
=============== ================ ======== ==========
</TABLE>
The Advisor owned 16,682 shares on October 31, 1999 and 15,723 shares on October
31, 1998.
6. FINANCIAL INSTRUMENTS
The Series 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 Series on October 31, 1999.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Exeter Fund,
Inc. - Flexible Yield Series II:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, 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.- Flexible
Yield Series II (the "Series") at October 31, 1999, and the results of its
operations, changes in net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Series' management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit 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 audit, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above. The financial statements of the Series as
of October 31, 1998 and for the periods then ended, as indicated therein, were
audited by other independent accountants whose report dated December 4, 1998
expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 3, 1999
12
<PAGE>
OTHER INFORMATION (UNAUDITED)
CHANGE OF ACCOUNTANTS
On July 15, 1999, the Fund dismissed Deloitte & Touche LLP ("D&T") as the Fund's
independent auditors by action of the Fund's Board of Directors upon the
recommendation of the Audit Committee of the Board. D&T's reports of the funds
financial statements for the fiscal years ended October 31, 1998 and 1997,
contained no adverse opinion or disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, (i) there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of D&T, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report on the Fund's financials statements for such years, and (ii) there
were no "reportable events" of the kind described in Item 304(a)(1)(v) of
Regulations S-K under the Securities Exchange Act of 1934, as amended.
On July 15, 1999, the Fund by action of its Board of Directors upon the
recommendation of the Audit Committee of the Board engaged
PricewaterhouseCoopers ("PwC") as the independent auditors to audit the Fund's
financial statements for the fiscal year ending October 31, 1999. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, neither the Fund nor
anyone on its behalf has consulted PwC on items which (i) concerned the
application of accounting principles to a specified transaction, whether
completed or proposed, or the type of audit opinion that might be rendered on
the Fund's financial statements or (ii) concerned the subject of a disagreement
(as defined in paragraph (a)(a)(iv) of Item 304 of Regulation S-X) or reportable
event (as described in paragraph (a)(1)(v) of said Item 304).
13
<PAGE>
<PAGE>
Exeter Fund, Inc.
Flexible Yield Series III
Annual Report
October, 31, 1999
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
Dear Shareholders:
When one is younger and blissfully unaware of the many risks that exist in the
world, worries are rare. As one grows older and setbacks occur, the list of
worries grows. Youthful optimism is replaced by cautious optimism, and it
becomes progressively easier to see the glass as half-empty rather than
half-full. It can be argued that the bond market "matures" in a similar fashion.
Early in the cycle when rates are falling, risks are quickly discounted and bad
news is easily explained away. The market has few worries. As the situation
changes and interest rates start to turn up, the list of worries grows. At some
point, psychology turns and the market finds something negative in almost every
release, which in turn drives interest rates even higher.
Over the last six months, the psychology of the bond market has been especially
negative; as far as the market was concerned, the glass was consistently
half-empty. The pessimism permeated the market's perception of wages, it
permeated the market's take on the state of the dollar, and it has colored the
market's opinion regarding future trends in inflation.
WAGES The overriding concern of the bond market has been a historically low
unemployment rate and a fear that it would translate into higher wages, which in
turn would trigger higher prices. While that was, and still is, a legitimate
concern, there were/are extenuating circumstances. Given a general lack of
pricing power due to an increasingly competitive global marketplace, firms
recognize that productivity and efficiency gains are the keys to success. That
has triggered two ongoing events. The first is an exceptional level of business
investment, especially in computer technology, which has lowered the number of
workers needed to complete a given task (creating strong productivity gains).
The second is a remarkable number of mergers (creating solid efficiency gains).
Both have offset the low unemployment rate, as evidenced by the moderating year
over year increases in the Employment Cost Index and the average hourly earnings
figures.
DOLLAR The dollar has weakened versus the Japanese yen, but the situation
relative to the euro has been a bit different. From the time the euro was
introduced at the start of this year through July, the euro did nothing but
depreciate versus the dollar. After a slight up-tick late in the summer and
early in the fall, the euro once again lost value relative to the dollar as
October came to a close. The up-tick spooked the market, and discussions
regarding an unsustainable current account deficit, which would cause the value
of the dollar to fall even further and ultimately result in higher U.S. interest
rates, were widespread. A less pessimistic view is that what has been happening
to exchange rates had more to do with the Japanese yen than it did with the U.S.
dollar.
INFLATION There is very little disagreement that inflation as measured by the
CPI will be higher in 1999 than it was in 1998. Last year declining commodity
prices held down inflation; this year rising oil prices have pushed inflation
up. Year to year fluctuations will remain the norm. The bigger question is what
should one expect over the next three to five years? Manning & Napier is of the
opinion that inflation is much more likely to average around 2% than it is to
return to the elevated levels of the 1970's and 1980's. That opinion is driven
by the intense competition that a global economy creates, a central bank which
recognizes the importance of being an inflation fighter first and pump primer
second (i.e. raising short rates before inflation emerges), and the amazing
technological changes (i.e. computerization and the Internet) that are
inherently disinflationary.
1
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
The reality is that the pessimism of the last six months translated into higher
rates. Short-term rates increased by 60 or 70 basis points (0.60% to 0.70%).
Longer-term rates were up more than 50 basis points (0.50%). Rising interest
rates have a negative effect on bond returns, and that effect is stronger for
bonds with longer maturities. Because the Flexible Yield Series III was
invested in bonds with a slightly longer average maturity than its benchmark,
its returns were more strongly affected by the increase than those of the
benchmark. In addition, its holdings are higher quality than the benchmark,
because we feel the additional risk resulting from investments in lower quality
bonds is not compensated by the additional yield they offer.
As always, we appreciate the opportunity to serve you.
Sincerely,
EXETER ASSET MANAGEMENT
<graphic>
<pie chart>
Data for pie chart to follow:
Effective Maturity - As of 10/31/99
Less than 1 Year - 2%
1 - 2 Years - 18%
2 - 3 Years - 5%
3 - 5 Years - 16%
5 - 7 Years - 12%
7 - 10 Years - 16%
Over 10 Years - 31%
Portfolio Composition - As of 10/31/99
U.S. Treasury Securities - 69%
U.S. Government Agencies - 28%
Cash, equivalents and other assets, less liabilities - 3%
2
<PAGE>
PERFORMANCE UPDATE AS OF OCTOBER 31, 1999
Exeter Fund, Inc. - Flexible Yield Series III
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through. Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
One Year $ 9,779 -2.21% -2.21%
Five Year $14,872 48.72% 8.26%
Inception 1 $13,756 37.56% 5.58%
</TABLE>
Merrill Lynch Corporate/Government Bond Index
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through. Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
One Year $ 9,926 -0.74% -0.74%
Five Year $14,586 45.86% 7.84%
Inception 1 $14,053 40.53% 5.97%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - Flexible Yield
Series III from its inception (12/20/93) to present (10/31/99) as compared to
the Merrill Lynch Corporate/Government Bond Index. 2
<TABLE>
<CAPTION>
Exeter Fund, Inc. Merrill Lynch Government/
Date Flexible Yield Series III Corporate Bond Index
<S> <C> <C>
12/21/93 10,000 10,000
12/31/93 9,960 10,013
12/31/94 9,380 9,686
12/31/95 11,451 11,532
10/31/96 11,431 11,778
10/31/97 12,542 12,832
10/31/98 14,066 14,158
10/31/99 13,756 14,053
</TABLE>
1 The Fund and Index performance are calculated from December 20, 1993, the
Fund's inception date. The Fund's performance is historical and may not be
indicative of future results.
