UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04087
--------------------------------------------------
Manning & Napier Fund, Inc.
----------------------------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
290 Woodcliff Drive, Fairport, NY 14450
-----------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
B. Reuben Auspitz 290 Woodcliff Drive, Fairport, NY 14450
-----------------------------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant’s telephone number, including area code: 585-325-6880
-----------------------------
Date of fiscal year end: October 31, 2006
---------------------------------------------------------------------
Date of reporting period: November 1, 2005 through October 31, 2006
-------------------------------------------------------------------
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1: REPORTS TO STOCKHOLDERS
December 27, 2006
To Shareholders of the following Series of the Manning & Napier Fund, Inc.:
Pro-Blend® Conservative Term Series
Pro-Blend® Moderate Term Series
Pro-Blend® Extended Term Series
Pro-Blend® Maximum Term Series
Tax Managed Series
Equity Series
Overseas Series
Dear Shareholder:
Enclosed are copies of the Annual Reports for each of the above Series of the Manning & Napier Fund in which you owned shares as of October 31, 2006. The reports include information about the Series’ performance as well as portfolio listings as of that date.
You will notice that we have made some changes to the benchmarks against which we measure our performance for the Pro-Blend®, Equity, and Tax Managed Series. These Annual Reports contain information on both the old and new benchmarks. These changes were made to more closely reflect the types of securities in which the Series may invest.
Please contact our Fund Services department at 1-800-466-3863 if you have any questions about your Manning & Napier Fund account.
Sincerely,
/s/ Amy J. Williams
Amy J. Williams
Fund Services Manager
Manning & Napier Fund, Inc.
Equity Series
Annual Report
October 31, 2006
Management Discussion and Analysis (unaudited)
Dear Shareholders:
The Equity Series has outperformed its benchmark for the past year, and it has also outperformed its benchmarks for the longer-term current market cycle period (starting April 1, 2000). Because a market cycle includes periods of both rising and falling markets, it is more informative to evaluate investment performance over a market cycle than over periods based only on the calendar.
Over the past year, the economy has continued to give mixed signals while the stock market has made a slow climb to double-digit returns. Each month positive economic data has been followed by negative data adding to the uncertainty of whether the Federal Reserve (the “Fed”) would decide to continue to attempt to constrain inflation through higher interest rates. More recently, the Fed has stopped increasing rates as inflation fears have eased and energy prices declined. At the same time, Gross Domestic Product growth has slowed, but corporate profits continue to grow at a double-digit rate, adding to the conflicting economic news. It is an environment with few trends and one which we feel is well suited to our investment approach.
Over the course of the past year, the Series has benefited primarily from positions in the Information Technology, Consumer Discretionary, and Energy sectors. Overall, however, the Equity Series’ performance has been driven less by broad trends than by selective individual stock opportunities.
During the spring of this year as the sector was experiencing a sharp decline, we increased our position in the Information Technology sector, overweighting our position relative to the Standard & Poor’s 500 Total Return Index. We purchased companies that provide IT security and communications infrastructure, and several holdings in this sector did particularly well during the last three months of the fiscal year.
Many stocks in the consumer sector had fallen out of favor with investors who feared that rising interest rates and a weakening consumer would put a damper on consumers’ ability to purchase big ticket items. We took advantage of the weakness in the Consumer Discretionary sector by purchasing companies whose sales are less affected by rising interest rates, like cable television companies. These stocks did well over the year.
The Series also benefited earlier in the year from its stock positions in the Energy sector. We actively pared back positions and realized gains as they appreciated, dampening the impact of falling energy prices on the Series’ portfolio during more recent months. Despite the recent sell off in these stocks, we continue to maintain holdings in oil services companies that benefit from capital spending in the supply-constrained Energy sector.
Our independent, opportunistic investment approach has helped our clients through a wide variety of market environments, including speculative bull markets, bear markets, and interim periods of volatility, such as we’ve experienced in the last year. The key to our approach is not to simply buy securities that have fallen in price, but to opportunistically seek out those areas of the market that have sound fundamentals in spite of stock price weakness.
We wish you a happy and healthy New Year.
Sincerely,
Manning & Napier Advisors, Inc.
1
Performance Update as of October 31, 2006 (unaudited)
| Average Annual Total Returns | |||
| As of October 31, 2006 | |||
| One | Five | Since | |
| Year | Year | Inception1 | |
Manning & Napier Fund, Inc. - Equity Series2,3 | 20.36% | 11.22% | 9.66% |
Russell 3000® Index4 | 16.37% | 8.35% | 4.66% |
Standard & Poor's (S&P) 500 Total Return Index5 | 16.33% | 7.25% | 4.17% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Equity Series from its inception1 (5/1/98) to present (10/31/06) to the Russell 3000® Index and the S&P 500 Total Return Index.
Data for line graph to follow:
| Manning & Napier Fund, Inc. | S&P 500 Total | ||
| Date | Equity Series2 | Russell 3000® Index | Return Index |
| 5/1/98 | $10,000 | $10,000 | $10,000 |
| 10/31/98 | 7,750 | 9,635 | 9,961 |
| 10/31/99 | 10,900 | 12,022 | 12,561 |
| 10/31/00 | 14,080 | 13,180 | 13,278 |
| 10/31/01 | 12,870 | 9,863 | 9,973 |
| 10/31/02 | 11,420 | 8,447 | 8,468 |
| 10/31/03 | 13,455 | 10,448 | 10,228 |
| 10/31/04 | 15,678 | 11,442 | 11,190 |
| 10/31/05 | 18,194 | 12,655 | 12,165 |
| 10/31/06 | 21,899 | 14,726 | 14,151 |
1Performance numbers for the Series and Index are calculated from May 1, 1998, the Collective's inception date (see Note 3 below).
2The Series' performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series' performance is historical and may not be indicative of future results.
3For periods prior to the inception of the Series on July 10, 2002, the performance figures reflect the performance of the Exeter Trust Company Group Trust for Employee Benefit Plans - All-Equity Collective Investment Trust (the "Collective"), which was managed by the Advisor and reorganized into the Series. The Collective was not open to the public generally, or registered under the Investment Company Act of 1940 (the "1940 Act"), or subject to certain restrictions that are imposed by the 1940 Act. If the Collective had been registered under the 1940 Act, performance may have been adversely affected. Because the fees of the Collective were lower than the Series' fees, historical performance would have been lower if the Collective had been subject to the same fees.
4The primary index has been changed from the S&P 500 Total Return Index to the Russell 3000® Index because it more accurately reflects the Advisor’s all-capitalization equity investment approach. The Russell 3000® Index is an unmanaged, market-capitalization weighted index of the 3,000 largest U.S. domiciled companies. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
5The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the Over-the-Counter market. The Index returns assume daily reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
2
Shareholder Expense Example (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as potential wire charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Account Value | Account Value | During Period* | |
5/1/06 | 10/31/06 | 5/1/06-10/31/06 | |
| Actual | $1,000.00 | $1,056.70 | $5.44 |
| Hypothetical | |||
| (5% return before expenses) | $1,000.00 | $1,019.91 | $5.35 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.05%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.
3
Portfolio Composition as of October 31, 2006 (unaudited)
Data for pie chart to follow:
Sector Allocation*
| Consumer Discretionary | 11.9% |
| Consumer Staples | 7.2% |
| Energy | 11.4% |
| Financials | 11.1% |
| Health Care | 11.8% |
| Industrials | 8.8% |
| Information Technology | 20.5% |
| Materials | 2.7% |
| Utilities | 4.6% |
| Cash, short-term investments, and liabilities, less other assets | 10.0% |
*As a percentage of net assets.
4
Value | ||
Shares | (Note 2) | |
COMMON STOCKS - 90.0% | ||
Consumer Discretionary - 11.9% | ||
Hotels, Restaurants & Leisure - 4.1% | ||
| Carnival Corp. | 4,200 | $205,044 |
| International Game Technology | 3,180 | 135,182 |
| 340,226 | ||
Media - 7.8% | ||
| Comcast Corp. - Class A* | 4,330 | 176,101 |
| The E.W. Scripps Co. - Class A | 4,100 | 202,786 |
| Time Warner, Inc. | 13,490 | 269,935 |
| 648,822 | ||
Total Consumer Discretionary | 989,048 | |
Consumer Staples - 7.2% | ||
Beverages - 3.0% | ||
| The Coca-Cola Co. | 5,400 | 252,288 |
Food & Staples Retailing - 1.8% | ||
| Wal-Mart Stores, Inc. | 3,040 | 149,811 |
Food Products - 1.0% | ||
| Kellogg Co. | 1,550 | 77,980 |
Personal Products - 1.4% | ||
| The Estee Lauder Companies, Inc. - Class A | 2,930 | 118,343 |
Total Consumer Staples | 598,422 | |
Energy - 11.4% | ||
Energy Equipment & Services - 9.9% | ||
| Baker Hughes, Inc. | 2,380 | 164,339 |
| Cameron International Corp.* | 3,170 | 158,817 |
| National-Oilwell Varco, Inc.* | 2,660 | 160,664 |
| Schlumberger Ltd. | 3,000 | 189,240 |
| Weatherford International Ltd.* | 3,620 | 148,710 |
| 821,770 | ||
Oil, Gas & Consumable Fuels - 1.5% | ||
| Hess Corp. | 3,030 | 128,472 |
Total Energy | 950,242 | |
Financials - 11.1% | ||
Capital Markets - 4.0% | ||
| The Bank of New York Co., Inc. | 6,470 | 222,374 |
| SEI Investments Co. | 1,905 | 107,213 |
| 329,587 | ||
Commercial Banks - 5.5% | ||
| PNC Financial Services Group, Inc. | 2,510 | 175,775 |
| U.S. Bancorp | 4,330 | 146,527 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - October 31, 2006
Value | ||
Shares | (Note 2) | |
Financials (continued) | ||
Commercial Banks (continued) | ||
| Wachovia Corp. | 2,390 | $132,645 |
| 454,947 | ||
Diversified Financial Services - 1.6% | ||
| Bank of America Corp. | 2,490 | 134,136 |
Total Financials | 918,670 | |
Health Care - 11.8% | ||
Health Care Equipment & Supplies - 4.7% | ||
| Bausch & Lomb, Inc. | 1,790 | 95,837 |
| The Cooper Companies, Inc. | 2,270 | 130,820 |
| Medtronic, Inc. | 3,430 | 166,972 |
| 393,629 | ||
Health Care Technology - 3.2% | ||
| Eclipsys Corp.* | 5,800 | 122,902 |
| Emdeon Corp.* | 11,975 | 139,509 |
| 262,411 | ||
Life Sciences Tools & Services - 3.9% | ||
| Affymetrix, Inc.* | 3,700 | 94,350 |
| Invitrogen Corp.* | 1,710 | 99,197 |
| PerkinElmer, Inc. | 6,170 | 131,791 |
| 325,338 | ||
Total Health Care | 981,378 | |
Industrials - 8.8% | ||
Air Freight & Logistics - 2.5% | ||
| United Parcel Service, Inc. - Class B | 2,710 | 204,198 |
Airlines - 2.4% | ||
| JetBlue Airways Corp.* | 5,750 | 72,220 |
| Southwest Airlines Co. | 8,670 | 130,310 |
| 202,530 | ||
Commercial Services & Supplies - 1.5% | ||
| The Dun & Bradstreet Corp.* | 1,600 | 123,584 |
Industrial Conglomerates - 2.4% | ||
| 3M Co. | 2,530 | 199,465 |
Total Industrials | 729,777 | |
Information Technology - 20.5% | ||
Communications Equipment - 4.1% | ||
| Cisco Systems, Inc.* | 8,330 | 201,003 |
| Juniper Networks, Inc.* | 7,970 | 137,243 |
| 338,246 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - October 31, 2006
| Shares/ | Value | |
Principal Amount | (Note 2) | |
Information Technology (continued) | ||
Computers & Peripherals - 3.1% | ||
| EMC Corp.* | 21,180 | $259,455 |
IT Services - 6.5% | ||
| Automatic Data Processing, Inc. | 4,200 | 207,648 |
| CheckFree Corp.* | 3,360 | 132,653 |
| Western Union Co.* | 9,270 | 204,403 |
| 544,704 | ||
Software - 6.8% | ||
| Electronic Arts, Inc.* | 2,440 | 129,052 |
| NAVTEQ Corp.* | 3,750 | 124,500 |
| Salesforce.com, Inc.* | 3,075 | 119,987 |
| Symantec Corp.* | 9,650 | 191,456 |
| 564,995 | ||
Total Information Technology | 1,707,400 | |
Materials - 2.7% | ||
Chemicals - 2.7% | ||
| Minerals Technologies, Inc. | 1,880 | 103,701 |
| The Scotts Miracle-Gro Co. - Class A | 2,420 | 119,693 |
Total Materials | 223,394 | |
Utilities - 4.6% | ||
Electric Utilities - 3.1% | ||
| Allegheny Energy, Inc.* | 2,930 | 126,078 |
| American Electric Power Co., Inc. | 3,030 | 125,533 |
| 251,611 | ||
Multi-Utilities - 1.5% | ||
| Xcel Energy, Inc. | 5,750 | 126,903 |
Total Utilities | 378,514 | |
TOTAL COMMON STOCKS | ||
| (Identified Cost $6,621,835) | 7,476,845 | |
SHORT-TERM INVESTMENTS - 10.2% | ||
| Dreyfus Treasury Cash Management - Institutional Shares | 405,876 | 405,876 |
| U.S. Treasury Bill, 12/21/2006 | $450,000 | 446,886 |
TOTAL SHORT-TERM INVESTMENTS | ||
| (Identified Cost $852,823) | 852,762 | |
TOTAL INVESTMENTS - 100.2% | ||
| (Identified Cost $7,474,658) | 8,329,607 | |
LIABILITIES, LESS OTHER ASSETS - (0.2%) | (19,420) | |
NET ASSETS - 100% | $8,310,187 |
*Non-income producing security
The accompanying notes are an integral part of the financial statements.
7
Statement of Assets and Liabilities
October 31, 2006
ASSETS: | |
| Investments, at value (identified cost $7,474,658) (Note 2) | $8,329,607 |
| Receivable for securities sold | 61,693 |
| Receivable for fund shares sold | 49,065 |
| Dividends receivable | 3,238 |
| TOTAL ASSETS | 8,443,603 |
LIABILITIES: | |
| Accrued management fees (Note 3) | 901 |
| Accrued fund accounting and transfer agent fees (Note 3) | 1,554 |
| Accrued Chief Compliance Officer service fees (Note 3) | 570 |
| Payable for securities purchased | 98,344 |
| Audit fees payable | 29,133 |
| Other payables and accrued expenses | 2,914 |
| TOTAL LIABILITIES | 133,416 |
TOTAL NET ASSETS | $8,310,187 |
NET ASSETS CONSIST OF: | |
| Capital stock | $4,332 |
| Additional paid-in-capital | 7,175,031 |
| Undistributed net investment income | 15,778 |
| Accumulated net realized gain on investments | 260,097 |
| Net unrealized appreciation on investments | 854,949 |
TOTAL NET ASSETS | $8,310,187 |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($8,310,187/433,145 shares) | $19.19 |
The accompanying notes are an integral part of the financial statements.
8
Statement of Operations
For the Year Ended October 31, 2006
INVESTMENT INCOME: | |
| Dividends | $51,176 |
| Interest | 12,748 |
| Total Investment Income | 63,924 |
EXPENSES: | |
| Management fees (Note 3) | 45,702 |
| Directors' fees (Note 3) | 7,100 |
| Fund accounting and transfer agent fees (Note 3) | 6,946 |
| Chief Compliance Officer service fees (Note 3) | 5,698 |
| Audit fees | 29,226 |
| Custodian fees | 2,699 |
| Miscellaneous | 7,249 |
| Total Expenses | 104,620 |
| Less reduction of expenses (Note 3) | (56,474) |
| Net Expenses | 48,146 |
| NET INVESTMENT INCOME | 15,778 |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | |
| Net realized gain on investments | 257,455 |
| Net change in unrealized appreciation on investments | 578,152 |
| NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 835,607 |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $851,385 |
The accompanying notes are an integral part of the financial statements.
9
Statements of Changes in Net Assets
For the | For the | |
Year Ended | Year Ended | |
10/31/06 | 10/31/05 | |
INCREASE (DECREASE) IN NET ASSETS: | ||
OPERATIONS: | ||
| Net investment income (loss) | $15,778 | $(989) |
| Net realized gain on investments | 257,455 | 223,579 |
| Net change in unrealized appreciation on investments | 578,152 | 90,045 |
| Net increase from operations | 851,385 | 312,635 |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||
| From net realized gain on investments | (212,143) | (100,539) |
CAPITAL STOCK ISSUED AND REPURCHASED: | ||
| Net increase from capital share transactions (Note 5) | 4,957,234 | 732,223 |
| Net increase in net assets | 5,596,476 | 944,319 |
NET ASSETS: | ||
| Beginning of year | 2,713,711 | 1,769,392 |
End of year (including undistributed net investment income (loss) of $15,778 and $0, respectively) | $8,310,187 | $2,713,711 |
The accompanying notes are an integral part of the financial statements.
10
Financial Highlights
For the Period | |||||
For the Years Ended | 7/10/021 to | ||||
10/31/06 | 10/31/05 | 10/31/04 | 10/31/03 | 10/31/02 | |
Per share data (for a share outstanding | |||||
throughout each period): | |||||
Net asset value - Beginning of period | $17.24 | $15.63 | $13.42 | $11.42 | $11.51 |
| Income (loss) from investment operations: | |||||
| Net investment income (loss) | 0.04 | (0.01) | (0.01) | 0.01 | 0.03 |
| Net realized and unrealized gain (loss) on investments | 3.25 | 2.45 | 2.23 | 2.02 | (0.12) |
| Total from investment operations | 3.29 | 2.44 | 2.22 | 2.03 | (0.09) |
| Less distributions to shareholders: | |||||
| From net investment income | - | - | (0.01) | (0.03) | - |
| From net realized gain on investments | (1.34) | (0.83) | - | - | - |
| Total distributions to shareholders | (1.34) | (0.83) | (0.01) | (0.03) | - |
Net asset value - End of period | $19.19 | $17.24 | $15.63 | $13.42 | $11.42 |
Total return2 | 20.36% | 16.05% | 16.52% | 17.82% | (0.78%) |
Ratios (to average net assets)/Supplemental Data: | |||||
| Expenses* | 1.05% | 1.05% | 1.05% | 1.05% | 1.05%3 |
| Net investment income (loss) | 0.35% | (0.04%) | (0.06%) | 0.09% | 0.78%3 |
| Portfolio turnover | 55% | 57% | 60% | 58% | 30% |
Net assets - End of period (000's omitted) | $8,310 | $2,714 | $1,769 | $1,206 | $518 |
*The investment advisor did not impose its management fee and paid a portion of the Series' expenses. If these expenses had been incurred by the Series, the expense ratio (to
average net assets) would have been increased as follows:
| 1.24% | 2.33% | 2.85% | 11.55% | 31.99%3 |
1Commencement of operations.
2Represents aggregate total return for the period indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the period. Periods less than one year are not annualized.
3Annualized.
The accompanying notes are an integral part of the financial statements.
11
Notes to Financial Statements
1. ORGANIZATION
Equity Series (the "Series") is a no-load diversified series of Manning & Napier Fund, Inc. (the "Fund"), formerly Exeter Fund, Inc. The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide long-term growth of capital, primarily through investments in U.S. common stocks.
Shares of the Series are offered to investors and employees of Manning & Napier Advisors, Inc. (the “Advisor”) and its affiliates. The total authorized capital stock of the Fund consists of 1.7 billion shares of common stock each having a par value of $0.01. As of October 31, 2006, 1.16 billion shares have been designated in total among 21 series, of which 75 million have been designated as Equity Series common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation
Portfolio securities, including domestic equities, foreign equities and options, listed on an exchange other than the NASDAQ National Market System are valued at the latest quoted sales price of the exchange on which the security is primarily traded. Securities not traded on valuation date or securities not listed on an exchange are valued at the latest quoted bid price provided by the Fund’s pricing service. Securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account. Fair value is determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund's Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less are valued at amortized cost, which approximates market value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Interest income and expenses are recorded on an accrual basis.
Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund's Board, taking into consideration, among other things, the nature and type of expense.
Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
12
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Federal Taxes
The Series' policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series is not subject to federal income or excise tax to the extent that the Series distributes to shareholders each year its taxable income, including any net realized gains on investments, in accordance with requirements of the Internal Revenue Code. Accordingly, no provision for federal income tax or excise tax has been made in the financial statements.
Distributions of Income and Gains
Distributions to shareholders of net investment income and net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES
3. TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series' average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series' organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund, and the Special Assistant Secretary’s salary, which is paid by BISYS Fund Services Ohio, Inc. (“BISYS”)), and of all Directors who are "affiliated persons" of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each "non-affiliated" Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended for each active series of the Fund plus a fee for each committee meeting attended.
