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 Shares 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 Shares 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
SHARES
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 SHARES 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 Shares appreciated 8.2% and is up 9.5%
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 19% 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
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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 SHARES FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1996
(unaudited)
Number Value
of Shares (Note A)
------------ ------------
COMMON STOCKS & OTHER EQUITY INTERESTS (78.85%)
Aerospace (2.89%)
* Hexcel Corp.............................. 1,721,098 $ 23,622,070
* Litton Industries, Inc................... 1,194,200 51,947,700
Lockheed Martin Corp..................... 454,900 38,211,600
* Loral Space & Communications............. 733,500 9,993,938
McDonnell Douglas Corp................... 974,400 47,258,400
------------
171,033,708
------------
Banking (9.90%)
Banco Central Hispano-
Americano, SA.......................... 484,723 9,876,089
Bank of Boston Corp...................... 126,200 6,246,900
Barclays PLC............................. 895,000 10,732,831
Bay View Capital Corp.................... 309,100 10,509,400
Baybanks, Inc............................ 6,200 668,050
Chase Manhattan Corp..................... 6,662,888 470,566,465
Den Norske Bank ASA...................... 4,875,000 14,761,374
* Dime Bancorp, Inc........................ 272,800 3,546,400
Downey Financial Corp.................... 503,520 11,014,500
First Chicago NBD Corp................... 943,800 36,926,175
Great Western Financial Corp............. 389,400 9,296,925
Grove Bank............................... 51,600 1,560,900
* Mechanics Savings Bank................... 23,000 264,500
------------
585,970,509
------------
Chemicals (0.34%)
Bayer AG................................. 65,000 2,297,278
Eastman Chemical Co., Inc................ 293,300 17,854,638
------------
20,151,916
------------
Communications (4.15%)
* 360 Communications Company............... 653,466 15,683,184
AT&T Corp................................ 1,617,100 100,260,200
* Associated Group Inc., Class A........... 131,325 3,972,581
* Associated Group Inc., Class B........... 131,325 3,923,334
MCI Communications Corp.................. 621,000 15,913,125
Sprint Corp.............................. 871,500 36,603,000
Telephone & Data Systems, Inc............ 1,540,100 69,304,500
------------
245,659,924
------------
Conglomerates (8.47%)
Alexander & Baldwin, Inc................. 273,000 6,586,125
* American Standard Companies Inc.......... 455,200 15,021,600
BTR PLC.................................. 7,750,282 30,499,184
* Berkshire Hathaway Inc. Class A.......... 1,025 31,467,500
Harcourt General, Inc.................... 159,100 7,955,000
Incentive AB, A Shares................... 671,600 35,662,144
Incentive AB, B Shares................... 642,100 34,240,568
Investor AB, A Shares.................... 1,770,400 66,578,417
Investor AB, B Shares.................... 4,543,500 169,839,609
Philips Electronics NV................... 1,265,000 41,064,222
Philips Electronics NV, ADR.............. 1,325,900 43,257,488
Varian Associates, Inc................... 371,900 19,245,825
------------
501,417,682
------------
Construction (0.43%)
Lone Star Industries, Inc................ 63,095 2,121,569
Noland Co................................ 134,475 2,622,263
* Schuller Corp............................ 1,339,535 13,897,675
* USG Corporation.......................... 246,800 6,879,550
------------
25,521,057
------------
Consumer Products & Services (9.75%)
B.A.T Industries PLC..................... 3,614,000 28,107,268
* Bulova Corp.............................. 37,900 161,075
Corning Inc.............................. 1,289,400 49,480,725
DSM NV................................... 209,000 20,720,302
Dial Corp................................ 3,490,300 99,909,838
(A) Fab Industries, Inc...................... 331,100 9,022,475
* KinderCare Learning Centers, Inc......... 181,926 2,797,112
Philip Morris Companies Inc.............. 208,300 21,663,200
Premark International, Inc............... 610,500 11,294,250
RJR Nabisco Holdings Corp................ 5,081,552 157,528,112
* Ranger Industries, Inc................... 76,839 9,751
(A)(R)* Sunbeam Corp............................. 11,260,174 141,174,432
* Tupperware Corp.......................... 599,400 25,324,650
* U.S. Industries, Inc..................... 428,900 10,347,213
------------
577,540,403
------------
Entertainment & Media (4.92%)
* BHC Communications, Inc.................. 305,017 29,815,412
* Cablevision Systems Corp................. 329,600 15,244,000
* Chris Craft Industries, Inc.............. 204,417 8,994,348