2 The Merrill Lynch Corporate/Government Bond Index is a market value weighted
measure of approximately 4,500 corporate and government bonds. The Index is
comprised of investment grade securities with maturities greater than one year.
The Index returns assume reinvestment of coupons and, unlike Fund returns, do
not reflect any fees or expenses.
3
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL VALUE
AMOUNT (NOTE 2)
---------- ---------
<S> <C> <C>
U.S. TREASURY SECURITIES - 68.88%
U.S. TREASURY BONDS - 15.89%
U.S. Treasury Bond, 6.875%, 8/15/2025
(Identified Cost $150,993) . . . . . . . . . . $ 155,000 $163,622
---------
U.S. TREASURY NOTES - 52.99%
U.S. Treasury Note, 5.50%, 3/31/2000 . . . . . 20,000 20,019
U.S. Treasury Note, 5.375%, 2/15/2001. . . . . 90,000 89,606
U.S. Treasury Note, 5.625%, 5/15/2001. . . . . 40,000 39,913
U.S. Treasury Note, 6.25%, 6/30/2002 . . . . . 50,000 50,422
U.S. Treasury Note, 5.875%, 2/15/2004. . . . . 110,000 109,691
U.S. Treasury Note, 6.50%, 8/15/2005 . . . . . 55,000 55,980
U.S. Treasury Note, 5.625%, 2/15/2006. . . . . 70,000 68,272
U.S. Treasury Note, 6.25%, 2/15/2007 . . . . . 50,000 50,234
U.S. Treasury Note, 6.625%, 5/15/2007. . . . . 60,000 61,575
---------
TOTAL U.S. TREASURY NOTES
(Identified Cost $534,475) . . . . . . . . . . 545,712
----------
TOTAL U.S. TREASURY SECURITIES
(Identified Cost $685,468) . . . . . . . . . . 709,334
----------
U.S. GOVERNMENT AGENCIES - 28.30%
MORTGAGE BACKED SECURITIES - 9.36%
GNMA, Pool #224199, 9.50%, 7/15/2018 . . . . . 5,743 6,160
GNMA, Pool #299164, 9.00%, 12/15/2020. . . . . 5,809 6,112
GNMA, Pool #310604, 9.00%, 10/15/2021. . . . . 56,653 59,602
GNMA, Pool #376345, 6.50%, 12/15/2023. . . . . 25,684 24,556
---------
TOTAL MORTGAGE BACKED SECURITIES
(Identified Cost $94,932). . . . . . . . . . . 96,430
----------
OTHER AGENCIES - 18.94%
Federal National Mortgage Association Medium
Term Note, 4.625%, 10/15/2001. . . . . . . . . 55,000 53,508
Federal National Mortgage Association Medium
Term Note, 5.625%, 5/14/2004 . . . . . . . . . 50,000 48,443
Federal National Mortgage Association Medium
Term Note, 5.75%, 2/15/2008. . . . . . . . . . 50,000 47,117
Federal National Mortgage Association Medium
Term Note, 6.25%, 5/15/2029. . . . . . . . . . 50,000 46,031
---------
TOTAL OTHER AGENCIES
(Identified Cost $203,674) . . . . . . . . . . 195,099
----------
TOTAL U.S. GOVERNMENT AGENCIES
(Identified Cost $298,606). . . . . . . . . . . 291,529
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
---------- ---------
<S> <C> <C>
SHORT-TERM INVESTMENTS - 2.29%
Dreyfus Treasury Cash Management Fund
(Identified Cost $23,628) . . . . . 23,628 $ 23,628
---------
TOTAL INVESTMENTS - 99.47%
(Identified Cost $1,007,702). . . . 1,024,491
OTHER ASSETS, LESS LIABILITIES - 0.53% 5,439
----------
NET ASSETS - 100%. . . . . . . . . . . $1,029,930
==========
</TABLE>
Federal Tax Information:
At October 31, 1999, the net unrealized appreciation based on identified cost
for federal income tax purposes of $1,007,702 was as follows:
Unrealized appreciation $26,505
Unrealized depreciation (9,716)
-------
UNREALIZED APPRECIATION - NET $16,789
=======
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, 1999
ASSETS:
<S> <C>
Investments, at value (identified cost $1,007,702)(Note 2) $1,024,491
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Interest receivable. . . . . . . . . . . . . . . . . . . . 15,095
Receivable from investment advisor (Note 3). . . . . . . . 18,094
----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . 1,057,740
----------
LIABILITIES:
Accrued directors' fees (Note 3) . . . . . . . . . . . . . 7,241
Transfer agent fees payable (Note 3) . . . . . . . . . . . 285
Audit fee payable. . . . . . . . . . . . . . . . . . . . . 9,249
Other payables and accrued expenses. . . . . . . . . . . . 11,035
----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . . 27,810
----------
NET ASSETS FOR 102,432 SHARES OUTSTANDING. . . . . . . . . $1,029,930
==========
NET ASSETS CONSIST OF:
Capital stock. . . . . . . . . . . . . . . . . . . . . . . $ 1,024
Additional paid-in-capital . . . . . . . . . . . . . . . . 967,006
Undistributed net investment income. . . . . . . . . . . . 12,552
Accumulated net realized gain on investments . . . . . . . 32,559
Net unrealized appreciation on investments . . . . . . . . 16,789
----------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . . . . . $1,029,930
==========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($1,029,930/102,432 shares) . . . . . . . . . . . . . . $ 10.05
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME:
<S> <C>
Interest . . . . . . . . . . . . . . . . . . . . . . . . $ 69,660
----------
EXPENSES:
Management fees (Note 3) . . . . . . . . . . . . . . . . 5,939
Directors' fees (Note 3) . . . . . . . . . . . . . . . . 7,201
Transfer agent fees (Note 3) . . . . . . . . . . . . . . 285
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . 9,978
Legal fees . . . . . . . . . . . . . . . . . . . . . . . 4,972
Registration and filing fees . . . . . . . . . . . . . . 2,549
Custodian fee. . . . . . . . . . . . . . . . . . . . . . 2,200
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 1,005
----------
Total Expenses . . . . . . . . . . . . . . . . . . . . . 34,129
Less Reduction of Expenses (Note 3). . . . . . . . . . . (24,033)
----------
Net Expenses . . . . . . . . . . . . . . . . . . . . . . 10,096
----------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . 59,564
----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investments (identified cost basis) 34,689
Net change in unrealized appreciation on investments . . (121,104)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS. . . . . . . . . . . . . . . . . . . . (86,415)
----------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $ (26,851)
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
10/31/99 10/31/98
------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment income . . . . . . . . . . . $ 59,564 $ 75,844
Net realized gain on investments. . . . . . 34,689 41,155
Net change in unrealized appreciation
on investments . . . . . . . . . . . . . (121,104) 51,301
------------ ------------
Net increase (decrease) from operations . . (26,851) 168,300
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
(NOTE 2):
From net investment income. . . . . . . . . (65,659) (77,682)
From net realized gain on investments . . . (40,247) (763)
------------ ------------
Total distributions to shareholders . . . . (105,906) (78,445)
------------ ------------
CAPITAL STOCK ISSUED
AND REPURCHASED:
Net increase (decrease) from capital share
transactions (Note 5). . . . . . . . . . (585,984) 313,535
------------ ------------
Net increase (decrease) in net assets . . . (718,741) 403,390
NET ASSETS:
Beginning of year . . . . . . . . . . . . . 1,748,671 1,345,281
------------ ------------