The Advisor has contractually agreed, until at least February 28, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total expenses for the Series at no more than 1.05% of average daily net assets each year. Accordingly, the Advisor did not impose its fee of $45,702 and assumed expenses amounting to $10,772 for the year ended October 31, 2006, which is reflected as a reduction of expenses on the Statement of Operations. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.
13
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (continued)
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund's shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
For fund accounting and transfer agent services, through October 31, 2006, the Fund paid the Advisor an annual fee of 0.12% of the Fund’s average daily net assets up to $900 million, 0.09% of the Fund’s average daily net assets between $900 million and $1.5 billion, and 0.05% of the Fund’s average daily net assets over $1.5 billion. Effective November 1, 2006, the fee rates were reduced as follows: 0.11% of the Fund’s average daily net assets up to $900 million, 0.07% of the Fund’s average daily net assets between $900 million and $1.5 billion, and 0.04% of the Fund’s average daily net assets over $1.5 billion. Additionally, certain transaction and account-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense. The Advisor has an agreement with BISYS under which BISYS serves as sub-accounting services and sub-transfer agent.
4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 2006, purchases and sales of securities, other than United States Government securities and short-term securities, were $6,443,913 and $2,387,366, respectively. There were no purchases or sales of United States Government securities.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Equity Series were:
For the Year | For the Year | |||
Ended 10/31/06 | Ended 10/31/05 | |||
Shares | Amount | Shares | Amount | |
| Sold | 285,373 | $5,132,563 | 41,666 | $694,741 |
| Reinvested | 12,768 | 210,548 | 6,322 | 100,539 |
| Repurchased | (22,384) | (385,877) | (3,837) | (63,057) |
| Total | 275,757 | $4,957,234 | 44,151 | $732,223 |
At October 31, 2006, the retirement plan of the advisor and its affiliates owned 157,034 shares of the Series (36.3% of shares outstanding) valued at $3,013,482.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on October 31, 2006.
14
Notes to Financial Statements
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the United States Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the United States Government. No such investments were held by the Series on October 31, 2006.
8. FEDERAL INCOME TAX INFORMATION
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including differences in the cost basis of securities contributed in-kind and losses deferred due to wash sales. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series' net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
For the Year | For the Year | |
Ended 10/31/06 | Ended 10/31/05 | |
| Ordinary income | $54,198 | $- |
| Long-term capital gains | 157,945 | 100,539 |
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Series hereby designates the long-term capital gains disclosed above as capital gains for its taxable year ended October 31, 2006.
At October 31, 2006, the tax basis components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:
| Cost for federal income tax purposes | $7,492,419 |
| Unrealized appreciation | $847,022 |
| Unrealized depreciation | (9,834) |
| Net unrealized appreciation | $837,188 |
| Undistributed ordinary income | 79,875 |
| Undistributed long-term capital gains | 213,237 |
9. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109. FIN 48 supplements FASB Statement 109, Accounting for Income Taxes, by defining the confidence level that a tax position must meet in order to be recognized in the financial statements. FIN 48 provides guidance for how a fund should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the fund has taken or expects to take on a tax return.
15
Notes to Financial Statements
9. RECENT ACCOUNTING PRONOUNCEMENTS (continued)
FIN 48 requires that the tax effects of a position be recognized only if it is “more likely than not” to be sustained based solely on its technical merits. Tax positions not deemed to meet the more likely than not threshold would be recorded as a tax benefit or expense in the current year. FIN 48 is effective for fiscal periods beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At adoption, the financial statements must be adjusted to reflect only those tax positions that are more likely than not to be sustained as of the adoption date. Management of the Fund is currently evaluating the impact that FIN 48 will have on the financial statements.
In addition, in September 2006, FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”) was issued, and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair value methods and applications. At this time, management is evaluating the implications of FAS 157, but it is not expected to materially impact the Series’ financial statements.
16
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Equity Series:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Equity Series (a Series of Manning & Napier Fund, Inc., hereafter referred to as the "Series") at October 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
December 13, 2006
17
Supplemental Tax Information (unaudited)
For federal income tax purposes, the Series designates for the current fiscal year $20,716 or, if different, the maximum amount allowable under the tax law as qualified dividend income.
18
Directors' and Officers' Information (unaudited)
The Statement of Additional Information provides additional information about the Fund's directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:\\www.sec.gov). The following chart shows certain information about the Fund's officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.
INTERESTED DIRECTOR/OFFICER | |
| Name: | B. Reuben Auspitz* |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 59 |
| Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1& Length of Time Served: | Indefinite - Director since 1984; Vice President 1984 - 2003; President since 2004; |
| Principal Executive Officer Since 2002 | |
| Principal Occupation(s) During Past 5 Years: | Executive Vice President; Co-Executive Director; Executive Group Member**; Chief |
| Compliance Officer since 2004 - Manning & Napier Advisors, Inc.; President; Director - | |
| Manning & Napier Investor Services, Inc.; Holds or has held one or more of | |
| the following titles for various subsidiaries and affiliates: President, Vice President, | |
| Director, Chairman, Treasurer, Chief Compliance Officer or Member | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
INDEPENDENT DIRECTORS | |
| Name: | Stephen B. Ashley |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 66 |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1996 |
| Principal Occupation(s) During Past 5 Years: | Chairman, Director, President & Chief Executive Officer, |
| The Ashley Group (property management and investment) | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | Genesee Corp. |
| The Ashley Group | |
| Fannie Mae | |
| Name: | Peter L. Faber |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 68 |
| Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1987 |
| Principal Occupation(s) During Past 5 Years: | Partner, McDermott, Will & Emery LLP (law firm) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | Partnership for New York City, Inc. |
| New York Collegium | |
| Name: | Harris H. Rusitzky |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 71 |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1985 |
| Principal Occupation(s) During Past 5 Years: | President, The Greening Group (business consultants) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
19
Directors' and Officers' Information (unaudited)
OFFICERS | |
| Name: | Jeffrey S. Coons, Ph.D., CFA |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 43 |
| Current Position(s) Held with Fund: | Vice President |
Term of Office1& Length of Time Served: | Since 2004 |
| Principal Occupation(s) During Past 5 Years: | Co-Director of Research since 2002 & Executive Group Member**, |
| Manning & Napier Advisors, Inc.; Managing Director - Risk Management, Manning & | |
| Napier Advisors, Inc., 1993-2002; Holds one or more of the following titles for various | |
| subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Christine Glavin |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 40 |
| Current Position(s) Held with Fund: | Principal Financial Officer, Chief Financial Officer |
Term of Office1& Length of Time Served: | Principal Financial Officer since 2002; Chief Financial Officer since 2001 |
| Principal Occupation(s) During Past 5 Years: | Fund Accounting Manager, Manning & Napier Advisors, Inc. |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Jodi L. Hedberg |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 38 |
| Current Position(s) Held with Fund: | Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance |
| Officer | |
Term of Office1& Length of Time Served: | Corporate Secretary since 1997; Chief Compliance Officer since 2004 |
| Principal Occupation(s) During Past 5 Years: | Director of Compliance, Manning & Napier Advisors, Inc. and affiliates |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Alaina V. Metz |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 39 |
| Current Position(s) Held with Fund: | Special Assistant Secretary |
| Term of Office & Length of Time Served: | Indefinite - Since 2002 |
| Principal Occupation(s) During Past 5 Years: | Vice President, BISYS Fund Services Ohio, Inc. (mutual fund servicing company) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund's investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, Inc. and President and Director, Manning & Napier Investor Services, Inc., the Fund's distributor.
**The Executive Group performs the duties of the Office of the Chief Executive of Manning & Napier Advisors, Inc.
1The term of office for President, Vice President, Chief Financial Officer, and Corporate Secretary is one year and until their respective successors are chosen and qualified. All other officers' terms are indefinite.
20
(THIS PAGE INTENTIONALLY LEFT BLANK)
21
Literature Requests (unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone 1-800-466-3863
On the Securities and Exchange
Commission’s (SEC) web site http://www.sec.gov
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-Q, and are available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Prospectus and Statement of Additional Information (SAI)
The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
On the Advisor’s web site http://www.manningnapieradvisors.com
Additional information available at www.manningnapieradvisors.com
| 1. | Fund Holdings - Month-End |
| 2. | Fund Holdings - Quarter-End |
| 3. | Shareholder Report - Annual |
| 4. | Shareholder Report - Semi-Annual |
22
Manning & Napier Fund, Inc.
Overseas Series
Annual Report
October 31, 2006
Management Discussion and Analysis (unaudited)
Dear Shareholders:
The Overseas Series produced positive absolute and relative returns to its benchmark for the 12-month period ended October 31, 2006. A weakening U.S. dollar versus the euro, combined with healthy returns from most regions around the world, helped fuel international stock markets to strong gains. Since the current market cycle (which includes both rising and falling markets) began on January 1, 2000, the Overseas Series has substantially outperformed the benchmark.
Our team of analysts uses time-tested investment strategies to choose stocks for the portfolio. These strategies include the Profile Strategy, Hurdle Rate Strategy, and the Bankable Deal Strategy. Our investment process also follows strict pricing disciplines in order to avoid buying stocks that are not attractively valued.
The Series has a larger position than its benchmark in the Information Technology sector as our analysts have found exciting companies with attractive valuations to own. Performance was strong as these holdings, which included a wireless communications service provider, a manufacturer of video conferencing systems, and a company that sells testing equipment to the telecommunications industry, exceeded the returns of the benchmark. A majority of the stocks we hold within the Information Technology sector fall under our Profile Strategy. In this strategy our analysts seek to identify companies that we believe can grow their earnings faster than the industries in which they operate. Typically, this is accomplished by some sustainable competitive advantage that keeps competitors from entering their markets. We also have significant positions purchased under the Profile Strategy in a variety of companies that manufacture and distribute consumer goods on a global scale. While these stocks earned positive returns over the 12 month period, they slightly trailed the benchmark returns. Many of the products consumers use on a daily basis, including food, beverages, and beauty products, are produced by the companies we hold in the portfolio. These firms are going through constructive improvements to gain market share and raise profit margins through increased advertising while enhancing their product mix to attract customers.
Within our Hurdle Rate Strategy we have positions across a variety of areas. In this strategy we seek to identify industries in a downturn where profits are temporarily depressed and future expectations are low. When capacity is finished leaving the industry and demand begins to pick up, we want to own those companies that are in the strongest position to increase profits and gain market share. Stocks held within this strategy, particularly those in the Energy sector, performed quite strongly over the last year. Current holdings also include an aircraft maker and a manufacturer of printing presses.
Our third strategy, the Bankable Deal Strategy, looks for companies selling at extremely depressed prices as compared to their underlying assets. The Series owned only a few stocks under this strategy in the past year. An example of a stock we own is one of the premier resort destinations for families. We believed the underlying value of its properties is far below what the land the properties are located on could be sold for on the open market, a typical Bankable Deal stock to own for the portfolio. The company’s improvement in sales, marketing, and distribution efforts helped the stock to earn double-digit returns over the past year.
Japan performed well on an absolute basis over the last year; however, it trailed the benchmark for the period. We maintained very small allocations to the country throughout the year, which benefited the Series’ performance relative to the benchmark. Although the Japanese government continues to be proactive in making the economy more competitive globally, we believe valuations appear to be stretched, giving us pause in increasing our holdings in the country. Emerging markets continued to perform strongly relative to developed markets. We sold into the strength throughout the year and reduced our holdings in emerging markets as we believed valuations became too expensive. Developed economies in Europe, on the heals of an improved regulatory environment, appear to offer the most compelling valuations as compared to other regions of the world. As always, we will adhere to our investment strategies and strict pricing disciplines to position the portfolio for competitive returns.
We wish you a happy and healthy New Year.
Sincerely,
Manning & Napier Advisors, Inc.
1
Performance Update as of October 31, 2006 (unaudited)
| Average Annual Total Returns | |||
| As of October 31, 2006 | |||
| One | Five | Since | |
| Year | Year | Inception1 | |
Manning & Napier Fund, Inc. - Overseas Series2,3 | 33.68% | 16.94% | 14.33% |
Morgan Stanley Capital International (MSCI) All Country World Index ex U.S.4 | 28.40% | 16.22% | 9.87% |
The following graph compares the value of a $5,000,000 investment in the Manning &Napier Fund, Inc. - Overseas Series from its inception1 (9/23/98) to present (10/31/06) to the MSCI All Country World Index ex U.S.
Data for line graph to follow:
| Manning & Napier Fund, Inc. | MSCI | |
| Date | Overseas Series2 | All Country World Index ex U.S. |
| 9/23/98 | $5,000,000 | $5,000,000 |
| 10/31/98 | 5,105,000 | 5,523,996 |
| 10/31/99 | 6,270,000 | 6,910,336 |
| 10/31/00 | 7,250,000 | 6,749,920 |
| 10/31/01 | 6,770,000 | 5,046,742 |
| 10/31/02 | 6,270,000 | 4,483,188 |
| 10/31/03 | 7,830,000 | 5,822,318 |
| 10/31/04 | 9,519,494 | 6,942,499 |
| 10/31/05 | 11,074,574 | 8,335,368 |
| 10/31/06 | 14,803,996 | 10,702,717 |
1Performance numbers for the Series are calculated from September 23, 1998, the Collective's inception date (see Note 3 below). Prior to 2001, the MSCI All Country World Index ex U.S. only published month-end numbers; therefore, performance numbers for the Index are calculated from September 30, 1998.
2The Series' performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series' performance is historical and may not be indicative of future results.
3For periods prior to the inception of the Series on July 10, 2002, the performance figures reflect the performance of the Exeter Trust Company Group Trust for Employee Benefit Plans - International Equity Collective Investment Trust (the "Collective"), which was managed by the Advisor and reorganized into the Series. The Collective was not open to the public generally, or registered under the Investment Company Act of 1940 (the "1940 Act"), or subject to certain restrictions that are imposed by the 1940 Act. If the Collective had been registered under the 1940 Act, performance may have been adversely affected. Because the fees of the Collective were lower than the Series' fees, historical performance would have been lower if the Collective had been subject to the same fees.
2
Shareholder Expense Example (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as potential wire charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Account Value | Account Value | During Period* | |
5/1/06 | 10/31/06 | 5/1/06-10/31/06 | |
| Actual | $1,000.00 | $1,070.60 | $4.96 |
| Hypothetical | |||
| (5% return before expenses) | $1,000.00 | $1,020.42 | $4.84 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.95%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.
3
Portfolio Composition as of October 31, 2006 (unaudited)
Data for pie chart to follow:
Country Allocation*
| Brazil | 3.5% |
| Canada | 2.1% |
| France | 14.4% |
| Germany | 6.5% |
| Guernsey | 2.9% |
| Israel | 2.3% |
| Netherlands | 7.5% |
| Norway | 2.3% |
| Switzerland | 14.8% |
| United Kingdom | 27.1% |
Miscellaneous** | 4.9% |
| Cash, short-term investments, and liabilities, less other assets | 11.7% |
*As a percentage of net assets.
**Miscellaneous
Australia (1.7%)
Bermuda (1.1%)
Spain (1.1%)
Sweden (1.0%)
Sector Allocation*
| Consumer Discretionary | 12.5% |
| Consumer Staples | 14.7% |
| Energy | 6.8% |
| Financials | 14.7% |
| Health Care | 6.6% |
| Industrials | 13.2% |
| Information Technology | 13.1% |
| Materials | 5.2% |
| Telecommunication Services | 1.5% |
| Cash, short-term investments, and liabilities, less other assets | 11.7% |
*As a percentage of net assets.
4
Investment Portfolio - October 31, 2006
Value | ||
Shares | (Note 2) | |
COMMON STOCKS - 88.3% | ||
Consumer Discretionary - 12.5% | ||
Auto Components - 1.0% | ||
| Autoliv, Inc. (Sweden) | 15,810 | $899,115 |
Hotels, Restaurants & Leisure - 3.8% | ||
| Club Mediterranee S.A.* (France) | 62,300 | 3,355,728 |
Media - 3.3% | ||
| Pearson plc (United Kingdom) | 133,000 | 1,962,150 |
| Reuters Group plc (United Kingdom) | 105,830 | 902,775 |
| 2,864,925 | ||
Specialty Retail - 4.4% | ||
| Douglas Holding AG (Germany) | 18,900 | 914,080 |
| Kingfisher plc (United Kingdom) | 583,290 | 2,928,688 |
| 3,842,768 | ||
Total Consumer Discretionary | 10,962,536 | |
Consumer Staples - 14.7% | ||
Beverages - 1.0% | ||
| Heineken N.V. (Netherlands) | 19,540 | 885,439 |
Food & Staples Retailing - 2.9% | ||
| Carrefour S.A. (France) | 41,630 | 2,536,134 |
Food Products - 8.2% | ||
| Cadbury Schweppes plc (United Kingdom) | 188,880 | 1,900,328 |
| Nestle S.A. (Switzerland) | 5,000 | 1,708,611 |
| Unilever plc - ADR (United Kingdom) | 146,230 | 3,550,464 |
| 7,159,403 | ||
Personal Products - 2.6% | ||
| Clarins S.A. (France) | 32,420 | 2,244,379 |
Total Consumer Staples | 12,825,355 | |
Energy - 6.8% | ||
Energy Equipment & Services - 5.7% | ||
| Abbot Group plc (United Kingdom) | 512,940 | 2,944,782 |
| Compagnie Generale de Geophysique S.A. (CGG)* (France) | 11,980 | 2,025,611 |
| 4,970,393 | ||
Oil, Gas & Consumable Fuels - 1.1% | ||
| Petroleo Brasileiro S.A. (Petrobras) - ADR (Brazil) | 12,390 | 1,003,094 |
Total Energy | 5,973,487 | |
Financials - 14.7% | ||
Capital Markets - 1.6% | ||
| Macquarie Bank Ltd. (Australia) | 25,100 | 1,448,503 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - October 31, 2006
Value | ||
Shares | (Note 2) | |
Financials (continued) | ||
Commercial Banks - 9.2% | ||
| ABN AMRO Holding N.V. (Netherlands) | 97,760 | $2,850,564 |
| Barclays plc (United Kingdom) | 138,420 | 1,867,865 |
| HSBC Holdings plc (United Kingdom) | 53,000 | 1,004,806 |
| Royal Bank of Scotland Group plc (United Kingdom) | 64,160 | 2,285,922 |
| 8,009,157 | ||
Diversified Financial Services - 0.6% | ||
| Financiere Marc de Lacharriere S.A. (Fimalac) (France) | 5,867 | 546,541 |
Insurance - 3.3% | ||
| Allianz SE (Germany) | 10,170 | 1,881,017 |
| Willis Group Holdings Ltd. (United Kingdom) | 25,750 | 979,272 |
| 2,860,289 | ||
Total Financials | 12,864,490 | |
Health Care - 6.6% | ||
Health Care Equipment & Supplies - 1.1% | ||
| Straumann Holding AG (Switzerland) | 4,230 | 961,673 |
Pharmaceuticals - 5.5% | ||
| Novartis AG - ADR (Switzerland) | 64,000 | 3,886,720 |
| Sanofi-Aventis - ADR (France) | 21,840 | 932,350 |
| 4,819,070 | ||
Total Health Care | 5,780,743 | |
Industrials - 13.2% | ||
Aerospace & Defense - 2.4% | ||
| Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) | 49,740 | 2,070,676 |
Air Freight & Logistics - 5.4% | ||
| Deutsche Post AG (Germany) | 67,540 | 1,867,684 |
| TNT N.V. (Netherlands) | 74,140 | 2,853,431 |
| 4,721,115 | ||
Electrical Equipment - 3.2% | ||
| ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) | 124,300 | 1,854,556 |
| Gamesa Corporacion Tecnologica S.A. (Spain) | 42,340 | 971,998 |
| 2,826,554 | ||
Industrial Conglomerates - 1.1% | ||
| Tyco International Ltd. (Bermuda) | 32,470 | 955,592 |
Machinery - 1.1% | ||
| Heidelberger Druckmaschinen AG (Germany) | 21,310 | 970,812 |
Total Industrials | 11,544,749 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - October 31, 2006
Shares/ | Value | |
Principal Amount | (Note 2) | |
Information Technology - 13.1% | ||
Communications Equipment - 5.8% | ||
| ECI Telecom Ltd.* (Israel) | 266,050 | $1,974,091 |
| Spirent Communications plc* (United Kingdom) | 966,000 | 1,040,988 |
| Tandberg ASA (Norway) | 174,490 | 2,016,253 |
| 5,031,332 | ||
Software - 7.3% | ||
| Amdocs Ltd.* (Guernsey) | 65,830 | 2,551,571 |
| Cognos, Inc.* (Canada) | 50,750 | 1,851,360 |
| Misys plc (United Kingdom) | 269,000 | 1,045,370 |
| UbiSoft Entertainment S.A.* (France) | 15,440 | 952,833 |
| 6,401,134 | ||
Total Information Technology | 11,432,466 | |
Materials - 5.2% | ||
Chemicals - 5.2% | ||
| Lonza Group AG (Switzerland) | 58,700 | 4,530,996 |
Telecommunication Services - 1.5% | ||
Wireless Telecommunication Services - 1.5% | ||
| Vodafone Group plc - ADR (United Kingdom) | 49,870 | 1,289,139 |
TOTAL COMMON STOCKS | ||
| (Identified Cost $71,002,626) | 77,203,961 | |
SHORT-TERM INVESTMENTS - 12.7% | ||
| Dreyfus Treasury Cash Management - Institutional Shares | 3,099,253 | 3,099,253 |
| Fannie Mae Discount Note, 12/20/2006 | $3,000,000 | 2,979,915 |
| Freddie Mac Discount Note, 11/9/2006 | 3,500,000 | 3,496,018 |
| U.S. Treasury Bill, 11/9/2006 | 1,500,000 | 1,498,473 |
TOTAL SHORT-TERM INVESTMENTS | ||
| (Identified Cost $11,073,001) | 11,073,659 | |
TOTAL INVESTMENTS - 101.0% | ||
| (Identified Cost $82,075,627) | 88,277,620 | |
LIABILITIES, LESS OTHER ASSETS - (1.0%) | (859,738) | |
NET ASSETS - 100% | $87,417,882 |
*Non-income producing security
ADR - American Depository Receipt
The Series' portfolio holds, as a percentage of net assets, greater than 10% in the following countries: United Kingdom - 27.1%; Switzerland - 14.8%; France - 14.4%.
