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 Qualified 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 Qualified 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
QUALIFIED
FUND
[LOGO]
ANNUAL
REPORT
December 31, 1995
[LOGO]
<PAGE>
Mutual Qualified Fund
Yearly Performance
Total Return*
-------------
1980 ........................................................... 9.20%
1981 ........................................................... 22.35%
1982 ........................................................... 15.36%
1983 ........................................................... 34.54%
1984 ........................................................... 14.71%
1985 ........................................................... 25.16%
1986 ........................................................... 17.51%
1987 ........................................................... 7.72%
1988 ........................................................... 30.15%
1989 ........................................................... 14.44%
1990 ........................................................... 10.12%
1991 ........................................................... 21.13%
1992 ........................................................... 22.70%
1993 ........................................................... 22.71%
1994 ........................................................... 5.73%
1995 ........................................................... 26.60%
- --------------------------------------------------------------------------------
Comparison of Changes in Value of $10,000 Investment in
Mutual Qualified Fund
The S&P 500 and The Lipper Growth and Income Funds Average
- --------------------------------------------------------------------------------
[The following table was presented as a line graph in the printed document]
- -------------------------------------
AVERAGE ANNUAL TOTAL RETURN*
1 Year 5 Year 10 Year
26.60% 19.54% 15.26%
- -------------------------------------
Lipper Growth
Mutual Qualified S&P 500 & Income Funds Average
---------------- ------- ----------------------
'85 10000 10000 10000
'86 11751 11867 11636
'87 12658 12490 11858
'88 16475 14565 13752
'89 18854 19180 17013
'90 16946 18584 16279
'91 20526 24246 21026
'92 25186 26094 22896
'93 30905 28724 25561
'94 32676 29103 25320
'95 41368 40040 33288
- --------------------------------------------------------------------------------
Portfolio manager Michael F. Price has been responsible for the day-to-day
management of the Fund for more than five years.
* Total Return and Average Annual 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.
- --------------------------------------------------------------------------------
<PAGE>
MUTUAL SERIES FUND INC.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
February 20, 1996
TO THE SHAREHOLDERS OF
MUTUAL QUALIFIED FUND:
Mutual Qualified's performance in 1995 was in absolute terms one of its
best years since the Fund's inception in 1980. The Fund appreciated 26.6% over
the year with cash balances averaging about 21% of assets. Given the
extraordinary gains in broader market indices such as the S&P 500, our relative
performance certainly lagged, but that is not unexpected in this kind of a
market. Our mix of "cheap stocks" trading at substantial discounts to their net
asset value, securities of companies involved in corporate mergers, acquisitions
and spinoffs, as well as distressed/bankruptcy investments is less linked to the
market movements generally than to the specifics of each particular investment.
As we do not profess to predict market movements, we will not sacrifice capital
preservation in the hope for highly speculative capital appreciation. The
portfolio is designed for bad markets as well as good, and we will clearly
sacrifice some upside potential in exchange for downside protection.
One of the highlights for us in 1995 was the investment in Chase Manhattan
Bank. Early in the year our senior banking analyst Ray Garea identified Chase as
a substantially undervalued stock at $35 per share with component parts and
"hidden assets" worth twice the stock price. At the same time several other
financial institutions were demonstrating the viability of monetizing these
kinds of assets through either sales or spinoffs in a tax efficient manner. With
firm conviction in the values and of a way for Chase to achieve them, the Fund
accumulated its largest dollar position ever in a single stock and expressed its
views to management over the course of several months. Although Chase ultimately
chose a somewhat different course than we originally expected in its effort to
enhance shareholder values, i.e. through a merger with Chemical Bank, we have
been fully supportive of this approach and very much like the prospects for the
combined Chase-Chemical entity.
Although the Fund has received considerable media attention from the Chase
investment, it is important to distinguish between the elements of this
investment that are typical for Mutual and those that are quite atypical. As a
cheap stock trading at a large discount to its intrinsic value, Chase was a
"bread and butter" investment for the Fund. What was unusual was the public
persona of this investment and the incorrect perception that the Fund may have
had some interest in taking control of Chase. The vast majority of our work is
completely out of the public eye, and we know that we are investors, not
managers or control players. We have positive, productive relationships with
3
<PAGE>
virtually all managements of companies in which we invest, and we believe that
these managements respect and appreciate our involvement.
A more typical example of Mutual's approach involves US West, a regional
Bell operating company with extensive cable and cellular interests. In 1994,
senior analyst Larry Sondike, who follows telecommunications companies for us,
concluded that the stock market was largely ignoring the high growth, low
current earning cable and cellular businesses. Over a two year period Mutual
accumulated a very significant position in the stock, in the expectation that
over time the market would give due credit to all the parts of US West. We also
expressed our views to management concerning our perception of the values and
various ways to highlight them. In November of 1995, the company announced that
it would distribute to shareholders a separate share of the cable and cellular
interests in an entity now called US West, Inc.-Media Group. The sum of the two
pieces of US West provided close to a 60% return to the company's shareholders
last year. We continue to like US West Media Group and believe the stock has
significant upside from its current trading price of $21 per share.
The growth in our trading and research personnel has provided a full
pipeline of ideas that permits us to manage an increasing pool of assets with
the same discipline and investment philosophy that we have always utilized. One
of our senior analysts, Robert Friedman, recently moved to London, reflecting
our increased focus on Europe. Rob's work is complemented by several analysts
and traders based here who also spend most of their time on overseas
investments. Bull markets do not make it easier for us to find good ideas, but
our research and trading capabilities have never been better.
Additionally, we have significantly increased our shareholder service
personnel as well as the physical space and computer capabilities of our office
facility. We believe that these changes will enable us to serve you better.