Comcast Corp., Class A................... 105,500 1,938,562
5
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Number Value
of Shares (Note A)
------------ ------------
Comcast Corp., Class A,
Special Non-Voting..................... 701,100 $ 12,970,350
* Tele-Communications, Inc.,
Class A - TCI Group.................... 1,389,000 25,175,625
Todd A.O. Corp., Class A................. 332,723 5,489,930
* US West, Inc. - Media Group.............. 10,506,373 191,741,307
------------
291,369,534
------------
Financial Services (6.26%)
Bear Stearns Companies, Inc.............. 1,303,831 30,803,007
Beneficial Corp.......................... 66,900 3,754,762
Capital One Financial Corp............... 1,131,400 32,244,900
Countrywide Credit Industries, Inc....... 120,000 2,970,000
Dean Witter, Discover & Co............... 1,854,000 106,141,500
Finova Group Inc......................... 1,291,100 62,941,125
First USA, Inc........................... 797,900 43,884,500
(A) Fund American Enterprise
Holdings, Inc.......................... 657,782 53,280,342
Lehman Brothers Holdings Inc............. 1,393,400 34,486,650
------------
370,506,786
------------
Food & Beverages (3.35%)
Brown-Forman Corp., Class B.............. 376,300 15,052,000
Cadbury Schweppes PLC.................... 1,005,000 7,941,026
* FoodBrands America, Inc.................. 271,379 3,494,005
(A) Genesee Corp., Class A................... 15,911 731,906
(A) Genesee Corp., Class B................... 103,550 4,763,300
Heineken Holding NV...................... 86,328 17,410,010
Hormel Foods Corp........................ 507,600 13,578,300
Morrison Fresh Cooking, Inc.............. 406,766 2,135,522
Morrisson Health Care, Inc............... 452,466 6,334,524
Nestle SA, Registered.................... 9,915 11,300,925
Ruby Tuesday, Inc........................ 325,650 7,367,831
(A) Seaboard Corp............................ 76,450 15,175,325
Seagram Company Ltd...................... 778,000 26,160,250
(A) Van Melle NV............................. 916,266 67,258,222
------------
198,703,146
------------
Healthcare (7.04%)
* Beverly Enterprises, Inc................. 3,000,500 36,006,000
Ciba Geigy AG, Class B................... 2,800 3,390,150
Ciba Geigy AG, Registered................ 19,336 23,519,362
(A)* FHP International Corp................... 2,143,300 58,672,838
* Foundation Health Corp................... 845,400 30,328,725
* Health Systems International, Inc........ 1,339,600 36,336,650
* Horizon/CMS Healthcare Corp.............. 1,306,500 16,821,188
* Humana, Inc.............................. 1,546,500 27,643,687
(R)* Kendall International, Inc.,
Residual Ownership Certificates........ 379 5,859
* Laboratory Corp. of America.............. 2,063,272 15,474,540
* Laboratory Corp. of America,
Warrants............................... 360,015 180,008
* Mid Atlantic Medical Services, Inc....... 2,113,700 30,120,225
* Perrigo Co............................... 924,500 10,400,625
Pharmacia & Upjohn, Inc.................. 10,500 458,046
Pharmacia & Upjohn, Inc., ADR............ 157,100 6,971,313
Sandoz AG, Registered.................... 10,967 12,517,469
* Tenet HealthCare Corp.................... 4,186,400 89,484,300
United HealthCare Corp................... 365,600 18,462,800
------------
416,793,785
------------
Industrial (1.35%)
Crown Cork & Seal, Inc................... 715,859 32,213,655
Greif Brothers Corp...................... 182,800 5,849,600
(A)(R)* Lancer Industries, Inc., Class B......... 3 43,591
* PXL Holdings Corp........................ 21 16,800
Westinghouse Electric Corporation........ 2,223,100 41,683,125
------------
79,806,771
------------
Insurance (5.68%)
* 20th Century Industries.................. 218,800 3,637,550
Aetna Life & Casualty Co................. 90,000 6,435,000
* Alleghany Corp........................... 194,514 37,346,688
Allmerica Property & Casualty
Companies, Inc......................... 963,000 26,001,000
Allstate Corp............................ 324,000 14,782,500
Argonaut Group, Inc...................... 205,800 6,431,250
Enhance Financial Services
Group, Inc............................. 588,700 16,483,600
Financial Security Assurance
Holdings Ltd........................... 519,700 14,226,788
First Colony Corp........................ 672,700 20,853,700
Home Beneficial Corp., Class B........... 465,200 12,211,500
ING Groep NV............................. 373,882 11,130,955
ITT Hartford Group, Inc.................. 273,800 14,579,850
Kansas City Life Insurance Co............ 78,300 4,267,350
Old Republic International Corp.......... 1,551,780 33,363,270
Progressive Corp......................... 124,800 5,772,000
Provident Companies, Inc................. 440,700 16,305,900
Providian Corp........................... 778,584 33,381,788
SAFECO Corp.............................. 258,900 9,158,588
