A Portfolio of
Mutual Series Fund Inc.
[Logo]
This report and the financial statements contained herein are submitted for the
general information of the shareholders of Mutual Beacon Fund. The report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
The shares of Mutual Beacon Fund are offered at the net asset value per share.
There are no underwriting discounts or commissions and the Fund receives the
full amount of the proceeds paid by the subscribers.
MUTUAL
BEACON
FUND
[Logo]
SEMI-
ANNUAL
REPORT
June 30, 1996
[Logo]
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MUTUAL SERIES FUND INC.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
August 22, 1996
TO THE SHAREHOLDERS OF
MUTUAL BEACON FUND:
The first six months of 1996 have been an exciting period in the markets
and for our organization. Equity markets started the year the same way they
ended, with strong upside movements reflecting huge inflows into the equity
markets. However, unflagging optimism gave way to despair, as it inevitably
does, in June and July, and the markets dropped somewhat precipitously (at least
for a few hours). Through June 30, Mutual Beacon appreciated 10.3% and is up
10.4% at this writing.
After the dramatic increase in share prices over the last eighteen months,
our bread-and-butter "cheap" stocks are harder to come by in the domestic
markets at the kind of discounts we like. However, attractive opportunities in
Europe have counterbalanced this relative scarcity in domestic markets. The
portfolio at June 30 reflects an investment in foreign equities of about 25% of
total assets, with the largest areas of concentration in Sweden, the United
Kingdom and the Netherlands. One of the great attractions in Sweden, for
example, is the presence of diversified holding companies (e.g. Investor AB)
that trade at large discounts to the value of the disparate pieces in the
corporate empire. Often these holding companies are controlled by families or a
handful of institutions that are feeling increasing pressure to unlock the true
values to shareholders. We believe that the movement in Europe toward increased
accountability to shareholders will continue and it provides fertile investment
territory for us.
Although the cheap value stocks may not be as prevalent today in the U.S.
markets, we are witnessing an unprecedented number of corporate restructurings
here whereby companies separate certain assets that are not properly reflected
in market valuations. For example, Dial Corp., AT&T and 3M have each embarked
upon "spinoffs" of distinct companies (Viad, Lucent and Imation, respectively)
to their shareholders on the theory that the parts will have a greater value
when they are not part of one conglomerate. This theory is more than just paper
shuffling or accounting mumbo-jumbo and makes sense for several reasons.
Spinoffs encourage a closer alignment of management's interests with those of
shareholders and may permit a management team to explore strategies that are
inconsistent with those of the larger company. In addition, spinoffs may attract
different kinds of investors who put a higher value on the "pure play" of the
new entity. Our job is to analyze both the new spinoff and the remaining corpus
to take advantage of disparities between trading values and enterprise values.
I noted earlier in the letter that the first half of this year was also an
exciting time for us internally. Of course this reference was to the
announcement in late June of the pending sale of
3
<PAGE>
Heine Securities, investment adviser to the Fund, to Franklin Resources. The
proxy that you received describes this transaction in great detail, and I won't
repeat that discussion here. (If you have not voted yet, please do so.) But the
process leading to this announcement was a long and interesting one, and it led
me to reflect a lot on the Fund and its future. I'd like to share some of those
thoughts with you.
When I started in the investment business with Max Heine in 1975, our
mutual fund assets totaled $5 million. Even as our assets have grown to the $17
billion they are today, for me the essence of the job remains the same --
digging beneath the surface of companies to find a dollar of value selling for
fifty or sixty cents. The mutual fund business likewise has undergone an
enormous transformation since I started. Its growth has been well documented and
will continue as more retirement assets (e.g., 401(k) and social security) come
into the system. This is an exciting, dynamic business that is never the same
from day to day.
Our transaction is different from many of the others in the industry
because the transaction will not result in any changes to the portfolio
management of the Fund (other than those that are typically incidental to
becoming part of a large fund complex). Our independence and style of portfolio
management will not change. The ownership of the adviser will change from a
privately owned company to a corporate subsidiary of Franklin Resources Inc.,
but key members of the management team have signed contracts and after the close
of the transaction will continue to be responsible for managing the Fund.
Our partnership with Franklin Resources satisfies the objectives I set out
when Istarted thinking about the alternatives for the investment adviser. This
transaction takes what has grown into an institution and places its ownership in
the hands of another institution, in this case a first-rate, entrepreneurial
mutual fund complex. In many ways this provides benefits to our shareholders
that would have taken us many years of work to achieve on our own. At the same
time we have built in protections against an increase in the costs of providing
these investment and other shareholder services to you.
Additionally Fund shareholders, at the close of the transaction, who
maintain an investment in the Fund will be able to invest new money into any
series of Mutual Series in existing as well as new accounts and to reinvest
distributions and dividends without any sales charges or 12b-1 fees.
I want to make special mention of the work that your Board of Directors has
done over the last several months. They not only provided me with guidance in my
decision making, but they kept paramount their responsibilities to shareholders.
Of particular note was their demand that expenses borne by current shareholders
not rise as a result of the Franklin transaction. I believe that there is a
renewed sense of enthusiasm here as we enter this new stage in the life of our
Funds, and we look forward to working for you over the coming years.
Sincerely,
MICHAEL F. PRICE, President
4
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MUTUAL BEACON FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1996
(unaudited)
Number Value
of Shares (Note A)
----------- -------------
COMMON STOCK & OTHER EQUITY INTERESTS (76.74%)
Aerospace (2.12%)
* Coltec Industries, Inc................. 477,000 $ 6,797,250
* Hexcel Corp............................ 980,601 13,458,749
* Litton Industries, Inc................. 315,300 13,715,550
Lockheed Martin Corp................... 299,900 25,191,600
* Loral Space & Communications........... 521,000 7,098,625
McDonnell Douglas Corp................. 398,600 19,332,100
Teledyne Inc........................... 211,700 7,647,662
------------
93,241,536
------------
Banking (7.12%)
Banco Central Hispano-
Americano, SA........................ 296,660 6,044,361
Bank of Boston Corp.................... 75,000 3,712,500
Barclays PLC........................... 590,000 7,075,274
Bay View Capital Corp.................. 128,000 4,352,000
Baybanks, Inc.......................... 4,200 452,550
Chase Manhattan Corp................... 3,352,352 236,759,860
* Dime Bancorp, Inc...................... 732,800 9,526,400
Downey Financial Corp.................. 242,265 5,299,547
First Chicago NBD Corp................. 609,700 23,854,513
Great Western Financial Corp........... 263,900 6,300,612
* PFF Bancorp, Inc....................... 27,059 301,031
RCSB Financial, Inc.................... 363,700 9,410,737
------------
313,089,385
------------
Chemicals (0.31%)
Bayer AG............................... 41,000 1,449,052
Eastman Chemical Co., Inc.............. 203,000 12,357,625
------------
13,806,677
------------
Communications (3.95%)
* 360 Communications Company............. 392,000 9,408,000
AT&T Corp.............................. 1,057,400 65,558,800