The accompanying notes are an integral part of the financial statements.
7
Statement of Assets & Liabilities
October 31, 2006
ASSETS: | |
| Investments, at value (identified cost $82,075,627) (Note 2) | $88,277,620 |
| Cash | 86,317 |
| Foreign currency, at value (cost $5,129) | 5,194 |
| Receivable for securities sold | 936,671 |
| Dividends receivable | 77,228 |
| Foreign tax reclaims receivable | 12,687 |
| TOTAL ASSETS | 89,395,717 |
LIABILITIES: | |
| Accrued management fees (Note 3) | 42,253 |
| Accrued fund accounting and transfer agent fees (Note 3) | 10,616 |
| Accrued Chief Compliance Officer service fees (Note 3) | 570 |
| Payable for securities purchased | 1,879,611 |
| Audit fees payable | 32,855 |
| Registration and filing fees payable | 8,256 |
| Other payables and accrued expenses | 3,674 |
| TOTAL LIABILITIES | 1,977,835 |
TOTAL NET ASSETS | $87,417,882 |
NET ASSETS CONSIST OF: | |
| Capital stock | $32,759 |
| Additional paid-in-capital | 78,396,118 |
| Undistributed net investment income | 561,865 |
| Accumulated net realized gain on investments, foreign currency and other assets and liabilities | 2,224,347 |
| Net unrealized appreciation on investments, foreign currency and other assets and liabilities | 6,202,793 |
TOTAL NET ASSETS | $87,417,882 |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($87,417,882/3,275,877 shares) | $26.69 |
The accompanying notes are an integral part of the financial statements.
8
Statement of Operations
For the Year Ended October 31, 2006
INVESTMENT INCOME: | |
| Dividends (net of foreign tax withheld, $37,704) | $764,599 |
| Interest | 108,118 |
| Total Investment Income | 872,717 |
EXPENSES: | |
| Management fees (Note 3) | 230,809 |
| Fund accounting and transfer agent fees (Note 3) | 30,835 |
| Directors' fees (Note 3) | 7,100 |
| Chief Compliance Officer service fees (Note 3) | 5,698 |
| Audit fees | 32,890 |
| Custodian fees | 17,399 |
| Miscellaneous | 20,140 |
| Total Expenses | 344,871 |
| Less reduction of expenses (Note 3) | (30,267) |
| Net Expenses | 314,604 |
| NET INVESTMENT INCOME | 558,113 |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | |
| Net realized gain on - | |
| Investments | 2,240,023 |
| Foreign currency and other assets and liabilities | 3,754 |
| 2,243,777 | |
| Net change in unrealized appreciation on - | |
| Investments | 6,000,357 |
| Foreign currency and other assets and liabilities | 847 |
| 6,001,204 | |
| NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 8,244,981 |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $8,803,094 |
The accompanying notes are an integral part of the financial statements.
9
Statements of Changes in Net Assets
For the | For the | |
Year Ended | Year Ended | |
10/31/06 | 10/31/05 | |
INCREASE (DECREASE) IN NET ASSETS: | ||
OPERATIONS: | ||
| Net investment income | $558,113 | $15,937 |
| Net realized gain on investments and foreign currency | 2,243,777 | 103,444 |
| Net change in unrealized appreciation on investments and foreign currency | 6,001,204 | 58,417 |
| Net increase from operations | 8,803,094 | 177,798 |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||
| From net investment income | (15,768) | (8,506) |
| From net realized gain on investments | (112,617) | (10,922) |
| Total distributions to shareholders | (128,385) | (19,428) |
CAPITAL STOCK ISSUED AND REPURCHASED: | ||
| Net increase from capital share transactions (Note 5) | 77,126,610 | 413,841 |
| Net increase in net assets | 85,801,319 | 572,211 |
NET ASSETS: | ||
| Beginning of year | 1,616,563 | 1,044,352 |
End of year (including undistributed net investment income of $561,865 and $15,766, respectively) | $87,417,882 | $1,616,563 |
The accompanying notes are an integral part of the financial statements.
10
Financial Highlights
For the Period | |||||
For the Years Ended | 7/10/021 to | ||||
10/31/06 | 10/31/05 | 10/31/04 | 10/31/03 | 10/31/02 | |
Per share data (for a share outstanding | |||||
throughout each period): | |||||
Net asset value - Beginning of period | $21.56 | $18.84 | $15.66 | $12.54 | $14.37 |
| Income (loss) from investment operations: | |||||
| Net investment income (loss) | 0.425 | 0.21 | 0.17 | 0.15 | -3 |
| Net realized and unrealized gain (loss) on investments | 6.42 | 2.85 | 3.18 | 2.97 | (1.83) |
| Total from investment operations | 6.84 | 3.06 | 3.35 | 3.12 | (1.83) |
| Less distributions to shareholders: | |||||
| From net investment income | (0.21) | (0.15) | (0.17) | - | - |
| From net realized gain on investments | (1.50) | (0.19) | - | - | - |
| Total distributions to shareholders | (1.71) | (0.34) | (0.17) | - | - |
Net asset value - End of period | $26.69 | $21.56 | $18.84 | $15.66 | $12.54 |
Total return2 | 33.68% | 16.34% | 21.58% | 24.88% | (12.73%) |
Ratios (to average net assets)/Supplemental Data: | |||||
| Expenses* | 0.95% | 1.05% | 1.05% | 1.05% | 1.05%4 |
| Net investment income (loss) | 1.69% | 1.15% | 1.08% | 1.15% | (0.10%)4 |
| Portfolio turnover | 54% | 40% | 35% | 30% | 12% |
Net assets - End of period (000's omitted) | $87,418 | $1,617 | $1,044 | $701 | $510 |
*The investment advisor did not impose all or a portion of its management fee and in some periods paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased as follows:
| 0.09% | 4.16% | 5.63% | 19.95% | 33.12%4 |
1Commencement of operations.
2Represents aggregate total return for the period indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the period. Periods less than one year are not annualized.
3Less than $0.01.
4Annualized.
5Calculated based on average shares outstanding during the period.
The accompanying notes are an integral part of the financial statements.
11
Notes to Financial Statements
1. ORGANIZATION
Overseas Series (the "Series") is a no-load diversified series of Manning & Napier Fund, Inc. (the "Fund"), formally Exeter Fund, Inc. The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide long-term capital growth by investing primarily in common stocks of issuers from outside the United States.
Shares of the Series are offered to investors and employees of Manning & Napier Advisors, Inc. (the “Advisor”) and its affiliates. The total authorized capital stock of the Fund consists of 1.7 billion shares of common stock each having a par value of $0.01. As of October 31, 2006, 1.16 billion shares have been designated in total among 21 series, of which 50 million have been designated as Overseas Series common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation
Portfolio securities, including domestic equities, foreign equities and options, listed on an exchange other than the NASDAQ National Market System are valued at the latest quoted sales price of the exchange on which the security is primarily traded. Securities not traded on valuation date or securities not listed on an exchange are valued at the latest quoted bid price provided by the Fund's pricing service. Securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account. Fair value is determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund's Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less are valued at amortized cost, which approximates market value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Interest income and expenses are recorded on an accrual basis.
Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund's Board, taking into consideration, among other things, the nature and type of expense.
Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
12
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign Currency Translation
The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series does not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized foreign currency gains and losses represent foreign currency gains and losses between trade date and settlement date on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.
Federal Taxes
The Series' policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series is not subject to federal income or excise tax to the extent that the Series distributes to shareholders each year its taxable income, including any net realized gains on investments, in accordance with requirements of the Internal Revenue Code. Accordingly, no provision for federal income tax or excise tax has been made in the financial statements.
Distributions of Income and Gains
Distributions to shareholders of net investment income and net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series paid a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series' average daily net assets through December 31, 2005. Effective January 1, 2006, the Series pays the Advisor a fee, computed daily and payable monthly, at an annual rate of 0.70% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series' organization. The Advisor also provides the Fund with necessary office space and fund
13
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (continued)
administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund, and the Special Assistant Secretary’s salary, which is paid by BISYS Fund Services Ohio, Inc. (“BISYS”)), and of all Directors who are "affiliated persons" of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each "non-affiliated" Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended for each active series of the Fund plus a fee for each committee meeting attended.
Through December 31, 2005, the Advisor had contractually agreed to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total expenses for the Series at no more than 1.05% of average daily net assets each year. Effective January 1, 2006, the Advisor contractually agreed to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total expenses for the Series at no more than 0.95% of average daily net assets each year. This Contractual fee waiver will be in effect until at least February 28, 2008. Accordingly, the Advisor waived fees of $30,267 for the year ended October 31, 2006, which is reflected as a reduction of expenses on the Statement of Operations. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund's shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
For fund accounting and transfer agent services, through October 31, 2006, the Fund paid the Advisor an annual fee of 0.12% of the Fund’s average daily net assets up to $900 million, 0.09% of the Fund’s average daily net assets between $900 million and $1.5 billion, and 0.05% of the Fund’s average daily net assets over $1.5 billion. Effective November 1, 2006, the fee rates were reduced as follows: 0.11% of the Fund’s average daily net assets up to $900 million, 0.07% of the Fund’s average daily net assets between $900 million and $1.5 billion, and 0.04% of the Fund’s average daily net assets over $1.5 billion. Additionally, certain transaction and account-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense. The Advisor has an agreement with BISYS under which BISYS serves as sub-accounting services and sub-transfer agent.
4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 2006, purchases and sales of securities, other than United States Government securities and short-term securities, were $83,543,467 and $16,154,963, respectively. There were no purchases or sales of United States Government securities.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Overseas Series were:
For the Year | For the Year | |||
Ended 10/31/06 | Ended 10/31/05 | |||
Shares | Amount | Shares | Amount | |
| Sold | 3,200,190 | $77,121,998 | 21,281 | $452,281 |
| Reinvested | 5,980 | 127,802 | 963 | 19,428 |
| Repurchased | (5,256) | (123,190) | (2,707) | (57,868) |
| Total | 3,200,914 | $77,126,610 | 19,537 | $413,841 |
14
Notes to Financial Statements
5. CAPITAL STOCK TRANSACTIONS (continued)
At October 31, 2006, the retirement plan of the Advisor and its affiliates owned 86,548 shares of the Series (2.6% of shares outstanding) valued at $2,309,966. In addition, two shareholders owned 2,723,546 shares of the Series (83.1% of shares outstanding) valued at $72,691,443. Investment activities of these shareholders may have a material effect on the Series.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on October 31, 2006.
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the United States Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the United States Government.
8. FEDERAL INCOME TAX INFORMATION
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including differences in the cost basis of securities contributed in-kind, losses deferred due to wash sales and foreign currency gains and losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series' net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
For the Year Ended 10/31/06 | For the Year Ended 10/31/05 | |
| Ordinary income | $42,577 | $8,506 |
| Long-term capital gains | 85,808 | 10,922 |
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Series hereby designates the long-term capital gains disclosed above as capital gains for its taxable year ended October 31, 2006.
15
Notes to Financial Statements
8. FEDERAL INCOME TAX INFORMATION (continued)
8. FEDERAL INCOME TAX INFORMATION (continued)
At October 31, 2006, the tax basis components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:
| Cost for federal income tax purposes | $82,118,877 |
| Unrealized appreciation | $6,421,013 |
| Unrealized depreciation | (262,270) |
| Net unrealized appreciation | $6,158,743 |
| Undistributed ordinary income | 2,499,488 |
| Undistributed long-term capital gains | 321,636 |
9. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109. FIN 48 supplements FASB Statement 109, Accounting for Income Taxes, by defining the confidence level that a tax position must meet in order to be recognized in the financial statements. FIN 48 provides guidance for how a fund should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the fund has taken or expects to take on a tax return. FIN 48 requires that the tax effects of a position be recognized only if it is “more likely than not” to be sustained based solely on its technical merits. Tax positions not deemed to meet the more likely than not threshold would be recorded as a tax benefit or expense in the current year. FIN 48 is effective for fiscal periods beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At adoption, the financial statements must be adjusted to reflect only those tax positions that are more likely than not to be sustained as of the adoption date. Management of the Fund is currently evaluating the impact that FIN 48 will have on the financial statements.
In addition, in September 2006, FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”) was issued, and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair value methods and applications. At this time, management is evaluating the implications of FAS 157, but it is not expected to materially impact the Series’ financial statements.
16
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Overseas Series:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Overseas Series (a Series of Manning & Napier Fund, Inc., hereafter referred to as the "Series") at October 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
December 13, 2006
17
Supplemental Tax Information (unaudited)
For federal income tax purposes, the Series designates for the current fiscal year $27,704 or, if different, the maximum amount allowable under the tax law as qualified dividend income.
18
Directors' and Officers' Information (unaudited)
The Statement of Additional Information provides additional information about the Fund's directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:\\www.sec.gov). The following chart shows certain information about the Fund's officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.
INTERESTED DIRECTOR/OFFICER | |
| Name: | B. Reuben Auspitz* |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 59 |
| Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1& Length of Time Served: | Indefinite - Director since 1984; Vice President 1984 - 2003; President since 2004; |
| Principal Executive Officer Since 2002 | |
| Principal Occupation(s) During Past 5 Years: | Executive Vice President; Co-Executive Director; Executive Group Member**; Chief |
| Compliance Officer since 2004 - Manning & Napier Advisors, Inc.; President; Director - | |
| Manning & Napier Investor Services, Inc.; Holds or has held one or more of | |
| the following titles for various subsidiaries and affiliates: President, Vice President, | |
| Director, Chairman, Treasurer, Chief Compliance Officer or Member | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
INDEPENDENT DIRECTORS | |
| Name: | Stephen B. Ashley |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 66 |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1996 |
| Principal Occupation(s) During Past 5 Years: | Chairman, Director, President & Chief Executive Officer, |
| The Ashley Group (property management and investment) | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | Genesee Corp. |
| The Ashley Group | |
| Fannie Mae | |
| Name: | Peter L. Faber |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 68 |
| Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1987 |
| Principal Occupation(s) During Past 5 Years: | Partner, McDermott, Will & Emery LLP (law firm) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | Partnership for New York City, Inc. |
| New York Collegium | |
| Name: | Harris H. Rusitzky |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 71 |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1985 |
| Principal Occupation(s) During Past 5 Years: | President, The Greening Group (business consultants) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
19
Directors' and Officers' Information (unaudited)
OFFICERS | |
| Name: | Jeffrey S. Coons, Ph.D., CFA |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 43 |
| Current Position(s) Held with Fund: | Vice President |
Term of Office1& Length of Time Served: | Since 2004 |
| Principal Occupation(s) During Past 5 Years: | Co-Director of Research since 2002 & Executive Group Member**, |
| Manning & Napier Advisors, Inc.; Managing Director - Risk Management, Manning & | |
| Napier Advisors, Inc., 1993-2002; Holds one or more of the following titles for various | |
| subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Christine Glavin |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 40 |
| Current Position(s) Held with Fund: | Principal Financial Officer, Chief Financial Officer |
Term of Office1& Length of Time Served: | Principal Financial Officer since 2002; Chief Financial Officer since 2001 |
| Principal Occupation(s) During Past 5 Years: | Fund Accounting Manager, Manning & Napier Advisors, Inc. |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Jodi L. Hedberg |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 38 |
| Current Position(s) Held with Fund: | Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance |
| Officer | |
Term of Office1& Length of Time Served: | Corporate Secretary since 1997; Chief Compliance Officer since 2004 |
| Principal Occupation(s) During Past 5 Years: | Director of Compliance, Manning & Napier Advisors, Inc. and affiliates |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Alaina V. Metz |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 39 |
| Current Position(s) Held with Fund: | Special Assistant Secretary |
| Term of Office & Length of Time Served: | Indefinite - Since 2002 |
| Principal Occupation(s) During Past 5 Years: | Vice President, BISYS Fund Services Ohio, Inc. (mutual fund servicing company) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund's investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, Inc. and President and Director, Manning & Napier Investor Services, Inc., the Fund's distributor.
**The Executive Group performs the duties of the Office of the Chief Executive of Manning & Napier Advisors, Inc.
1The term of office for President, Vice President, Chief Financial Officer, and Corporate Secretary is one year and until their respective successors are chosen and qualified. All other officers' terms are indefinite.
20
(THIS PAGE INTENTIONALLY LEFT BLANK)
21
Literature Requests (unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone 1-800-466-3863
On the Securities and Exchange
Commission’s (SEC) web site http://www.sec.gov
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-Q, and are available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Prospectus and Statement of Additional Information (SAI)
The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
On the Advisor’s web site http://www.manningnapieradvisors.com
Additional information available at www.manningnapieradvisors.com
| 1. | Fund Holdings - Month-End |
| 2. | Fund Holdings - Quarter-End |
| 3. | Shareholder Report - Annual |
| 4. | Shareholder Report - Semi-Annual |
22
Manning & Napier Fund, Inc.
Tax Managed Series
Annual Report
October 31, 2006
Management Discussion and Analysis (unaudited)
Dear Shareholders:
The Tax Managed Series has outperformed its benchmark for the past year, and it has also outperformed its benchmarks for the longer-term current market cycle period (starting April 1, 2000). Because a market cycle includes periods of both rising and falling markets, it is more informative to evaluate investment performance over a market cycle than over periods based only on the calendar.
Over the past year, the economy has continued to give mixed signals while the stock market has made a slow climb to double-digit returns. Each month positive economic data has been followed by negative data adding to the uncertainty of whether the Federal Reserve (the “Fed”) would decide to continue to attempt to constrain inflation through higher interest rates. More recently, the Fed has stopped increasing rates as inflation fears have eased and energy prices declined. At the same time, Gross Domestic Product growth has slowed, but corporate profits continue to grow at a double-digit rate, adding to the conflicting economic news. It is an environment with few trends and one which we feel is well suited to our investment approach.
Over the course of the past year, the Series has benefited primarily from positions in the Information Technology, Consumer Discretionary, and Energy sectors. Overall, however, the Tax Managed Series’ performance has been driven less by broad trends than by selective individual stock opportunities.
During the spring of this year as the sector was experiencing a sharp decline, we increased our position in the Information Technology sector, overweighting our position relative to the Standard & Poor’s 500 Total Return Index. We purchased companies that provide IT security and communications infrastructure and several holdings in this sector did particularly well during the last three months of the fiscal year.
Many stocks in the consumer sector had fallen out of favor with investors who feared that rising interest rates and a weakening consumer would put a damper on consumers’ ability to purchase big ticket items. We took advantage of the weakness in the Consumer Discretionary sector by purchasing companies whose sales are less affected by rising interest rates, like cable television companies. These stocks did well over the year.
The Series also benefited earlier in the year from its stock positions in the Energy sector. We actively pared back positions and realized gains as they appreciated, dampening the impact of falling energy prices on the Series’ portfolio during more recent months. Despite the recent sell off in these stocks, we continue to maintain holdings in oil services companies that benefit from capital spending in the supply-constrained Energy sector.