END OF YEAR (including undistributed
net investment income of $12,552
and $16,515, respectively). . . . . . . $ 1,029,930 $ 1,748,671
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR YEAR YEAR TEN MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96 12/31/95 12/31/94
---------- ---------- ---------- ------------ ---------- ----------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD. . . $ 11.06 $ 10.41 $ 10.13 $ 10.51 $ 9.11 $ 9.95
---------- ---------- ---------- ------------ ---------- ----------
Income from investment operations:
Net investment income*. . . . . . . . . 0.567 0.531 0.580 0.497 0.582 0.262
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . (0.802) 0.692 0.355 (0.532) 1.393 (0.841)
---------- ---------- ---------- ------------ ---------- ----------
Total from investment operations . . . . . (0.235) 1.223 0.935 (0.035) 1.975 (0.579)
---------- ---------- ---------- ------------ ---------- ----------
Less distributions to shareholders:
From net investment income. . . . . . . (0.526) (0.567) (0.610) (0.345) (0.575) (0.261)
From net realized gain on investments . (0.249) (0.006) (0.045) -- -- --
---------- ---------- ---------- ------------ ---------- ----------
Total distributions to shareholders. . . . (0.775) (0.573) (0.655) (0.345) (0.575) (0.261)
---------- ---------- ---------- ------------ ---------- ----------
NET ASSET VALUE - END OF PERIOD. . . . . . $ 10.05 $ 11.06 $ 10.41 $ 10.13 $ 10.51 $ 9.11
========== ========== ========== ============ ========== ==========
Total return 1 . . . . . . . . . . . . . . (2.21%) 12.15% 9.73% (0.18%) 22.09% (5.83%)
Ratios (to average net assets)
/Supplemental Data:
Expenses*. . . . . . . . . . . . . . . . . 0.85% 0.85% 0.85% 0.85%2 0.85% 0.85%
Net investment income* . . . . . . . . . . 5.01% 5.25% 5.82% 5.98%2 6.13% 6.22%
Portfolio turnover . . . . . . . . . . . . 29% 20% 51% 5% 6% 1%
NET ASSETS - END OF PERIOD (000's omitted) $ 1,030 $ 1,749 $ 1,345 $ 1,098 $ 1,159 $ 748
========== ========== ========== ============ ========== ==========
</TABLE>
* The investment advisor did not impose its management fee and paid a portion of
the Series' expenses. If these expenses had been incurred by the Series, and had
1994 and 1996 expenses been limited to that allowed by state securities law, the
net investment income per share and the ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net investment income. . . . . $0.308 $0.379 $0.437 $ 0.360 $0.429 $0.192
Ratios(to average net assets):
Expenses . . . . . . . . . 2.87% 2.35% 2.28% 2.50%2 2.46% 2.50%
Net investment income. . . 2.99% 3.75% 4.39% 4.33%2 4.52% 4.57%
</TABLE>
1 Represents aggregate total return for the period indicated.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Flexible Yield Series III (the "Series") is a no-load diversified series of
Exeter Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company.
The Series 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.
The total authorized capital stock of the Fund consists of 1.7 billion shares of
common stock each having a par value of $0.01. As of October 31, 1999, 1,550
million shares have been designated in total among 31 series, of which 37.5
million have been designated as Flexible Yield Series III Class A Common Stock.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
Portfolio securities listed on an exchange are valued at the latest quoted sales
price of the exchange on which the security is traded most extensively.
Securities not traded on valuation date or securities not listed on an exchange
are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities, will
normally be valued on the basis of evaluated bid prices 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 the Advisor under procedures established by and under the general supervision
and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty 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 Fund can be attributed to a specific series. Expenses
which cannot be directly attributed are apportioned among the series in the
Fund.
FEDERAL INCOME TAXES
The Series' policy is to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. The Series is not subject to
federal income or excise tax to the extent the Series 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 Series uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DISTRIBUTIONS OF INCOME AND GAINS
Distributions to shareholders of net investment income are made quarterly.
Distributions are recorded on the ex-dividend date. Distributions of net
realized gains are distributed annually. An additional distribution may be
necessary to avoid taxation of the Series.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a result
of deferral of certain losses, character reclassification between net income and
net gains, or other tax adjustments. As a result, net investment income (loss)
and net investment gain (loss) on investment transactions for a reporting period
may differ significantly from distributions to shareholders during such period.
As a result, the Series may periodically make reclassifications among its
capital accounts without impacting the Series' net asset value.
For the year ended October 31, 1999, the Series distributed $40,248 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier Advisors,
Inc., DBA Exeter Asset Management (the "Advisor"), for which the Series pays the
Advisor a fee, computed daily and payable monthly, at an annual rate of 0.50% of
the Series' average daily net assets. The fee amounted to $5,939 for the year
ended October 31, 1999.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Series with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise maintain
the Series' organization. The Advisor also provides the Fund with necessary
office space and portfolio accounting and bookkeeping services. The salaries of
all officers of the Fund and of all Directors who are "affiliated persons" of
the Fund or of the Advisor, and all personnel of the Fund or of the Advisor
performing services relating to research, statistical and investment activities
are paid by the Advisor.
The Advisor has voluntarily agreed to waive its fee and, if necessary, pay other
expenses of the Series in order to maintain total expenses for the Series at no
more than 0.85% of average daily net assets each year. Accordingly, the Advisor
did not impose any of its fee and paid expenses amounting to $18,094 for the
year ended October 31, 1999, which is reflected as a reduction of expenses on
the Statement of Operations. The fee waiver and assumption of expenses by the
Advisor is voluntary and may be terminated at any time.
The Advisor also acts as the transfer, dividend paying and shareholder servicing
agent for the Fund. For these services, the Series 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 $285 for the year ended October 31, 1999.