* Associated Group Inc., Class A......... 86,375 2,612,844
* Associated Group Inc., Class B......... 86,375 2,580,453
MCI Communications Corp................ 420,900 10,785,645
* NetCom Systems AB, Class A............. 287,550 3,157,609
* NetCom Systems AB, Class B............. 1,387,552 15,654,262
* NYNEX CableComms Group................. 2,175,000 3,511,441
Sprint Corp............................ 335,000 14,070,000
Telephone & Data Systems, Inc.......... 1,031,400 46,413,000
* Unitrode Corp., Warrants............... 8,148 13,240
------------
173,765,294
------------
Conglomerates (7.59%)
Alexander & Baldwin, Inc............... 154,800 3,734,550
* American Standard Companies Inc........ 304,000 10,032,000
BTR PLC................................ 4,464,107 17,567,312
* Berkshire Hathaway Inc., Class A....... 305 9,363,500
Cheung Kong Holdings Ltd............... 1,750,000 12,603,346
* Griffon Corp........................... 7,955 64,634
Harcourt General, Inc.................. 100,900 5,045,000
Incentive AB, A Shares................. 340,694 18,090,945
Incentive AB, B Shares................. 344,800 18,386,775
Investor AB, A Shares.................. 1,004,900 37,790,698
Investor AB, B Shares.................. 1,634,700 61,106,374
Kinnevik AB, A Shares.................. 287,550 8,521,218
Kinnevik AB, B Shares.................. 1,398,452 42,282,989
Pacific Dunlop Ltd.....................13,762,448 30,994,552
Philips Electronics NV................. 508,700 16,513,336
Philips Electronics NV, ADR............ 575,500 18,775,687
Semi-Tech (Global) Ltd................. 7,251,021 11,193,606
Varian Associates, Inc................. 232,500 12,031,875
------------
334,098,397
------------
Construction (0.34%)
Lone Star Industries, Inc.............. 123,768 4,161,699
Puerto Rican Cement Co., Inc........... 85,000 2,645,625
* Schuller Corp.......................... 489,617 5,079,776
* USG Corporation........................ 116,800 3,255,800
------------
15,142,900
------------
Consumer Products & Services (7.65%)
B.A.T Industries PLC................... 2,570,000 19,987,736
BIC SA................................. 192,900 27,354,006
Corning Inc............................ 856,100 32,852,838
DSM NV................................. 137,000 13,582,207
Dial Corp.............................. 2,259,800 64,686,775
Jostens, Inc........................... 327,300 6,464,175
* KinderCare Learning Centers, Inc....... 52,078 800,699
Philip Morris Companies Inc............ 141,000 14,664,000
Premark International, Inc............. 368,500 6,817,250
RJR Nabisco Holdings Corp.............. 3,538,085 109,680,635
* Ranger Industries, Inc................. 5,059 642
(R)* Sunbeam Corp........................... 1,480,670 18,563,900
* Tupperware Corp........................ 361,000 15,252,250
* U.S. Industries, Inc................... 246,000 5,934,750
------------
336,641,863
------------
5
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Number Value
of Shares (Note A)
----------- -------------
Entertainment & Media (4.61%)
* BHC Communications, Inc................ 180,798 $ 17,673,005
* Cablevision Systems Corp. ............. 108,000 4,995,000
* Chris Craft Industries, Inc............ 228,847 10,069,268
Citicasters Inc........................ 592,575 18,517,969
Comcast Corp., Class A................. 70,000 1,286,250
Comcast Corp., Class A,
Special Non-Voting................... 356,500 6,595,250
Shaw Brothers Ltd...................... 8,516,300 9,901,395
* Tele-Communications, Inc.,
Class A - TCI Group.................. 603,000 10,929,375
Todd A.O. Corp., Class A............... 116,828 1,927,662
* US West, Inc. - Media Group............ 6,618,400 120,785,800
------------
202,680,974
------------
Financial Services (5.80%)
AT&T Capital Corp...................... 291,800 12,766,250
Bear Stearns Companies, Inc............ 774,377 18,294,657
Beneficial Corp........................ 38,500 2,160,707
Capital One Financial Corp............. 685,000 19,522,500
Countrywide Credit Industries, Inc..... 84,800 2,098,800
Dean Witter, Discover & Co............. 1,027,400 58,818,650
Finova Group Inc....................... 665,000 32,418,750
First USA, Inc......................... 540,000 29,700,000
Fund American Enterprise
Holdings, Inc........................ 265,111 21,473,991
Lehman Brothers Holdings Inc........... 358,600 8,875,350
Leucadia National Corp................. 177,400 4,346,300
Liberty Financial Companies, Inc....... 152,444 5,164,040
Salomon Inc............................ 495,400 21,797,600
United Asset Management Corp........... 718,200 17,595,900
------------
255,033,495
------------
Food & Beverages (3.62%)
Brown-Forman Corp., Class A............ 24,700 975,650
Brown-Forman Corp., Class B............ 249,700 9,988,000
Cadbury Schweppes PLC.................. 465,000 3,674,206
Cultor Oy, Series 1.................... 414,300 20,332,429
Farmer Brothers Co..................... 52,036 7,180,968
* FoodBrands America, Inc................ 143,936 1,853,176
Heineken Holding NV.................... 64,741 13,056,499
Hormel Foods Corp...................... 329,500 8,814,125
Lindt & Spruengli AG,
Participation Certificate............ 3,977 6,819,980
Lindt & Springli AG, Registered........ 68 1,280,000
Morrison Fresh Cooking, Inc............ 270,175 1,418,419
Morrisson Health Care, Inc............. 292,800 4,099,200
Nestle SA, Registered.................. 2,619 2,985,086
Nutricia Verenigde Bedrijven NV........ 228,000 24,070,890
Ruby Tuesday, Inc...................... 239,550 5,419,819
Seaboard Corp.......................... 5,350 1,061,975
Seagram Company Ltd.................... 336,500 11,314,812
Societe Sucriere de Pithiviers SA...... 11,670 8,262,949
Van Melle NV........................... 235,302 17,272,271
Weetabix PLC, Class A.................. 262,105 9,561,718
------------
159,442,172
------------
Healthcare (6.60%)
* Beverly Enterprises, Inc............... 2,046,100 24,553,200
Ciba Geigy AG, Class B................. 1,700 2,058,305
Ciba Geigy AG, Registered.............. 8,800 10,703,888
* FHP International Corp................. 1,365,900 37,391,512
* Foundation Health Corp................. 552,800 19,831,700
Getinge Industrier AB, B Shares........ 2,051,470 38,574,228
* Health Systems International, Inc...... 668,200 18,124,925
* Horizon/CMS Healthcare Corp............ 881,000 11,342,875
* Humana, Inc............................ 598,900 10,705,338
(R)* Kendall International, Inc.,
Residual Ownership Certificates...... 49 758
* Laboratory Corp. of America............ 900,976 6,757,320
* Laboratory Corp. of America,
Warrants............................. 177,387 88,694
Mallinckrodt Group Inc. ............... 411,600 16,000,950
* Maxicare Health Plans, Inc............. 860,000 16,232,500
* Mid Atlantic Medical Services, Inc..... 1,335,000 19,023,750
* Perrigo Co............................. 470,100 5,288,625
Pharmacia & Upjohn, Inc................ 7,100 309,727
Pharmacia & Upjohn, Inc., ADR.......... 54,000 2,396,250
Sandoz AG, Registered.................. 6,500 7,418,943
* Tenet HealthCare Corp.................. 1,460,400 31,216,050
United HealthCare Corp................. 247,100 12,478,550
------------
290,498,088
------------
Industrial (4.26%)
Briggs & Stratton Corp. ............... 794,300 32,665,588
Bucher Holding AG, Bearer ............. 13,233 10,290,867
Crown Cork & Seal, Inc................. 504,800 22,716,000
Greif Brothers Corp.................... 28,800 921,600
Hayes Wheels International, Inc........ 802,900 25,492,075
(R)* Lancer Industries, Inc., Class B....... 1 5,130
Lucas Industries PLC................... 3,460,000 12,165,699
SGS Societe Generale de
Surveillance Holding SA, Class B..... 12,691 30,316,686
Smith Investment Co.................... 7,254 507,780
(A)* Toro Co................................ 675,600 22,379,250
6
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Number Value
of Shares (Note A)
----------- -------------
Vulcan International Corp.............. 15,884 $ 399,086
Westinghouse Electric Corporation...... 1,569,700 29,431,875
------------
187,291,636
------------
Insurance (4.08%)
* 20th Century Industries................ 141,400 2,350,775
Aetna Life & Casualty Co............... 60,000 4,290,000
* Alleghany Corp......................... 60,172 11,553,024
Allmerica Property & Casualty
Companies, Inc....................... 415,400 11,215,800
Allstate Corp.......................... 191,452 8,734,997
Argonaut Group, Inc.................... 47,600 1,487,500