Our independent, opportunistic investment approach has helped our clients through a wide variety of market environments, including speculative bull markets, bear markets, and interim periods of volatility, such as we’ve experienced in the last year. The key to our approach is not to simply buy securities that have fallen in price, but to opportunistically seek out those areas of the market that have sound fundamentals in spite of stock price weakness.
We wish you a happy and healthy New Year.
Sincerely,
Manning & Napier Advisors, Inc.
1
Performance Update as of October 31, 2006 (unaudited)
| Average Annual Total Returns | ||||
| As of October 31, 2006 | ||||
| One | Five | Ten | Since | |
| Year | Year | Year | Inception1 | |
| Manning & Napier Fund, Inc. - Tax Managed Series | ||||
Returns Before Taxes2,4 | 20.01% | 10.98% | 11.48% | 11.91% |
Returns After Taxes on Distributions3,4 | 17.83% | 10.29% | 10.99% | 11.46% |
Returns After Taxes on Distributions and Sale of Series Shares3,4 | 15.22% | 9.35% | 10.09% | 10.56% |
Russell 3000® Index5 | 16.37% | 8.35% | 8.89% | 10.04% |
Standard & Poor's (S&P) 500 Total Return Index6 | 16.33% | 7.25% | 8.64% | 9.96% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Tax Managed Series (returns before taxes) for the ten years ended October 31, 2006 to the Russell 3000® Index and the S&P 500 Total Return Index.
Data for line graph to follow:
| Manning & Napier Fund, Inc. | S&P 500 | ||
| Date | Tax Managed Series4 | Russell 3000® Index | Total Return Index |
| 11/1/96 | $10,000 | $10,000 | $10,000 |
| 10/31/97 | 13,070 | 13,160 | 13,210 |
| 10/31/98 | 12,773 | 15,331 | 16,116 |
| 10/31/99 | 15,588 | 19,129 | 20,251 |
| 10/31/00 | 20,518 | 20,971 | 21,483 |
| 10/31/01 | 17,610 | 15,693 | 16,136 |
| 10/31/02 | 15,939 | 13,441 | 13,700 |
| 10/31/03 | 18,372 | 16,625 | 16,548 |
| 10/31/04 | 21,487 | 18,205 | 18,104 |
| 10/31/05 | 24,701 | 20,136 | 19,682 |
| 10/31/06 | 29,643 | 23,432 | 22,895 |
1Performance numbers for the Series and Index are calculated from November 1, 1995, the Series' inception date.
2Returns before taxes do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares.
3Returns after taxes on distributions assume that an investor owned the Series during the entire period and paid taxes on the Series' distributions. Returns after taxes on distributions and sale of series shares assume that an investor paid taxes on the Series' distributions and sold all shares at the end of each period. After-tax returns reflect the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Actual after-tax returns depend on an investor's tax situation and may differ from those shown. After-tax returns reflect past tax effects and are not indicative of future tax effects. After-tax returns are not relevant to those investing through 401(k) plans, IRAs or other tax-deferred arrangements.
4The Series' performance is historical and may not be indicative of future results.
5The primary index has been changed from the S&P 500 Total Return Index to the Russell 3000® Index because it more accurately reflects the Advisor’s all-capitalization equity investment approach. The Russell 3000® Index is an unmanaged, market-capitalization weighted index of the 3,000 largest U.S. domiciled companies. The Index returns assume reinvestment of income and, unlike Series returns, does not reflect any fees or expenses.
6The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the Over-the-Counter market. The Index returns assume daily reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
2
Shareholder Expense Example (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as potential wire charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Account Value | Account Value | During Period* | |
5/1/06 | 10/31/06 | 5/1/06-10/31/06 | |
| Actual | $1,000.00 | $1,077.40 | $6.28 |
| Hypothetical | |||
| (5% return before expenses) | $1,000.00 | $1,019.16 | $6.11 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.20%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.
3
Portfolio Composition as of October 31, 2006 (unaudited)
Data for pie chart to follow:
Sector Allocation*
| Consumer Discretionary | 13.6% |
| Consumer Staples | 12.2% |
| Energy | 8.7% |
| Financials | 9.2% |
| Health Care | 14.3% |
| Industrials | 9.8% |
| Information Technology | 20.8% |
| Materials | 4.8% |
| Telecommunication Services | 1.1% |
| Utilities | 4.1% |
| Cash, short-term investments, and liabilities, less other assets | 1.4% |
*As a percentage of net assets.
4
Investment Portfolio - October 31, 2006
Value | ||
Shares | (Note 2) | |
COMMON STOCKS - 98.6% | ||
Consumer Discretionary - 13.6% | ||
Hotels, Restaurants & Leisure - 3.6% | ||
| Carnival Corp. | 3,425 | $167,208 |
| International Game Technology | 2,450 | 104,150 |
| 271,358 | ||
Leisure Equipment & Products - 0.6% | ||
| Marvel Entertainment, Inc.* | 1,625 | 41,194 |
Media - 6.2% | ||
| Comcast Corp. - Class A* | 3,575 | 145,395 |
| The E.W. Scripps Co. - Class A | 2,780 | 137,499 |
| Time Warner, Inc. | 9,410 | 188,294 |
| 471,188 | ||
Specialty Retail - 3.2% | ||
| Kingfisher plc (United Kingdom) (Note 7) | 23,100 | 115,985 |
| The Sherwin-Williams Co. | 2,175 | 128,825 |
| 244,810 | ||
Total Consumer Discretionary | 1,028,550 | |
Consumer Staples - 12.2% | ||
Beverages - 2.9% | ||
| The Coca-Cola Co. | 4,775 | 223,088 |
Food & Staples Retailing - 2.0% | ||
| Carrefour S.A. (France) (Note 7) | 1,220 | 74,323 |
| Wal-Mart Stores, Inc. | 1,530 | 75,398 |
| 149,721 | ||
Food Products - 5.5% | ||
| Nestle S.A. (Switzerland) (Note 7) | 475 | 162,318 |
| Unilever plc - ADR (United Kingdom) (Note 7) | 10,530 | 255,668 |
| 417,986 | ||
Personal Products - 1.8% | ||
| The Estee Lauder Companies, Inc. - Class A | 3,400 | 137,326 |
Total Consumer Staples | 928,121 | |
Energy - 8.7% | ||
Energy Equipment & Services - 7.3% | ||
| Baker Hughes, Inc. | 1,605 | 110,825 |
| Cameron International Corp.* | 1,650 | 82,665 |
| National-Oilwell Varco, Inc.* | 1,724 | 104,130 |
| Schlumberger Ltd. | 2,350 | 148,238 |
| Weatherford International Ltd.* | 2,630 | 108,040 |
| 553,898 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - October 31, 2006
Value | ||
Shares | (Note 2) | |
Energy (continued) | ||
Oil, Gas & Consumable Fuels - 1.4% | ||
| Hess Corp. | 2,440 | $103,456 |
Total Energy | 657,354 | |
Financials - 9.2% | ||
Capital Markets - 3.3% | ||
| The Bank of New York Co., Inc. | 4,075 | 140,058 |
| SEI Investments Co. | 1,885 | 106,088 |
| 246,146 | ||
Commercial Banks - 4.5% | ||
| PNC Financial Services Group, Inc. | 1,550 | 108,547 |
| U.S. Bancorp | 4,100 | 138,744 |
| Wachovia Corp. | 1,725 | 95,738 |
| 343,029 | ||
Diversified Financial Services - 1.4% | ||
| Bank of America Corp. | 2,000 | 107,740 |
Total Financials | 696,915 | |
Health Care - 14.3% | ||
Health Care Equipment & Supplies - 5.6% | ||
| Bausch & Lomb, Inc. | 1,600 | 85,664 |
| The Cooper Companies, Inc. | 3,275 | 188,738 |
| DENTSPLY International, Inc. | 400 | 12,512 |
| Medtronic, Inc. | 2,840 | 138,251 |
| 425,165 | ||
Health Care Technology - 3.4% | ||
| Eclipsys Corp.* | 5,480 | 116,121 |
| Emdeon Corp.* | 12,050 | 140,383 |
| 256,504 | ||
Life Sciences Tools & Services - 2.6% | ||
| Affymetrix, Inc.* | 3,140 | 80,070 |
| PerkinElmer, Inc. | 5,510 | 117,694 |
| 197,764 | ||
Pharmaceuticals - 2.7% | ||
| Novartis AG - ADR (Switzerland) (Note 7) | 3,350 | 203,446 |
Total Health Care | 1,082,879 | |
Industrials - 9.8% | ||
Aerospace & Defense - 1.5% | ||
| Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) (Note 7) | 2,600 | 108,238 |
Air Freight & Logistics - 1.3% | ||
| United Parcel Service, Inc. - Class B | 1,325 | 99,839 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - October 31, 2006
Value | ||
Shares | (Note 2) | |
Industrials (continued) | ||
Airlines - 2.3% | ||
| JetBlue Airways Corp.* | 5,020 | $63,051 |
| Southwest Airlines Co. | 7,475 | 112,349 |
| 175,400 | ||
Commercial Services & Supplies - 1.4% | ||
| The Dun & Bradstreet Corp.* | 1,400 | 108,136 |
Industrial Conglomerates - 3.3% | ||
| 3M Co. | 1,995 | 157,286 |
| Tyco International Ltd. (Bermuda) (Note 7) | 3,180 | 93,587 |
| 250,873 | ||
Total Industrials | 742,486 | |
Information Technology - 20.8% | ||
Communications Equipment - 8.1% | ||
| Avaya, Inc.* | 8,000 | 102,480 |
| Cisco Systems, Inc.* | 6,730 | 162,395 |
| Juniper Networks, Inc.* | 4,960 | 85,411 |
| Research In Motion Ltd. (RIM)* (Canada) (Note 7) | 2,235 | 262,568 |
| 612,854 | ||
Computers & Peripherals - 1.9% | ||
| EMC Corp.* | 11,800 | 144,550 |
IT Services - 5.0% | ||
| Automatic Data Processing, Inc. | 3,325 | 164,388 |
| CheckFree Corp.* | 2,540 | 100,279 |
| Western Union Co.* | 5,295 | 116,755 |
| 381,422 | ||
Software - 5.8% | ||
| Electronic Arts, Inc.* | 1,580 | 83,566 |
| NAVTEQ Corp.* | 3,320 | 110,224 |
| Salesforce.com, Inc.* | 2,120 | 82,722 |
| Symantec Corp.* | 8,225 | 163,184 |
| 439,696 | ||
Total Information Technology | 1,578,522 | |
Materials - 4.8% | ||
Chemicals - 4.8% | ||
| Lonza Group AG (Switzerland) (Note 7) | 850 | 65,611 |
| Minerals Technologies, Inc. | 1,625 | 89,635 |
| Nalco Holding Co.* | 5,275 | 106,713 |
| The Scotts Miracle-Gro Co. - Class A | 2,020 | 99,909 |
Total Materials | 361,868 |
The accompanying notes are an integral part of the financial statements.
7
Investment Portfolio - October 31, 2006
Value | ||
Shares | (Note 2) | |
Telecommunication Services - 1.1% | ||
Wireless Telecommunication Services - 1.1% | ||
| Vodafone Group plc - ADR (United Kingdom) (Note 7) | 3,340 | $86,339 |
Utilities - 4.1% | ||
Electric Utilities - 2.9% | ||
| Allegheny Energy, Inc.* | 2,575 | 110,802 |
| American Electric Power Co., Inc. | 2,700 | 111,861 |
| 222,663 | ||
Multi-Utilities - 1.2% | ||
| Xcel Energy, Inc. | 4,180 | 92,253 |
Total Utilities | 314,916 | |
TOTAL COMMON STOCKS | ||
| (Identified Cost $5,907,218) | 7,477,950 | |
SHORT-TERM INVESTMENTS - 1.8% | ||
| Dreyfus Treasury Cash Management - Institutional Shares | ||
| (Identified Cost $135,978) | 135,978 | 135,978 |
TOTAL INVESTMENTS - 100.4% | ||
| (Identified Cost $6,043,196) | 7,613,928 | |
LIABILITIES, LESS OTHER ASSETS - (0.4%) | (29,307) | |
NET ASSETS - 100% | $7,584,621 |
*Non-income producing security
ADR - American Depository Receipt
The accompanying notes are an integral part of the financial statements.
8
Statement of Assets and Liabilities
October 31, 2006
ASSETS: | |
| Investments, at value (identified cost $6,043,196) (Note 2) | $7,613,928 |
| Foreign currency, at value (cost $2) | 2 |
| Foreign tax reclaims receivable | 3,684 |
| Dividends receivable | 3,676 |
| TOTAL ASSETS | 7,621,290 |
LIABILITIES: | |
| Accrued management fees (Note 3) | 2,141 |
| Accrued fund accounting and transfer agent fees (Note 3) | 2,097 |
| Accrued Chief Compliance Officer service fees (Note 3) | 570 |
| Audit fees payable | 29,394 |
| Other payables and accrued expenses | 2,467 |
| TOTAL LIABILITIES | 36,669 |
TOTAL NET ASSETS | $7,584,621 |
NET ASSETS CONSIST OF: | |
| Capital stock | $2,808 |
| Additional paid-in-capital | 5,429,097 |
| Undistributed net investment income | 35,808 |
| Accumulated net realized gain on investments, foreign currency and other assets and liabilities | 546,169 |
| Net unrealized appreciation on investments, foreign currency and other assets and liabilities | 1,570,739 |
TOTAL NET ASSETS | $7,584,621 |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS A ($7,584,621/280,804 shares) | $27.01 |
The accompanying notes are an integral part of the financial statements.
9
Statement of Operations
For the Year Ended October 31, 2006
INVESTMENT INCOME: | |
| Dividends (net of foreign tax withheld, $2,253) | $113,957 |
| Interest | 5,122 |
| Total Investment Income | 119,079 |
EXPENSES: | |
| Management fees (Note 3) | 68,558 |
| Fund accounting and transfer agent fees (Note 3) | 10,393 |
| Directors' fees (Note 3) | 7,100 |
| Chief Compliance Officer service fees (Note 3) | 5,698 |
| Audit fees | 29,490 |
| Custodian fees | 2,301 |
| Miscellaneous | 12,292 |
| Total Expenses | 135,832 |
| Less reduction of expenses (Note 3) | (53,540) |
| Net Expenses | 82,292 |
| NET INVESTMENT INCOME | 36,787 |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | |
| Net realized gain on - | |
| Investments | 554,287 |
| Foreign currency and other assets and liabilities | 161 |
| 554,448 | |
| Net change in unrealized appreciation on - | |
| Investments | 690,694 |
| Foreign currency and other assets and liabilities | 155 |
| 690,849 | |
| NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 1,245,297 |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $1,282,084 |
The accompanying notes are an integral part of the financial statements.
10
Statements of Changes in Net Assets
For the | For the | |
Year Ended | Year Ended | |
10/31/06 | 10/31/05 | |
INCREASE (DECREASE) IN NET ASSETS: | ||
OPERATIONS: | ||
| Net investment income | $36,787 | $15,546 |
| Net realized gain on investments and foreign currency | 554,448 | 784,646 |
| Net change in unrealized appreciation on investments and foreign currency | 690,849 | 122,605 |
| Net increase from operations | 1,282,084 | 922,797 |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||
| From net investment income | (15,005) | (4,007) |
| From net realized gain on investments | (790,371) | (351,018) |
| Total distributions to shareholders | (805,376) | (355,025) |
CAPITAL STOCK ISSUED AND REPURCHASED: | ||
| Net increase from capital share transactions (Note 5) | 222,291 | 113,338 |
| Net increase in net assets | 698,999 | 681,110 |
NET ASSETS: | ||
| Beginning of year | 6,885,622 | 6,204,512 |
End of year (including undistributed net investment income of $35,808 and $13,865, respectively) | $7,584,621 | $6,885,622 |
The accompanying notes are an integral part of the financial statements.
11
Financial Highlights
For the Years Ended | |||||
10/31/06 | 10/31/05 | 10/31/04 | 10/31/03 | 10/31/02 | |
Per share data (for a share outstanding | |||||
throughout each year): | |||||
Net asset value - Beginning of year | $25.60 | $23.51 | $20.15 | $17.59 | $19.53 |
| Income (loss) from investment operations: | |||||
| Net investment income | 0.13 | 0.06 | 0.03 | 0.05 | 0.10 |
| Net realized and unrealized gain (loss) on investments | 4.41 | 3.36 | 3.38 | 2.62 | (1.94) |
| Total from investment operations | 4.54 | 3.42 | 3.41 | 2.67 | (1.84) |
| Less distributions to shareholders: | |||||
| From net investment income | (0.06) | (0.02) | (0.05) | (0.11) | (0.10) |
| From net realized gain on investments | (3.07) | (1.31) | - | - | - |
| Total distributions to shareholders | (3.13) | (1.33) | (0.05) | (0.11) | (0.10) |
Net asset value - End of year | $27.01 | $25.60 | $23.51 | $20.15 | $17.59 |
Total return1 | 20.01% | 14.96% | 16.96% | 15.27% | (9.49%) |
Ratios (to average net assets)/Supplemental Data: | |||||
| Expenses* | 1.20% | 1.20% | 1.20% | 1.20% | 1.20% |
| Net investment income | 0.54% | 0.23% | 0.10% | 0.26% | 0.53% |
| Portfolio turnover | 61% | 68% | 64% | 34% | 63% |
Net assets - End of year (000's omitted) | $7,585 | $6,886 | $6,205 | $4,875 | $3,726 |
*The investment advisor did not impose all or a portion of its management fee and in some years paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased as follows:
| 0.78% | 0.82% | 0.83% | 2.53% | 3.16% |
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the year.
The accompanying notes are an integral part of the financial statements.
12
Notes to Financial Statements
1. ORGANIZATION
Tax Managed Series (the "Series") is a no-load diversified series of Manning & Napier Fund, Inc. (the "Fund"), formerly Exeter Fund, Inc. The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to maximize long-term growth while attempting to minimize the impact of taxes on the total return earned by shareholders.
The Series is authorized to issue five classes of shares (Class A, B, C, D and E). Currently, only Class A shares have been issued. Each class of shares is substantially the same, except that class-specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate.
Shares of the Series are offered to investors and employees of Manning & Napier Advisors, Inc. (the “Advisor”) and its affiliates. The total authorized capital stock of the Fund consists of 1.7 billion shares of common stock each having a par value of $0.01. As of October 31, 2006, 1.16 billion shares have been designated in total among 21 series, of which 37.5 million have been designated as Tax Managed Series Class A common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation
Portfolio securities, including domestic equities, foreign equities and options, listed on an exchange other than the NASDAQ National Market System are valued at the latest quoted sales price of the exchange on which the security is primarily traded. Securities not traded on valuation date or securities not listed on an exchange are valued at the latest quoted bid price provided by the Fund’s pricing service. Securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account. Fair value is determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund's Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less are valued at amortized cost, which approximates market value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Interest income and expenses are recorded on an accrual basis.
Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund's Board, taking into consideration, among other things, the nature and type of expense.
13
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Security Transactions, Investment Income and Expenses (continued)
Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
Foreign Currency Translation
The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series does not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized foreign currency gains and losses represent foreign currency gains and losses between trade date and settlement date on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.
Federal Taxes
The Series' policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series is not subject to federal income or excise tax to the extent that the Series distributes to shareholders each year its taxable income, including any net realized gains on investments, in accordance with requirements of the Internal Revenue Code. Accordingly, no provision for federal income tax or excise tax has been made in the financial statements.
Distributions of Income and Gains
Distributions to shareholders of net investment income and net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
14
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series' average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series' organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund, and the Special Assistant Secretary’s salary, which is paid by BISYS Fund Services Ohio, Inc. (“BISYS”)), and of all Directors who are "affiliated persons" of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each "non-affiliated" Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended for each active series of the Fund plus a fee for each committee meeting attended.
The Advisor has contractually agreed, until at least February 28, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total expenses for the Class A Series at no more than 1.20% of average daily net assets each year. Accordingly, the Advisor waived fees of $53,540 for the year ended October 31, 2006, which is reflected as a reduction of expenses on the Statement of Operations. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund's shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
For fund accounting and transfer agent services, through October 31, 2006, the Fund paid the Advisor an annual fee of 0.12% of the Fund’s average daily net assets up to $900 million, 0.09% of the Fund’s average daily net assets between $900 million and $1.5 billion, and 0.05% of the Fund’s average daily net assets over $1.5 billion. Effective November 1, 2006, the fee rates were reduced as follows: 0.11% of the Fund’s average daily net assets up to $900 million, 0.07% of the Fund’s average daily net assets between $900 million and $1.5 billion, and 0.04% of the Fund’s average daily net assets over $1.5 billion. Additionally, certain transaction and account-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense. The Advisor has an agreement with BISYS under which BISYS serves as sub-accounting services and sub-transfer agent.