Sincerely,
MICHAEL F. PRICE, President
4
<PAGE>
MUTUAL QUALIFIED FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1995
Number Value
of Shares (Note A)
----------- -------------
COMMON STOCK & OTHER EQUITY INTERESTS (69.22%)
Aerospace (2.81%)
*Hexcel Corp. ........................... 833,907 $ 8,443,308
*Litton Industries, Inc. ................ 517,400 23,024,300
Lockheed Martin Corp. .................. 237,000 18,723,000
Loral Corp. ............................ 284,000 10,046,500
McDonnell Douglas Corp. ................ 261,000 24,012,000
-------------
84,249,108
-------------
Banking (6.99%)
Banco Central Hispano-
Americano, SA ........................ 352,700 7,129,058
Bay View Capital Corp. ................. 96,800 2,758,800
Chase Manhattan Corp. .................. 2,394,800 145,184,750
Chemical Banking Corp. ................. 414,000 24,322,500
*Dime Bancorp Inc. ...................... 762,800 8,867,550
Downey Financial Corp. ................. 256,725 5,615,859
*Farmers & Mechanics Bank ............... 40,219 884,818
First Interstate Bancorp ............... 45,900 6,265,350
*Glendale Federal Bank, FSB ............. 62,457 1,092,997
Grove Bank for Savings ................. 17,000 420,750
(A)*Imperial Thrift & Loan Association ..... 375,000 4,593,750
*Primary Bank ........................... 23,417 295,640
*Standard Financial, Inc. ............... 11,842 173,189
Wells Fargo & Company .................. 9,800 2,116,800
-------------
209,721,811
-------------
Communications (2.89%)
*Associated Group Inc., Class A ......... 67,225 1,268,872
*Associated Group Inc., Class B ......... 67,225 1,277,275
Sprint Corp. ........................... 1,349,600 53,815,300
Telephone & Data Systems, Inc. ......... 768,500 30,355,750
-------------
86,717,197
-------------
Computer & Electronic Equipment (0.18%)
Advanced Micro Devices, Inc. ........... 266,700 4,400,550
*NexGen, Inc. ........................... 69,700 888,675
*Unitrode Corp., Warrants ............... 4,569 17,134
-------------
5,306,359
-------------
Conglomerates (7.18%)
Alexander & Baldwin, Inc. .............. 143,200 3,293,600
*Berkshire Hathaway Inc. ................ 425 13,642,500
Forvaltnings AB Ratos, B Shares ........ 426,200 7,076,755
*Griffon Corp. .......................... 175,100 1,575,900
Harcourt General Inc. .................. 75,500 3,161,562
Incentive AB, A Shares ................. 444,800 19,383,011
Incentive AB, B Shares ................. 423,000 18,433,034
Investor AB, A Shares .................. 934,900 30,765,767
Investor AB, B Shares .................. 2,203,900 72,526,122
Philips Electronics NV ................. 554,000 19,982,587
Philips Electronics NV, ADR ............ 651,900 23,386,912
*Philips Electronics NV, Warrants ....... 155,000 2,419,465
-------------
215,647,215
-------------
Construction (0.47%)
Lone Star Industries, Inc. ............. 27,116 677,900
*Manville Corp. ......................... 549,081 7,206,688
*Manville Corp., Warrants ............... 103,483 400,997
Noland Co. ............................. 17,500 315,000
Puerto Rican Cement Co., Inc. .......... 75,900 2,514,187
*USG Corporation ........................ 103,600 3,108,000
-------------
14,222,772
-------------
Consumer Products & Services (10.56%)
BIC SA ................................. 192,900 19,578,967
CarnaudMetalbox ........................ 308,600 14,088,739
Corning Inc. ........................... 656,600 21,011,200
Dial Corp. ............................. 735,000 21,774,375
Fab Industries, Inc. ................... 109,800 3,499,875
Jostens, Inc. .......................... 729,600 17,692,800
*KinderCare Learning Centers, Inc. ...... 78,464 990,608
Pacific Dunlop Ltd. .................... 24,069,454 56,314,400
Premark International, Inc. ............ 235,900 11,942,437
RJR Nabisco Holdings Corp. ............. 2,526,683 78,011,338
*Ranger Industries, Inc. ................ 24,483 2,847
Rothmans Inc. .......................... 76,600 6,400,410
(A)(R)Sunbeam Corp. .......................... 4,800,554 62,227,181
*U.S. Industries, Inc. .................. 190,300 3,496,762
-------------
317,031,939
-------------
5
<PAGE>
Number Value
of Shares (Note A)
----------- -------------
Entertainment & Media (3.95%)
BHC Communications Inc. ................ 36,341 $ 3,434,224
*Cablevision Systems Corp. .............. 131,100 7,112,175
Capital Cities Co./ABC, Inc. ........... 7,500 925,312
*Chris Craft Industries, Inc. ........... 142,116 6,146,517
Comcast Corp., Class A ................. 45,000 793,125
Comcast Corp., Class A,
Special Non-Voting .................... 214,200 3,895,762
*ITT Corp. .............................. 65,500 3,471,500
*Tele-Communications, Inc.,
Class A, - TCI Group .................. 567,000 11,269,125
Todd A.O. Corp., Class A ............... 191,774 1,486,248
*United Television, Inc. ................ 31,600 2,851,900
*US West, Inc. - Media Group ............ 4,068,100 77,293,900
-------------
118,679,788
-------------
Financial Services (3.95%)
Bear Stearns Companies, Inc. ........... 347,700 6,910,537
Capital One Financial Corp. ............ 628,000 14,993,500
Dean Witter, Discover & Co. ............ 575,500 27,048,500
Finova Group Inc. ...................... 558,100 26,928,325
First USA Inc. ......................... 137,400 6,097,125
Fund American Enterprise
Holdings, Inc. ........................ 242,976 18,101,712
Lehman Brothers Holdings Inc. .......... 716,800 15,232,000
Liberty Financial Companies Inc. ....... 102,147 3,089,947
-------------
118,401,646
-------------
Food & Beverages (3.72%)
Brown-Forman Corp., Class B ............ 164,800 6,015,200
Dole Food Co., Inc. .................... 149,000 5,215,000
*FoodBrands America Inc. ................ 146,016 1,752,192
Genesee Corp., Class A ................. 7,000 308,000
Genesee Corp., Class B ................. 45,341 1,995,004
Heineken Holding NV .................... 52,000 8,504,975
Hormel Foods Corp. ..................... 246,000 6,057,750
Lindt & Spruengli AG,
Participation Certificate ............. 4,445 6,471,057
Lindt & Spruengli AG, Registered ....... 230 3,846,620