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 Series.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The compensation of the non-affiliated Directors totaled $7,201 for the year
ended October 31, 1999.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of United States Government securities, other than
short-term securities, were $337,345 and $796,145, respectively, for the year
ended October 31, 1999.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Flexible Yield Series III Class A Common Stock were:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED 10/31/99 ENDED 10/31/98
--------------- ----------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
--------------- ---------------- -------- ----------
Sold. . . . 25,257 $ 275,582 64,913 $ 701,793
Reinvested. 9,895 103,502 6,198 65,259
Repurchased (90,772) (965,068) (42,333) (453,517)
--------------- ---------------- -------- ----------
Net change. (55,620) $ (585,984) 28,778 $ 313,535
=============== ================ ======== ==========
</TABLE>
The Advisor owned 13,079 shares on October 31, 1999 and 12,153 shares on October
31, 1998.
6. FINANCIAL INSTRUMENTS
The Series 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 Series on October 31, 1999.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Exeter Fund, Inc.
- - Flexible Yield Series III:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, 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.-Flexible
Yield Series III (the "Series") at October 31, 1999, and the results of its
operations, changes in net assets and the financial highlights for the year then
ended, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Series' management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit 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 audit, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above. The financial statements of the Series as
of October 31, 1998 and for the periods then ended, as indicated therein, were
audited by other independent accountants whose report dated December 4, 1998
expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 3, 1999
13
<PAGE>
OTHER INFORMATION
CHANGE OF ACCOUNTANTS
On July 15, 1999, the Fund dismissed Deloitte & Touche LLP ("D&T") as the Fund's
independent auditors by action of the Fund's Board of Directors upon the
recommendation of the Audit Committee of the Board. D&T's reports of the funds
financial statements for the fiscal years ended October 31, 1998 and 1997,
contained no adverse opinion or disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, (i) there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of D&T, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report on the Fund's financials statements for such years, and (ii) there
were no "reportable events" of the kind described in Item 304(a)(1)(v) of
Regulations S-K under the Securities Exchange Act of 1934, as amended.
On July 15, 1999, the Fund by action of its Board of Directors upon the
recommendation of the Audit Committee of the Board engaged
PricewaterhouseCoopers ("PwC") as the independent auditors to audit the Fund's
financial statements for the fiscal year ending October 31, 1999. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, neither the Fund nor
anyone on its behalf has consulted PwC on items which (i) concerned the
application of accounting principles to a specified transaction, whether
completed or proposed, or the type of audit opinion that might be rendered on
the Fund's financial statements or (ii) concerned the subject of a disagreement
(as defined in paragraph (a)(a)(iv) of Item 304 of Regulation S-X) or reportable
event (as described in paragraph (a)(1)(v) of said Item 304).
14
<PAGE>
<PAGE>
Exeter Fund, Inc.
Tax Managed Series
Annual Report
October 31, 1999
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
DEAR SHAREHOLDERS:
The Tax Managed Series has provided shareholders with strong returns over the
past year through October 31, 1999, while remaining focused on the added goal of
minimizing taxable distributions.
The U.S. markets have been anything but stable over the last six months, with
peaks and valleys reflecting growing uncertainty regarding the future
performance of the economy and corporate earnings. While stocks rose broadly
earlier this year and relatively undervalued sectors improved, the third quarter
experienced almost exactly the opposite with negative returns across most
sectors of the U.S. equity market. The Series has withstood this volatility
well, as a result of the portfolio's focus on companies with strong strategic
positioning in their industry, stocks benefiting from strengthening foreign
markets, and several well-positioned technology stocks.
We believe the risk in the U.S. stock market continues to build. Rising energy
prices and tight labor markets are two of the factors that are forcing costs to
go up in a number of industries this year. With costs rising and most companies
lacking true pricing power, the inevitable result is a margin squeeze. Add to
that the impact of rising interest rates and the result is likely to be a
difficult environment for high valuation (e.g., high price-to-earnings ratio)
stocks. Given this environment, we have continued with our current focus on
stocks with lower valuations, which we believe positions the portfolio well for
the future. Likewise, in an effort to protect the portfolio from almost certain
earnings disappointments being experienced broadly in the U.S., we have
maintained a focus on companies with strong strategic positioning in their
industry and/or industries near the bottom of their supply/demand cycles.
Beyond being able to make some stock purchases at prices considered attractive
by our investment disciplines, we were able to minimize taxable distributions by
the Series through strategic, tax-driven security sales. Specifically, we were
able to sell some of the portfolio's lagging holdings in order to generate
losses and help offset gains taken in several highly appreciated technology
stocks, thus minimizing the tax impact to the holders of the Series. We will
continue to utilize these management techniques in the future to lessen the tax
burden of equity investments to the shareholders.
As always, we appreciate the opportunity to serve you.
Sincerely,
EXETER ASSET MANAGEMENT
1
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
<graphic>
<pie chart>
Data for pie chart to follow:
Portfolio Composition - As of 10/31/99
Chemicals & Allied Products - 16%
Crude Petroleum & Natural Gas - 9%
Electronics & Electrical Equipment - 8%
Food & Kindred Products - 7%
Glass Products - 6%
Paper & Allied Products - 9%
Restaurants - 5%
Software - 6%
Technical Instruments & Supplies - 7%
Telecommunication Services - 4%
Transportation - 9%
Miscellaneous* - 14%
* Miscellaneous includes:
Air Transportation
Computer Equipment
Health Services
Holding Companies - Publishing
Manufacturing - Miscellaneous
Motion Picture Production
Cash, short-term investments, and other assets, less liabilities
2
<PAGE>
PERFORMANCE UPDATE AS OF OCTOBER 31, 1999
Exeter Fund, Inc. - Tax Managed Series
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through. Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
One Year $12,204 22.04% 22.04%
Inception 1 $18,129 81.29% 16.02%
</TABLE>
Standard & Poor's 500 Total Return
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Total Return
Through. Growth of $10,000 Average
10/31/99 Investment Cumulative Annual
One Year $12,566 25.66% 25.66%
Inception 1 $25,127 151.27% 25.88%
</TABLE>
The value of a $10,000 investment in the Exeter Fund, Inc. - Tax Managed
Series from its inception (11/1/95) to present (10/31/99) as compared to the
Standard & Poor's (S&P) 500 Total Return Index. 2
<graphic>
<line chart>
Data for line chart to follow:
<TABLE>
<CAPTION>
<S> <C> <C>
Exeter Fund, Inc. Standard & Poor's 500
Date . . Tax Managed Series Total Return Index
11/01/95 10,000 10,000
10/31/96 11,630 12,408
10/31/97 15,200 16,392
10/31/98 14,855 19,996
10/31/99 18,129 25,127
</TABLE>
1 The Fund and Index performance are calculated from November 1,1995, the Fund's
inception date. The Fund's performance is historical and may not be indicative
of future results.
2 The 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 the
Over-the-Counter Market. The Index returns assume reinvestment of income and,
unlike Fund returns, do not reflect any fees or expenses.