Assurances Generales de France......... 276,355 7,473,111
Berkley (W.R.) Corp.................... 253,000 10,562,750
Enhance Financial Services
Group, Inc. ......................... 306,000 8,568,000
Financial Security Assurance
Holdings Ltd......................... 232,000 6,351,000
First Colony Corp...................... 482,500 14,957,500
Home Beneficial Corp., Class B......... 303,600 7,969,500
ING Groep NV........................... 134,035 3,990,397
ITT Hartford Group, Inc................ 170,300 9,068,475
Kansas City Life Insurance Co.......... 17,750 967,375
(A)* National Security Group, Inc. ......... 174,977 2,252,829
Old Republic International Corp........ 721,365 15,509,348
Progressive Corp. ..................... 84,000 3,885,000
Provident Companies, Inc. ............. 240,000 8,880,000
Providian Corp. ....................... 435,700 18,680,637
Reliable Life Insurance Company,
Class A.............................. 16,684 1,151,196
SAFECO Corp............................ 168,500 5,960,688
Selective Insurance Group, Inc......... 104,750 3,404,375
Torchmark Corp......................... 161,000 7,043,750
Unitrin, Inc........................... 69,800 3,280,600
------------
179,588,627
------------
Investment Companies (1.04%)
* Austria Fund, Inc...................... 233,700 2,132,512
Forvaltnings AB Ratos, B Shares........ 1,538,100 38,060,328
JF Indonesia Fund Inc.................. 1,407,300 1,772,533
New Age Media Fund, Inc................ 249,700 3,807,925
------------
45,773,298
------------
Metals (0.36%)
* Algoma Steel, Inc...................... 649,670 2,267,925
* Algoma Steel, Inc., Units.............. 952,483 5,176,120
* Alumax, Inc............................ 185,400 5,631,525
* Bayou Steel Corp....................... 15,000 58,125
Central Steel & Wire Co................ 959 618,555
Cyprus Amax Minerals Co................ 83,500 1,889,187
------------
15,641,437
------------
Natural Resources (3.23%)
Apco Argentina Inc..................... 81,179 1,968,591
* Crown Central Petroleum Corp.,
Class A.............................. 43,300 654,912
* Crown Central Petroleum Corp.,
Class B.............................. 98,400 1,512,900
* Diamond Fields Resources Inc........... 307,400 8,679,476
Dual Invest ASA, B Shares.............. 1,143,700 4,043,206
* Energy Ventures, Inc................... 342,300 11,124,750
* ENSCO International, Inc............... 161,716 5,255,770
Fina, Inc.............................. 42,600 2,353,650
(A)* GulfMark International, Inc............ 275,037 9,557,536
Imperial Oil Ltd....................... 606,100 25,531,963
Royal Dutch Petroleum Co............... 31,200 4,797,000
Saga Petroleum A/S, A Shares........... 1,626,990 23,882,193
Saga Petroleum A/S, B Shares........... 1,266,205 17,126,658
Shell Transport & Trading Co........... 686,500 10,049,513
Temple Inland Inc...................... 55,900 2,613,325
* Transocean ASA......................... 200,000 5,179,834
Union Texas Petroleum
Holdings, Inc........................ 407,000 7,936,500
------------
142,267,777
------------
Printing & Publishing (3.92%)
Daily Mail & General Trust PLC,
Class A ............................. 371,200 8,482,201
Daily Mail & General Trust PLC,
Ordinary............................. 19,000 466,756
De Telegraaf Holding NV................ 168,625 28,257,041
Dow Jones & Co., Inc................... 25,000 1,043,750
Dun & Bradstreet Corp.................. 580,900 36,306,250
Gannett, Inc........................... 120,100 8,497,075
Houghton Mifflin Co.................... 254,200 12,646,450
Knight-Ridder, Inc..................... 81,000 5,872,500
Mirror Group PLC.......................11,156,200 35,243,049
Scripps (E.W.) Co., Class A ........... 358,200 16,701,075
Wallace Computer Services, Inc......... 318,300 19,018,425
------------
172,534,572
------------
Real Estate (3.00%)
* Al-Zar Ltd............................. 12 4,200
Alico, Inc............................. 33,900 661,050
* Cadillac Fairview Corp................. 1,023,500 12,760,445
* Cadillac Fairview Corp., Warrants...... 112,599 371,600
* Castle & Cooke, Inc.................... 43,333 693,328
* E & J Properties Ltd., Units........... 15,000 39,375
7
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Number Value
of Shares (Note A)
----------- -------------
Gould Investors L.P.................... 14,600 $ 511,000
(A)(R)* MB Metropolis, L.L.C................... 6,651,920 8,215,121
(A)(R)* MSCW Investors III, L.L.C..............28,372,000 44,043,586
(A)(R)* Resurgence Properties Inc.............. 900,000 7,036,920
(A)* Resurgence Properties Inc.............. 591,900 4,627,948
St. Joe Paper Co....................... 100,000 6,450,000
(A)(R)* Value Property Trust................... 3,880,280 46,539,302
* Value Property Trust, Warrants......... 24,204 9,077
------------
131,962,952
------------
Retail (2.91%)
American Stores Co..................... 359,800 14,841,750
CML Group, Inc......................... 2,186,000 9,290,500
Delchamps, Inc......................... 66,700 1,617,475
Esselte AB, A Shares................... 625,000 12,598,153
Esselte AB, B Shares................... 804,500 16,397,868
* Hills Stores Co........................ 227,260 2,016,932
* Isosceles PLC, Ordinary................ 255,680 3,969
Melville Corp.......................... 267,800 10,845,900
* Payless ShoeSource, Inc................ 280,500 8,905,875
Sears PLC..............................22,054,500 33,894,183
* Service Merchandise Co., Inc........... 2,180,600 12,265,875
Venture Stores, Inc.................... 825,100 5,363,150
------------
128,041,630
------------
Transportation (4.23%)
Arkansas Best Corp..................... 539,800 3,981,025
Canadian National Railway Co........... 388,900 7,146,037
Canadian Pacific, Ltd.................. 300,000 6,593,525
Florida East Coast Industries, Inc..... 282,900 23,480,700
Helikopter Services Group ASA.......... 549,300 6,332,232
* Old Dominion Freight Line, Inc......... 251,800 2,392,100
Railtrack Group PLC, Partly-Paid....... 4,836,000 16,440,808
Ryder Systems, Inc..................... 873,000 24,553,125
* Varity Corp............................ 849,200 40,867,772
Volvo AB, B Shares..................... 1,758,900 39,952,150
XTRA Corp.............................. 322,500 14,270,625
------------
186,010,099
------------
TOTAL COMMON STOCK &
OTHER EQUITY INTERESTS 3,376,552,809
-------------
Number
of Shares
or Principal Value
Amount (Note A)
---------------- -------------
PREFERRED STOCK (1.13%)
Crown Cork & Seal, Inc., 4.50%
Conv. Pfd........................... 88,766 $ 4,038,853
* FHP International Corp.,
Series A Conv. Pfd.................. 195,000 4,972,500
* Gentra Inc., Pfd. G................... 79,000 955,961
* Hills Stores Co., Pfd................. 48,309 486,109
(R)* Interlake Corp., 9.00%,
Series A3 Conv. Pfd................. 400 299,790
* Isosceles PLC, Series A
Preference Shares................... 512,915 7,962
(R)* Lancer Industries, Inc.,
Series C Pfd........................ 20,513 2,051,300
RJR Nabisco Holdings Corp.,
Class C Pfd......................... 2,689,000 17,478,500
Ransomes PLC,(pound)8.25
Conv. Pfd........................... 14,345,000 19,372,922
Teledyne Inc., Series E Pfd........... 7,720 118,695
------------
49,782,592
------------
CORPORATE BONDS AND NOTES (0.80%)
American Restaurant Group,
12.00%, 9/15/98..................... $11,000,000 9,625,000
Cadillac Fairview Corp. Ltd.,
12.00%, 7/31/05..................CAD 132,492 90,365
Comcast Cellular Corp.,
0%, 3/05/00, Series A............... 15,498,000 10,654,875
Comcast Cellular Corp.,
0%, 3/05/00, Series B............... 706,000 485,375
Continental Airlines, Inc.,
Lease Claim......................... 3,325,631 2,750,297
* Gentra Inc., Series A,
7.50%, 12/31/01..................CAD 4,734,850 3,923,861
* Gentra Inc., Series B,
7.50%, 12/31/01..................CAD 1,248,888 890,722
Home Holdings Inc.,
8.625%, 12/15/03.................... 1,650,000 957,000
Schuller Corp., 9.00%, 12/31/03....... 92,115 92,115
TransAmerican Refining Corp.,
16.50%, 2/15/02..................... 4,000,000 3,605,000
* TransAmerican Refining Corp.,
18.50%, 2/15/02..................... 3,260,000 2,086,400
------------
35,161,010
------------
8
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Principal Value
Amount (Note A)
---------------- -------------
BONDS AND NOTES IN REORGANIZATION (1.94%)
* Adams County CO, Industrial Dev.