Nestle SA, Registered .................. 6,656 7,359,667
Nutricia Verenigde Bedrijven NV ........ 246,100 19,865,535
Seaboard Corp. ......................... 10,100 2,715,637
Seagram Company Ltd. ................... 304,000 10,526,000
(A)Van Melle NV ........................... 451,768 30,904,527
-------------
111,537,164
-------------
Healthcare (6.11%)
*Beverly Enterprises, Inc. .............. 448,500 4,765,312
Cordis Corp. ........................... 70,200 7,055,100
*FHP International Corp. ................ 1,020,200 29,075,700
*Health Systems International, Inc. ..... 300,500 9,653,562
*Humana, Inc. ........................... 805,800 22,058,775
Instrumentarium Group, Series A ........ 131,700 3,411,682
Instrumentarium Group, Series B ........ 145,800 3,743,518
(R)*Kendall International, Inc.,
Residual Ownership Certificates ....... 444 6,864
*Laboratory Corp. of America ............ 825,576 7,739,775
*Laboratory Corp. of America,
Warrants .............................. 144,863 99,593
*Mid Atlantic Medical
Services, Inc. ........................ 721,800 17,503,650
*Perrigo Co. ............................ 519,000 6,163,125
Pharmacia & Upjohn Inc. ................ 176,000 6,820,000
*Physician Corp. of America ............. 918,500 15,614,500
*Tenet HealthCare Corp. ................. 2,270,600 47,114,950
*Wellpoint Health Networks Inc. ......... 79,200 2,544,300
-------------
183,370,406
-------------
Industrial (2.47%)
Bayer AG ............................... 46,300 12,265,636
CBI Industries, Inc. ................... 286,900 9,431,837
*Crown Cork & Seal Inc. ................. 133,800 5,586,150
Greif Brothers Corp. ................... 78,800 2,117,750
ITT Industries Inc. .................... 216,700 5,200,800
(A)(R)*Lancer Industries, Inc., Class B ....... 4 51,286
Volvo AB, B Shares ..................... 1,731,200 35,378,923
Westinghouse Electric Corporation ...... 250,000 4,125,000
-------------
74,157,382
-------------
Insurance (5.07%)
*Alleghany Corp. ........................ 81,132 16,064,136
Allmerica Property & Casualty
Companies, Inc. ....................... 369,400 9,973,800
Allstate Corp. ......................... 352,952 14,515,151
Argonaut Group, Inc. ................... 89,100 2,895,750
Chubb Corp. ............................ 13,500 1,306,125
Enhance Financial Services
Group, Inc. ........................... 291,000 7,747,875
Financial Security Assurance
Holdings Ltd. ......................... 212,900 5,295,887
Home Beneficial Corp., Class B ......... 255,600 6,134,400
6
<PAGE>
Number Value
of Shares (Note A)
----------- -------------
*ITT Hartford Group Inc. ................ 265,700 $ 12,853,237
Internationale Nederlanden
Groep NV .............................. 88,628 5,908,533
Kansas City Life Insurance Co. ......... 29,890 1,569,225
Koelnische Rueckversicherungs AG ....... 6,063 4,131,947
Koelnische Rueckversicherungs
AG, Junge ............................. 1,100 730,528
MBIA Inc. .............................. 13,400 1,005,000
Old Republic International Corp. ....... 524,100 18,605,550
*Provident Companies, Inc. .............. 145,600 4,932,200
Providian Corp. ........................ 232,000 9,454,000
Selective Insurance Group, Inc. ........ 135,400 4,806,700
Torchmark Corp. ........................ 366,900 16,602,225
*20th Century Industries ................ 127,300 2,530,087
Unitrin, Inc. .......................... 109,700 5,265,600
-------------
152,327,956
-------------
Investment Companies (0.32%)
G.T. Chile Growth Fund Ltd. ............ 83,100 3,365,550
New Germany Fund Inc. .................. 548,000 6,370,500
-------------
9,736,050
-------------
Metals (0.27%)
ASARCO Inc. ............................ 62,000 1,984,000
*Bayou Steel Corp. ...................... 169,000 654,875
Cyprus Amax Minerals Co. ............... 74,000 1,933,250
*Kreisler Manufacturing Corp. ........... 17,660 83,885
Oregon Steel Mills, Inc. ............... 124,000 1,736,000
Pitt-Des Moines Inc. ................... 46,600 1,805,750
-------------
8,197,760
-------------
Natural Resources (2.36%)
Amerada Hess Corp. ..................... 80,000 4,240,000
*Crown Central Petroleum Corp.,
Class A ............................... 71,900 1,060,525
*Crown Central Petroleum Corp.,
Class B ............................... 228,600 3,343,275
Helikopter Service A/S ................. 273,300 3,338,495
Imperial Oil Ltd. ...................... 421,400 15,223,075
Royal Dutch Petroleum Co. .............. 96,200 13,576,225
Transocean Drilling AS ................. 1,046,450 18,061,010
Union Texas Petroleum
Holdings, Inc. ........................ 619,900 12,010,562
-------------
70,853,167
-------------
Printing & Publishing (2.15%)
Belo (A.H.) Corp. ...................... 174,400 6,060,400
Daily Mail & General Trust PLC,
Class A ............................... 949,800 17,012,583
Daily Mail & General Trust PLC,
Ordinary .............................. 38,500 779,161
De Telegraaf Holding NV ................ 121,453 17,069,887
Dow Jones & Co., Inc. .................. 217,500 8,672,812
Gannett Inc. ........................... 101,400 6,223,425
Houghton Mifflin Co. ................... 204,900 8,810,700
-------------
64,628,968
-------------
Real Estate (3.05%)
*Al-Zar Ltd. ............................ 59 20,650
*Alexander's Inc. ....................... 134,390 9,340,105
*Cadillac Fairview Corp. ................ 1,066,639 11,531,443
*Cadillac Fairview Corp., Warrants ...... 126,360 347,308
*Castle & Cooke Inc. .................... 49,666 831,905
*E & J Properties Ltd., Units ........... 5,600 10,150
(A)(R)*MSCW Investors II, L.L.C ............... 23,562,000 36,539,973
St. Joe Paper Co. ...................... 85,800 4,719,000
(A)(R) S.H. Mortgage Acquisition L.L.C ........ 28,134,981 28,134,981
-------------
91,475,515
-------------
Retail (3.35%)
American Stores Co. .................... 464,500 12,425,375
CML Group, Inc. ........................ 431,700 2,212,463
*Caldor Corp. ........................... 777,600 2,527,200
Delchamps, Inc. ........................ 62,700 1,277,512