3
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
------- ---------
COMMON STOCK - 98.36%
<S> <C> <C>
AIR TRANSPORTATION - 1.61%
FDX Corp.* . . . . . . . . . . . . . . . . . . . . . 400 $ 17,225
---------
CHEMICAL & ALLIED PRODUCTS - 15.82%
BIOLOGICAL PRODUCTS - 3.53%
Sigma-Aldrich Corp.. . . . . . . . . . . . . . . . 1,325 $ 37,763
---------
PHARMACEUTICAL PREPARATIONS - 10.49%
Eli Lilly & Co.. . . . . . . . . . . . . . . . . . 200 13,775
Johnson & Johnson. . . . . . . . . . . . . . . . . 175 18,331
Mylan Laboratories, Inc. . . . . . . . . . . . . . 600 10,763
Pharmacia & Upjohn, Inc. . . . . . . . . . . . . . 375 20,227
Teva Pharmaceutical Industries Ltd. - ADR (Note 7) 600 29,025
Warner - Lambert Co. . . . . . . . . . . . . . . . 250 19,953
---------
112,074
---------
PLASTIC MATERIALS - 1.80%
Eastman Chemical Co. . . . . . . . . . . . . . . . 500 19,281
---------
169,118
---------
COMPUTER EQUIPMENT - 3.18%
Bell & Howell Co.* . . . . . . . . . . . . . . . . . 600 16,875
Compaq Computer Corp.. . . . . . . . . . . . . . . . 900 17,100
---------
33,975
---------
CRUDE PETROLEUM & NATURAL GAS - 8.69%
Gulf Canada Resources Ltd. - ADR* (Note 7) . . . . . 11,000 43,313
Petroleo Brasileiro S.A. (Petrobras) -
ADR (Note 7). . . . . . . . . . . . . . . . . . . 3,100 49,548
---------
92,861
---------
ELECTRONICS & ELECTRICAL EQUIPMENT - 7.71%
Koninklijke Philips Electronics NV-ADR (Note 7). . . 230 23,906
Motorola, Inc. . . . . . . . . . . . . . . . . . . . 600 58,463
---------
82,369
---------
FOOD & KINDRED PRODUCTS - 6.95%
Bestfoods. . . . . . . . . . . . . . . . . . . . . . 700 41,125
Unilever plc - ADR (Note 7). . . . . . . . . . . . . 892 33,171
---------
74,296
---------
GLASS PRODUCTS - 5.70%
Corning, Inc.. . . . . . . . . . . . . . . . . . . . 775 60,934
---------
HEALTH SERVICES - 2.05%
Caremark Rx, Inc.* . . . . . . . . . . . . . . . . . 4,500 21,937
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
INVESTMENT PORTFOLIO - OCTOBER 31, 1999
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 2)
--------- ---------
<S> <C> <C>
HOLDING COMPANIES - PUBLISHING - 1.83%
Reed International plc - ADR (Note 7). . . . . . 850 $ 19,550
---------
MANUFACTURING - MISCELLANEOUS - 3.00%
Mattel, Inc. . . . . . . . . . . . . . . . . . . 2,400 32,100
---------
MOTION PICTURE PRODUCTION - 1.48%
News Corporation Ltd. - ADR (Note 7) . . . . . . 575 15,848
---------
PAPER & ALLIED PRODUCTS - 9.23%
Fort James Corp. . . . . . . . . . . . . . . . . 740 19,471
International Paper Co.. . . . . . . . . . . . . 425 22,366
Kimberly-Clark Corp. . . . . . . . . . . . . . . 900 56,813
---------
98,650
---------
RESTAURANTS - 5.02%
McDonald's Corp. . . . . . . . . . . . . . . . . 1,300 53,625
---------
SOFTWARE - 5.78%
Oracle Corp.*. . . . . . . . . . . . . . . . . . 1,300 61,831
---------
TECHNICAL INSTRUMENTS & SUPPLIES - 7.02%
Eastman Kodak Co.. . . . . . . . . . . . . . . . 650 44,809
Millipore Corp.. . . . . . . . . . . . . . . . . 950 30,281
---------
75,090
---------
TELECOMMUNICATION SERVICES - 4.37%
Telecomunicacoes Brasileiras S.A. (Telebras) -
ADR PFD (Note 7) . . . . . . . . . . . . . . 600 46,725
Telecomunicacoes Brasileiras S.A., (Telebras) -
ADR (Note 7) . . . . . . . . . . . . . . . . 600 28
---------
46,753
---------
TRANSPORTATION - 8.92%
Burlington Northern Santa Fe Corp. . . . . . . . 1,000 31,875
Canadian National Railway Co. - ADR (Note 7) . . 1,250 38,125
The Boeing Co. . . . . . . . . . . . . . . . . . 550 25,334
---------
95,334
---------
TOTAL COMMON STOCK
(Identified Cost $834,412) . . . . . . . . . 1,051,496
-----------
SHORT-TERM INVESTMENTS - 0.08%
Dreyfus Treasury Cash Management Fund
(Identified Cost $878) . . . . . . . . . . . 878 878
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Investment Portfolio - October 31, 1999
<TABLE>
<CAPTION>
Value
(Note 2)
-----------
<S> <C>
TOTAL INVESTMENTS - 98.44%
(Identified Cost $835,290). . . . . . $1,052,374
OTHER ASSETS, LESS LIABILITIES - 1.56% 16,572
-----------
NET ASSETS - 100%. . . . . . . . . . . $1,068,946
===========
</TABLE>
*Non-income producing security
Federal Tax Information:
At October 31, 1999, the net unrealized appreciation based on identified cost
for
federal income tax purposes of $835,290 was as follows:
Unrealized appreciation $ 234,154
Unrealized depreciation (17,070)
---------------
UNREALIZED APPRECIATION - NET $ 217,084
============
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
OCTOBER 31, 1999
ASSETS:
<S> <C>
Investments, at value (identified cost $835,290)(Note 2) $1,052,374
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 28,876
Dividends receivable . . . . . . . . . . . . . . . . . . 115
Receivable from investment advisor (Note 3). . . . . . . 15,966
-----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . 1,097,331
-----------
LIABILITIES:
Accrued directors' fees (Note 3) . . . . . . . . . . . . 7,239
Transfer agent fees payable (Note 3) . . . . . . . . . . 229
Audit fee payable. . . . . . . . . . . . . . . . . . . . 9,255
Other payables and accrued expenses. . . . . . . . . . . 11,662
-----------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . . . . . 28,385
-----------
NET ASSETS FOR 61,347 SHARES OUTSTANDING . . . . . . . . $1,068,946
===========
NET ASSETS CONSIST OF:
Capital stock. . . . . . . . . . . . . . . . . . . . . . $ 613
Additional paid-in-capital . . . . . . . . . . . . . . . 855,028
Undistributed net investment income. . . . . . . . . . . 5,246
Accumulated net realized loss on investments . . . . . . (9,025)
Net unrealized appreciation on investments . . . . . . . 217,084
-----------
TOTAL NET ASSETS . . . . . . . . . . . . . . . . . . . . $1,068,946
===========
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE - CLASS A
($1,068,946/61,347 shares). . . . . . . . . . . . . . $ 17.42
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME:
<S> <C>
Dividends (net of foreign tax withheld, $865). . . . . . $ 13,844
Interest . . . . . . . . . . . . . . . . . . . . . . . . 2,311
---------
Total Investment Income. . . . . . . . . . . . . . . . . 16,155
---------
EXPENSES:
Management fees (Note 3) . . . . . . . . . . . . . . . . 9,555
Directors' fees (Note 3) . . . . . . . . . . . . . . . . 7,201
Transfer agent fees (Note 3) . . . . . . . . . . . . . . 229
Audit fee. . . . . . . . . . . . . . . . . . . . . . . . 9,919
Registration and filing fees . . . . . . . . . . . . . . 5,135
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 4,953
---------
Total Expenses . . . . . . . . . . . . . . . . . . . . . 36,992
Less Reduction of Expenses (Note 3). . . . . . . . . . . (25,520)
---------