Auth., 9.00%, 11/01/96.............. $ 1,775,000 $ 75,437
* Ames Department Stores, Inc.,
Trade Claims........................ 2,581,653 23,316
* Baldwin Co., 10.375%, 12/01/01........ 1,600,000 592,000
* Barings BV, 0%, 1/22/01............... 12,010,000 1,981,650
* Barings BV, 0%, 3/12/01............... 8,249,000 7,795,305
* Beatrice Foods Inc.,
12.00%, 12/01/01.................... 5,000 1,600
* Caldor Corp., Trade Claim............. 6,306,634 3,594,781
* Dow Corning Corp.,
Bank Debt........................... 2,850,000 2,878,500
* Dow Corning Corp., Swap............... 5,833,333 5,308,333
* Dow Corning Corp.,
8.15%, 10/15/29..................... 7,050,000 6,979,500
* Dow Corning Corp.,
9.30%, 1/27/98...................... 1,835,000 1,853,350
* Dow Corning Corp.,
9.375%, 2/01/08..................... 790,000 809,750
* Dow Corning Corp.,
9.50%, 8/10/95...................... 350,000 355,250
* Dow Corning Corp., Medium Term
Note, 8.55%, 3/01/01................ 1,100,000 1,100,000
* El Paso TX Housing Finance
Corp., 8.88%,10/15/96............... 27,574,000 1,378,700
* Eli Jacobs, Bank Claim................ 25,305,909 126,530
* Eurotunnel Finance Limited,
Bank Debt, Tranche A.............GBP 9,250,000 5,312,956
* Eurotunnel Finance Limited,
Bank Debt, Tranche A1............GBP 3,700,000 2,125,182
* Eurotunnel Finance Limited,
Bank Debt, Tranche B.............GBP 2,900,000 1,665,683
* Eurotunnel Finance Limited,
Bank Debt, Tranche B-U...........GBP 42,644 24,493
* Eurotunnel Finance Limited,
Bank Debt, Tranche B1............GBP 1,300,000 746,686
* Eurotunnel Finance Limited,
Bank Debt, Tranche B1............ECU 33,151 15,249
* Eurotunnel Finance Limited,
Bank Debt, Tranche C.............FRF 6,600,000 473,715
* Eurotunnel Finance Limited,
Bank Debt, Tranche E.............FRF 37,655,472 2,702,721
* Eurotunnel Finance Limited,
Bank Debt, Tranche E.............ECU 315,010 144,899
* Eurotunnel Finance Limited,
Bank Debt, Tranche E1............FRF 14,381,620 1,032,240
* Eurotunnel Finance Limited,
Bank Debt, Tranche E1-U..........FRF 865,580 62,127
* Heilman Acquisition Corp.,
9.625%, 1/31/04..................... $15,400,000 6,699,000
* Homeland Stores, Inc., Floating
Rate, Series D, 2/28/97............. 2,000,000 1,620,000
Isosceles PLC, 0%/7.00%,
7/05/03..........................GBP 2,012,576 31,242
Isosceles PLC, Facility A
Term Loan, 1998..................GBP 137,621 194,409
Isosceles PLC, Facility B
Term Loan, 2001..................GBP 612,980 865,925
* Louisiana Agriculture Finance
Authority, 8.25%, 10/01/96.......... 950,000 47,500
* Louisiana Housing Finance
Authority, 8.61%, 8/01/96........... 987,000 39,480
* Maxicare Health Plans, Inc.,
Bank Note........................... 68,320 18,720
Maxwell Communication Corp.
PLC, 5.00%, 6/16/95..............CHF 618,975 53,073
Maxwell Communication Corp.
PLC, 6.00%, 6/15/93..............DEM 206,000 9,459
Maxwell Communication Corp.