4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 2006, purchases and sales of securities, other than United States Government securities and short-term securities, were $4,104,721 and $4,615,896, respectively. There were no purchases or sales of United States Government securities.
15
Notes to Financial Statements
5. CAPITAL STOCK TRANSACTIONS
Transactions in Class A shares of Tax Managed Series were:
For the Year | For the Year | |||
Ended 10/31/06 | Ended 10/31/05 | |||
Shares | Amount | Shares | Amount | |
| Sold | 28,466 | $698,775 | 49,352 | $1,191,527 |
| Reinvested | 34,862 | 792,414 | 14,644 | 349,259 |
| Repurchased | (51,527) | (1,268,898) | (58,944) | (1,427,448) |
| Total | 11,801 | $222,291 | 5,052 | $113,338 |
The Advisor owned 28,095 shares on October 31, 2006 (10.0% of shares outstanding) valued at $758,846.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on October 31, 2006.
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the United States Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the United States Government.
8. FEDERAL INCOME TAX INFORMATION
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including losses deferred due to wash sales and foreign currency gains and losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series' net asset value. Any such reclassifications are not reflected in the financial highlights.
16
Notes to Financial Statements
8. FEDERAL INCOME TAX INFORMATION (continued)
The tax character of distributions paid were as follows:
For the Year | For the Year | |
Ended 10/31/06 | Ended 10/31/05 | |
| Ordinary income | $15,005 | $2,844 |
| Long-term capital gains | 790,371 | 352,181 |
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Series hereby designates the long-term capital gains disclosed above as capital gains for its taxable year ended October 31, 2006.
At October 31, 2006, the tax basis components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:
| Cost for federal income tax purposes | $6,051,291 |
| Unrealized appreciation | $1,568,379 |
| Unrealized depreciation | (5,742) |
| Net unrealized appreciation | $1,562,637 |
| Undistributed ordinary income | 35,808 |
| Undistributed long-term capital gains | 554,264 |
9. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109. FIN 48 supplements FASB Statement 109, Accounting for Income Taxes, by defining the confidence level that a tax position must meet in order to be recognized in the financial statements. FIN 48 provides guidance for how a fund should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the fund has taken or expects to take on a tax return. FIN 48 requires that the tax effects of a position be recognized only if it is “more likely than not” to be sustained based solely on its technical merits. Tax positions not deemed to meet the more likely than not threshold would be recorded as a tax benefit or expense in the current year. FIN 48 is effective for fiscal periods beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At adoption, the financial statements must be adjusted to reflect only those tax positions that are more likely than not to be sustained as of the adoption date. Management of the Fund is currently evaluating the impact that FIN 48 will have on the financial statements.
In addition, in September 2006, FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”) was issued, and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair value methods and applications. At this time, management is evaluating the implications of FAS 157, but it is not expected to materially impact the Series’ financial statements.
17
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Tax Managed Series:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Tax Managed Series (a Series of Manning & Napier Fund, Inc., hereafter referred to as the "Series") at October 31, 2006, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
December 13, 2006
18
Supplemental Tax Information (unaudited)
For federal income tax purposes, the Series designates for the current fiscal year $15,005 or, if different, the maximum amount allowable under the tax law as qualified dividend income.
For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal year is 100%.
19
Directors' and Officers' Information (unaudited)
The Statement of Additional Information provides additional information about the Fund's directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:\\www.sec.gov). The following chart shows certain information about the Fund's officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.
INTERESTED DIRECTOR/OFFICER | |
| Name: | B. Reuben Auspitz* |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 59 |
| Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1& Length of Time Served: | Indefinite - Director since 1984; Vice President 1984 - 2003; President since 2004; |
| Principal Executive Officer Since 2002 | |
| Principal Occupation(s) During Past 5 Years: | Executive Vice President; Co-Executive Director; Executive Group Member**; Chief |
| Compliance Officer since 2004 - Manning & Napier Advisors, Inc.; President; Director - | |
| Manning & Napier Investor Services, Inc.; Holds or has held one or more of | |
| the following titles for various subsidiaries and affiliates: President, Vice President, | |
| Director, Chairman, Treasurer, Chief Compliance Officer or Member | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
INDEPENDENT DIRECTORS | |
| Name: | Stephen B. Ashley |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 66 |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1996 |
| Principal Occupation(s) During Past 5 Years: | Chairman, Director, President & Chief Executive Officer, |
| The Ashley Group (property management and investment) | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | Genesee Corp. |
| The Ashley Group | |
| Fannie Mae | |
| Name: | Peter L. Faber |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 68 |
| Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1987 |
| Principal Occupation(s) During Past 5 Years: | Partner, McDermott, Will & Emery LLP (law firm) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | Partnership for New York City, Inc. |
| New York Collegium | |
| Name: | Harris H. Rusitzky |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 71 |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1985 |
| Principal Occupation(s) During Past 5 Years: | President, The Greening Group (business consultants) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
20
Directors' and Officers' Information (unaudited)
OFFICERS | |
| Name: | Jeffrey S. Coons, Ph.D., CFA |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 43 |
| Current Position(s) Held with Fund: | Vice President |
Term of Office1& Length of Time Served: | Since 2004 |
| Principal Occupation(s) During Past 5 Years: | Co-Director of Research since 2002 & Executive Group Member**, |
| Manning & Napier Advisors, Inc.; Managing Director - Risk Management, Manning & | |
| Napier Advisors, Inc., 1993-2002; Holds one or more of the following titles for various | |
| subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Christine Glavin |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 40 |
| Current Position(s) Held with Fund: | Principal Financial Officer, Chief Financial Officer |
Term of Office1& Length of Time Served: | Principal Financial Officer since 2002; Chief Financial Officer since 2001 |
| Principal Occupation(s) During Past 5 Years: | Fund Accounting Manager, Manning & Napier Advisors, Inc. |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Jodi L. Hedberg |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 38 |
| Current Position(s) Held with Fund: | Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance |
| Officer | |
Term of Office1& Length of Time Served: | Corporate Secretary since 1997; Chief Compliance Officer since 2004 |
| Principal Occupation(s) During Past 5 Years: | Director of Compliance, Manning & Napier Advisors, Inc. and affiliates |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Alaina V. Metz |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 39 |
| Current Position(s) Held with Fund: | Special Assistant Secretary |
| Term of Office & Length of Time Served: | Indefinite - Since 2002 |
| Principal Occupation(s) During Past 5 Years: | Vice President, BISYS Fund Services Ohio, Inc. (mutual fund servicing company) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund's investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, Inc. and President and Director, Manning & Napier Investor Services, Inc., the Fund's distributor.
**The Executive Group performs the duties of the Office of the Chief Executive of Manning & Napier Advisors, Inc.
1The term of office for President, Vice President, Chief Financial Officer, and Corporate Secretary is one year and until their respective successors are chosen and qualified. All other officers' terms are indefinite.
21
Literature Requests (unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone 1-800-466-3863
On the Securities and Exchange
Commission’s (SEC) web site http://www.sec.gov
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-Q, and are available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Prospectus and Statement of Additional Information (SAI)
The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
On the Advisor’s web site http://www.manningnapieradvisors.com
Additional information available at www.manningnapieradvisors.com
| 1. | Fund Holdings - Month-End |
| 2. | Fund Holdings - Quarter-End |
| 3. | Shareholder Report - Annual |
| 4. | Shareholder Report - Semi-Annual |
22
Manning & Napier Fund, Inc.
Pro-Blend® ConservativeTerm Series
Pro-Blend® Moderate Term Series
Pro-Blend® Extended Term Series
Pro-Blend® Maximum Term Series
Annual Report
October 31, 2006
Management Discussion and Analysis (unaudited)
Dear Shareholders:
Each of the Pro-Blend® Series has outperformed its benchmarks for the past year, and they have also outperformed their respective benchmarks for the current market cycle period (starting April 1, 2000). Because a market cycle includes periods of both rising and falling markets, it is more informative to evaluate investment performance over a market cycle than over periods based only on the calendar.
Over the past year, the economy has continued to give mixed signals while the stock market has made a slow climb to double-digit returns. Each month positive economic data has been followed by negative data adding to the uncertainty of whether the Federal Reserve (the “Fed”) would decide to continue to attempt to constrain inflation through higher interest rates. More recently, the Fed has stopped increasing rates as inflation fears have eased and energy prices declined. At the same time, Gross Domestic Product growth has slowed, but corporate profits continue to grow at a double-digit rate, adding to the conflicting economic news. It is an environment with few trends and one which we feel is well suited to our investment approach.
Because each of the Pro-Blend® Series invest in a combination of stocks, bonds, and cash, their performance is affected by both the stock market and the bond market environments. As the most conservative of the four, the Pro-Blend® Conservative Term Series is most affected by the bond market, and as the most aggressive, the Pro-Blend® Maximum Term Series is most affected by the stock market. The Pro-Blend® Moderate Term Series and Pro-Blend® Extended Term Series fall between the other two. In most cases, the individual securities held in the Series are similar, although their position sizes will be different in keeping with the objectives of each Series, and the Pro-Blend® Maximum Term Series has only a small bond position.
Over the course of the past year, the Series have benefited primarily from positions in the Information Technology, Consumer Discretionary, and Energy sectors, as discussed below. Overall, however, the performance of the equity portions of the Series' portfolios has been driven less by broad trends than by selective individual stock opportunities.
During the spring of this year as the sector was experiencing a sharp decline, we increased our position in the Information Technology sector. We purchased companies that provide IT security and communications infrastructure, and the several holdings in this sector did particularly well during the last three months of the fiscal year.
Many stocks in the consumer sector had fallen out of favor with investors who feared that rising interest rates and a weakening consumer would put a damper on consumers’ ability to purchase big ticket items. We took advantage of the weakness in the Consumer Discretionary sector by purchasing companies whose sales are less affected by rising interest rates, like cable television companies. These stocks did well over the year.
The Series also benefited earlier in the year from their stock positions in the Energy sector. We actively pared back positions and realized gains as they appreciated, dampening the impact of falling energy prices on the Series' performance toward the end of the fiscal year. Despite the recent sell off in these stocks, we continue to maintain holdings in oil services companies that benefit from capital spending in the supply-constrained Energy sector.
As would be expected in the face of this fluctuating economic news, bond yields have also been impacted. At the end of October, the two ends of the U.S. Treasury yield curve were inverted (i.e., the yields for shorter-term bonds were higher than those for longer-term bonds) as conflicting forces affected the bond market. Thirty-year Treasury bond yields rose to a high of 5.3% in May, falling back to 4.7% by the end of October. On the short end, the 3-month Treasury bill moved in stride as the Fed raised short-term interest rates. The yield on the 3-month started the period at 3.8% at the end of October 2005, then steadily increased throughout the year, ending at 5.0% in October 2006. As a result, the fixed income portion of the Series' portfolios did not have a significant impact on the Series’ overall performance for the year. We focused primarily on high quality U.S. Treasuries, but we continued to hold modest positions in both corporate bonds and mortgage-backed U.S. Government agency assets, except in the Pro-Blend® Maximum Term Series, which focuses primarily on equities due to its more aggressive investment objective.
Our independent, opportunistic investment approach has helped our clients through a wide variety of market environments, including speculative bull markets, bear markets, and interim periods of volatility, such as we’ve experienced in the last year. The key to our approach is not to simply buy securities that have fallen in price, but to opportunistically seek out those areas of the market that have sound fundamentals in spite of stock price weakness.
We wish you a happy and healthy New Year.
Sincerely,
Manning & Napier Advisors, Inc.
1
Performance Update - Pro-Blend® Conservative Term Series (unaudited)
| Average Annual Total Returns | ||||
| As of October 31, 2006 | ||||
| One | Five | Ten | Since | |
| Year | Year | Year | Inception1 | |
Manning & Napier Fund, Inc. - Pro-Blend® Conservative Term Series2 | 8.49% | 5.99% | 6.65% | 6.49% |
Lehman Brothers Intermediate U.S. Aggregate Bond Index3,6 | 5.12% | 4.25% | 5.99% | 6.01% |
Lehman Brothers Intermediate U.S. Government/Credit Bond Index4,6 | 4.67% | 4.10% | 5.82% | 5.82% |
5%/15%/80% Blended Index3,5,6,7 | 7.87% | 5.61% | 6.74% | 6.92% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Pro-Blend® Conservative Term Series for the ten years ended October 31, 2006 to the Lehman Brothers Intermediate U.S. Aggregate Bond Index, the Lehman Brothers Intermediate U.S. Government/Credit Bond Index and a 5%/15%/80% Blended Index.
Data for line graph to follow:
| Manning & Napier Fund, Inc. | Lehman Brothers Intermediate | Lehman Brothers Intermediate | 5%/15%/80% | |
| Date | Pro-Blend® Conservative Term Series2 | U.S. Aggregate Bond Index | U.S. Government/Credit Bond Index | Blended Index |
| 11/1/96 | 10,000 | 10,000 | 10,000 | 10,000 |
| 10/31/97 | 10,874 | 10,810 | 10,749 | 11,136 |
| 10/31/98 | 11,585 | 11,715 | 11,729 | 12,229 |
| 10/31/99 | 11,789 | 11,926 | 11,845 | 12,986 |
| 10/31/00 | 13,040 | 12,758 | 12,610 | 13,904 |
| 10/31/01 | 14,225 | 14,524 | 14,407 | 14,613 |
| 10/31/02 | 14,843 | 15,423 | 15,259 | 14,955 |
| 10/31/03 | 15,697 | 16,085 | 16,087 | 16,211 |
| 10/31/04 | 16,628 | 16,867 | 16,783 | 17,229 |
| 10/31/05 | 17,540 | 17,015 | 16,829 | 17,794 |
| 10/31/06 | 19,029 | 17,886 | 17,614 | 19,195 |
1Performance numbers for the Series and Indices are calculated from November 1, 1995, the Series' inception date.
2The Series' performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series' performance is historical and may not be indicative of future results.
3The primary index has been changed from the Lehman Brothers Intermediate U.S. Government/Credit Bond Index to the Lehman Brothers Intermediate U.S. Aggregate Bond Index because it more closely represents the fixed income universe of the Series. The Lehman Brothers Intermediate U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities greater than one year but less than ten years. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
4The Lehman Brothers Intermediate U.S. Government/Credit Bond Index is a market value weighted measure of over 3,000 investment grade corporate and government securities with maturities greater than one year but less than ten years. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
5The 5%/15%/80% Blended Index is 5% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 15% Russell 3000® Index, and 80% Lehman Brothers Intermediate U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). The Russell 3000® Index is an unmanaged, market-capitalization weighted index of the 3,000 largest U.S. domiciled companies. The Index returns assume reinvestment of income. Both Indices' returns, unlike Series returns, do not reflect any fees or expenses.
6Because the Series' asset allocation will vary over time, the composition of the Series' portfolio may not match the composition of the comparative Indices' portfolios.
7The components of the Blended Index have been broadened to more closely represent the investment universe for this series. The new index components take into account the Advisor’s all-capitalization and all-country equity investment approach, as well as the ability to invest across multiple fixed income sectors.
2
Shareholder Expense Example - Pro-Blend® Conservative Term Series (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as potential wire charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Account Value | Account Value | During Period* | |
5/1/06 | 10/31/06 | 5/1/06-10/31/06 | |
| Actual | $1,000.00 | $1,045.80 | $5.16 |
| Hypothetical | |||
| (5% return before expenses) | $1,000.00 | $1,020.16 | $5.09 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.00%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.
3
Portfolio Composition - Pro-Blend® Conservative Term Series (unaudited)
As of October 31, 2006
Data for pie chart to follow:
Asset Allocation*
| Common Stocks | 28.71% |
| Corporate Bonds | 1.23% |
| U.S. Government Agencies | 9.17% |
U.S. Treasury Bonds1 | 6.14% |
U.S. Treasury Notes2 | 49.32% |
| Cash, warrants, short-term investments, and liabilities, less other assets | 5.43% |
*As a percentage of net assets.
1A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years.
2A U.S. Treasury Note is an intermediate-term obligation of the U.S. Treasury issued with a maturity period between one and ten years.
Sector Allocation*
| Information Technology | 5.67% |
| Health Care | 4.45% |
| Consumer Discretionary | 3.96% |
| Consumer Staples | 3.73% |
| Financials | 3.42% |
| Industrials | 3.34% |
| Energy | 2.83% |
| Utilities | 1.36% |
| Telecommunication Services | 0.50% |
| Materials | 0.32% |
*Including Common Stocks, Warrants and Corporate Bonds, as a percentage of total investments.
Top Five Stock Holdings*
| Unilever plc - ADR (United Kingdom) | 1.06% |
| Novartis AG - ADR (Switzerland) | 1.04% |
| EMC Corp. | 0.94% |
| Time Warner, Inc. | 0.89% |
| The Coca-Cola Co. | 0.87% |
*As a percentage of total investments.
Top Five Bond Holdings*
| U.S. Treasury Note, 3.00%, 2/15/2008 | 11.30% |
| U.S. Treasury Note, 4.75%, 11/15/2008 | 8.68% |
| U.S. Treasury Note, 4.875%, 4/30/2011 | 6.97% |
| U.S. Treasury Bond, 5.50%, 8/15/2028 | 5.78% |
| U.S. Treasury Note, 4.00%, 11/15/2012 | 5.34% |
*As a percentage of total investments.
4
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Shares | (Note 2) |
COMMON STOCKS - 28.71% | ||
Consumer Discretionary - 3.53% | ||
Auto Components - 0.03% | ||
| Autoliv, Inc. (Sweden) (Note 7) | 150 | $8,530 |
| Azure Dynamics Corp.* (Canada) (Note 7) | 4,750 | 3,765 |
| Superior Industries International, Inc. | 300 | 5,070 |
| Tenneco, Inc.* | 350 | 7,945 |
| 25,310 | ||
Diversified Consumer Services - 0.02% | ||
| Corinthian Colleges, Inc.* | 500 | 6,125 |
| Universal Technical Institute, Inc.* | 450 | 8,991 |
| 15,116 | ||
Hotels, Restaurants & Leisure - 1.20% | ||
| Carnival Corp. | 9,415 | 459,640 |
| Club Mediterranee S.A.* (France) (Note 7) | 375 | 20,199 |
| International Game Technology | 8,900 | 378,339 |
| 858,178 | ||
Internet & Catalog Retail - 0.02% | ||
| Audible, Inc.* | 2,375 | 17,765 |
Media - 2.14% | ||
| Acme Communications, Inc.* | 550 | 2,904 |
| Comcast Corp. - Class A* | 9,025 | 367,047 |
| DreamWorks Animation SKG, Inc. - Class A* | 200 | 5,290 |
| The E.W. Scripps Co. - Class A | 8,950 | 442,667 |
| Impresa S.A. (SGPS)* (Portugal) (Note 7) | 500 | 2,795 |
| Pearson plc (United Kingdom) (Note 7) | 1,175 | 17,335 |
| Playboy Enterprises, Inc. - Class B* | 500 | 5,305 |
| Reed Elsevier plc - ADR (United Kingdom) (Note 7) | 275 | 12,460 |
| Reuters Group plc (United Kingdom) (Note 7) | 1,900 | 16,208 |
| Scholastic Corp.* | 200 | 6,284 |
| Time Warner, Inc. | 32,300 | 646,323 |
| Wolters Kluwer N.V. (Netherlands) (Note 7) | 350 | 9,620 |
| 1,534,238 | ||
Multiline Retail - 0.02% | ||
| PPR (France) (Note 7) | 75 | 11,188 |
Specialty Retail - 0.09% | ||
| Build-A-Bear Workshop, Inc.* | 500 | 14,590 |
| Douglas Holding AG (Germany) (Note 7) | 350 | 16,927 |
| Kingfisher plc (United Kingdom) (Note 7) | 4,900 | 24,603 |
| KOMERI Co. Ltd. (Japan) (Note 7) | 100 | 3,446 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Consumer Discretionary (continued) | ||
Specialty Retail (continued) | ||
| Tractor Supply Co.* | 100 | $4,842 |
| 64,408 | ||
Textiles, Apparel & Luxury Goods - 0.01% | ||
| LVMH S.A. (Louis Vuitton Moet Hennessy) (France) (Note 7) | 50 | 5,210 |
Total Consumer Discretionary | 2,531,413 | |
Consumer Staples - 3.78% | ||
Beverages - 0.91% | ||
| The Coca-Cola Co. | 13,550 | 633,056 |
| Diageo plc (United Kingdom) (Note 7) | 350 | 6,475 |
| Heineken N.V. (Netherlands) (Note 7) | 150 | 6,797 |
| Scottish & Newcastle plc (United Kingdom) (Note 7) | 625 | 6,723 |
| 653,051 | ||
Food & Staples Retailing - 0.71% | ||
| Carrefour S.A. (France) (Note 7) | 3,300 | 201,039 |
| Pathmark Stores, Inc.* | 600 | 6,078 |
| Tesco plc (United Kingdom) (Note 7) | 1,675 | 12,571 |
| Wal-Mart Stores, Inc. | 5,950 | 293,216 |
| 512,904 | ||
Food Products - 1.72% | ||
| Cadbury Schweppes plc (United Kingdom) (Note 7) | 2,600 | 26,159 |
| Groupe Danone (France) (Note 7) | 100 | 14,650 |
| Nestle S.A. (Switzerland) (Note 7) | 1,225 | 418,610 |
| Suedzucker AG (Germany) (Note 7) | 150 | 3,700 |
| Unilever plc - ADR (United Kingdom) (Note 7) | 31,660 | 768,705 |
| 1,231,824 | ||
Household Products - 0.01% | ||
| Reckitt Benckiser plc (United Kingdom) (Note 7) | 175 | 7,613 |
Personal Products - 0.43% | ||
| Clarins S.A. (France) (Note 7) | 342 | 23,676 |
| The Estee Lauder Companies, Inc. - Class A | 7,020 | 283,538 |
| 307,214 | ||
Total Consumer Staples | 2,712,606 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Energy - 2.75% | ||
Energy Equipment & Services - 2.31% | ||
| Abbot Group plc (United Kingdom) (Note 7) | 2,275 | $13,061 |
| APL ASA* (Norway) (Note 7) | 700 | 4,864 |
| Baker Hughes, Inc. | 4,120 | 284,486 |
| Cameron International Corp.* | 5,800 | 290,580 |
| Compagnie Generale de Geophysique S.A. (CGG)* (France) (Note 7) | 125 | 21,135 |
| Hydril Co.* | 200 | 12,010 |
| National-Oilwell Varco, Inc.* | 4,616 | 278,806 |
| Pride International, Inc.* | 600 | 16,566 |
| Schlumberger Ltd. | 7,360 | 464,269 |
| Weatherford International Ltd.* | 6,640 | 272,771 |
| 1,658,548 | ||
Oil, Gas & Consumable Fuels - 0.44% | ||
| BP plc (United Kingdom) (Note 7) | 550 | 6,116 |
| Eni S.p.A. (Italy) (Note 7) | 575 | 17,339 |
| Forest Oil Corp.* | 175 | 5,712 |
| Hess Corp. | 6,105 | 258,852 |
| Mariner Energy, Inc.* | 141 | 2,795 |
| Petroleo Brasileiro S.A. (Petrobras) - ADR (Brazil) (Note 7) | 100 | 8,096 |
| Royal Dutch Shell plc - Class B (United Kingdom) (Note 7) | 196 | 7,021 |
| Total S.A. (France) (Note 7) | 100 | 6,770 |
| 312,701 | ||
Total Energy | 1,971,249 | |
Financials - 3.15% | ||
Capital Markets - 0.80% | ||
| The Bank of New York Co., Inc. | 8,425 | 289,567 |
| The Charles Schwab Corp. | 300 | 5,466 |
| Deutsche Bank AG (Germany) (Note 7) | 150 | 18,835 |
| Franklin Resources, Inc. | 50 | 5,698 |
| Janus Capital Group, Inc. | 325 | 6,526 |
| Macquarie Bank Ltd. (Australia) (Note 7) | 200 | 11,542 |
Mellon Financial Corp.1 | 250 | 9,700 |
| Merrill Lynch & Co., Inc. | 100 | 8,742 |
| Morgan Stanley | 125 | 9,554 |
| SEI Investments Co. | 3,620 | 203,734 |
| W.P. Stewart & Co. Ltd. (Bermuda) (Note 7) | 475 | 6,555 |
| 575,919 |
The accompanying notes are an integral part of the financial statements.