Net Expenses . . . . . . . . . . . . . . . . . . . . . . 11,472
---------
NET INVESTMENT INCOME. . . . . . . . . . . . . . . . . . 4,683
---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss on investments (identified cost basis) (375)
Net change in unrealized appreciation on investments . . 164,611
---------
NET REALIZED AND UNREALIZED GAIN (LOSS )
ON INVESTMENTS. . . . . . . . . . . . . . . . . . . . 164,236
---------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $168,919
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR YEAR
ENDED ENDED
10/31/99 10/31/98
----------- ----------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C>
Net investment income . . . . . . . . . . . . . . . . $ 4,683 $ 5,151
Net realized loss on investments. . . . . . . . . . . (375) (878)
Net change in unrealized appreciation on investments. 164,611 (37,135)
----------- ----------
Net increase (decrease) from operations . . . . . . . 168,919 (32,862)
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2):
From net investment income. . . . . . . . . . . . . . (7,164) --
From net realized gain on investments . . . . . . . . (3,302) (14,205)
----------- ----------
Total distributions to shareholders . . . . . . . . . (10,466) (14,205)
----------- ----------
CAPITAL STOCK ISSUED AND
REPURCHASED:
Net increase from capital share transactions (Note 5) 138,747 294,616
----------- ----------
Net increase in net assets. . . . . . . . . . . . . . 297,200 247,549
NET ASSETS:
Beginning of year . . . . . . . . . . . . . . . . . . 771,746 524,197
----------- ----------
END OF YEAR (including undistributed net investment
Income of $5,246 and $5,151, respectively) . . . . $1,068,946 $ 771,746
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE YEAR
YEAR ENDED YEAR ENDED YEAR ENDED ENDED
10/31/99 10/31/98 10/31/97 10/31/96
------------ ------------ ------------ --------------
Per share data (for a share outstanding throughout
Each period):
<S> <C> <C> <C> <C>
NET ASSET VALUE - BEGINNING OF PERIOD. . . . . . . . $ 14.46 $ 15.20 $ 11.63 $ 10.00
------------ ------------ ------------ --------------
Income from investment operations:
Net investment income (loss)* . . . . . . . . . . 0.122 0.097 (0.008) (0.020)
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . 3.032 (0.440) 3.578 1.650
------------ ------------ ------------ --------------
Total from investment operations . . . . . . . . . . 3.154 (0.343) 3.570 1.630
------------ ------------ ------------ --------------
Less distributions to shareholders:
From net investment income. . . . . . . . . . . . (0.133) -- -- --
From net realized gain on investments . . . . . . (0.061) (0.397) -- --
------------ ------------ ------------ --------------
Total distributions to shareholders. . . . . . . . . (0.194) (0.397) -- --
------------ ------------ ----------- -------------
NET ASSET VALUE - END OF PERIOD. . . . . . . . . . . $ 17.42 $ 14.46 $ 15.20 $ 11.63
============ ============ ============ ==============
Total return 1 . . . . . . . . . . . . . . . . . . . 22.04% (2.27%) 30.70% 16.30%
Ratios (to average net assets) / Supplemental Data:
Expenses*. . . . . . . . . . . . . . . . . . . . 1.20% 1.20% 1.20% 1.20%
Net investment income (loss)*. . . . . . . . . . 0.49% 0.73% (0.09%) (0.21%)
Portfolio turnover . . . . . . . . . . . . . . . . . 85% 65% 103% 78%
NET ASSETS - END OF PERIOD (000's omitted) . . . . . $ 1,069 $ 772 $ 524 $ 224
============ ============ ============ ==============
</TABLE>
* The investment advisor did not impose its management fee and paid a portion of
the Series' expenses. If these expenses had been incurred by the Series, and
had 1996 expenses been limited to that allowed by state securities law, the net
investment loss per share and the ratios would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net investment loss ($0.543) ($0.431) ($0.620) ($0.144)
Ratios (to average net assets):
Expenses 3.87% 5.17% 8.08% 2.50%
Net investment loss (2.18%) (3.24%) (6.97%) (1.51%)
</TABLE>
1 Represents 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
Tax Managed Series (the "Series") is a no-load diversified series of Exeter
Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company.
The Series 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.
The total authorized capital stock of the Fund consists of 1.7 billion shares of
common stock each having a par value of $0.01. As of October 31, 1999, 1,550
million shares have been designated in total among 31 series, of which 37.5
million have been designated as Tax Managed 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 traded most extensively.
Securities not traded on valuation date or securities not listed on an exchange
are valued at the latest quoted bid price.
Debt securities, including government bonds and mortgage backed securities, will
normally be valued on the basis of evaluated bid prices 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 the Advisor under procedures established by and under the general supervision
and responsibility of the Fund's Board of Directors.
Short-term investments that mature in sixty 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 Fund can be attributed to a specific series. Expenses
which cannot be directly attributed are apportioned among the Series in the
Fund.
FEDERAL INCOME TAXES
The Series' policy is to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies. The Series is not subject to
federal income or excise tax to the extent that the Series 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 Series uses the identified cost method for determining realized gain or loss
on investments for both financial statement and federal income tax reporting
purposes.
At October 31, 1999, the Series, for federal income tax purposes, had a capital
loss carryforward of $9,023, which will expire on October 31, 2007.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Series.
The timing and characterization of certain income and capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. The differences may be a result
of deferral of certain losses, character reclassification between net income and
net gains, or other tax adjustments. As a result, net investment income (loss)
and net investment gain (loss) on investment transactions for a reporting period
may differ significantly from distributions to shareholders during such period.
As a result, the Series may periodically make reclassifications among its
capital accounts without impacting the Series' net asset value.
For the year ended October 31, 1999, the Series distributed $3,302 of long-term
capital gains.