PLC, 8.375%,9/01/93..............ECU 520,000 45,252
* Memphis TN Health Facilities,
8.68%, 9/15/96...................... 8,800,000 440,000
* Metallurg Inc., Bank Claim............ 6,995,482 4,407,154
* Metallurg Inc., Bank Claim #2......... 2,389,204 1,128,899
* Metallurg Inc., Trade Claim........... 665,812 119,846
* Nebraska Investment Finance Auth.,
8.34%, 11/01/93..................... 4,660,000 198,050
* Somerfield Holdings Ltd., Facility A
Term Loan, 2000..................GBP 1,293,362 1,927,454
* Somerfield Holdings Ltd., Facility B
Revolving Credit, 1998...........GBP 574,669 856,410
* SouthEast Banking Corp.,
0%, 12/16/96........................ 5,270,000 2,635,000
* SouthEast Banking Corp.,
0%, 11/10/97........................ 6,880,000 3,440,000
* SouthEast Banking Corp.,
6.50%, 3/15/99...................... 1,636,000 818,000
* SouthEast Banking Corp.,
10.50%, 4/11/01..................... 15,840,000 7,920,000
9
<PAGE>
Number
of Shares
or Principal Value
Amount (Note A)
---------------- -------------
* Southeast Texas Housing Finance
Authority, 8.60% 9/01/96............ $ 1,500,000 $ 82,500
Tiphook Finance Corp.,
8.00%, 3/15/00...................... 2,950,000 2,079,750
Tiphook Finance Corp.,
Lease Claim......................GBP 188,031 277,297
------------
85,114,373
------------
COMPANIES IN LIQUIDATION (0.05%)
* Aerospace Creditors Liquidating
Trust, Certificates of
Beneficial Interest................. 43,902 153,657
* Americana Hotels & Realty Corp........ 71,300 98,037
* City Investing Co.,
Liquidating Trust................... 250,187 281,460
* MBO Properties Inc.................... 159,135 254,616
* MEI Diversified Inc., Certificates of
Beneficial Interest ................ 13,957,852 1,116,628
* MCorp Financial Trust,
Claim Units......................... 13,334 161,351
* MCorp Trust, Claim Units.............. 13,327 31,420
(A)* Management Assistance, Inc.,
Liquidating Trust................... 431,100 101,050
------------
2,198,219
------------
UNITED STATES GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS (18.84%)
U.S. Government Agency Obligations (2.12%)
Federal Home Loan Bank System,
5.010%, 2/28/97...................... $12,500,000 12,441,425
5.106%, 2/23/98...................... 12,500,000 12,306,800
5.637%, 3/13/98...................... 25,000,000 24,769,175
Federal National Mortgage Association,
Medium Term Note,
5.760%, 9/03/96...................... 4,100,000 4,102,932
5.390%, 12/04/96...................... 5,400,000 5,396,544
5.410%, 12/06/96...................... 15,000,000 14,991,660
5.310%, 12/11/96...................... 14,800,000 14,784,623
Tennessee Valley Authority,
6.000%, 1/15/97....................... 4,500,000 4,506,232
------------
93,299,391
------------
U.S. Treasury Notes (3.01%)
6.125%, 7/31/96...................... 19,300,000 19,330,127
4.375%, 8/15/96...................... 26,400,000 26,383,500
6.250%, 8/31/96...................... 26,000,000 26,040,586
6.875%, 10/31/96...................... 35,500,000 35,688,540
7.250%, 11/30/96...................... 25,000,000 25,179,650
------------
132,622,403
------------
Principal Value
Amount (Note A)
---------------- -------------
U.S. Government Agency Discount Notes (12.81%)
Federal Home Loan Bank System,
4.820%, 7/09/96...................... $ 1,500,000 1,498,393
4.780%, 8/29/96...................... 4,500,000 4,464,748
5.200%, 11/04/96...................... 14,000,000 13,746,670
5.190%, 12/06/96...................... 20,500,000 20,007,856
5.095%, 12/18/96...................... 9,300,000 9,074,270
5.290%, 1/07/97...................... 10,000,000 9,725,560
5.210%, 1/21/97...................... 10,200,000 9,899,538
5.230%, 1/21/97...................... 10,000,000 9,705,429
5.270%, 2/13/97...................... 14,000,000 13,540,954
5.240%, 2/14/97...................... 15,000,000 14,506,005
5.320%, 2/26/97...................... 7,500,000 7,239,998
5.490%, 3/12/97...................... 3,000,000 2,889,933
5.490%, 3/14/97...................... 14,000,000 13,453,440
Federal Home Loan Mortgage Corp.,
5.420%, 1/27/97...................... 2,000,000 1,939,334
Federal National Mortgage Association,
4.840%, 7/05/96...................... 4,000,000 3,997,849
5.050%, 7/08/96...................... 7,800,000 7,792,341
5.080%, 7/09/96...................... 1,800,000 1,797,968
5.570%, 7/15/96...................... 1,000,000 997,834
4.780%, 7/16/96...................... 1,700,000 1,696,614
5.000%, 7/24/96...................... 8,100,000 8,074,125
5.290%, 7/26/96...................... 6,400,000 6,376,489
5.080%, 7/29/96...................... 4,500,000 4,482,220
4.920%, 8/01/96...................... 13,000,000 12,944,923
5.240%, 8/05/96...................... 3,600,000 3,581,660
5.580%, 8/09/96...................... 4,600,000 4,572,193
5.160%, 8/15/96...................... 2,000,000 1,986,543
5.500%, 8/15/96...................... 3,800,000 3,774,432
4.930%, 8/23/96...................... 4,000,000 3,970,968
4.810%, 8/29/96...................... 1,000,000 992,117
5.220%, 9/03/96...................... 9,200,000 9,113,318
5.210%, 9/04/96...................... 2,100,000 2,080,094
5.170%, 9/05/96...................... 24,000,000 23,763,288
4.840%, 9/06/96...................... 31,000,000 30,692,480
5.150%, 9/18/96...................... 15,000,000 14,823,570
5.160%, 9/19/96...................... 1,200,000 1,185,787
5.110%, 9/25/96...................... 5,100,000 5,036,648
5.180%, 10/09/96...................... 19,600,000 19,307,627
5.170%, 10/10/96...................... 22,000,000 21,679,042
5.180%, 10/15/96...................... 16,000,000 15,748,432
5.190%, 10/21/96...................... 11,600,000 11,406,199
4.890%, 10/24/96...................... 5,000,000 4,914,070
5.160%, 10/24/96...................... 40,000,000 39,312,560
5.050%, 10/30/96...................... 11,800,000 11,594,951
10
<PAGE>
Number
of Shares,
or Principal Value
Amount (Note A)
---------------- -------------
5.160%, 11/01/96...................... $ 6,000,000 $ 5,894,016
5.210%, 11/05/96...................... 60,000,000 58,905,660
5.110%, 11/15/96...................... 50,000,000 49,016,250
5.100%, 12/16/96...................... 25,500,000 24,888,331
5.400%, 12/17/96...................... 10,000,000 9,745,560
5.570%, 6/13/97...................... 6,000,000 5,676,132
--------------
563,514,419
--------------
U.S. Treasury Bills (0.90%)
5.340%, 8/22/96...................... 4,500,000 4,465,290
4.835%, 9/19/96...................... 26,000,000 25,705,342
4.870%, 11/14/96...................... 9,500,000 9,313,382
--------------
39,484,014
--------------
TOTAL INVESTMENTS IN
SECURITIES (99.50%) $4,377,729,230
==============
SECURITIES SOLD SHORT (0.42%)
* Household International, Inc.......... 113,200 $ 8,603,200
* Lucent Technologies Inc............... 239,400 9,067,275
* United States Cellular Corp........... 32,200 998,200
------------
$ 18,668,675
============
OPTIONS WRITTEN (0.01%)
* Lucas Industries PLC,
August/240/Put...................... 1,000 $ 341,500
============
* Non-income producing securities.
(A) Affiliated issuers.
(R) Restricted Securities.
The percentage shown for each investment category is the total value
of that category expressed as a percentage of total net assets of the
Fund.
See notes to financial statements.
Currency Type Abbreviations:
Principal amount is stated in United States dollars unless otherwise noted.