7
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Financials (continued) | ||
Commercial Banks - 1.66% | ||
| Aareal Bank AG* (Germany) (Note 7) | 375 | $15,969 |
| ABN AMRO Holding N.V. (Netherlands) (Note 7) | 900 | 26,243 |
| Barclays plc (United Kingdom) (Note 7) | 2,500 | 33,735 |
| BNP Paribas (France) (Note 7) | 50 | 5,497 |
| Boston Private Financial Holdings, Inc. | 425 | 11,747 |
| Commerzbank AG (Germany) (Note 7) | 300 | 10,620 |
| Credit Agricole S.A. (France) (Note 7) | 200 | 8,501 |
| The Hachijuni Bank Ltd. (Japan) (Note 7) | 1,000 | 7,081 |
| HSBC Holdings plc (United Kingdom) (Note 7) | 975 | 18,485 |
| HSBC Holdings plc - ADR (United Kingdom) (Note 7) | 150 | 14,320 |
| Huntington Bancshares, Inc. | 100 | 2,441 |
| KeyCorp | 100 | 3,714 |
| Marshall & Ilsley Corp. | 100 | 4,794 |
| PNC Financial Services Group, Inc. | 3,500 | 245,105 |
| Royal Bank of Scotland Group plc (United Kingdom) (Note 7) | 1,125 | 40,082 |
| Societe Generale (France) (Note 7) | 25 | 4,154 |
| The Sumitomo Trust & Banking Co. Ltd. (Japan) (Note 7) | 1,000 | 10,758 |
| SunTrust Banks, Inc. | 150 | 11,848 |
| TCF Financial Corp. | 300 | 7,809 |
| U.S. Bancorp | 10,575 | 357,858 |
| UniCredito Italiano S.p.A. (Italy) (Note 7) | 1,775 | 14,712 |
| Wachovia Corp. | 5,775 | 320,512 |
| Wells Fargo & Co. | 200 | 7,258 |
| Zions Bancorporation | 125 | 10,050 |
| 1,193,293 | ||
Consumer Finance - 0.01% | ||
| Capital One Financial Corp. | 50 | 3,966 |
Diversified Financial Services - 0.51% | ||
| Bank of America Corp. | 5,975 | 321,873 |
| Citigroup, Inc. | 175 | 8,778 |
| ING Groep N.V. (Netherlands) (Note 7) | 225 | 9,966 |
| JPMorgan Chase & Co. | 400 | 18,976 |
| Moody’s Corp. | 100 | 6,630 |
| 366,223 | ||
Insurance - 0.16% | ||
| Allianz SE (Germany) (Note 7) | 250 | 46,239 |
The accompanying notes are an integral part of the financial statements.
8
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Shares | (Note 2) |
COMMONS STOCKS (continued) | ||
Financials (continued) | ||
Insurance (continued) | ||
| Ambac Financial Group, Inc. | 100 | $8,349 |
| American International Group, Inc. | 150 | 10,075 |
| Axa (France) (Note 7) | 200 | 7,618 |
| MBIA, Inc. | 125 | 7,752 |
| Muenchener Rueckver AG (Germany) (Note 7) | 125 | 20,223 |
| Principal Financial Group, Inc. | 50 | 2,824 |
| Torchmark Corp. | 25 | 1,542 |
| Willis Group Holdings Ltd. (United Kingdom) (Note 7) | 275 | 10,458 |
| 115,080 | ||
Thrifts & Mortgage Finance - 0.01% | ||
| BankAtlantic Bancorp, Inc. - Class A | 325 | 4,257 |
| Flagstar Bancorp, Inc. | 200 | 3,006 |
| 7,263 | ||
Total Financials | 2,261,744 | |
Health Care - 4.50% | ||
Biotechnology - 0.07% | ||
| Amgen, Inc.* | 250 | 18,977 |
| Monogram Biosciences, Inc.* | 6,275 | 11,420 |
| Senomyx, Inc.* | 625 | 9,637 |
| Solexa, Inc.* | 1,300 | 13,312 |
| 53,346 | ||
Health Care Equipment & Supplies - 1.85% | ||
| Align Technology, Inc.* | 700 | 9,702 |
| Bausch & Lomb, Inc. | 5,100 | 273,054 |
| Biomet, Inc. | 300 | 11,352 |
| The Cooper Companies, Inc. | 6,040 | 348,085 |
| Cyberonics, Inc.* | 900 | 16,227 |
| Dexcom, Inc.* | 2,100 | 18,480 |
| Edwards Lifesciences Corp.* | 375 | 16,099 |
| Foxhollow Technologies, Inc.* | 1,025 | 35,885 |
| IntraLase Corp.* | 1,750 | 34,405 |
| Inverness Medical Innovations, Inc.* | 1,050 | 39,574 |
| Kyphon, Inc.* | 475 | 18,762 |
| Medtronic, Inc. | 7,595 | 369,725 |
| Mentor Corp. | 300 | 14,040 |
| OraSure Technologies, Inc.* | 3,625 | 28,130 |
| ResMed, Inc.* | 575 | 25,294 |
| Respironics, Inc.* | 350 | 12,362 |
The accompanying notes are an integral part of the financial statements.
9
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Health Care (continued) | ||
Health Care Equipment & Supplies (continued) | ||
| Straumann Holding AG (Switzerland) (Note 7) | 75 | $17,051 |
| Wright Medical Group, Inc.* | 1,725 | 42,625 |
| 1,330,852 | ||
Health Care Providers & Services - 0.17% | ||
| AMN Healthcare Services, Inc.* | 1,400 | 35,406 |
| Cross Country Healthcare, Inc.* | 1,375 | 26,620 |
| Healthways, Inc.* | 150 | 6,352 |
| Patterson Companies, Inc.* | 350 | 11,497 |
| Tenet Healthcare Corp.* | 3,600 | 25,416 |
| Triad Hospitals, Inc.* | 375 | 13,886 |
| 119,177 | ||
Health Care Technology - 0.45% | ||
| AMICAS, Inc.* | 9,475 | 29,846 |
| Emdeon Corp.* | 22,475 | 261,834 |
| iSOFT Group plc (United Kingdom) (Note 7) | 20,000 | 17,356 |
| Merge Technologies, Inc.* | 1,925 | 14,842 |
| 323,878 | ||
Life Sciences Tools & Services - 0.79% | ||
| Affymetrix, Inc.* | 7,160 | 182,580 |
| Caliper Life Sciences, Inc.* | 3,147 | 16,050 |
| Charles River Laboratories International, Inc.* | 475 | 20,387 |
| Invitrogen Corp.* | 200 | 11,602 |
| PerkinElmer, Inc. | 15,770 | 336,847 |
| 567,466 | ||
Pharmaceuticals - 1.17% | ||
| AstraZeneca plc (United Kingdom) (Note 7) | 25 | 1,477 |
| AstraZeneca plc - ADR (United Kingdom) (Note 7) | 150 | 8,805 |
| GlaxoSmithKline plc (United Kingdom) (Note 7) | 375 | 10,013 |
| Novartis AG - ADR (Switzerland) (Note 7) | 12,450 | 756,089 |
| Sanofi-Aventis (France) (Note 7) | 41 | 3,485 |
| Sanofi-Aventis - ADR (France) (Note 7) | 450 | 19,211 |
| Shire plc (United Kingdom) (Note 7) | 425 | 7,753 |
| Valeant Pharmaceuticals International | 1,700 | 31,756 |
| 838,589 | ||
Total Health Care | 3,233,308 |
The accompanying notes are an integral part of the financial statements.
10
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend�� Conservative Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Industrials - 3.21% | ||
Aerospace & Defense - 0.53% | ||
| Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) (Note 7) | 8,925 | $371,548 |
| Hexcel Corp.* | 600 | 9,714 |
| 381,262 | ||
Air Freight & Logistics - 0.42% | ||
| Deutsche Post AG (Germany) (Note 7) | 400 | 11,061 |
| TNT N.V. (Netherlands) (Note 7) | 475 | 18,281 |
| United Parcel Service, Inc. - Class B | 3,630 | 273,521 |
| 302,863 | ||
Airlines - 0.66% | ||
| AirTran Holdings, Inc.* | 650 | 6,481 |
| Deutsche Lufthansa AG (Germany) (Note 7) | 450 | 10,354 |
| JetBlue Airways Corp.* | 13,695 | 172,009 |
| Southwest Airlines Co. | 19,075 | 286,697 |
| 475,541 | ||
Commercial Services & Supplies - 0.40% | ||
| ChoicePoint, Inc.* | 75 | 2,729 |
| Covanta Holding Corp.* | 275 | 5,591 |
| The Dun & Bradstreet Corp.* | 3,575 | 276,133 |
| 284,453 | ||
Construction & Engineering - 0.01% | ||
| Quanta Services, Inc.* | 350 | 6,405 |
Electrical Equipment - 0.08% | ||
| ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) (Note 7) | 2,650 | 39,538 |
| Gamesa Corporacion Tecnologica S.A. (Spain) (Note 7) | 525 | 12,052 |
| Hubbell, Inc. - Class B | 125 | 6,190 |
| Plug Power, Inc.* | 850 | 3,392 |
| 61,172 | ||
Industrial Conglomerates - 1.07% | ||
| 3M Co. | 5,690 | 448,600 |
| Tyco International Ltd. (Bermuda) (Note 7) | 10,850 | 319,316 |
| 767,916 | ||
Machinery - 0.03% | ||
| Bucyrus International, Inc. - Class A | 150 | 6,285 |
| Heidelberger Druckmaschinen AG (Germany) (Note 7) | 125 | 5,695 |
The accompanying notes are an integral part of the financial statements.
11
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Industrials (continued) | ||
Machinery (continued) | ||
| Wabtec Corp. | 200 | $6,278 |
| 18,258 | ||
Trading Companies & Distributors - 0.01% | ||
| United Rentals, Inc.* | 225 | 5,330 |
Total Industrials | 2,303,200 | |
Information Technology - 5.67% | ||
Communications Equipment - 1.48% | ||
| Blue Coat Systems, Inc.* | 1,500 | 33,450 |
| Cisco Systems, Inc.* | 21,020 | 507,213 |
| ECI Telecom Ltd.* (Israel) (Note 7) | 3,775 | 28,011 |
| Ixia* | 2,025 | 18,529 |
| Juniper Networks, Inc.* | 19,745 | 340,009 |
| Plantronics, Inc. | 325 | 6,861 |
| RADWARE Ltd.* (Israel) (Note 7) | 1,650 | 24,090 |
| Spirent Communications plc* (United Kingdom) (Note 7) | 72,200 | 77,805 |
| Tandberg ASA (Norway) (Note 7) | 2,000 | 23,110 |
| 1,059,078 | ||
Computers & Peripherals - 0.98% | ||
| Avid Technology, Inc.* | 600 | 21,672 |
| EMC Corp.* | 55,850 | 684,163 |
| 705,835 | ||
Electronic Equipment & Instruments - 0.04% | ||
| LoJack Corp.* | 1,300 | 25,948 |
IT Services - 1.87% | ||
| Automatic Data Processing, Inc. | 9,825 | 485,748 |
| CheckFree Corp.* | 7,535 | 297,482 |
| Fiserv, Inc.* | 125 | 6,175 |
| MoneyGram International, Inc. | 400 | 13,684 |
| RightNow Technologies, Inc.* | 2,375 | 39,235 |
| Western Union Co.* | 22,750 | 501,638 |
| 1,343,962 | ||
Semiconductors & Semiconductor Equipment - 0.05% | ||
| Cabot Microelectronics Corp.* | 400 | 11,420 |
| Genesis Microchip, Inc.* | 1,700 | 17,425 |
| Taiwan Semiconductor Manufacturing Co. Ltd. - ADR (Taiwan) (Note 7) | 893 | 8,662 |
| 37,507 |
The accompanying notes are an integral part of the financial statements.
12
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Information Technology (continued) | ||
Software - 1.25% | ||
| Agile Software Corp.* | 1,900 | $12,806 |
| Amdocs Ltd.* (Guernsey) (Note 7) | 1,275 | 49,419 |
| Borland Software Corp.* | 5,400 | 29,808 |
| Cognos, Inc.* (Canada) (Note 7) | 375 | 13,680 |
| Electronic Arts, Inc.* | 5,560 | 294,068 |
| Kronos, Inc.* | 800 | 27,120 |
| Misys plc (United Kingdom) (Note 7) | 1,475 | 5,732 |
| NAVTEQ Corp.* | 1,025 | 34,030 |
| Salesforce.com, Inc.* | 650 | 25,363 |
| SAP AG (Germany) (Note 7) | 75 | 14,882 |
| Symantec Corp.* | 16,875 | 334,800 |
| Take-Two Interactive Software, Inc.* | 725 | 10,143 |
| TIBCO Software, Inc.* | 3,175 | 29,369 |
| UbiSoft Entertainment S.A.* (France) (Note 7) | 275 | 16,971 |
| 898,191 | ||
Total Information Technology | 4,070,521 | |
Materials - 0.28% | ||
Chemicals - 0.27% | ||
| Arkema* (France) (Note 7) | 2 | 98 |
| Bayer AG (Germany) (Note 7) | 400 | 20,065 |
| Lonza Group AG (Switzerland) (Note 7) | 2,225 | 171,746 |
| The Scotts Miracle-Gro Co. - Class A | 125 | 6,183 |
| 198,092 | ||
Paper & Forest Products - 0.01% | ||
| Louisiana-Pacific Corp. | 300 | 5,934 |
Total Materials | 204,026 | |
Telecommunication Services - 0.47% | ||
Diversified Telecommunication Services - 0.02% | ||
| Swisscom AG - ADR (Switzerland) (Note 7) | 350 | 12,240 |
Wireless Telecommunication Services - 0.45% | ||
| Vodafone Group plc - ADR (United Kingdom) (Note 7) | 12,568 | 324,883 |
Total Telecommunication Services | 337,123 | |
Utilities - 1.37% | ||
Electric Utilities - 0.90% | ||
| Allegheny Energy, Inc.* | 7,450 | 320,574 |
| American Electric Power Co., Inc. | 7,240 | 299,953 |
| E.ON AG (Germany) (Note 7) | 175 | 20,918 |
The accompanying notes are an integral part of the financial statements.
13
Investment Portfolio - October 31, 2006
Shares/ | Value | |
Pro-Blend® Conservative Term Series | Principal Amount | (Note 2) |
COMMON STOCKS (continued) | ||
Utilities (continued) | ||
Electric Utilities (continued) | ||
| Westar Energy, Inc. | 100 | $2,532 |
| 643,977 | ||
Multi-Utilities - 0.47% | ||
| Aquila, Inc.* | 2,700 | 12,393 |
| National Grid plc (United Kingdom) (Note 7) | 900 | 11,501 |
| Xcel Energy, Inc. | 14,400 | 317,808 |
| 341,702 | ||
Total Utilities | 985,679 | |
TOTAL COMMON STOCKS | ||
| (Identified Cost $17,808,721) | $20,610,869 | |
WARRANTS - 0.00%** | ||
Health Care - 0.00%** | ||
Life Sciences Tools & Services - 0.00%** | ||
| Caliper Life Sciences, Inc., 8/10/2011 | ||
| (Identified Cost $215) | 348 | 522 |
CORPORATE BONDS - 1.23% | ||
Convertible Corporate Bonds - 0.16% | ||
Consumer Discretionary - 0.10% | ||
Hotels, Restaurants & Leisure - 0.10% | ||
| Carnival Corp., 2.00%, 4/15/2021 | $25,000 | 31,875 |
| International Game Technology, 1/29/2033 | 45,000 | 40,669 |
Total Consumer Discretionary | 72,544 | |
Energy - 0.06% | ||
Energy Equipment & Services - 0.06% | ||
| Cooper Cameron Corp. (now known as Cameron International Corp.), 1.50%, 5/15/2024 | 25,000 | 38,312 |
Total Convertible Corporate Bonds | ||
| (Identified Cost $101,130) | 110,856 | |
Non-Convertible Corporate Bonds - 1.07% | ||
Consumer Discretionary - 0.38% | ||
Automobiles - 0.18% | ||
| General Motors Acceptance Corp. LLC, 6.125%, 1/22/2008 | 130,000 | 129,362 |
Media - 0.16% | ||
| AOL Time Warner (now known as Time Warner, Inc.), 6.75%, 4/15/2011 | 25,000 | 26,220 |
| Comcast Corp., 6.50%, 11/15/2035 | 55,000 | 56,160 |
The accompanying notes are an integral part of the financial statements.