Selective Insurance Group, Inc........... 366,954 11,926,005
Torchmark Corp........................... 596,500 26,096,875
Unitrin, Inc............................. 260,900 12,262,300
------------
336,654,457
------------
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Number Value
of Shares (Note A)
------------ ------------
Metals (0.51%)
* Alumax, Inc.............................. 274,300 $ 8,331,863
* Bayou Steel Corp......................... 394,000 1,526,750
Commercial Metals Co..................... 374,812 12,462,499
Cyprus Amax Minerals Co.................. 204,200 4,620,025
(A)* Kreisler Manufacturing Corp.............. 54,470 217,880
Pitt-Des Moines, Inc..................... 75,500 3,208,750
------------
30,367,767
------------
Natural Resources (2.24%)
Amerada Hess Corp........................ 337,800 18,114,525
* Crown Central Petroleum Corp.,
Class A................................ 90,100 1,362,762
* Crown Central Petroleum Corp.,
Class B................................ 700 10,763
* Diamond Fields Resources Inc............. 442,000 12,479,924
Imperial Oil Ltd......................... 810,400 34,138,100
Royal Dutch Petroleum Co................. 221,000 33,978,750
Saga Petroleum A/S, A Shares............. 857,000 12,579,696
Shell Transport & Trading Co............. 1,100,000 16,102,642
Temple Inland Inc........................ 83,500 3,903,625
------------
132,670,787
------------
Printing & Publishing (3.72%)
Belo (A.H.) Corp......................... 825,600 30,753,600
Daily Mail & General Trust PLC,
Class A................................ 1,284,500 29,351,796
Daily Mail & General Trust PLC,
Ordinary............................... 65,000 1,596,797
Dow Jones & Co., Inc..................... 251,200 10,487,600
Dun & Bradstreet Corp.................... 851,000 53,187,500
Gannett, Inc............................. 182,200 12,890,650
Houghton Mifflin Co...................... 461,200 22,944,700
Knight-Ridder, Inc....................... 121,000 8,772,500
United News & Media PLC.................. 4,654,300 50,287,075
------------
220,272,218
------------
Real Estate (2.36%)
* Al-Zar Ltd............................... 284 99,400
(A)* Alexander's Inc.......................... 386,000 28,033,250
* Cadillac Fairview Corp................... 2,460,681 30,678,433
* Cadillac Fairview Corp., Warrants........ 291,749 962,833
* Castle & Cooke, Inc...................... 112,933 1,806,927
(A)(R)* MSCW Investors I, L.L.C.................. 40,500,000 62,870,621
St. Joe Paper Co......................... 237,275 15,304,238
------------
139,755,702
------------
Number
of Shares
or Principal Value
Amount (Note A)
------------ ------------
Retail (1.35%)
American Stores Co....................... 712,300 $ 29,382,375
Delchamps, Inc........................... 131,100 3,179,175
Melville Corp............................ 332,300 13,458,150
* Payless ShoeSource, Inc.................. 416,000 13,208,000
* Service Merchandise Co., Inc............. 3,700,800 20,817,000
------------
80,044,700
------------
Transportation (4.14%)
Canadian National Railway Co............. 596,400 10,958,850
Canadian Pacific, Ltd.................... 449,000 9,868,288
Florida East Coast Industries, Inc....... 442,500 36,727,500
Helikopter Services Group ASA............ 905,800 10,441,900
Railtrack Group PLC, Partly-Paid......... 7,258,000 24,674,811
Ryder Systems, Inc....................... 1,323,000 37,209,375
* Scania AB, Class B Warrants.............. 611,550 662,349
Volvo AB, B Shares....................... 3,835,300 87,116,084
XTRA Corp................................ 623,000 27,567,750
------------
245,226,907
------------
TOTAL COMMON STOCK &
OTHER EQUITY INTERESTS 4,669,467,759
-------------
PREFERRED STOCK (0.91%)
Crown Cork & Seal, Inc.,
4.50% Conv. Pfd........................ 120,119 5,465,415
* Gentra Inc., Pfd. G...................... 157,500 1,905,871
(R)* Interlake Corp., 9.00%,
Series A3 Conv. Pfd.................... 2,450 1,836,214
(A)(R)* Lancer Industries, Inc., Series C Pfd.... 174,359 17,435,900
RJR Nabisco Holdings Corp.,
Class C Pfd............................ 4,138,100 26,897,650
* Wundies Industries Inc.,
11.25% Cum. Pfd........................ 30,892 50,200
------------
53,591,250
------------
CORPORATE BONDS AND NOTES (0.15%)
Cadillac Fairview Corp.,
12.00%, 7/31/05.....................CAD 302,084 206,034
Comcast Cellular Corp.,
0%, 3/05/00, Series A.................. $6,000,000 4,125,000
* Gentra Inc., Series A, 7.50%,
12/31/01............................CAD 2,820,000 2,336,988
* Gentra Inc., Series B, 7.50%,
12/31/01............................CAD 429,024 305,985
Schuller Corp., 9.00%, 12/31/03.......... 1,960,522 1,960,522
------------
8,934,529
------------
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Principal Value
Amount (Note A)
------------ ------------
BONDS AND NOTES IN REORGANIZATION (0.96%)
* Adams County CO, Industrial Dev.