ECU -- European currency unit
AUD -- Australian dollar
GBP -- British pound
CAD -- Canadian dollar
NLG -- Dutch guilder
FIM -- Finnish markka
FRF -- French franc
DEM -- German Deutsche mark
HKD -- Hong Kong dollar
NOK -- Norwegian krone
ESP -- Spanish peseta
SEK -- Swedish krona
CHF -- Swiss franc
Distribution of investments by country:
As a percentage of total investments in securities
United States................................. 74.8%
Sweden........................................ 7.6
United Kingdom................................ 6.1
Netherlands................................... 3.2
Canada........................................ 2.0
Switzerland................................... 1.6
Norway........................................ 1.3
France........................................ 1.2
Other (individually less than 1%)............. 2.2
-----
Total......................................... 100.0%
=====
11
<PAGE>
MUTUAL BEACON FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
(unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
Investments in Securities, at Value
Unaffiliated Issuers (Cost $3,700,454,092)...................................$4,232,975,688
Controlled Affiliated Issuers (Cost $84,530,499)............................. 98,798,009
Non Controlled Affiliated Issuers (Cost $38,432,602)......................... 45,955,533 $4,377,729,230
--------------
Cash............................................................................................... 8,126,873
Receivables:
Investment Securities Sold................................................................. 53,047,499
Capital Stock Subscribed................................................................... 8,063,863
Dividends.................................................................................. 7,938,472
Interest................................................................................... 3,477,819
Deposits with Brokers for Securities Sold Short.................................................... 10,799,551
Other Assets .................................................................................... 10,052,124
--------------
TOTAL ASSETS........................................................................ 4,479,235,431
--------------
LIABILITIES
Payables:
Investment Securities Purchased............................................................ 39,726,496
Net Payable for Foreign Currency Exchange Contracts........................................ 16,694,895
Investment Advisory Fee.................................................................... 2,090,903
Capital Stock Repurchased.................................................................. 2,010,062
Securities Sold Short, at Value (Proceeds Receivable $17,387,542).................................. 18,668,675
Outstanding Options Written, at Value (Premium Received $250,295).................................. 341,500
--------------
TOTAL LIABILITIES................................................................... 79,532,531
--------------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK................................................. $4,399,702,900
==============
NUMBER OF SHARES OUTSTANDING
(Authorized -- 200,000,000 Shares, $.001 Par Value)........................................ 114,382,279
==============
NET ASSET VALUE PER SHARE
(Offering and Redemption Price Per Share).................................................. $ 38.46
==============
COMPOSITION OF NET ASSETS
Paid In Capital.................................................................................... $3,644,953,095
Undistributed Net Investment Income................................................................ 84,824,552
Accumulated Net Realized Gain on Investments and Foreign Currency Transactions..................... 133,702,006
Net Unrealized Appreciation of Investments, Securities Sold Short and Options Written.............. 552,939,699
Net Unrealized Depreciation of Foreign Currency Exchange Contracts and Dividends................... (16,716,452)
--------------
TOTAL NET ASSETS.................................................................... $4,399,702,900
==============
</TABLE>
See notes to financial statements.
12
<PAGE>
MUTUAL BEACON FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Dividends -- Unaffiliated Issuers
(Net of Foreign Withholding - $3,460,002)............................. $80,980,361
Dividends -- Non Controlled Affiliated Issuers.......................... 201,625
Interest................................................................ 31,083,763
Other Income............................................................ 504,536
------------
TOTAL INCOME ................................................................. $112,770,285
Expenses:
Investment Advisory Fee................................................. 12,218,992
Shareholder Servicing Costs............................................. 763,120
Administrative.......................................................... 462,081
Custodian Fees.......................................................... 429,766
Registration and Filing Fees............................................ 385,765
Shareholder Reports..................................................... 127,069
Insurance............................................................... 61,732
Legal Fees.............................................................. 37,006
Auditing Fees........................................................... 36,640
Directors' Fees and Expenses............................................ 23,085
Miscellaneous........................................................... 39,736
------------
TOTAL EXPENSES ................................................................. 14,584,992
------------
NET INVESTMENT INCOME................................................. 98,185,293
------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net Realized Gain on Investments and Foreign Currency Transactions
in Unaffiliated Issuers.............................................. 159,821,251
Net Realized Loss on Investments in Non Controlled Affiliates Issuers... (16,942,389)
Net Realized Loss on Securities Sold Short.............................. (2,824,356)
Net Realized Gain on Options Written.................................... 47,551
Change in Unrealized Appreciation/(Depreciation) of Investments,
Securities Sold Short, Options Written and Foreign Currency Transactions 148,567,504
------------
NET GAIN ON INVESTMENTS............................................... 288,669,561
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS...................................... $386,854,854
============
</TABLE>
See notes to financial statements.
13
<PAGE>
MUTUAL BEACON FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31,
(unaudited) 1995
---------------- ----------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net Investment Income ............................................ $ 98,185,293 $ 85,517,780
Net Realized Gain on Investments and Foreign Currency Transactions 140,102,057 274,784,273
Change in Unrealized Appreciation/(Depreciation) of Investments .. 148,567,504 297,322,201
--------------- ---------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ....................................... 386,854,854 657,624,254
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income ............................................ (5,487,574) (77,357,961)
Net Realized Gain on Investments ................................. (126,214,191) (200,919,879)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ....................... (131,701,765) (278,277,840)
--------------- ---------------
CAPITAL STOCK TRANSACTIONS ............................................... 571,252,669 1,133,497,944
--------------- ---------------
NET INCREASE IN NET ASSETS ............................................... 826,405,758 1,512,844,358
NET ASSETS:
Beginning of Year ................................................ 3,573,297,142 2,060,452,784
--------------- ---------------
End of Period -- Including Undistributed Net Investment
Income of $84,824,552, and Distributions in Excess of
Net Investment Income of $7,873,167, respectively ............. $ 4,399,702,900 $ 3,573,297,142
=============== ===============
</TABLE>
See notes to financial statements.
14
<PAGE>
MUTUAL BEACON FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(unaudited)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Mutual Beacon Fund is a portfolio of Mutual Series Fund Inc. (the "Series
Fund"), which is registered under the Investment Company Act of 1940 as a
no-load, diversified, open-end management investment company. The Series Fund
currently consists of four portfolios: Mutual Beacon Fund, Mutual Shares Fund,
Mutual Qualified Fund and Mutual Discovery Fund. Each of these portfolios is
considered to be a separate entity for financial reporting and Federal income
tax purposes. The financial statements and notes include operations with respect
to Mutual Beacon Fund (the "Fund") only.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
may affect the reported amounts of assets and liabilities. Actual results could
differ from those estimates.
Security Valuation: Investments in securities and securities sold short
that are listed on an exchange or the NASDAQ national market or other securities
traded in the over-the-counter market are valued at the last reported sales
price on the day of valuation; however, if there are no sales on that day, such
securities are valued at the mean between the closing bid and asked prices.
Securities for which market quotations are not readily available are valued at
"fair value" as determined in good faith by management under the direction of
the Board of Directors. Fair value reflects what management believes is the bid
price for the securities and is based on estimates and assumptions deemed
relevant under the circumstances. Actual results could differ from these
estimates. Temporary investments are valued at the prevailing market value.
Restricted Securities: The Fund invests in securities which are restricted
as to public sale in accordance with the Securities Act of 1933. Such assets are
valued at fair value as determined in good faith by management under the
direction of the Board of Directors. It is the Fund's policy that no more than
15%, as determined at the time of investment, of the value of the Fund's assets
be invested in restricted securities.
Foreign Securities: The value of foreign securities is converted into U.S.
dollars at the rate of exchange prevailing on the day of valuation. Purchases
and sales of foreign securities, as well as income and expenses relating to such
securities, are converted at the prevailing rate of exchange on the respective
date of such transactions.
Foreign Exchange Contracts: The Fund may engage in currency transactions in
order to hedge the value of portfolio holdings denominated in foreign currencies
against fluctuations in relative value. Foreign Exchange contracts are valued at
the forward rate, and are marked-to-market daily. The change in market value is
recorded by the Fund as an unrealized gain or loss. When the contract is closed,
the Fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed. The use of currency transactions can result in the Fund incurring losses
as a result of a number of factors including the imposition of exchange
controls, suspension of settlements, or the inability to deliver or receive a
specified currency. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
15
<PAGE>
MUTUAL BEACON FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(unaudited)
Options Written: When the Fund writes an option, the premium received is
recorded as a liability with subsequent daily adjustment to current market
value. When the Fund enters into a closing transaction or the option expires or
is exercised, the Fund realizes a gain or loss, and the liability is eliminated.
All securities covering outstanding options are held in a segregated account by
the custodian bank.