OTHER
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an investment advisory agreement with Manning & Napier Advisors,
Inc., DBA Exeter Asset Management (the "Advisor"), for which the Series pays the
Advisor a fee, computed daily and payable monthly, at an annual rate of 1.0% of
the Series' average daily net assets. The fee amounted to $9,555 for the year
ended October 31, 1999.
Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of
the Advisor provide the Series with advice and assistance in the choice of
investments and the execution of securities transactions, and otherwise maintain
the Series' organization. The Advisor also provides the Fund with necessary
office space and portfolio accounting and bookkeeping services. The salaries of
all officers of the Fund and of all Directors who are "affiliated persons" of
the Fund or of the Advisor, and all personnel of the Fund or of the Advisor
performing services relating to research, statistical and investment activities
are paid by the Advisor.
The Advisor has voluntarily agreed to waive its fee and, if necessary, pay other
expenses of the Series in order to maintain total expenses for the Series at no
more than 1.2% of average daily net assets each year. Accordingly, the Advisor
did not impose any of its fee and paid expenses amounting to $15,965 for the
year ended October 31, 1999, which is reflected as a reduction of expenses on
the Statement of Operations. The fee waiver and assumption of expenses by the
Advisor is voluntary and may be terminated at any time.
The Advisor also acts as the transfer, dividend paying and shareholder servicing
agent for the Fund. For these services, the Series 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 $229 for the year ended October 31, 1999.
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 Series.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH AFFILIATES (CONTINUED)
The compensation of the non-affiliated Directors totaled $7,201 for the year
ended October 31, 1999.
4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 1999, purchases and sales of securities, other
than United States Government securities and short-term securities, were
$917,517 and $775,312, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Tax Managed Series Class A Common Stock were:
<TABLE>
<CAPTION>
For the Year For the Year
Ended 10/31/99 Ended 10/31/98
--------------- ----------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
--------------- ---------------- -------- ----------
Sold. . . . 31,500 $ 526,082 33,205 $ 509,255
Reinvested. 703 10,466 962 13,996
Repurchased (24,220) (397,801) (15,294) (228,635)
--------------- ---------------- -------- ----------
Net change. 7,983 $ 138,747 18,873 $ 294,616
=============== ================ ======== ==========
</TABLE>
The Advisor owned 22,907 shares on October 31, 1999 and 12,841 shares on October
31, 1998.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing exposure
to various market risks. These financial instruments include written options,
forward foreign currency exchange contracts, and futures contracts and may
involve, to a varying degree, elements of risk in excess of the amounts
recognized for financial statement purposes. No such investments were held by
the Series on October 31, 1999.
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments
involves special risks and considerations not typically associated with
investing in securities of domestic companies and the United States Government.
These risks include revaluation of currencies and future adverse political and
economic developments. Moreover, securities of foreign companies and foreign
governments may be less liquid and their prices more volatile than those of
securities of comparable domestic companies and the United States Government.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Exeter Fund, Inc.
- Tax Managed Series:
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, 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.- Tax Managed
Series (the "Series") at October 31, 1999, and the results of its operations,
changes in net assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Series' management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit 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 audit, which included confirmation of securities at October
31, 1999 by correspondence with the custodian and brokers, provides a reasonable
basis for the opinion expressed above. The financial statements of the Series as
of October 31, 1998 and for the periods then ended, as indicated therein, were
audited by other independent accountants whose report dated December 4, 1998
expressed an unqualified opinion on those statements.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 3, 1999
14
<PAGE>
OTHER INFORMATION (UNAUDITED)
CHANGE OF ACCOUNTANTS
On July 15, 1999, the Fund dismissed Deloitte & Touche LLP ("D&T") as the Fund's
independent auditors by action of the Fund's Board of Directors upon the
recommendation of the Audit Committee of the Board. D&T's reports of the funds
financial statements for the fiscal years ended October 31, 1998 and 1997,
contained no adverse opinion or disclaimer of opinion nor were they qualified or
modified as to uncertainty, audit scope or accounting principles. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, (i) there were no
disagreements with D&T on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedures, which
disagreements, if not resolved to the satisfaction of D&T, would have caused it
to make reference to the subject matter of the disagreements in connection with
its report on the Fund's financials statements for such years, and (ii) there
were no "reportable events" of the kind described in Item 304(a)(1)(v) of
Regulations S-K under the Securities Exchange Act of 1934, as amended.
On July 15, 1999, the Fund by action of its Board of Directors upon the
recommendation of the Audit Committee of the Board engaged
PricewaterhouseCoopers ("PwC") as the independent auditors to audit the Fund's
financial statements for the fiscal year ending October 31, 1999. During the
Fund's fiscal years ended October 31, 1998 and 1997, and the interim period
commencing November 1, 1998 and ending July 15, 1999, neither the Fund nor
anyone on its behalf has consulted PwC on items which (i) concerned the
application of accounting principles to a specified transaction, whether
completed or proposed, or the type of audit opinion that might be rendered on
the Fund's financial statements or (ii) concerned the subject of a disagreement
(as defined in paragraph (a)(a)(iv) of Item 304 of Regulation S-X) or reportable
event (as described in paragraph (a)(1)(v) of said Item 304).