Auth., 9.00%, 11/01/96................. $16,729,000 $ 710,982
* Ames Department Stores, Inc.,
Trade Claims........................... 10,578,487 90,617
* Baldwin Co., 10.375%, 12/01/01........... 2,150,000 795,500
* Dow Corning Corp., Bank Debt JPY........ 600,000,000 4,976,984
* Dow Corning Corp.,
Bank Debt #1........................... 7,500,000 7,575,000
* Dow Corning Corp.,
Bank Debt #2........................... 1,391,595 1,405,511
* Dow Corning Corp.,
8.15%, 10/15/29........................ 4,330,000 4,286,700
* Dow Corning Corp.,
9.375%, 2/01/08........................ 1,300,000 1,332,500
* Dow Corning Corp.,
9.50%, 8/10/95......................... 1,250,000 1,268,750
* El Paso TX Housing Finance
Corp., 8.88%, 10/15/96................. 9,355,000 467,750
* Eurotunnel Finance Limited,
Bank Debt, Tranche D................BEF 490,000,000 5,781,342
* Eurotunnel Finance Limited,
Bank Debt, Tranche D1...............BEF 73,000,000 861,302
* Eurotunnel Finance Limited,
Bank Debt, Tranche E ...............ECU 600,000 275,988
* Eurotunnel Finance Limited,
Bank Debt, Tranche E................FRF 75,500,000 5,419,011
* Eurotunnel Finance Limited,
Bank Debt, Tranche E1...............FRF 23,835,020 1,710,758
* Eurotunnel Finance Limited,
Bank Debt, Tranche J................GBP 2,924,547 1,679,782
* Louisiana Agriculture Finance
Authority, 8.25%, 10/01/96............. 3,450,000 172,500
* Louisiana Agriculture Finance
Authority, 8.80%, 10/01/96............. 775,000 38,750
* Louisiana Housing Finance
Authority, 8.61%, 8/01/96.............. 11,530,000 461,200
* Memphis TN Health Facilities,
8.68%, 9/15/96......................... 7,110,000 355,500
* Metallurg Inc., Bank Claim............... 8,635,849 5,440,583
* Metallurg Inc., Bank Claim #2............ 5,780,806 2,731,431
* Metallurg Inc., Trade Claim.............. 1,610,968 289,974
* SouthEast Banking Corp.,
0%, 12/16/96........................... 230,000 115,000
Number
of Shares
or Principal Value
Amount (Note A)
------------ ------------
* SouthEast Banking Corp.,
0%, 11/10/97........................... $ 1,250,000 $ 625,000
* SouthEast Banking Corp.,
4.75%, 10/15/97........................ 3,317,000 2,156,050
* SouthEast Banking Corp.,
6.50%, 3/15/99......................... 500,000 250,000
* SouthEast Banking Corp.,
10.50%, 4/11/01........................ 5,300,000 2,650,000
* Southeast Texas Housing Finance
Authority, 8.60%, 9/01/96.............. 200,000 11,000
Tiphook Finance Corp.,
8.00%, 3/15/00......................... 3,881,000 2,736,105
Tiphook Finance Corp.,
Lease Claim.........................GBP 238,846 352,237
------------
57,023,807
------------
COMPANIES IN LIQUIDATION (0.13%)
(A)* Aerospace Creditors
Liquidating Trust, Certificates of
Beneficial Interest.................... 279,703 978,961
* Americana Hotels & Realty Corp........... 325,300 447,288
* Apco Oil Corp............................ 9,200 2,300
(A)* City Investing Co.,
Liquidating Trust...................... 4,314,037 4,853,292
* MBO Properties Inc....................... 167,437 267,899
* MCorp Financial Trust,
Claim Units............................ 64,189 776,729
* MCorp Trust, Claim Units................. 64,172 151,292
(A)* Management Assistance, Inc.,
Liquidating Trust...................... 1,358,500 318,432
* Roeser & Pendelton....................... 2,800 3,304
------------
7,799,497
------------
UNITED STATES GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS (18.37%)
U.S. Government Agency Obligations (2.80%)
Federal Home Loan Bank System,
5.010%, 2/28/97....................... $25,000,000 24,882,850
5.106%, 2/23/98....................... 25,000,000 24,613,600
5.637%, 3/13/98....................... 50,000,000 49,538,350
Federal Home Loan Mortgage Corp.,
5.170%, 3/24/97....................... 14,000,000 13,929,146
Federal National Mortgage Association,
Medium Term Note,
5.760%, 9/03/96....................... 9,800,000 9,807,007
8
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Principal Value
Amount (Note A)
------------ ------------
5.390%, 12/04/96....................... $ 9,800,000 $ 9,793,728
5.410%, 12/06/96....................... 24,650,000 24,636,294
Tennessee Valley Authority,
6.000%, 1/15/97....................... 8,500,000 8,511,773
------------
165,712,748
------------
U.S. Treasury Notes (0.94%)
6.875%, 10/31/96....................... 40,000,000 40,212,440