Securities Sold Short: The Fund is engaged in selling securities short,
which obligates the Fund to replace a security borrowed by purchasing the same
security at the current market value. The Fund would incur a loss if the price
of the security increases between the date of the short sale and the date on
which the Fund replaces the borrowed security. The Fund would realize a gain if
the price of the security declines between those dates.
The Fund is required to establish a margin account with the broker lending
the security sold short. While the short sale is outstanding, the broker retains
the proceeds of the short sale and the Fund must also maintain a cash deposit
with the broker having a value equal to a specified percentage of the value of
the securities sold short.
Securities Transactions and Investment Income: Securities transactions are
recorded on a trade-date basis. Securities gains or losses are determined on the
identified cost basis. Dividend income is recorded on the ex-dividend date or,
for certain foreign dividends, as soon as the Fund becomes aware of the
dividends. Interest income, including original issue discount, where applicable,
is recorded on the accrual basis, except for bonds trading "flat", in which case
interest is recorded when received.
Dividends and Distributions to Shareholders: Income dividends and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments of income and gains on
various investment securities held by the Fund, timing differences and differing
characterization of distributions made by the Fund.
Federal Income Taxes: The Fund qualifies, and intends to continue to meet
the requirements for qualification, as a regulated investment company, as
defined in applicable sections of the Internal Revenue Code ("Code"). By
complying with Code provisions, the Fund is relieved from Federal income tax
provided that substantially all of its taxable income is distributed to
shareholders. Therefore, no Federal income tax provision has been provided.
NOTE B -- INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund retains Heine Securities Corporation (the "Adviser") as its
investment adviser under an investment advisory agreement (the "Agreement").
Certain individuals who are executive officers and a director of the Fund are
also executive officers and a director of the Adviser.
For the six months ended June 30, 1996, the Adviser received fees of
$12,218,992 for investment management and advisory services under the Agreement.
The fee was paid monthly based on average daily net assets at the annual rate of
six-tenths of one percent. Administrative personnel and services were provided
at approximate cost by the Adviser.
Clearwater Securities, Inc. ("Clearwater"), is a registered securities
dealer which is owned by Michael F. Price. Since October 1, 1994, the Fund has
executed certain security transactions with Clearwater. For the six months ended
June 30, 1996, the Fund paid brokerage commissions totalling $308,607 to
Clearwater.
The Fund has expense offset arrangements with certain of its service
providers. The impact of these arrangements on the Fund's total expenses
reflected in the Statement of Operations, is less than .01% of the Fund's
average daily net assets.
16
<PAGE>
MUTUAL BEACON FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(unaudited)
NOTE C -- INVESTMENT TRANSACTIONS
Purchases and proceeds from the sale of investment securities (excluding
short-term investments) for the six months ended June 30, 1996 aggregated
$1,519,369,954 and $934,843,558, respectively.
For Federal income tax purposes, the identified cost of investments at June
30, 1996 was $3,824,628,556. Net unrealized appreciation for all securities at
June 30, 1996, based on Federal income tax cost, amounted to $553,100,674,
consisting of aggregate gross unrealized appreciation of $640,742,251 and
aggregate gross unrealized depreciation of $87,641,577.
Transactions in options written during the six months ended June 30, 1996
were as follows:
<TABLE>
<CAPTION>
Principal
Amount or
Number of
Contracts Premium
---------- --------
<S> <C> <C>
Options outstanding at December 31, 1995................................... 75 $ 9,431
Options written............................................................ 58,310 339,081
Options expired............................................................ (57,060) (42,315)
Options terminated in closing transactions................................. (250) (46,471)
Options exercised.......................................................... (75) (9,431)
------- --------
Options outstanding at June 30, 1996....................................... 1,000 $250,295
======= =========
</TABLE>
NOTE D -- RESTRICTED SECURITIES
A summary of the restricted securities held at June 30, 1996 follows:
<TABLE>
<CAPTION>
Acquisition
Name of Issuer Date Value
- -------------- ------------ --------
<S> <C> <C>
Common Stock & Other Equity Interests
Kendall International, Inc., Residual Ownership Certificates................ 7/06/92 $ 758
Lancer Industries, Inc., Class B............................................ 8/11/89 5,130
MB Metropolis, L.L.C........................................................ 12/07/94 8,215,121
MSCW Investors III, L.L.C................................................... 12/27/95 44,043,586
Resurgence Properties Inc................................................... 4/05/95 7,036,920
Sunbeam Corp................................................................ 2/23/90 18,563,900
Value Property Trust........................................................ 12/13/93 46,539,302
Preferred Stock
Interlake Corp., 9.00%, Series A3 Conv. Pfd................................. 6/17/92 299,790
Lancer Industries, Inc., Series C Pfd....................................... 8/11/89 2,051,300
-----------
Total restricted securities: (Cost $97,737,105) (2.88% of Net Assets)........... $126,755,807
============
</TABLE>
17
<PAGE>
MUTUAL BEACON FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(unaudited)
NOTE E -- INVESTMENT IN AFFILIATES*
<TABLE>
<CAPTION>
Balance of Shares Gross Gross Sales Balance of Shares Value Dividend Income
Held Dec. 31, Purchases and and Held Jun. 30, Jun. 30, Jan. 1-Jun. 30,
Name of Issuer: 1995 Additions Reductions 1996 1996 1996
- -------------------------------- ----------------- -------------- ------------ ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Controlled Affiliates**
MB Metropolis, L.L.C............ 6,651,920 -- -- 6,651,920 $ 8,215,121 --
MSCW Investors III, L.L.C....... 28,372,000 -- -- 28,372,000 44,043,586 --
Value Property Trust............ 3,880,280 -- -- 3,880,280 46,539,302 --
----------- -----------
Total Controlled Affiliates $98,798,009 $ 0
=========== ===========
Non Controlled Affiliates
Caldor Corp..................... 903,300 -- 903,300 0 *** --
GulfMark International, Inc..... 273,037 2,000 -- 275,037 $ 9,557,536 --
Hexcel Corp..................... 980,601 -- -- 980,601 *** --
Management Assistance, Inc.,
Liquidating Trust........... 431,100 -- -- 431,100 101,050 --
National Security Group, Inc.... 174,977 -- -- 174,977 2,252,829 $ 55,993
New Dimensions in Medicine, Inc. 862,595 -- 862,595 0 *** --
Resurgence Properties Inc....... 591,900 -- -- 591,900 4,627,948 --
Resurgence Properties Inc.
(Restricted)................ 900,000 -- -- 900,000 7,036,920 --
Toro Co......................... 0 675,600 -- 675,600 22,379,250 145,632
----------- -----------
Total Non Controlled Affiliates $45,955,533 $ 201,625
=========== ===========
</TABLE>
* Affiliated issuers, as defined in the Investment Company Act of 1940, are
issuers in which the Fund held 5% or more of the outstanding voting
securities.
** Issuer in which the Fund owns 25% or more of the outstanding voting
securities.