Melville Corp. ......................... 381,000 11,715,750
Morrison Restaurants Inc. .............. 640,600 8,968,400
*Revco D.S., Inc. ....................... 90,000 2,542,500
Sears PLC .............................. 11,800,000 19,031,429
Sears, Roebuck & Co. ................... 676,756 26,393,484
*Service Merchandise Co., Inc. .......... 2,007,000 10,035,000
*The Vons Companies, Inc. ............... 123,000 3,474,750
-------------
100,603,863
-------------
Transportation (1.37%)
Arkansas Best Corp. .................... 562,300 4,428,113
*Canadian National Railway Co. .......... 110,000 1,650,000
Florida East Coast
Industries, Inc. ...................... 169,700 11,582,025
*Southern Pacific Rail Corp. ............ 732,721 17,585,304
XTRA Corp. ............................. 140,200 5,958,500
-------------
41,203,942
-------------
TOTAL COMMON STOCK &
OTHER EQUITY INTERESTS ................ 2,078,070,008
-------------
7
<PAGE>
Number
of Shares
or Principal Value
Amount (Note A)
----------- -------------
PREFERRED STOCK (2.09%)
*Columbia Gas System, Inc.,
Dividend Enhanced Conv. Stock ......... 172,002 $ 6,923,080
*Columbia Gas System, Inc., Pfd. ........ 280,847 6,915,857
*Gentra Inc., Priority Pfd. A ........... 23,104 368,316
*Gentra Inc., Pfd. G .................... 74,000 766,116
*Gentra Inc., Pfd. J .................... 96,000 1,020,266
(R)*Interlake Corp., 9.00%, Series A3
Conv. Pfd. ............................ 1,050 579,810
(A)(R) Lancer Industries, Inc.,
Series C Pfd. ........................ 205,128 18,461,520
Manville Corp., Cum. Pfd. B ............ 258,896 6,504,762
RJR Nabisco Holdings Corp.,
Class C Pfd. .......................... 2,191,000 13,967,625
Wang Laboratories, Inc.,
11.00%, Pfd. .......................... 299,154 7,104,908
*Wundies Industries Inc.,
11.25%, Cum. Pfd. ..................... 12,168 22,055
-------------
62,634,315
-------------
CORPORATE BONDS AND NOTES (0.61%)
Cadillac Fairview Corp.,
12.00%, 7/31/05 ...................CAD 131,926 90,410
*Gentra Inc., 7.50%, 12/31/01 .......CAD 9,900,000 7,909,261
Home Holdings Inc.,
8.625%, 12/15/03 ......................$12,365,000 9,582,875
Manville Corp., 9.00%, 12/31/03 ........ 774,718 774,718
-------------
18,357,264
-------------
BONDS AND NOTES IN REORGANIZATION (2.77%)
*Adams County CO, Industrial Dev.
Auth., 9.00%, 11/01/96 ................ 7,201,000 738,103
*Ames Department Stores, Inc.,
Trade Claims .......................... 4,002,809 40,026
*Caldor Corp., Trade Claim .............. 8,401,001 5,040,601
*Dow Corning Corp., Bank Debt ........... 2,850,000 2,337,000
*Dow Corning Corp., Swap ................ 5,833,333 4,725,000
*Dow Corning Corp.,
8.15%, 10/15/29 ....................... 5,150,000 4,287,375
*Dow Corning Corp.,
9.30%, 1/27/98 ........................ 1,835,000 1,573,513
*Dow Corning Corp.,
9.375%, 2/01/08 ....................... 625,000 540,625
El Paso Electric Company,
Bank Claim ............................ 2,725,000 2,888,500
El Paso Electric Company,
4.625%, 2/01/92 ....................... 1,445,000 1,491,963
El Paso Electric Company,
6.75%, 5/01/98 ........................ 1,500,000 1,560,000
El Paso Funding Corp.,
10.375% 1/02/11 ....................... 1,250,000 850,000
El Paso Electric Company,
11.10%, 12/15/01 ...................... 12,750,000 13,642,500
El Paso Electric Company,
11.58%, 12/01/97 ...................... 1,818,000 1,963,440
El Paso Electric Company,
12.02%, 12/15/99 ...................... 4,250,000 4,584,688
El Paso Electric Company,
12.63%, 12/01/05 ...................... 18,800,000 20,492,000
El Paso Electric Company,
13.25%, 5/01/94 ....................... 1,448,000 1,607,280
El Paso TX Housing Finance
Corp., 8.88%, 10/15/96 ................ 3,565,000 338,675
*Lomas Financial Corp.,
9.75%, 10/01/97 ....................... 7,500,000 3,825,000
*Lomas Mortgage USA,
10.25%, 10/01/02 ...................... 2,450,000 1,249,500
*Louisiana Agriculture Finance
Authority, 8.25%, 10/01/96 ............ 1,600,000 156,000
*Louisiana Agriculture Finance
Authority, 8.80%, 10/01/96 ............ 750,000 73,125
*Louisiana Housing Finance
Authority, 8.61%, 8/01/96 ............. 6,150,000 599,625
*Maxicare Health Plans, Inc.,
Bank Note ............................. 124,847 48,441
*Metallurg Inc., Bank Claim ............. 6,675,644 4,205,656
*Metallurg Inc., Bank Claim #2 .......... 2,304,362 1,088,811
*Metallurg Inc., Trade Claim ............ 642,169 115,590
*Nebraska Investment Finance
Auth., 8.34%, 11/01/93 ................ 1,000,000 97,500
Tiphook Finance Corp.,
8.00%, 3/15/00 ........................ 3,500,000 2,590,000
Tiphook Finance Corp.,
Lease Claim ....................... GBP 227,901 291,579
-------------
83,042,116
-------------
8
<PAGE>
Number
of Shares
or Principal Value
Amount (Note A)
----------- -------------
COMPANIES IN LIQUIDATION (0.11%)
*Aerospace Creditors
Liquidating Trust,
Certificates of Beneficial Interest ... 126,677 $ 435,452
*Americana Hotels & Realty Corp. ........ 143,000 464,750
*City Investing Co.,
Liquidating Trust ..................... 1,579,485 1,480,767
*MBO Properties Inc. .................... 120,917 302,292
*MCorp Financial Trust,
Claim Units ........................... 27,617 381,841
*MCorp Trust, Claim Units ............... 27,611 80,562
(A)*Management Assistance, Inc.,
Liquidating Trust ..................... 575,717 233,914
*San Juan Racing Association, Inc. ...... 105,800 57,132
-------------
3,436,710
-------------
UNITED STATES GOVERNMENT AND
GOVERNMENT AGENCY OBLIGATIONS (24.70%)
U.S. Government Agency Obligations (3.66%)
Federal Home Loan Bank System,
6.850%, 2/28/96 ......................$15,800,000 15,838,046
Federal Home Loan Mortgage Corp.,
5.170%, 3/24/97 ...................... 6,000,000 5,982,936
Federal National Mortgage Association,
Floating Rate, 2/16/96 ............... 11,470,000 11,465,412
6.860%, 2/28/96 ...................... 10,000,000 10,031,250
5.830%, 6/06/96 ...................... 4,600,000 4,611,160
5.500%, 6/12/96 ...................... 2,700,000 2,702,927
5.640%, 10/02/96 ..................... 17,300,000 17,344,029