7.250%, 11/30/96....................... 15,000,000 15,107,790
------------
55,320,230
------------
U.S. Government Agency Discount Notes (13.30%)
Federal Farm Credit Bank,
5.330%, 9/13/96....................... 14,000,000 13,847,484
Federal Home Loan Bank System,
4.820%, 7/09/96....................... 13,000,000 12,985,897
4.980%, 7/09/96....................... 8,200,000 8,191,104
4.780%, 8/29/96....................... 41,000,000 40,678,811
5.160%, 10/21/96....................... 8,000,000 7,871,328
5.200%, 11/04/96....................... 24,500,000 24,056,673
5.190%, 12/06/96....................... 40,500,000 39,527,717
5.095%, 12/18/96....................... 12,500,000 12,196,600
5.280%, 1/08/97....................... 13,000,000 12,632,373
5.240%, 1/13/97....................... 17,000,000 16,513,154
5.230%, 1/21/97....................... 20,000,000 19,410,660
5.330%, 2/05/97....................... 7,250,000 7,020,661
5.270%, 2/13/97....................... 8,500,000 8,221,294
5.240%, 2/14/97....................... 11,000,000 10,637,737
5.320%, 2/26/97....................... 4,500,000 4,343,999
5.400%, 3/03/97....................... 10,500,000 10,107,699
5.500%, 3/03/97....................... 21,735,000 20,922,937
5.410%, 3/04/97....................... 12,750,000 12,296,954
5.420%, 3/04/97....................... 10,000,000 9,644,670
5.500%, 3/04/97....................... 8,765,000 8,453,554
5.490%, 3/12/97....................... 10,000,000 9,633,110
Federal National Mortgage Association,...
5.260%, 7/02/96....................... 6,200,000 6,199,094
4.810%, 7/03/96....................... 9,000,000 8,997,595
4.840%, 7/05/96....................... 5,000,000 4,997,311
4.840%, 7/08/96....................... 18,000,000 17,982,766
5.050%, 7/08/96....................... 12,000,000 11,988,511
5.080%, 7/09/96....................... 10,000,000 9,988,711
4.780%, 7/16/96....................... 12,300,000 12,275,502
5.220%, 7/19/96....................... 19,700,000 19,648,583
5.250%, 7/22/96....................... 14,800,000 14,754,675
5.140%, 7/26/96....................... 11,500,000 11,458,425
Number
of Shares
or Principal Value
Amount (Note A)
------------ ------------
5.290%, 7/26/96....................... $ 9,000,000 $ 8,967,463
4.920%, 8/01/96....................... 15,000,000 14,936,450
5.190%, 8/05/96....................... 6,600,000 6,566,423
5.240%, 8/05/96....................... 39,500,000 39,299,044
5.580%, 8/09/96....................... 14,900,000 14,809,930
5.160%, 8/15/96....................... 20,000,000 19,869,300
5.500%, 8/15/96....................... 5,000,000 4,967,325
4.930%, 8/23/96....................... 2,000,000 1,985,484
5.240%, 8/30/96....................... 34,200,000 33,897,911
4.840%, 9/06/96....................... 13,500,000 13,366,080
5.140%, 9/16/96....................... 30,000,000 29,658,000
5.150%, 9/18/96....................... 11,500,000 11,364,737
5.110%, 9/25/96....................... 5,700,000 5,629,195
5.310%, 9/27/96....................... 9,700,000 9,573,386
5.220%, 10/01/96....................... 17,000,000 16,774,087
5.180%, 10/09/96....................... 11,500,000 11,328,455
5.120%, 10/15/96....................... 50,000,000 49,213,850
5.160%, 10/24/96....................... 38,000,000 37,346,932
5.210%, 11/05/96....................... 6,000,000 5,890,566
5.140%, 11/20/96....................... 10,600,000 10,383,834
5.400%, 12/17/96....................... 10,000,000 9,745,560
5.570%, 6/13/97....................... 5,000,000 4,730,110
------------
787,789,711
------------
U.S. Treasury Bills (1.33%)
5.290%, 8/22/96....................... 9,900,000 9,824,312
5.340%, 8/22/96....................... 600,000 595,413
4.835%, 9/19/96....................... 25,000,000 24,716,675
5.285%, 9/19/96....................... 3,500,000 3,460,334
5.335%, 9/19/96....................... 16,100,000 15,917,539
5.870%, 11/14/96....................... 25,000,000 24,508,900
------------
79,023,173
------------
TOTAL INVESTMENTS
IN SECURITIES (99.37%) $5,884,662,704
SECURITIES SOLD SHORT (0.50%)
* Household International, Inc............. 168,600 $ 12,813,600
* Lucent Technologies Inc.................. 363,000 13,748,625
* United States Cellular Corp.............. 90,000 2,790,000
------------
$ 29,352,225
============
* Non-income producing securities.
(A) Affiliated issuers.
(R) Restricted Securities.