*** As of June 30, 1996 no longer an affiliate.
18
<PAGE>
NOTE F -- FOREIGN CURRENCY EXCHANGE CONTRACTS
At June 30, 1996, the Fund had various contracts which obligate the Fund to
deliver currencies at specified future dates. Open contracts were as follows:
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Deliver In Exchange For Settlement Date Value Appreciation/(Depreciation)
--------------------- --------------- --------------- ------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Sales
AUD 45,239,097 $ 35,612,985 11/06/96 $ 35,385,117 $ 227,868
CAD 54,105,352 39,507,377 11/29/96 39,796,369 (288,992)
CHF 86,345,457 69,898,370 12/09/96 69,796,893 101,477
DEM 8,309,361 5,710,901 9/18/96 5,475,662 235,239
ESP 1,317,814,803 10,479,641 8/16/96 10,262,608 217,033
FIM 106,880,016 22,695,039 9/03/96 23,080,249 (385,210)
FRF 233,391,990 45,021,174 8/28/96 45,390,771 (369,597)
GBP 82,620,349 125,454,287 8/16/96 128,209,266 (2,754,979)
GBP 78,855,732 119,495,259 11/18/96 122,363,593 (2,868,334)
HKD 262,337,947 33,917,446 7/10/96 33,889,185 28,261
NLG 92,655,585 56,742,478 9/06/96 54,444,101 2,298,377
NLG 69,000,000 40,469,208 9/17/96 40,575,418 (106,210)
NLG 70,251,697 41,446,429 12/10/96 41,556,756 (110,327)
NOK 328,105,318 50,412,264 9/09/96 50,491,522 (79,258)
SEK 664,127,827 97,884,810 7/19/96 99,880,066 (1,995,256)
SEK 1,024,935,815 145,618,285 8/15/96 154,112,430 (8,494,145)
SEK 643,346,408 94,469,602 11/15/96 96,735,035 (2,265,433)
-------------- -------------- -----------
$1,034,835,555 $1,051,445,041 (16,609,486)
============== ============== -----------
Purchases
$ 6,163,870 AUD 7,800,000 11/06/96 $ 6,101,004 (62,866)
3,531,827 CAD 4,811,250 11/29/96 3,538,842 7,015
4,079,923 DEM 6,130,723 9/18/96 4,039,994 (39,929)
4,633,569 ESP 585,586,956 8/16/96 4,560,314 (73,255)
3,462,532 FIM 16,260,644 9/03/96 3,511,411 48,879
4,542,954 SEK 30,219,522 8/15/96 4,543,898 944
2,877,737 SEK 19,363,500 11/15/96 2,911,540 33,803
------------ -------------- -----------
$ 29,292,412 $ 29,207,003 (85,409)
============ ============== ------------
$(16,694,895)
============
</TABLE>
Currency type abbreviations are explained on page 11.
NOTE G -- CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1996 Year Ended
(unaudited) December 31, 1995
---------------------------------------- --------------------------------
Shares Amount Shares Amount
---------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Shares sold................................ 20,754,916 $ 792,038,998 39,265,763 $1,353,842,644
Shares issued in reinvestment of dividends. 3,054,733 118,952,440 7,089,659 251,570,646
Shares redeemed............................ (8,838,441) (339,738,769) (13,339,166) (471,915,346)
---------- -------------- ----------- --------------
Net Increase 14,971,208 $ 571,252,669 33,016,256 $1,133,497,944
========== ============== =========== ==============
</TABLE>
19
<PAGE>
MUTUAL BEACON FUND
FINANCIAL HIGHLIGHTS
(Selected data for a share of capital stock outstanding throughout each period)
<TABLE>
<CAPTION>
(unaudited)
For the six months Year Ended December 31,
ended June 30, ----------------------------------------------------
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.................. $35.94 $31.03 $31.09 $27.10 $23.36 $20.80
------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment Income................ .70 .87 .46 .37 .45 .75
Net Gains or Losses on Securities
(realized and unrealized)......... 3.02 7.09 1.28 5.81 4.85 2.88
------ ------ ------ ------ ------ ------
Total from Investment
Operations........................ 3.72 7.96 1.74 6.18 5.30 3.63
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income)........................... .05 .84 .44 .37 .46 .74
Distributions (from capital gains)... 1.15 2.21 1.36 1.82 1.10 .33
------ ------ ------ ------ ------ ------
Total Distributions............... 1.20 3.05 1.80 2.19 1.56 1.07
------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period........................ $38.46 $35.94 $31.03 $31.09 $27.10 $23.36
====== ====== ====== ====== ====== ======
Total Return**.......................... 10.31% 25.89% 5.61% 22.93% 22.92% 17.60%
====== ====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net Assets, End of Period
(millions)........................... $4,400 $3,573 $2,060 $1,062 $534 $398
Ratio of Expenses to
Average Net Assets................... .71%* .72% .75% .73% .81% .85%
Ratio of Net Investment Income
to Average Net Assets................ 4.79%* 2.89% 1.96% 1.53% 1.90% 3.07%
Portfolio Turnover Rate ................ 27.14% 73.18% 70.63% 52.88% 57.52% 56.63%
Average Commission Per Share***......... $ .038 -- -- -- -- --
<CAPTION>
Sept. 1, Year Ended
Year Ended December 31, 1987 to August 31,
--------------------------------- Dec. 31, ----------------
1990 1989 1988 1987 1987 1986
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.................. $24.09 $22.85 $19.49 $24.78 $19.27 $15.73
------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment Income................ 1.08 1.12 .77 .22 .37 .28
Net Gains or Losses on Securities
(realized and unrealized)......... (3.03) 2.84 4.80 (3.96) 6.39 3.51
------ ------ ------ ------ ------ ------
Total from Investment
Operations........................ (1.95) 3.96 5.57 (3.74) 6.76 3.79
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income)........................... 1.08 1.17 .80 .51 .31 .25
Distributions (from capital gains)... .26 1.55 1.41 1.04 .94 -0-
------ ------ ------ ------ ------ ------
Total Distributions............... 1.34 2.72 2.21 1.55 1.25 .25
------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period........................ $20.80 $24.09 $22.85 $19.49 $24.78 $19.27
====== ====== ====== ====== ====== ======
Total Return**.......................... (8.17)% 17.46% 28.79% (15.12)% 37.33% 24.34%
====== ====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net Assets, End of Period
(millions)........................... $388 $409 $214 $131 $159 $65
Ratio of Expenses to
Average Net Assets................... .85% .67%+ .59%+ .87%* .85% 1.16%
Ratio of Net Investment Income
to Average Net Assets................ 4.59% 4.98%+ 3.64%+ 2.86%* 2.50% 2.86%
Portfolio Turnover Rate ................ 57.74% 67.18% 86.79% 28.07% 73.41% 112.91%
Average Commission Per Share***......... -- -- -- -- -- --
</TABLE>
* Annualized.
** Total return includes changes in share price and reinvestment of dividends
and capital gain distributions. The Fund's total return is a historical
measure of past performance and is not intended to indicate future
performance. Investment return and principal value will fluctuate;
therefore the Fund's shares may become worth more or less than their
original cost.
*** Average commission rate is calculated for periods beginning on or after
January 1, 1996.
+ After reduction of expenses by the Investment Adviser. Had the Investment
Adviser not undertaken such action, the ratios of operating expenses and
net investment income would have been .68% and 4.97% in 1989 and .66% and
3.57% in 1988.
20
<PAGE>
MUTUAL SERIES FUND INC.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
1-800-448-3863 201-912-2100
BOARD OF DIRECTORS
Michael F. Price (Chairman)
Edward I. Altman, Ph.D.
Richard L. Chasse, M.D.
Ann Torre Grant
Peter A. Langerman
Bruce A. MacPherson
Barry F. Schwartz
Vaughn R. Sturtevant, M.D.
Robert E. Wade
OFFICERS
Michael F. Price, President
Peter A. Langerman, Exec. Vice President
Jeffrey A. Altman, Vice President
Robert L. Friedman, Vice President
Raymond Garea, Vice President
Lawrence N. Sondike, Vice President
Edward J. Bradley, Treasurer
Stuart C. Pistol, Assistant Treasurer
Liz Cohernour, Gen. Counsel & Secretary
Lily Simo, Assistant Secretary
INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, Ma. 02116
COUNSEL
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, N.Y. 10022
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Ma. 02110
TRANSFER AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, De. 19809