5.410%, 12/06/96 ..................... 15,000,000 15,009,383
5.310%, 12/11/96 ..................... 7,300,000 7,302,281
6.140%, 7/29/97 ...................... 12,500,000 12,516,650
Tennessee Valley Authority,
6.000%, 1/15/97 ...................... 7,000,000 7,042,497
-------------
109,846,571
-------------
U.S. Treasury Notes (1.34%)
6.875%, 10/31/96 ....................... 29,800,000 30,200,393
7.250%, 11/30/96 ....................... 10,000,000 10,178,120
-------------
40,378,513
-------------
Principal
Amount
---------
U.S. Government Agency Discount Notes (18.43%)
Federal Home Loan Bank System,
5.600%, 1/02/96 ...................... $8,200,000 8,198,723
5.790%, 1/16/96 ...................... 3,200,000 3,192,280
5.530%, 2/12/96 ...................... 5,000,000 4,967,741
5.540%, 2/22/96 ...................... 4,600,000 4,563,190
5.420%, 3/18/96 ...................... 5,600,000 5,533,763
5.330%, 6/06/96 ...................... 10,300,000 10,061,926
Federal Home Loan Mortgage Corp.,
5.550%, 2/02/96 ...................... 10,000,000 9,950,667
5.700%, 4/01/96 ...................... 9,500,000 9,371,547
5.725%, 7/25/96 ...................... 12,500,000 12,499,725
5.730%, 7/25/96 ...................... 12,500,000 12,500,450
6.140%, 8/01/97 ...................... 10,000,000 9,994,600
Federal National Mortgage Association,
5.500%, 1/09/96 ...................... 700,000 699,144
5.430%, 1/16/96 ...................... 3,300,000 3,292,534
5.530%, 2/13/96 ...................... 4,300,000 4,271,597
5.440%, 3/08/96 ...................... 6,800,000 6,730,014
5.420%, 3/12/96 ...................... 12,400,000 12,268,424
5.420%, 3/13/96 ...................... 18,100,000 17,899,814
5.440%, 3/13/96 ...................... 4,500,000 4,450,230
5.440%, 3/14/96 ...................... 4,300,000 4,252,218
5.420%, 4/05/96 ...................... 6,800,000 6,704,718
5.420%, 4/09/96 ...................... 10,900,000 10,735,138
5.350%, 4/11/96 ...................... 14,500,000 14,276,251
5.630%, 4/12/96 ...................... 6,000,000 5,906,502
5.910%, 4/12/96 ...................... 1,700,000 1,673,509
5.380%, 4/16/96 ...................... 9,900,000 9,739,679
5.360%, 4/19/96 ...................... 10,200,000 10,030,139
5.330%, 4/22/96 ...................... 10,800,000 10,615,201
5.740%, 5/02/96 ...................... 11,700,000 11,485,890
5.430%, 5/03/96 ...................... 2,600,000 2,552,030
5.260%, 5/07/96 ...................... 24,100,000 23,640,895
5.310%, 5/07/96 ...................... 9,600,000 9,417,120
5.360%, 5/08/96 ...................... 1,500,000 1,471,200
5.400%, 5/09/96 ...................... 3,500,000 3,432,275
5.250%, 5/15/96 ...................... 18,000,000 17,635,500
5.610%, 5/17/96 ...................... 5,500,000 5,386,975
5.320%, 5/20/96 ...................... 2,900,000 2,839,100
5.575%, 5/24/96 ...................... 13,300,000 13,012,720
9
<PAGE>
Number
of Shares
or Principal Value
Amount (Note A)
----------- -------------
5.320%, 6/03/96 ......................$15,800,000 $ 15,435,020
5.280%, 6/04/96 ...................... 11,800,000 11,530,736
5.190%, 6/10/96 ...................... 32,800,000 32,022,542
5.260%, 6/12/96 ...................... 25,000,000 24,404,600
5.260%, 7/02/96 ...................... 1,500,000 1,459,664
5.200%, 7/05/96 ...................... 19,100,000 18,577,959
5.190%, 7/15/96 ...................... 18,000,000 17,483,544
5.140%, 7/26/96 ...................... 8,600,000 8,343,359
5.290%, 7/26/96 ...................... 10,500,000 10,186,659
5.240%, 8/05/96 ...................... 19,400,000 18,783,740
5.580%, 8/09/96 ...................... 8,300,000 8,031,478
5.160%, 8/15/96 ...................... 8,000,000 7,734,160
5.500%, 8/15/96 ...................... 2,000,000 1,933,540
5.240%, 8/30/96 ...................... 17,800,000 17,173,013
5.220%, 9/03/96 ...................... 12,500,000 12,052,413
5.160%, 9/19/96 ...................... 6,800,000 6,537,710
5.200%, 9/23/96 ...................... 12,200,000 11,722,236
5.240%, 9/30/96 ...................... 6,100,000 5,854,829
5.160%, 11/18/96 ..................... 6,700,000 6,382,380
5.190%, 11/18/96 ..................... 13,000,000 12,383,722
-------------
553,286,733
-------------
U.S. Treasury Bills (1.27%)
6.590%, 1/11/96 ......................$ 4,100,000 $ 4,092,495
5.440%, 3/07/96 ...................... 4,900,000 4,856,610
5.340%, 4/04/96 ...................... 4,500,000 4,441,955
5.350%, 4/04/96 ...................... 1,200,000 1,184,521
5.340%, 8/22/96 ...................... 6,000,000 5,804,610
5.285%, 9/19/96 ...................... 14,400,000 13,878,101
5.290%, 9/19/96 ...................... 3,900,000 3,758,652
--------------
38,016,944
--------------
TOTAL INVESTMENTS IN
SECURITIES (99.50%) .................... $2,987,069,174
==============
SECURITIES SOLD SHORT (0.58%)
*Disney (Walt) Co. ...................... 7,500 $ 442,500
*First Bank System, Inc. ................ 59,000 2,927,875
*Pacific Telesis Group .................. 107,100 3,601,238
*Paine Webber Group Inc. ................ 34,200 684,000
*Rite Aid Corp. ......................... 40,500 1,387,125
*Roadway Services Inc. .................. 61,000 2,981,375
*Union Pacific Resources Group Inc. ..... 40,500 5,034,400
*United States Cellular Corp. ........... 13,000 438,750
--------------
$ 17,497,263
==============
Number
of Contracts
------------
OPTIONS WRITTEN (0.00%)
*First Bank System, Inc.,
January/50/Put ........................ 65 $ 8,531
==============
* 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.
AUD -- Australian dollar
GBP -- British pound
CAD -- Canadian dollar
NLG -- Dutch guilder
FIM -- Finnish markka
FRF -- French franc
DEM -- German Deutsche mark
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 .............................. 79.0%
Sweden ..................................... 6.1
Netherlands ................................ 4.7
United Kingdom ............................. 2.6
Australia .................................. 1.9
Canada ..................................... 1.9
France ..................................... 1.1