9
<PAGE>
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
BEF -- Belgium franc
GBP -- British pound
CAD -- Canadian dollar
NLG -- Dutch guilder
FRF -- French franc
DEM -- German Deutsche mark
JPY -- Japanese yen
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................................. 80.5%
Sweden........................................ 6.8
United Kingdom................................ 4.6
Netherlands................................... 4.0
Canada........................................ 2.2
Others (individually less than 1%)............ 1.9
-------
Total......................................... 100.0%
=======
10
<PAGE>
MUTUAL SHARES FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
(unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments in Securities, at Value
Unaffiliated Issuers (Cost $4,567,318,624) ............................... $ 5,419,831,937
Controlled Affiliated Issuers (Cost $62,329,500) ......................... 62,870,621
Non Controlled Affiliated Issuers (Cost $204,729,412) .................... 401,960,146 $ 5,884,662,704
--------------- ---------------
Cash .............................................................................................. 4,995,892
Receivables:
Investment Securities Sold .................................................................. 64,075,862
Dividends ................................................................................... 7,320,512
Capital Stock Subscribed .................................................................... 3,377,808
Interest .................................................................................... 2,325,787
Deposits with Brokers for Securities Sold Short ................................................... 14,880,836
Other Assets ...................................................................................... 24,058,455
---------------
TOTAL ASSETS .......................................................................... 6,005,697,856
---------------
LIABILITIES
Payables:
Investment Securities Purchased ............................................................. 35,550,926
Net Payable for Foreign Currency Exchange Contracts ......................................... 14,391,993
Investment Advisory Fee ..................................................................... 2,833,038
Capital Stock Repurchased ................................................................... 1,609,928
Accrued Expenses and Other Liabilities ...................................................... 154,154
Securities Sold Short, at Value (Proceeds Receivable $27,529,450) ................................. 29,352,225
---------------
TOTAL LIABILITIES ..................................................................... 83,892,264
---------------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK ................................................ $ 5,921,805,592
===============
NUMBER OF SHARES OUTSTANDING
(Authorized-- 200,000,000 Shares, $.001 Par Value) .......................................... 65,380,100
===============
NET ASSET VALUE PER SHARE
(Offering and Redemption Price Per Share) ................................................... $ 90.58
===============
COMPOSITION OF NET ASSETS
Paid in Capital ................................................................................... $ 4,622,394,272
Undistributed Net Investment Income ............................................................... 103,597,203
Accumulated Net Realized Gain on Investments and Foreign Currency Transactions .................... 161,738,498
Net Unrealized Appreciation of Investments and Securities Sold Short .............................. 1,048,462,393
Net Unrealized Depreciation of Foreign Currency Exchange Contracts and Dividends................... (14,386,774)
---------------
TOTAL NET ASSETS ...................................................................... $ 5,921,805,592
===============
</TABLE>
See notes to financial statements.
11
<PAGE>
MUTUAL SHARES 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-- $1,897,380) ............... $ 97,588,823
Dividends -- Non Controlled Affiliated Issuers
(Net of Foreign Withholding-- $48,674) .................. 3,530,724
Interest .................................................. 39,089,004
Other Income .............................................. 1,230,242
-------------
TOTAL INCOME .................................................... $ 141,438,793
Expenses:
Investment Advisory Fee ................................... 17,187,774
Shareholder Servicing Costs ............................... 1,016,917
Administrative ............................................ 630,810
Custodian Fees ............................................ 224,216
Registration and Filing Fees .............................. 123,000
Insurance ................................................. 84,039
Auditing Fees ............................................. 55,489
Shareholder Reports ....................................... 51,185
Directors' Fees and Expenses .............................. 32,184
Legal Fees ................................................ 24,123
Miscellaneous ............................................. 2,175
-------------
TOTAL EXPENSES ................................................................. 19,431,912
-------------
NET INVESTMENT INCOME ..................................... 122,006,881
-------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net Realized Gain on Investments
and Foreign Currency Transactions
in Unaffiliated Issuers ................................................ 166,524,394
Net Realized Gain on Investments
in Non Controlled Affiliated Issuers ................................... 599,028
Net Realized Loss on Securities Sold Short ............................... (911,173)
Net Realized Gain on Options Written ..................................... 94,185
Change in Unrealized Appreciation/(Depreciation) of
Investments, Securities Sold Short, Options Written and
Foreign Currency Transactions........................................... 150,255,270
-------------
NET GAIN ON INVESTMENTS ................................... 316,561,704
-------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ..................................... $ 438,568,585
=============
</TABLE>
See notes to financial statements.
12
<PAGE>
MUTUAL SHARES 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 .................................................... $ 122,006,881 $ 113,283,268
Net Realized Gain on Investments and Foreign Currency Transactions ....... 166,306,434 711,760,828
Change in Unrealized Appreciation/(Depreciation) of Investments .......... 150,255,270 311,202,838
--------------- ---------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ................................................ 438,568,585 1,136,246,934
--------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income .................................................... (6,335,464) (102,773,385)
Net Realized Gain on Investments ......................................... (183,728,448) (674,837,860)
--------------- ---------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................................ (190,063,912) (777,611,245)
--------------- ---------------
CAPITAL STOCK TRANSACTIONS ..................................................... 443,727,002 1,125,212,286
--------------- ---------------
NET INCREASE IN NET ASSETS ..................................................... 692,231,675 1,483,847,975
NET ASSETS:
Beginning of Year ........................................................ 5,229,573,917 3,745,725,942
--------------- ---------------
End of Period -- Including Undistributed Net Investment Income of
$103,597,203 and Distributions in Excess of Net Investment
Income of $12,074,214, respectively ................................... $ 5,921,805,592 $ 5,229,573,917
=============== ===============
</TABLE>
See notes to financial statements.