14
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS (continued) | ||
Non-Convertible Corporate Bonds (continued) | ||
Consumer Discretionary (continued) | ||
Media (continued) | ||
| The Walt Disney Co., 7.00%, 3/1/2032 | $30,000 | $35,011 |
| 117,391 | ||
Multiline Retail - 0.04% | ||
| Target Corp., 5.875%, 3/1/2012 | 25,000 | 25,810 |
Total Consumer Discretionary | 272,563 | |
Energy - 0.07% | ||
Oil, Gas & Consumable Fuels - 0.07% | ||
| Anadarko Petroleum Corp., 5.95%, 9/15/2016 | 20,000 | 20,312 |
| Arch Western Finance, 6.75%, 7/1/2013 | 30,000 | 28,950 |
Total Energy | 49,262 | |
Financials - 0.31% | ||
Capital Markets - 0.04% | ||
| The Goldman Sachs Group, Inc., 6.345%, 2/15/2034 | 30,000 | 30,634 |
Commercial Banks - 0.13% | ||
| PNC Funding Corp., 7.50%, 11/1/2009 | 25,000 | 26,533 |
| U.S. Bank National Association, 6.375%, 8/1/2011 | 30,000 | 31,510 |
| Wachovia Corp., 5.25%, 8/1/2014 | 35,000 | 34,695 |
| 92,738 | ||
Diversified Financial Services - 0.06% | ||
| Bank of America Corp. Capital Trust VI, 5.625%, 3/8/2035 | 45,000 | 42,418 |
Insurance - 0.08% | ||
| Ambac Financial Group, Inc., 5.95%, 12/5/2035 | 35,000 | 35,386 |
| American International Group, Inc., 4.25%, 5/15/2013 | 25,000 | 23,555 |
| 58,941 | ||
Total Financials | 224,731 | |
Industrials - 0.17% | ||
Airlines - 0.05% | ||
| Southwest Airlines Co., 5.25%, 10/1/2014 | 35,000 | 34,336 |
Industrial Conglomerates - 0.05% | ||
| General Electric Capital Corp., 6.75%, 3/15/2032 | 30,000 | 34,640 |
Road & Rail - 0.03% | ||
| CSX Corp., 6.75%, 3/15/2011 | 25,000 | 26,395 |
The accompanying notes are an integral part of the financial statements.
15
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS (continued) | ||
Non-Convertible Corporate Bonds (continued) | ||
Industrials (continued) | ||
Trading Companies & Distributors - 0.04% | ||
| United Rentals North America, Inc., 7.00%, 2/15/2014 | $30,000 | $28,725 |
Total Industrials | 124,096 | |
Information Technology - 0.06% | ||
Communications Equipment - 0.06% | ||
| Corning, Inc., 6.20%, 3/15/2016 | 45,000 | 46,152 |
Materials - 0.04% | ||
Metals & Mining - 0.04% | ||
| Alcoa, Inc., 7.375%, 8/1/2010 | 25,000 | 26,826 |
Telecommunication Services - 0.04% | ||
Diversified Telecommunication Services - 0.04% | ||
| Verizon Wireless Capital LLC, 5.375%, 12/15/2006 | 25,000 | 24,990 |
Total Non-Convertible Corporate Bonds | ||
| (Identified Cost $765,222) | 768,620 | |
TOTAL CORPORATE BONDS | ||
| (Identified Cost $866,352) | 879,476 | |
U.S. TREASURY SECURITIES - 55.46% | ||
U.S. Treasury Bonds - 6.14% | ||
| U.S. Treasury Bond, 6.875%, 8/15/2025 | 170,000 | 212,925 |
| U.S. Treasury Bond, 5.50%, 8/15/2028 | 3,835,000 | 4,197,526 |
Total U.S. Treasury Bonds | ||
| (Identified Cost $4,365,807) | 4,410,451 | |
U.S. Treasury Notes - 49.32% | ||
| U.S. Treasury Note, 3.50%, 11/15/2006 | 700,000 | 699,570 |
| U.S. Treasury Note, 3.625%, 4/30/2007 | 2,000,000 | 1,986,094 |
| U.S. Treasury Note, 4.375%, 5/15/2007 | 500,000 | 498,184 |
| U.S. Treasury Note, 6.625%, 5/15/2007 | 35,000 | 35,284 |
| U.S. Treasury Note, 3.25%, 8/15/2007 | 1,050,000 | 1,036,014 |
| U.S. Treasury Note, 6.125%, 8/15/2007 | 15,000 | 15,128 |
| U.S. Treasury Note, 3.00%, 2/15/2008 | 8,400,000 | 8,210,672 |
| U.S. Treasury Note, 5.50%, 2/15/2008 | 90,000 | 90,752 |
| U.S. Treasury Note, 5.625%, 5/15/2008 | 10,000 | 10,128 |
| U.S. Treasury Note, 3.25%, 8/15/2008 | 300,000 | 292,559 |
| U.S. Treasury Note, 4.75%, 11/15/2008 | 6,300,000 | 6,306,892 |
| Interest Stripped - Principal Payment, 2/15/2009 | 17,000 | 15,306 |
| U.S. Treasury Note, 3.50%, 11/15/2009 | 2,000,000 | 1,937,890 |
| U.S. Treasury Note, 3.875%, 5/15/2010 | 1,000,000 | 977,227 |
| U.S. Treasury Note, 5.00%, 2/15/2011 | 1,000,000 | 1,018,086 |
The accompanying notes are an integral part of the financial statements.
16
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Conservative Term Series | Principal Amount | (Note 2) |
U.S. TREASURY SECURITIES (continued) | ||
U.S. Treasury Notes (continued) | ||
| U.S. Treasury Note, 4.875%, 4/30/2011 | $5,000,000 | $5,059,570 |
| U.S. Treasury Note, 4.00%, 11/15/2012 | 4,000,000 | 3,881,092 |
| U.S. Treasury Note, 3.625%, 5/15/2013 | 3,525,000 | 3,337,597 |
Total U.S. Treasury Notes | ||
| (Identified Cost $35,351,420) | 35,408,045 | |
TOTAL U.S. TREASURY SECURITIES | ||
| (Identified Cost $39,717,227) | 39,818,496 | |
U.S. GOVERNMENT AGENCIES - 9.17% | ||
Mortgage-Backed Securities - 9.15% | ||
| Fannie Mae, Pool #805347, 5.50%, 1/1/2020 | 28,946 | 28,987 |
| Fannie Mae, Pool #851149, 5.00%, 4/1/2021 | 480,898 | 473,614 |
| Fannie Mae, Pool #747607, 6.50%, 11/1/2033 | 36,210 | 37,006 |
Fannie Mae, TBA2, 4.50%, 11/15/2021 | 116,000 | 112,194 |
Fannie Mae, TBA2, 5.00%, 11/15/2021 | 106,000 | 104,377 |
Fannie Mae, TBA2, 5.00%, 11/15/2036 | 224,000 | 216,230 |
Fannie Mae, TBA2, 5.50%, 11/15/2036 | 317,000 | 313,236 |
Fannie Mae, TBA2, 6.00%, 11/15/2036 | 121,000 | 121,718 |
| Federal Home Loan Mortgage Corp., Pool #B16835, 5.50%, 10/1/2019 | 23,346 | 23,387 |
| Federal Home Loan Mortgage Corp., Pool #G11912, 5.50%, 3/1/2021 | 463,677 | 464,149 |
| Federal Home Loan Mortgage Corp., Pool #G01736, 6.50%, 9/1/2034 | 16,702 | 17,075 |
Federal Home Loan Mortgage Corp., TBA2, 5.00%, 11/15/2021 | 87,000 | 85,613 |
Federal Home Loan Mortgage Corp., TBA2, 4.50%, 12/15/2021 | 131,000 | 126,497 |
Federal Home Loan Mortgage Corp., TBA2, 5.00%, 11/15/2036 | 145,000 | 140,061 |
Federal Home Loan Mortgage Corp., TBA2, 5.50%, 11/15/2036 | 185,000 | 182,919 |
Federal Home Loan Mortgage Corp., TBA2, 6.00%, 11/15/2036 | 69,000 | 69,453 |
| GNMA, Pool #365225, 9.00%, 11/15/2024 | 2,155 | 2,329 |
| GNMA, Pool #398655, 6.50%, 5/15/2026 | 2,442 | 2,518 |
| GNMA, Pool #452826, 9.00%, 1/15/2028 | 3,861 | 4,187 |
| GNMA, Pool #460820, 6.00%, 6/15/2028 | 16,138 | 16,403 |
| GNMA, Pool #458983, 6.00%, 1/15/2029 | 41,340 | 42,014 |
| GNMA, Pool #530481, 8.00%, 8/15/2030 | 17,620 | 18,674 |
| GNMA, Pool #577796, 6.00%, 1/15/2032 | 61,985 | 62,939 |
| GNMA, Pool #631703, 6.50%, 9/15/2034 | 11,060 | 11,372 |
| GNMA, Pool #003808M, 6.00%, 1/20/2036 | 764,847 | 773,037 |
The accompanying notes are an integral part of the financial statements.
17
Investment Portfolio - October 31, 2006
Principal Amount/ | Value | |
Pro-Blend® Conservative Term Series | Shares | (Note 2) |
U.S. GOVERNMENT AGENCIES (continued) | ||
Mortgage-Backed Securities (continued) | ||
| GNMA, Pool #651235X, 6.50%, 2/15/2036 | $1,335,434 | $1,371,428 |
| GNMA, Pool #003830M, 5.50%, 3/20/2036 | 1,554,859 | 1,543,508 |
GNMA, TBA2, 5.00%, 11/15/2036 | 49,000 | 47,775 |
GNMA, TBA2, 5.50%, 11/15/2036 | 97,000 | 96,576 |
GNMA, TBA2, 6.00%, 11/15/2036 | 57,000 | 57,766 |
Total Mortgage-Backed Securities | ||
| (Identified Cost $6,583,147) | 6,567,042 | |
Other Agencies - 0.02% | ||
| Fannie Mae, 5.25%, 1/15/2009 | ||
| (Identified Cost $15,537) | 15,000 | 15,111 |
TOTAL U.S. GOVERNMENT AGENCIES | ||
| (Identified Cost $6,598,684) | 6,582,153 | |
SHORT-TERM INVESTMENTS - 6.61% | ||
| Dreyfus Treasury Cash Management - Institutional Shares | 774,671 | 774,671 |
| Fannie Mae Discount Note, 12/20/2006 | $1,000,000 | 993,305 |
| Freddie Mac Discount Note, 12/26/2006 | 2,000,000 | 1,984,454 |
| U.S. Treasury Bill, 12/21/2006 | 1,000,000 | 993,016 |
TOTAL SHORT-TERM INVESTMENTS | ||
| (Identified Cost $4,745,387) | 4,745,446 | |
TOTAL INVESTMENTS - 101.18% | ||
| (Identified Cost $69,736,586) | 72,636,962 | |
LIABILITIES, LESS OTHER ASSETS - (1.18%) | (846,486) | |
NET ASSETS - 100% | $71,790,476 |
*Non-income producing security
**Less than 0.01%
ADR - American Depository Receipt
1Mellon Financial Corp. is the parent company of Mellon Trust of New England N.A., the Fund's custodian.
2Securities purchased on a forward commitment or when-issued basis. TBA - to be announced.
The accompanying notes are an integral part of the financial statements.
18
Statement of Assets and Liabilities - Pro-Blend® Conservative Term Series
October 31, 2006
ASSETS: | |
| Investments, at value (identified cost $69,736,586) (Note 2) | $72,636,962 |
| Foreign currency, at value (cost $497) | 505 |
| Interest receivable | 505,993 |
| Receivable for fund shares sold | 269,840 |
| Receivable for securities sold | 121,777 |
| Dividends receivable | 12,780 |
| Foreign tax reclaims receivable | 5,451 |
| TOTAL ASSETS | 73,553,308 |
LIABILITIES: | |
| Accrued management fees (Note 3) | 44,096 |
| Accrued fund accounting and transfer agent fees (Note 3) | 6,894 |
| Accrued Chief Compliance Officer service fees (Note 3) | 570 |
| Payable for purchases of delayed delivery securities (Note 2) | 1,659,236 |
| Audit fees payable | 31,771 |
| Payable for securities purchased | 13,251 |
| Payable for fund shares repurchased | 722 |
| Other payables and accrued expenses | 6,292 |
| TOTAL LIABILITIES | 1,762,832 |
TOTAL NET ASSETS | $71,790,476 |
NET ASSETS CONSIST OF: | |
| Capital stock | $58,130 |
| Additional paid-in-capital | 66,252,431 |
| Undistributed net investment income | 1,113,848 |
| Accumulated net realized gain on investments, foreign currency and other assets and liabilities | 1,465,671 |
| Net unrealized appreciation on investments, foreign currency and other assets and liabilities | 2,900,396 |
TOTAL NET ASSETS | $71,790,476 |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS A ($71,790,476/5,812,969 shares) | $12.35 |
The accompanying notes are an integral part of the financial statements.
19
Statement of Operations - Pro-Blend® Conservative Term Series
For the Year Ended October 31, 2006
INVESTMENT INCOME: | |
| Interest | $1,763,870 |
| Dividends (net of foreign tax withheld, $6,991) | 348,472 |
| Total Investment Income | 2,112,342 |
EXPENSES: | |
| Management fees (Note 3) | 462,654 |
| Fund accounting and transfer agent fees (Note 3) | 62,750 |
| Directors' fees (Note 3) | 7,100 |
| Chief Compliance Officer service fees (Note 3) | 5,698 |
| Audit fees | 31,901 |
| Custodian fees | 16,999 |
| Miscellaneous | 34,203 |
| Total Expenses | 621,305 |
| Less reduction of expenses (Note 3) | (42,292) |
| Net Expenses | 579,013 |
| NET INVESTMENT INCOME | 1,533,329 |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | |
| Net realized gain on - | |
| Investments | 1,475,661 |
| Foreign currency and other assets and liabilities | 161 |
| 1,475,822 | |
| Net change in unrealized appreciation on - | |
| Investments | 1,896,662 |
| Foreign currency and other assets and liabilities | 222 |
| 1,896,884 | |
| NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 3,372,706 |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $4,906,035 |
The accompanying notes are an integral part of the financial statements.
20
Statements of Changes in Net Assets - Pro-Blend® Conservative Term Series
For the | For the | |
Year Ended | Year Ended | |
10/31/06 | 10/31/05 | |
INCREASE (DECREASE) IN NET ASSETS: | ||
OPERATIONS: | ||
| Net investment income | $1,533,329 | $653,468 |
| Net realized gain on investments and foreign currency | 1,475,822 | 1,324,501 |
| Net change in unrealized appreciation on investments and foreign currency | 1,896,884 | (172,144) |
| Net increase from operations | 4,906,035 | 1,805,825 |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||
| From net investment income | (855,161) | (493,684) |
| From net realized gain on investments | (1,298,762) | (234,753) |
| Total distributions to shareholders | (2,153,923) | (728,437) |
CAPITAL STOCK ISSUED AND REPURCHASED: | ||
| Net increase from capital share transactions (Note 5) | 23,139,225 | 17,977,549 |
| Net increase in net assets | 25,891,337 | 19,054,937 |
NET ASSETS: | ||
| Beginning of year | 45,899,139 | 26,844,202 |
End of year (including undistributed net investment income of $1,113,848 and $435,528, respectively) | $71,790,476 | $45,899,139 |
The accompanying notes are an integral part of the financial statements.
21
Financial Highlights - Pro-Blend® Conservative Term Series
For the Years Ended | |||||
10/31/06 | 10/31/05 | 10/31/04 | 10/31/03 | 10/31/02 | |
Per share data (for a share outstanding | |||||
throughout each year): | |||||
Net asset value - Beginning of year | $11.90 | $11.54 | $11.32 | $10.95 | $11.34 |
| Income from investment operations: | |||||
| Net investment income | 0.28 | 0.17 | 0.18 | 0.17 | 0.302 |
| Net realized and unrealized gain on investments | 0.69 | 0.46 | 0.48 | 0.45 | 0.152 |
| Total from investment operations | 0.97 | 0.63 | 0.66 | 0.62 | 0.45 |
| Less distributions to shareholders: | |||||
| From net investment income | (0.20) | (0.18) | (0.17) | (0.21) | (0.41) |
| From net realized gain on investments | (0.32) | (0.09) | (0.27) | (0.04) | (0.43) |
| Total distributions to shareholders | (0.52) | (0.27) | (0.44) | (0.25) | (0.84) |
Net asset value - End of year | $12.35 | $11.90 | $11.54 | $11.32 | $10.95 |
Total return1 | 8.49% | 5.49% | 5.93% | 5.75% | 4.35% |
Ratios (to average net assets)/Supplemental Data: | |||||
| Expenses* | 1.00% | 1.00% | 1.00% | 1.00% | 1.00% |
| Net investment income | 2.65% | 1.81% | 1.77% | 1.90% | 2.95%2 |
| Portfolio turnover | 48% | 60% | 25% | 40% | 55% |
Net assets - End of year (000's omitted) | $71,790 | $45,899 | $26,844 | $19,991 | $12,195 |
*The investment advisor did not impose all or a portion of its management fee and in some years paid a portion of the Series' expenses. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased as follows:
| 0.07% | 0.21% | 0.32% | 0.82% | 1.84% |
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the year.
2The Series adopted the provisions of the revised AICPA Audit and Accounting Guide for Investment Companies, which requires the Series to amortize premium and accrete discount on all debt securities (see Note 2 to the financial statements). The effect of this change for the year ended October 31, 2002 was to increase net investment income per share by $0.01, decrease net realized and unrealized gain on investments per share by $0.01, and increase the net investment income ratio from 2.80% to 2.95%. Per share data and ratios for the years prior to November 1, 2001 have not been restated to reflect this change in presentation.
The accompanying notes are an integral part of the financial statements.
22
Performance Update - Pro-Blend® Moderate Term Series (unaudited)
| Average Annual Total Returns | ||||
| As of October 31, 2006 | ||||
| One | Five | Ten | Since | |
| Year | Year | Year | Inception1 | |
Manning & Napier Fund, Inc. - Pro-Blend® Moderate Term Series2 | 12.88% | 8.05% | 8.30% | 8.29% |
Lehman Brothers U.S. Aggregate Bond Index3,6 | 5.19% | 4.51% | 6.26% | 6.11% |
Lehman Brothers Intermediate U.S. Government/Credit Bond Index4,6 | 4.67% | 4.10% | 5.82% | 5.69% |
10%/30%/60% Blended Index3,5,6,7 | 10.72% | 7.07% | 7.56% | 7.93% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Pro-Blend®Moderate Term Series for the ten years ended October 31, 2006 to the Lehman Brothers U.S. Aggregate Bond Index, the Lehman Brothers Intermediate U.S. Government/Credit Bond Index and a 10%/30%/60% Blended Index.
Data for line graph to follow:
| Manning & Napier Fund, Inc. | Lehman Brothers | Lehman Brothers | 10%/30%/60% | |
| Date | Pro-Blend® Moderate Term Series2 | U.S. Aggregate Bond Index | U.S. Government/Credit Bond Index | Blended Index |
| 11/1/96 | 10,000 | 10,000 | 10,000 | 10,000 |
| 10/31/97 | 11,301 | 10,889 | 10,749 | 11,514 |
| 10/31/98 | 12,012 | 11,906 | 11,729 | 12,857 |
| 10/31/99 | 12,532 | 11,969 | 11,845 | 14,126 |
| 10/31/00 | 14,551 | 12,843 | 12,610 | 15,154 |
| 10/31/01 | 15,074 | 14,713 | 14,407 | 14,732 |
| 10/31/02 | 14,573 | 15,579 | 15,259 | 14,479 |
| 10/31/03 | 16,303 | 16,343 | 16,087 | 16,358 |
| 10/31/04 | 17,731 | 17,247 | 16,783 | 17,683 |
| 10/31/05 | 19,672 | 17,443 | 16,829 | 18,719 |
| 10/31/06 | 22,205 | 18,348 | 17,614 | 20,726 |
1Performance numbers for the Series are calculated from September 15, 1993, the Series' inception date. The Lehman Brothers U.S. Aggregate Bond Index and the Lehman Brothers Intermediate U.S. Government/Credit Bond Index only publish month-end numbers; therefore, performance numbers for the indices are calculated from September 30, 1993.
2The Series' performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series' performance is historical and may not be indicative of future results.
3The primary index has been changed from the Lehman Brothers Intermediate U.S. Government/Credit Bond Index to the Lehman Brothers U.S. Aggregate Bond Index because it more closely represents the fixed income universe of the Series. The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expense.
4The Lehman Brothers Intermediate U.S. Government/Credit Bond Index is a market value weighted measure of over 3,000 investment grade corporate and government securities with maturities greater than one year but less than ten years. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
5The 10%/30%/60% Blended Index is 10% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 30% Russell 3000® Index, and 60% Lehman Brothers U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series (see Note 1 above) through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). The Russell 3000® Index is an unmanaged, market-capitalization weighted index of the 3,000 largest U.S. domiciled companies. The Index returns assume reinvestment of income. Both Indices' returns, unlike Series returns, do not reflect any fees or expenses.
6Because the Series' asset allocation will vary over time, the composition of the Series' portfolio may not match the composition of the comparative Indices' portfolios.
7The components of the Blended Index have been broadened to more closely represent the investment universe for this series. The new index components take into account the Advisor’s all-capitalization and all-country equity investment approach, as well as the ability to invest across multiple fixed income sectors.