Other (individually less than 1%) .......... 2.7
-----
Total ...................................... 100.0%
=====
10
<PAGE>
MUTUAL QUALIFIED FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments in Securities, at Value
Unaffiliated Issuers (Cost $2,466,290,088) ................................. $2,805,922,042
Controlled Affiliated Issuers (Cost $64,396,899) ........................... 64,674,954
Non Controlled Affiliated Issuers (Cost $51,607,018) ....................... 116,472,178 $2,987,069,174
--------------
Cash ............................................................................................. 1,560,119
Receivables:
Investment Securities Sold .................................................................. 41,968,257
Capital Stock Subscribed .................................................................... 4,897,972
Dividends ................................................................................... 2,991,655
Interest .................................................................................... 2,896,224
Deposits with Brokers for Securities Sold Short .................................................. 13,009,893
--------------
TOTAL ASSETS ............................................................................ 3,054,393,294
--------------
LIABILITIES
Payables:
Investment Securities Purchased ............................................................. 19,830,712
Net Payable for Foreign Currency Exchange Contracts ......................................... 8,483,177
Investment Advisory Fee ..................................................................... 1,461,971
Capital Stock Repurchased ................................................................... 710,589
Accrued Expenses and Other Liabilities ...................................................... 4,268,256
Securities Sold Short, at Value (Proceeds Receivable $16,994,391) ................................ 17,497,263
Outstanding Options Written, at Value (Premium Received $8,173) .................................. 8,531
--------------
TOTAL LIABILITIES ....................................................................... 52,260,499
--------------
NET ASSETS APPLICABLE TO OUTSTANDING CAPITAL STOCK ............................................... $3,002,132,795
==============
NUMBER OF SHARES OUTSTANDING
(Authorized-- 200,000,000 Shares, $.001 Par Value) .......................................... 100,959,394
==============
NET ASSET VALUE PER SHARE
(Offering and Redemption Price Per Share) ................................................... $ 29.74
==============
COMPOSITION OF NET ASSETS
Paid In Capital .................................................................................. $2,509,616,627
Distributions in Excess of Net Investment Income ................................................. (5,929,311)
Accumulated Net Realized Gain on Investments and Foreign Currency Transactions ................... 102,648,367
Net Unrealized Appreciation of Investments, Securities Sold Short and Options Written ............ 404,271,939
Net Unrealized Depreciation of Foreign Currency Exchange Contracts and Dividends ................. (8,474,827)
--------------
TOTAL NET ASSETS ........................................................................ $3,002,132,795
==============
</TABLE>
See notes to financial statements.
11
<PAGE>
MUTUAL QUALIFIED FUND
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Income:
Interest ...................................................................... $ 46,267,450
Dividends-- Unaffiliated Issuers
(Net of Foreign Withholding -- $1,117,138) .................................. 32,157,348
Dividends -- Non Controlled Affiliated Issuers
(Net of Foreign Withholding-- $24,655) ...................................... 2,882,164
Other Income .................................................................. 2,353,842
------------
TOTAL INCOME ....................................................................... $ 83,660,804
Expenses:
Investment Advisory Fee ....................................................... 14,607,723
Shareholder Servicing Costs ................................................... 1,307,657
Administrative ................................................................ 720,315
Custodian Fees ................................................................ 350,920
Registration and Filing Fees .................................................. 132,657
Shareholder Reports ........................................................... 125,046
Legal Fees .................................................................... 75,118
Insurance ..................................................................... 63,149
Auditing Fees ................................................................. 62,924
Directors' Fees and Expenses .................................................. 39,148
Miscellaneous ................................................................. 43,066
------------
TOTAL EXPENSES ..................................................................... 17,527,723
------------
NET INVESTMENT INCOME ................................................. 66,133,081
------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net Realized Gain on Investments and Foreign Currency Transactions
in Unaffiliated Issuers ..................................................... 317,162,868
Net Realized Gain on Investments in Controlled Affiliated Issuers ............. 155,194
Net Realized Gain on Securities Sold Short .................................... 9,101,030
Net Realized Gain on Options Written .......................................... 770,070
Change in Unrealized Appreciation/(Depreciation) of Investments,
Securities Sold Short, Options Written and Foreign Currency Transactions .... 156,169,968
------------
NET GAIN ON INVESTMENTS ............................................... 483,359,130
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ......................................... $549,492,211
============
</TABLE>
See notes to financial statements.