13
<PAGE>
MUTUAL SHARES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Mutual Shares 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 Shares Fund, Mutual Qualified
Fund, Mutual Beacon 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 Shares 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.
14
<PAGE>
MUTUAL SHARES 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
$17,187,774 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 $336,131 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.
15
<PAGE>
MUTUAL SHARES 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
$1,681,975,139 and $1,085,804,143, respectively.
For Federal income tax purposes, the identified cost of investments at June
30, 1996 was $4,835,830,325. Net unrealized appreciation for all securities at
June 30, 1996, based on Federal income tax cost, amounted to $1,048,832,379,
consisting of aggregate gross unrealized appreciation of $1,119,893,537 and
aggregate gross unrealized depreciation of $71,061,158.
Transactions in options written during the six months ended June 30, 1996
were as follows:
Principal
Amount or
Number of
Contracts Premium
--------- -------
Options outstanding at December 31, 1995 ........... 110 $ 13,832
Options written .................................... 138,090 94,185
Options expired .................................... (138,090) (94,185)
Options terminated in closing transactions ......... (110) (13,832)
-------- --------
Options outstanding at June 30, 1996 ............... -0- -0-
======== ========
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 $ 5,859
Lancer Industries, Inc., Class B ................................. 8/11/89 43,591
MSCW Investors I, L.L.C .......................................... 12/27/95 62,870,621
Sunbeam Corp. .................................................... 2/23/90 141,174,432
Preferred Stock
Interlake Corp., 9.00%, Series A3 Conv. Pfd. ..................... 6/17/92 1,836,214
Lancer Industries, Inc., Series C Pfd. ........................... 8/11/89 17,435,900
------------
Total restricted securities: (Cost $110,893,302) (3.77% of Net Assets) $223,366,617
============
</TABLE>
16
<PAGE>
MUTUAL SHARES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE E -- INVESTMENT IN AFFILIATES*
<TABLE>
<CAPTION>
Balance of Shares Gross Sales Balance of Shares Value Dividend Income
Held Dec. 31, Gross Purchases and Held Jun. 30, Jun. 30, Jan. 1-Jun. 30,
Name of Issuer: 1995 and Additions Reductions 1996 1996 1996
- ---------------------------------- ----------------- --------------- ----------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Controlled Affiliates**
MSCW Investors I, L.L.C .......... 40,500,000 -- -- 40,500,000 $ 62,870,621 --
============ ============
Non Controlled Affiliates
Aerospace Creditors
Liquidating Trust, Certificates.
of Beneficial Interest ......... 279,703 -- -- 279,703 $ 978,961 --
Alexander's Inc. ................. 386,000 -- -- 386,000 28,033,250 --
Americana Hotels & Realty Corp. .. 325,300 -- -- 325,300 *** --
City Investing Co.,
Liquidating Trust .............. 4,314,037 -- -- 4,314,037 4,853,292 --
FHP International Corp. .......... 2,121,100 22,200 -- 2,143,300 58,672,838 --
Fab Industries, Inc. ............. 218,500 112,600 -- 331,100 9,022,475 $ 96,180
Fund American Enterprise
Holdings, Inc. ................. 657,782 -- -- 657,782 53,280,342 263,113
Genesee Corp., Class A ........... 15,911 -- -- 15,911 731,906 17,502
Genesee Corp., Class B ........... 103,550 -- -- 103,550 4,763,300 113,905
Hexcel Corp. ..................... 1,721,098 -- -- 1,721,098 *** --
Kreisler Manufacturing Corp. ..... 54,470 -- -- 54,470 217,880 --
Lancer Industries, Inc., Class B . 3 -- -- 3 43,591 --
Lancer Industries, Inc.,
Series C Pfd. .................. 174,359 -- -- 174,359 17,435,900 1,743,600
Management Assistance, Inc.,
Liquidating Trust .............. 1,358,500 -- -- 1,358,500 318,432 --
Seaboard Corp. ................... 76,450 -- -- 76,450 15,175,325 --
Sunbeam Corp. .................... 11,260,174 -- -- 11,260,174 141,174,432 227,253
Van Melle NV ..................... 905,612 10,654 -- 916,266 67,258,222 1,069,171
------------ ------------
Total Non Controlled Affiliates . $401,960,146 $ 3,530,724
============ ============
</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.