15
<PAGE>
<PAGE>
<PAGE>
[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] EXETER FUND BLENDED ASSET SERIES 1
[NUMBER] 11
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[PERIOD-TYPE] 1-YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 26490920
[INVESTMENTS-AT-VALUE] 26210354
[RECEIVABLES] 353543
[ASSETS-OTHER] 21182
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 26585079
[PAYABLE-FOR-SECURITIES] 15842
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 54060
[TOTAL-LIABILITIES] 69902
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 25761635
[SHARES-COMMON-STOCK] 2395134
[SHARES-COMMON-PRIOR] 2785586
[ACCUMULATED-NII-CURRENT] 526915
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 507200
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (280573)
[NET-ASSETS] 26515177
[DIVIDEND-INCOME] 232930
[INTEREST-INCOME] 1148625
[OTHER-INCOME] 0
[EXPENSES-NET] 386670
[NET-INVESTMENT-INCOME] 994885
[REALIZED-GAINS-CURRENT] 588481
[APPREC-INCREASE-CURRENT] 22061
[NET-CHANGE-FROM-OPS] 1605427
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 970289
[DISTRIBUTIONS-OF-GAINS] 1849031
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 724072
[NUMBER-OF-SHARES-REDEEMED] 1370353
[SHARES-REINVESTED] 255829
[NET-CHANGE-IN-ASSETS] (5776040)
[ACCUMULATED-NII-PRIOR] 502925
[ACCUMULATED-GAINS-PRIOR] 1767144
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 322226
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 395713
[AVERAGE-NET-ASSETS] 31959484
[PER-SHARE-NAV-BEGIN] 11.59
[PER-SHARE-NII] 0.383
[PER-SHARE-GAIN-APPREC] 0.217
[PER-SHARE-DIVIDEND] 0.344
[PER-SHARE-DISTRIBUTIONS] 0.776
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.07
[EXPENSE-RATIO] 1.20
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] EXETER FUND BLENDED ASSET SERIES 2
[NUMBER] 12
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[PERIOD-TYPE] 1-YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 66396955
[INVESTMENTS-AT-VALUE] 64318326
[RECEIVABLES] 1085205
[ASSETS-OTHER] 50516
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 65454047
[PAYABLE-FOR-SECURITIES] 47525
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 201776
[TOTAL-LIABILITIES] 249301
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 63161714
[SHARES-COMMON-STOCK] 5117865
[SHARES-COMMON-PRIOR] 5234961
[ACCUMULATED-NII-CURRENT] 873829
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3247854
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (2078651)
[NET-ASSETS] 65204746
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[NUMBER-OF-SHARES-SOLD] 1929179
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[NET-CHANGE-IN-ASSETS] (768276)
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[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] EXETER FUND FLEXIBLE YIELD SERIES 1
[NUMBER] 13
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[PERIOD-TYPE] 1-YEAR
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[SHARES-COMMON-PRIOR] 108126
[ACCUMULATED-NII-CURRENT] 11784
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (9485)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (27207)
[NET-ASSETS] 1393544
[DIVIDEND-INCOME] 0
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[EXPENSES-NET] 9746
[NET-INVESTMENT-INCOME] 58316
[REALIZED-GAINS-CURRENT] (8740)
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[NUMBER-OF-SHARES-SOLD] 102284
[NUMBER-OF-SHARES-REDEEMED] 79406
[SHARES-REINVESTED] 5700
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[ACCUMULATED-NII-PRIOR] 8180
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[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] EXETER FUND FLEXIBLE YIELD SERIES 2
[NUMBER] 14
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[PERIOD-TYPE] 1-YEAR
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[INVESTMENTS-AT-COST] 552318
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[REALIZED-GAINS-CURRENT] 5625
[APPREC-INCREASE-CURRENT] (44376)
[NET-CHANGE-FROM-OPS] (6750)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 32631
[DISTRIBUTIONS-OF-GAINS] 5048
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[NET-CHANGE-IN-ASSETS] (141888)
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[OVERDISTRIB-NII-PRIOR] 0
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[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 29682
[AVERAGE-NET-ASSETS] 620366
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[PER-SHARE-NII] 0.541
[PER-SHARE-GAIN-APPREC] (0.642)
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[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.80
[EXPENSE-RATIO] 0.80
[AVG-DEBT-OUTSTANDING] 0
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[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] EXETER FUND FLEXIBLE YIELD SERIES 3
[NUMBER] 15
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[PERIOD-TYPE] 1-YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 1007702
[INVESTMENTS-AT-VALUE] 1024491
[RECEIVABLES] 33189
[ASSETS-OTHER] 60
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[OTHER-ITEMS-LIABILITIES] 27810
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[SENIOR-EQUITY] 0
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[SHARES-COMMON-PRIOR] 158052
[ACCUMULATED-NII-CURRENT] 12552
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 32559
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 16789
[NET-ASSETS] 1029930
[DIVIDEND-INCOME] 0
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[NET-INVESTMENT-INCOME] 59564
[REALIZED-GAINS-CURRENT] 34689
[APPREC-INCREASE-CURRENT] (121104)
[NET-CHANGE-FROM-OPS] (26851)
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[DISTRIBUTIONS-OF-INCOME] 65659
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[NET-CHANGE-IN-ASSETS] (718741)
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[AVERAGE-NET-ASSETS] 1187316
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[RETURNS-OF-CAPITAL] 0
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[EXPENSE-RATIO] 0.85
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[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] EXETER FUND DEFENSIVE SERIES
[NUMBER] 2
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[PERIOD-TYPE] 1-YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 4854535
[INVESTMENTS-AT-VALUE] 4781508
[RECEIVABLES] 63346
[ASSETS-OTHER] 7876
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 4852730
[PAYABLE-FOR-SECURITIES] 1201
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 14771
[TOTAL-LIABILITIES] 15972
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 4760974
[SHARES-COMMON-STOCK] 455382
[SHARES-COMMON-PRIOR] 528593
[ACCUMULATED-NII-CURRENT] 117154
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 31657
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (73027)
[NET-ASSETS] 4836758
[DIVIDEND-INCOME] 15215
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[NET-INVESTMENT-INCOME] 235418
[REALIZED-GAINS-CURRENT] 39396
[APPREC-INCREASE-CURRENT] (154121)
[NET-CHANGE-FROM-OPS] 120693
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 212396
[DISTRIBUTIONS-OF-GAINS] 20762
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[SHARES-REINVESTED] 21934
[NET-CHANGE-IN-ASSETS] (896401)
[ACCUMULATED-NII-PRIOR] 99985
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[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] EXETER FUND MAXIMUM HORIZON SERIES
[NUMBER] 5
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[PERIOD-TYPE] 1-YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 20929377
[INVESTMENTS-AT-VALUE] 21161574
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[OTHER-ITEMS-ASSETS] 0
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[PAYABLE-FOR-SECURITIES] 24986
[SENIOR-LONG-TERM-DEBT] 0
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[ACCUMULATED-NII-CURRENT] 52108
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[ACCUMULATED-NET-GAINS] 2074302
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 232189
[NET-ASSETS] 21514707
[DIVIDEND-INCOME] 303165
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[OTHER-INCOME] 0
[EXPENSES-NET] 263399
[NET-INVESTMENT-INCOME] 204473
[REALIZED-GAINS-CURRENT] 2187613
[APPREC-INCREASE-CURRENT] 2706385
[NET-CHANGE-FROM-OPS] 5098471
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 344505
[DISTRIBUTIONS-OF-GAINS] 911021
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 498281
[NUMBER-OF-SHARES-REDEEMED] 648323
[SHARES-REINVESTED] 105342
[NET-CHANGE-IN-ASSETS] 2810150
[ACCUMULATED-NII-PRIOR] 107296
[ACCUMULATED-GAINS-PRIOR] 882554
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[GROSS-ADVISORY-FEES] 219497
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[GROSS-EXPENSE] 279993
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[ARTICLE] 6
[LEGEND]
[RESTATED]
[CIK] 0000751173
[NAME] EXETER FUND, INC.
[SERIES]
[NAME] EXETER FUND TAX MANAGED SERIES
[NUMBER] 8
[MULTIPLIER] 1
[CURRENCY] 1
[FISCAL-YEAR-END] OCT-31-1999
[PERIOD-START] NOV-01-1998
[PERIOD-END] OCT-31-1999
[PERIOD-TYPE] 1-YEAR
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 835290
[INVESTMENTS-AT-VALUE] 1052374
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[OTHER-ITEMS-LIABILITIES] 28385
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[ACCUMULATED-NET-GAINS] (9025)
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[REALIZED-GAINS-CURRENT] (375)
[APPREC-INCREASE-CURRENT] 164611
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[ACCUMULATED-NII-PRIOR] 5151
[ACCUMULATED-GAINS-PRIOR] (880)
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