12
<PAGE>
MUTUAL QUALIFIED FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994
-------------- --------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net Investment Income ..................................................... $ 66,133,081 $ 31,143,270
Net Realized Gain on Investments and Foreign Currency Transactions ........ 327,189,162 133,486,286
Change in Unrealized Appreciation/(Depreciation) of Investments ........... 156,169,968 (77,996,839)
-------------- --------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS .................................................... 549,492,211 86,632,717
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net Investment Income ..................................................... (58,854,226) (26,959,574)
Net Realized Gain on Investments .......................................... (289,682,676) (89,375,043)
-------------- --------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS ................................... (348,536,902) (116,334,617)
-------------- --------------
CAPITAL STOCK TRANSACTIONS ..................................................... 1,009,236,508 310,627,877
-------------- --------------
NET INCREASE IN NET ASSETS ..................................................... 1,210,191,817 280,925,977
NET ASSETS:
Beginning of Year ......................................................... 1,791,940,978 1,511,015,001
-------------- --------------
End of Year -- Including Distributions in Excess of Net Investment
Income of $5,929,311 and Undistributed Net Investment Income of
$481,077, respectively ................................................... $3,002,132,795 $1,791,940,978
============== ==============
</TABLE>
See notes to financial statements.
13
<PAGE>
MUTUAL QUALIFIED FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE A -- SIGNIFICANT ACCOUNTING POLICIES
Mutual Qualified 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 Qualified Fund, Mutual Shares
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 Qualified 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
policies are in conformity with generally accepted accounting principles.
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.
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.
14
<PAGE>
MUTUAL QUALIFIED FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
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. Differences in the
recognition or classification of income between the financial statements and tax
earnings and profits which result in temporary over-distributions for financial
statement purposes are classified as distributions in excess of net investment
income or accumulated net realized gains. During the year ended December 31,
1995, permanent book and tax differences of $13,689,243, relating to foreign
currency transactions, was reclassified from distributions in excess of net
investment income to accumulated net realized gains on investments and foreign
currency transactions. Net investment income, net realized gain, and net assets
were not affected by this change.
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 year ended December 31, 1995, the Adviser received fees of
$14,607,723 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 year ended
December 31, 1995, the Fund paid brokerage commissions totalling $640,588 to
Clearwater.
15
<PAGE>
MUTUAL QUALIFIED FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
The Fund has expense offset arrangements with certain of its service
providers. The impact of these arrangments on the Fund's total expenses
reflected in the Statement of Operations, is less than .01% of the Fund's
average daily net assets.
NOTE C -- INVESTMENT TRANSACTIONS
Purchases and proceeds from the sale of investment securities (excluding
short-term investments) for the year ended December 31, 1995 aggregated
$1,983,553,680 and $1,548,419,946, respectively.
For Federal income tax purposes, the identified cost of investments at
December 31, 1995 was $2,583,206,277. Net unrealized appreciation for all
securities at December 31, 1995, based on Federal income tax cost, amounted to
$403,862,897 consisting of aggregate gross unrealized appreciation of
$460,843,191 and aggregate gross unrealized depreciation of $56,980,294.
Transactions in options written during the year ended December 31, 1995
were as follows:
Principal
Amount or
Number of
Contracts Premium
-------- ----------
Options written ............................. 311,456 $1,034,163
Options expired ............................. (108,049) (311,845)
Options terminated in closing transactions .. (116,157) (579,513)
Options exercised ........................... (87,185) (134,632)
-------- ----------
Options outstanding at December 31, 1995 .... 65 $ 8,173
======== ==========
NOTE D -- RESTRICTED SECURITIES
A summary of the restricted securities held at December 31, 1995 follows:
Acquisition
Name of Issuer Date Value
- -------------- ----------- ------------
Common Stock & Other Equity Interests
Kendall International, Inc., Residual
Ownership Certificates ......................... 7/06/92 $ 6,864
Lancer Industries, Inc., Class B ................. 8/11/89 51,286
MSCW Investors II, L.L.C ......................... 12/27/95 36,539,973
S.H. Mortgage Acquisition L.L.C .................. 8/17/95 28,134,981
Sunbeam Corp. .................................... 2/23/90 62,227,181
Preferred Stock
Interlake Corp., 9.00%, Series A3 Conv. Pfd. ..... 6/17/92 579,810
Lancer Industries, Inc., Series C Pfd. ........... 8/11/89 18,461,520
------------
Total restricted securities: (Cost $97,682,209)
(4.86% of Net Assets) ............................ $146,001,615
============
16
<PAGE>
MUTUAL QUALIFIED FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
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 Dec. 31, Dec. 31, Jan. 1-Dec. 31
Name of Issuer: 1994 and Additions Reductions 1995 1995 1995
- ---------------------------------------- ----------------- --------------- ----------- --------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Controlled Affiliates**
MSCW Investors II, L.L.C ................. 0 23,562,000 -- 23,562,000 $ 36,539,973 --
S. H. Mortgage Acquisition L.L.C ......... 0 28,893,093 758,112 28,134,981 28,134,981 --
------------ ------------
Total Controlled Affiliates ............ $ 64,674,954 $ 0
============ ============
Non Controlled Affiliates
Imperial Thrift & Loan Association ....... 0 375,000 -- 375,000 $ 4,593,750 --
Lancer Industries, Inc., Class B ......... 4 -- -- 4 51,286 --
Lancer Industries, Inc.,
Series C Pfd. ......................... 205,128 -- -- 205,128 18,461,520 $ 2,051,280
Management Assistance, Inc.,
Liquidating Trust ..................... 575,717 -- -- 575,717 233,914 --
Sunbeam Corp. (A) ........................ 4,800,554 -- -- 4,800,554 62,227,181 190,279
Van Melle NV ............................. 443,700 8,068 -- 451,768 30,904,527 640,605
------------ ------------
Total Non Controlled Affiliates ........ $116,472,178 $ 2,882,164
============ ============
</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.