17
<PAGE>
MUTUAL SHARES FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
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
BEL 205,495,000 $ 6,592,717 8/07/96 $ 6,567,198 $ 25,519
CAD 70,022,964 51,130,313 11/29/96 51,504,326 (374,013)
CHF 59,694,343 48,323,762 12/09/96 48,253,606 70,156
DEM 7,217,949 4,960,790 9/18/96 4,756,449 204,341
ESP 1,919,414,906 15,263,737 8/16/96 14,947,627 316,110
FRF 36,257,282 6,977,922 8/28/96 7,051,424 (73,502)
GBP 85,186,119 129,424,408 8/16/96 132,190,797 (2,766,389)
GBP 77,433,121 117,509,369 11/18/96 120,156,071 (2,646,702)
JPY 534,000,000 5,169,409 9/19/96 4,921,183 248,226
NLG 156,838,477 96,056,119 9/06/96 92,157,747 3,898,372
NLG 97,000,000 56,891,496 9/17/96 57,040,806 (149,310)
NLG 96,492,447 56,927,698 12/10/96 57,079,235 (151,537)
NOK 240,032,415 36,898,088 9/09/96 36,938,145 (40,057)
SEK 1,201,585,799 177,329,246 7/19/96 180,709,893 (3,380,647)
SEK 987,719,798 140,421,902 8/15/96 148,516,518 (8,094,616)
SEK 566,241,499 83,253,855 11/15/96 85,141,364 (1,887,509)
-------------- -------------- --------------
$1,033,130,831 $1,047,932,389 (14,801,558)
============== ============== --------------
Purchases
$ 2,680,420 DEM 4,027,123 9/18/96 $ 2,653,774 (26,646)
5,410,222 ESP 683,272,077 8/16/96 5,321,046 (89,176)
32,929,505 SEK 222,279,974 8/15/96 33,422,686 493,181
2,980,850 SEK 20,038,639 11/15/96 3,013,056 32,206
----------- ----------- ------------
$44,000,997 $44,410,562 409,565
=========== =========== ============
($14,391,993)
============
</TABLE>
Currency type abbreviations are explained on page 10.
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 5,869,499 $ 534,047,780 7,891,894 $ 708,857,120
Shares issued in reinvestment of dividends 1,917,407 176,264,870 8,345,334 718,907,620
Shares redeemed (2,898,070) (266,585,648) (3,348,189) (302,552,454)
---------- --------------- ---------- ---------------
Net Increase 4,888,836 $ 443,727,002 12,889,039 $ 1,125,212,286
========== =============== ========== ===============
</TABLE>
18
<PAGE>
MUTUAL SHARES FUND
FINANCIAL HIGHLIGHTS
(Selected data for a share of capital stock outstanding throughout each period)
<TABLE>
<CAPTION>
(unaudited)
For the six
momths ended Year Ended December 31,
June 30, ------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ......... $86.45 $78.69 $80.97 $73.36 $64.49 $56.39 $67.16 $67.77 $57.83 $60.43 $57.57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment Income ..... 1.49 1.99 1.34 1.41 1.55 2.04 3.32 4.03 2.64 2.23 2.43
Net Gains or Losses on
Securities (realized and
unrealized) ............ 5.64 20.51 2.28 13.89 12.07 9.69 (9.86) 6.00 14.98 1.78 7.29
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations ............. 7.13 22.50 3.62 15.30 13.62 11.73 (6.54) 10.03 17.62 4.01 9.72
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net
investment income) ..... .10 1.93 1.34 1.38 1.59 2.00 3.34 4.09 2.63 2.52 2.34
Distributions (from capital
gains) ................. 2.90 12.81 4.56 6.31 3.16 1.63 .89 6.55 5.05 4.09 4.52
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions .... 3.00 14.74 5.90 7.69 4.75 3.63 4.23 10.64 7.68 6.61 6.86
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period ............ $90.58 $86.45 $78.69 $80.97 $73.36 $64.49 $56.39 $67.16 $67.77 $57.83 $60.43
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return** ............... 8.20% 29.11% 4.53% 21.00% 21.33% 20.99% (9.82)% 14.93% 30.69% 6.34% 16.99%
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net Assets, End of
Period (millions) ......... $5,922 $5,230 $3,746 $3,527 $2,913 $2,640 $2,521 $3,403 $2,551 $1,685 $1,403
Ratio of Expenses to
Average Net Assets ........ .67%* .69% .72% .74% .78% .82% .85% .65%+ .67%+ .69% .70%
Ratio of Net Investment Income
to Average Net Assets ..... 4.23%* 2.47% 1.80% 1.90% 2.18% 3.08% 4.88% 5.57%+ 4.16%+ 3.32% 4.07%
Portfolio Turnover Rate ...... 22.96% 79.32% 66.55% 48.78% 41.06% 47.89% 43.41% 71.54% 89.67% 77.72% 122.30%
Average Commission
Per Share*** .............. $ .040 -- -- -- -- -- -- -- -- -- --
</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 .67% and 5.55% in 1989 and .74% and
4.09% in 1988.
19
<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