** Issuers in which the Fund owns 25% or more of the outstanding voting
securities.
(A) Received in exchange for 17,293,514 shares of Sunbeam-Oster Equities L.P.
NOTE F -- FOREIGN CURRENCY EXCHANGE CONTRACTS
At December 31, 1995, 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 76,365,633 $ 57,816,421 2/05/96 $ 56,630,081 $ 1,186,340
CAD 45,809,683 33,797,907 5/30/96 33,554,652 243,255
CHF 27,083,953 22,944,292 3/07/96 23,622,645 (678,353)
DEM 26,599,032 18,407,634 3/15/96 18,563,361 (155,727)
ESP 887,627,935 7,111,264 2/16/96 7,261,503 (150,239)
FIM 44,560,543 10,312,876 3/01/96 10,240,095 72,781
FRF 139,151,177 28,580,766 2/28/96 28,388,125 192,641
GBP 45,349,452 70,129,536 2/16/96 70,252,015 (122,479)
NLG 103,821,767 64,341,821 3/06/96 64,800,637 (458,816)
NLG 99,609,551 61,969,361 6/17/96 62,504,503 (535,142)
NOK 130,956,750 20,610,776 3/08/96 20,656,235 (45,459)
SEK 491,690,811 68,278,090 2/15/96 73,632,787 (5,354,697)
SEK 481,806,594 69,737,055 4/19/96 71,805,449 (2,068,394)
SEK 413,422,556 61,153,535 5/15/96 61,497,914 (344,379)
----------- ----------- ----------
$595,191,334 $603,410,002 $(8,218,668)
=========== =========== ===========
</TABLE>
17
<PAGE>
MUTUAL QUALIFIED FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Deliver In Exchange for Settlement Date Value Appreciation/(Depreciation)
-------------------- --------------- --------------- ------------ ---------------------------
<S> <C> <C> <C> <C> <C>
Purchases
$ 3,065,513 CAD 4,175,200 5/30/96 $ 3,058,248 $ (7,265)
5,912,500 CHF 6,715,076 3/07/96 5,856,895 (55,605)
2,384,758 DEM 3,425,712 3/15/96 2,390,791 6,033
3,155,733 FIM 13,331,760 3/01/96 3,063,663 (92,070)
151,581 NLG 243,242 3/06/96 151,820 239
8,818,048 SEK 59,100,000 4/19/96 8,807,895 (10,153)
20,289,756 SEK 135,688,325 5/15/96 20,184,068 (105,688)
---------- ---------- -----------
$43,777,889 $ 43,513,380 (264,509)
========== ========== -----------
$(8,483,177)
===========
</TABLE>
Currency type abbreviations are explained on page 10.
NOTE G -- CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1995 1994
----------------------------------------------------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ................................... 29,376,535 $ 885,069,058 12,215,260 $342,436,501
Shares issued in reinvestment of dividends .... 11,321,587 334,553,126 4,223,273 112,314,845
Shares redeemed ............................... (6,936,714) (210,385,676) (5,209,625) (144,123,469)
---------- --------------- ---------- ------------
Net Increase ............................. 33,761,408 $1,009,236,508 11,228,908 $310,627,877
========= =============== ========== ============
</TABLE>
18
<PAGE>
MUTUAL QUALIFIED FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(Selected data for a share of capital stock outstanding throughout each year)
Year Ended December 31,
-----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year $26.67 $27.00 $24.43 $21.18 $18.37 $22.21 $22.71 $19.37 $20.06 $19.15
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment Income ........... .66 .43 .38 .49 .67 1.22 1.34 .84 .77 .90
Net Gains or Losses on Securities
(realized and unrealized) 6.33 1.10 5.12 4.27 3.18 (3.45) 1.91 4.95 .86 2.42
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations 6.99 1.53 5.50 4.76 3.85 (2.23) 3.25 5.79 1.63 3.32
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment
income) ....................... .65 .43 .37 .49 .67 1.23 1.36 .83 .88 .85
Distributions (from capital gains) 3.27 1.43 2.56 1.02 .37 .38 2.39 1.62 1.44 1.56
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions 3.92 1.86 2.93 1.51 1.04 1.61 3.75 2.45 2.32 2.41
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Year .................... $29.74 $26.67 $27.00 $24.43 $21.18 $18.37 $22.21 $22.71 $19.37 $20.06
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return* ..................... 26.60% 5.73% 22.71% 22.70% 21.13% (10.12)% 14.44% 30.15% 7.72% 17.51%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios/Supplemental Data:
Net Assets, End of Year (millions) $3,002 $1,792 $1,511 $1,251 $1,110 $1,075 $1,470 $1,094 $686 $561
Ratio of Expenses to
Average Net Assets .72% .73% .78% .82% .87% .89% .70%+ .62%+ .71% .68%
Ratio of Net Investment Income to
Average Net Assets 2.71% 1.91% 1.65% 2.10% 3.09% 5.40% 5.61%+ 3.96%+ 3.43% 4.55%
Portfolio Turnover Rate 75.59% 67.65% 56.22% 47.39% 51.99% 46.12% 73.41% 85.05% 73.50% 123.50%
</TABLE>
* 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.
+ 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 .71% and 5.60% in 1989 and .69% and
3.89% in 1988.
19
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
MUTUAL SERIES FUND INC.
We have audited the accompanying statement of assets and liabilities of
Mutual Qualified Fund, a portfolio of Mutual Series Fund Inc. ("Fund"),
including the schedule of investments, as of December 31, 1995, the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended, and the financial
highlights for each of the nine years in the period then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits. The financial
highlights of Mutual Qualified Fund for the year ended December 31, 1986 were
audited by other auditors whose report dated January 23, 1987 expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers, or other
appropriate auditing procedures when replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Mutual
Qualified Fund, a portfolio of Mutual Series Fund Inc., at December 31, 1995,
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the nine years in the period then ended, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 9, 1996
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