23
Shareholder Expense Example - Pro-Blend® Moderate Term Series (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as potential wire charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| Beginning | Ending | Expenses Paid | |
| Account Value | Account Value | During Period* | |
| 5/1/06 | 10/31/06 | 5/1/06-10/31/06 | |
| Actual | $1,000.00 | $1,055.40 | $5.96 |
| Hypothetical | |||
| (5% return before expenses) | $1,000.00 | $1,019.41 | $5.85 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.15%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data.
24
Portfolio Composition - Pro-Blend® Moderate Term Series (unaudited)
As of October 31, 2006
Data for pie chart to follow:
Asset Allocation*
| Common Stocks | 53.83% |
| Corporate Bonds | 3.12% |
| U.S. Government Agencies | 4.53% |
U.S. Treasury Bonds1 | 8.70% |
U.S. Treasury Notes2 | 23.01% |
| Cash, warrants, short-term investments, and liabilities, less other assets | 6.81% |
*As a percentage of net assets.
1A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years.
2A U.S. Treasury Note is an intermediate-term obligation of the U.S. Treasury issued with a maturity period between one and ten years.
Sector Allocation*
| Information Technology | 9.89% |
| Health Care | 8.36% |
| Consumer Discretionary | 7.66% |
| Consumer Staples | 7.03% |
| Financials | 6.65% |
| Industrials | 6.10% |
| Energy | 5.27% |
| Utilities | 2.58% |
| Telecommunication Services | 0.84% |
| Materials | 0.58% |
*Including Common Stocks, Warrants and Corporate Bonds, as a percentage of total investments.
Top Ten Stock Holdings*
| Unilever plc - ADR (United Kingdom) | 2.11% |
| Novartis AG - ADR (Switzerland) | 1.97% |
| EMC Corp. | 1.57% |
| Time Warner, Inc. | 1.57% |
| The Coca-Cola Co. | 1.47% |
| Western Union Co. | 1.23% |
| Cisco Systems, Inc. | 1.20% |
| Schlumberger Ltd. | 1.17% |
| Carnival Corp. | 1.13% |
| 3M Co. | 1.11% |
*As a percentage of total investments.
25
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMON STOCKS - 53.83% | ||
Consumer Discretionary - 6.98% | ||
Auto Components - 0.06% | ||
| Autoliv, Inc. (Sweden) (Note 7) | 975 | $55,448 |
| Azure Dynamics Corp.* (Canada) (Note 7) | 31,950 | 25,328 |
| Superior Industries International, Inc. | 2,325 | 39,292 |
| Tenneco, Inc.* | 2,500 | 56,750 |
| 176,818 | ||
Diversified Consumer Services - 0.04% | ||
| Corinthian Colleges, Inc.* | 3,600 | 44,100 |
| Universal Technical Institute, Inc.* | 3,525 | 70,430 |
| 114,530 | ||
Hotels, Restaurants & Leisure - 2.07% | ||
| Carnival Corp. | 71,485 | 3,489,898 |
| Club Mediterranee S.A.* (France) (Note 7) | 3,800 | 204,683 |
| International Game Technology | 57,825 | 2,458,141 |
| 6,152,722 | ||
Internet & Catalog Retail - 0.05% | ||
| Audible, Inc.* | 20,200 | 151,096 |
Leisure Equipment & Products - 0.00%** | ||
| K2, Inc.* | 525 | 7,172 |
Media - 3.79% | ||
| Acme Communications, Inc.* | 6,500 | 34,320 |
| Comcast Corp. - Class A* | 66,050 | 2,686,253 |
| DreamWorks Animation SKG, Inc. - Class A* | 1,500 | 39,675 |
| The E.W. Scripps Co. - Class A | 63,650 | 3,148,129 |
| Impresa S.A. (SGPS)* (Portugal) (Note 7) | 6,100 | 34,095 |
| Pearson plc (United Kingdom) (Note 7) | 7,175 | 105,853 |
| Playboy Enterprises, Inc. - Class B* | 4,025 | 42,705 |
| Reed Elsevier plc - ADR (United Kingdom) (Note 7) | 2,350 | 106,479 |
| Reuters Group plc (United Kingdom) (Note 7) | 13,450 | 114,734 |
| Scholastic Corp.* | 1,400 | 43,988 |
| Time Warner, Inc. | 241,575 | 4,833,916 |
| Wolters Kluwer N.V. (Netherlands) (Note 7) | 2,925 | 80,400 |
| 11,270,547 | ||
Multiline Retail - 0.02% | ||
| PPR (France) (Note 7) | 475 | 70,858 |
Specialty Retail - 0.92% | ||
| Build-A-Bear Workshop, Inc.* | 4,150 | 121,097 |
| Douglas Holding AG (Germany) (Note 7) | 3,000 | 145,092 |
The accompanying notes are an integral part of the financial statements.
26
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMONS STOCKS (continued) | ||
Consumer Discretionary (continued) | ||
Specialty Retail (continued) | ||
| Kingfisher plc (United Kingdom) (Note 7) | 465,700 | $2,338,271 |
| KOMERI Co. Ltd. (Japan) (Note 7) | 2,300 | 79,263 |
| Tractor Supply Co.* | 825 | 39,947 |
| 2,723,670 | ||
Textiles, Apparel & Luxury Goods - 0.03% | ||
| LVMH S.A. (Louis Vuitton Moet Hennessy) (France) (Note 7) | 700 | 72,935 |
Total Consumer Discretionary | 20,740,348 | |
Consumer Staples - 7.23% | ||
Beverages - 1.60% | ||
| The Coca-Cola Co. | 96,600 | 4,513,152 |
| Diageo plc (United Kingdom) (Note 7) | 2,900 | 53,652 |
| Heineken N.V. (Netherlands) (Note 7) | 1,150 | 52,111 |
| Kirin Brewery Co. Ltd. (Japan) (Note 7) | 5,000 | 66,530 |
| Scottish & Newcastle plc (United Kingdom) (Note 7) | 7,625 | 82,024 |
| 4,767,469 | ||
Food & Staples Retailing - 1.29% | ||
| Carrefour S.A. (France) (Note 7) | 24,775 | 1,509,314 |
| Pathmark Stores, Inc.* | 4,300 | 43,559 |
| Tesco plc (United Kingdom) (Note 7) | 17,825 | 133,781 |
| Wal-Mart Stores, Inc. | 43,400 | 2,138,752 |
| 3,825,406 | ||
Food Products - 3.49% | ||
| Cadbury Schweppes plc (United Kingdom) (Note 7) | 22,975 | 231,152 |
| Groupe Danone (France) (Note 7) | 1,075 | 157,483 |
| Nestle S.A. (Switzerland) (Note 7) | 10,000 | 3,417,223 |
| Suedzucker AG (Germany) (Note 7) | 2,500 | 61,667 |
| Unilever plc - ADR (United Kingdom) (Note 7) | 267,726 | 6,500,387 |
| 10,367,912 | ||
Household Products - 0.04% | ||
| Kao Corp. (Japan) (Note 7) | 1,000 | 26,253 |
| Reckitt Benckiser plc (United Kingdom) (Note 7) | 2,100 | 91,362 |
| 117,615 | ||
Personal Products - 0.81% | ||
| Clarins S.A. (France) (Note 7) | 3,458 | 239,391 |
The accompanying notes are an integral part of the financial statements.
27
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMONS STOCKS (continued) | ||
Consumer Staples (continued) | ||
Personal Products (continued) | ||
| The Estee Lauder Companies, Inc. - Class A | 53,820 | $2,173,790 |
| 2,413,181 | ||
Total Consumer Staples | 21,491,583 | |
Energy - 5.20% | ||
Energy Equipment & Services - 4.37% | ||
| Abbot Group plc (United Kingdom) (Note 7) | 31,025 | 178,114 |
| APL ASA* (Norway) (Note 7) | 5,600 | 38,911 |
| Baker Hughes, Inc. | 31,465 | 2,172,658 |
| Cameron International Corp.* | 48,000 | 2,404,800 |
| Compagnie Generale de Geophysique S.A. (CGG)* (France) (Note 7) | 1,400 | 236,716 |
| Hydril Co.* | 1,575 | 94,579 |
| National-Oilwell Varco, Inc.* | 33,514 | 2,024,246 |
| Pride International, Inc.* | 5,800 | 160,138 |
| Schlumberger Ltd. | 56,900 | 3,589,252 |
| Weatherford International Ltd.* | 50,635 | 2,080,086 |
| 12,979,500 | ||
Oil, Gas & Consumable Fuels - 0.83% | ||
| BP plc (United Kingdom) (Note 7) | 6,800 | 75,613 |
| Eni S.p.A. (Italy) (Note 7) | 4,025 | 121,370 |
| Forest Oil Corp.* | 1,250 | 40,800 |
| Hess Corp. | 46,535 | 1,973,084 |
| Mariner Energy, Inc.* | 1,011 | 20,038 |
| Petroleo Brasileiro S.A. (Petrobras) - ADR (Brazil) (Note 7) | 750 | 60,720 |
| Royal Dutch Shell plc - Class B (United Kingdom) (Note 7) | 2,382 | 85,321 |
| Total S.A. (France) (Note 7) | 1,200 | 81,236 |
| 2,458,182 | ||
Total Energy | 15,437,682 | |
Financials - 6.13% | ||
Capital Markets - 1.61% | ||
| The Bank of New York Co., Inc. | 72,625 | 2,496,121 |
| The Charles Schwab Corp. | 2,450 | 44,639 |
| Daiwa Securities Group, Inc. (Japan) (Note 7) | 3,000 | 34,043 |
| Deutsche Bank AG (Germany) (Note 7) | 1,050 | 131,846 |
| Franklin Resources, Inc. | 775 | 88,319 |
| Janus Capital Group, Inc. | 4,875 | 97,890 |
| Macquarie Bank Ltd. (Australia) (Note 7) | 1,525 | 88,007 |
The accompanying notes are an integral part of the financial statements.
28
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Financials (continued) | ||
Capital Markets (continued) | ||
Mellon Financial Corp.1 | 1,650 | $64,020 |
| Merrill Lynch & Co., Inc. | 1,425 | 124,573 |
| Morgan Stanley | 950 | 72,609 |
| SEI Investments Co. | 27,175 | 1,529,409 |
| 4,771,476 | ||
Commercial Banks - 3.27% | ||
| Aareal Bank AG* (Germany) (Note 7) | 3,050 | 129,879 |
| ABN AMRO Holding N.V. (Netherlands) (Note 7) | 8,450 | 246,392 |
| Barclays plc (United Kingdom) (Note 7) | 21,100 | 284,727 |
| BNP Paribas (France) (Note 7) | 700 | 76,955 |
| Boston Private Financial Holdings, Inc. | 3,100 | 85,684 |
| The Chugoku Bank Ltd. (Japan) (Note 7) | 4,000 | 52,540 |
| Commerzbank AG (Germany) (Note 7) | 2,375 | 84,072 |
| Credit Agricole S.A. (France) (Note 7) | 1,475 | 62,697 |
| The Hachijuni Bank Ltd. (Japan) (Note 7) | 7,000 | 49,564 |
| HSBC Holdings plc (United Kingdom) (Note 7) | 7,600 | 144,085 |
| HSBC Holdings plc - ADR (United Kingdom) (Note 7) | 1,175 | 112,177 |
| Huntington Bancshares, Inc. | 650 | 15,867 |
| KeyCorp | 2,025 | 75,209 |
| Marshall & Ilsley Corp. | 900 | 43,146 |
| Mitsubishi UFJ Financial Group, Inc. (Japan) (Note 7) | 4 | 50,282 |
| PNC Financial Services Group, Inc. | 36,250 | 2,538,588 |
| Royal Bank of Scotland Group plc (United Kingdom) (Note 7) | 10,050 | 358,066 |
| Societe Generale (France) (Note 7) | 400 | 66,459 |
| The Sumitomo Trust & Banking Co. Ltd. (Japan) (Note 7) | 7,000 | 75,304 |
| SunTrust Banks, Inc. | 1,050 | 82,940 |
| TCF Financial Corp. | 3,950 | 102,819 |
| U.S. Bancorp | 71,950 | 2,434,788 |
| UniCredito Italiano S.p.A. (Italy) (Note 7) | 17,000 | 140,900 |
| Wachovia Corp. | 41,000 | 2,275,500 |
| Wells Fargo & Co. | 1,200 | 43,548 |
| Zions Bancorporation | 925 | 74,370 |
| 9,706,558 | ||
Consumer Finance - 0.02% | ||
| Capital One Financial Corp. | 875 | 69,414 |
The accompanying notes are an integral part of the financial statements.
29
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Financials (continued) | ||
Diversified Financial Services - 0.85% | ||
| Bank of America Corp. | 39,900 | $2,149,413 |
| Citigroup, Inc. | 2,375 | 119,130 |
| ING Groep N.V. (Netherlands) (Note 7) | 1,875 | 83,050 |
| JPMorgan Chase & Co. | 2,850 | 135,204 |
| Moody’s Corp. | 700 | 46,410 |
| 2,533,207 | ||
Insurance - 0.36% | ||
| Allianz SE (Germany) (Note 7) | 2,100 | 388,410 |
| Ambac Financial Group, Inc. | 775 | 64,705 |
| American International Group, Inc. | 1,750 | 117,548 |
| Axa (France) (Note 7) | 1,850 | 70,469 |
| MBIA, Inc. | 1,250 | 77,525 |
| Muenchener Rueckver AG (Germany) (Note 7) | 1,125 | 182,006 |
| Principal Financial Group, Inc. | 325 | 18,359 |
| Torchmark Corp. | 250 | 15,420 |
| Willis Group Holdings Ltd. (United Kingdom) (Note 7) | 3,625 | 137,859 |
| 1,072,301 | ||
Thrifts & Mortgage Finance - 0.02% | ||
| BankAtlantic Bancorp, Inc. - Class A | 2,500 | 32,750 |
| Flagstar Bancorp, Inc. | 1,850 | 27,806 |
| 60,556 | ||
Total Financials | 18,213,512 | |
Health Care - 8.55% | ||
Biotechnology - 0.16% | ||
| Amgen, Inc.* | 1,925 | 146,127 |
| Monogram Biosciences, Inc.* | 50,075 | 91,136 |
| Senomyx, Inc.* | 4,650 | 71,703 |
| Solexa, Inc.* | 14,675 | 150,272 |
| 459,238 | ||
Health Care Equipment & Supplies - 3.33% | ||
| Align Technology, Inc.* | 5,925 | 82,121 |
| Bausch & Lomb, Inc. | 33,600 | 1,798,944 |
| Biomet, Inc. | 3,375 | 127,710 |
| The Cooper Companies, Inc. | 40,705 | 2,345,829 |
| Cyberonics, Inc.* | 7,300 | 131,619 |
| Dexcom, Inc.* | 15,950 | 140,360 |
| Edwards Lifesciences Corp.* | 3,925 | 168,500 |
| Foxhollow Technologies, Inc.* | 8,425 | 294,959 |
The accompanying notes are an integral part of the financial statements.
30
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Health Care (continued) | ||
Health Care Equipment & Supplies (continued) | ||
| IntraLase Corp.* | 15,000 | $294,900 |
| Inverness Medical Innovations, Inc.* | 10,200 | 384,438 |
| Kyphon, Inc.* | 3,875 | 153,063 |
| Medtronic, Inc. | 57,345 | 2,791,555 |
| Mentor Corp. | 2,825 | 132,210 |
| OraSure Technologies, Inc.* | 29,150 | 226,204 |
| ResMed, Inc.* | 4,375 | 192,456 |
| Respironics, Inc.* | 2,725 | 96,247 |
| Straumann Holding AG (Switzerland) (Note 7) | 500 | 113,673 |
| Wright Medical Group, Inc.* | 16,600 | 410,186 |
| 9,884,974 | ||
Health Care Providers & Services - 0.37% | ||
| AMN Healthcare Services, Inc.* | 13,350 | 337,622 |
| Cross Country Healthcare, Inc.* | 12,300 | 238,128 |
| Healthways, Inc.* | 1,250 | 52,938 |
| Patterson Companies, Inc.* | 4,400 | 144,540 |
| Tenet Healthcare Corp.* | 28,825 | 203,505 |
| Triad Hospitals, Inc.* | 3,325 | 123,125 |
| 1,099,858 | ||
Health Care Technology - 0.89% | ||
| AMICAS, Inc.* | 76,975 | 242,471 |
| Emdeon Corp.* | 171,720 | 2,000,538 |
| iSOFT Group plc (United Kingdom) (Note 7) | 153,000 | 132,777 |
| Merge Technologies, Inc.* | 14,900 | 114,879 |
| WebMD Health Corp. - Class A* | 4,575 | 166,805 |
| 2,657,470 | ||
Life Sciences Tools & Services - 1.47% | ||
| Affymetrix, Inc.* | 54,160 | 1,381,080 |
| Caliper Life Sciences, Inc.* | 65,993 | 336,564 |
| Charles River Laboratories International, Inc.* | 4,525 | 194,213 |
| Invitrogen Corp.* | 1,675 | 97,167 |
| PerkinElmer, Inc. | 111,035 | 2,371,708 |
| 4,380,732 | ||
Pharmaceuticals - 2.33% | ||
| AstraZeneca plc (United Kingdom) (Note 7) | 350 | 20,681 |
| AstraZeneca plc - ADR (United Kingdom) (Note 7) | 1,150 | 67,505 |
| GlaxoSmithKline plc (United Kingdom) (Note 7) | 2,850 | 76,101 |
| Novartis AG - ADR (Switzerland) (Note 7) | 100,000 | 6,073,000 |
The accompanying notes are an integral part of the financial statements.
31
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Health Care (continued) | ||
Pharmaceuticals (continued) | ||
| Sanofi-Aventis (France) (Note 7) | 570 | $48,443 |
| Sanofi-Aventis - ADR (France) (Note 7) | 4,575 | 195,307 |
| Shire plc (United Kingdom) (Note 7) | 5,725 | 104,443 |
| Takeda Pharmaceutical Co. Ltd. (Japan) (Note 7) | 1,000 | 64,221 |
| Valeant Pharmaceuticals International | 13,800 | 257,784 |
| 6,907,485 | ||
Total Health Care | 25,389,757 | |
Industrials - 5.79% | ||
Aerospace & Defense - 0.86% | ||
| Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) (Note 7) | 59,650 | 2,483,230 |
| Hexcel Corp.* | 4,400 | 71,236 |
| 2,554,466 | ||
Air Freight & Logistics - 0.85% | ||
| Deutsche Post AG (Germany) (Note 7) | 4,100 | 113,377 |
| TNT N.V. (Netherlands) (Note 7) | 4,950 | 190,511 |
| United Parcel Service, Inc. - Class B | 29,400 | 2,215,290 |
| 2,519,178 | ||
Airlines - 1.20% | ||
| AirTran Holdings, Inc.* | 7,050 | 70,288 |
| AMR Corp.* | 850 | 24,089 |
| Continental Airlines, Inc. - Class B* | 725 | 26,738 |
| Deutsche Lufthansa AG (Germany) (Note 7) | 5,675 | 130,570 |
| JetBlue Airways Corp.* | 102,995 | 1,293,617 |
| Southwest Airlines Co. | 134,350 | 2,019,281 |
| 3,564,583 | ||
Commercial Services & Supplies - 0.77% | ||
| ChoicePoint, Inc.* | 1,700 | 61,863 |
| Covanta Holding Corp.* | 2,000 | 40,660 |
| The Dun & Bradstreet Corp.* | 28,175 | 2,176,237 |
| 2,278,760 | ||
Construction & Engineering - 0.02% | ||
| Quanta Services, Inc.* | 2,675 | 48,953 |
Electrical Equipment - 0.13% | ||
| ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) (Note 7) | 9,375 | 139,875 |
| Gamesa Corporacion Tecnologica S.A. (Spain) (Note 7) | 8,025 | 184,230 |
The accompanying notes are an integral part of the financial statements.
32
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Industrials (continued) | ||
Electrical Equipment (continued) | ||
| Hubbell, Inc. - Class B | 900 | $44,568 |
| Plug Power, Inc.* | 6,350 | 25,336 |
| 394,009 | ||
Industrial Conglomerates - 1.89% | ||
| 3M Co. | 43,435 | 3,424,415 |
| Sonae S.A. (SGPS) (Portugal) (Note 7) | 24,275 | 46,156 |
| Tyco International Ltd. (Bermuda) (Note 7) | 73,075 | 2,150,597 |
| 5,621,168 | ||
Machinery - 0.06% | ||
| Bucyrus International, Inc. - Class A | 1,075 | 45,043 |
| FANUC Ltd. (Japan) (Note 7) | 600 | 52,078 |
| Heidelberger Druckmaschinen AG (Germany) (Note 7) | 950 | 43,279 |
| Wabtec Corp. | 1,450 | 45,516 |
| 185,916 | ||
Trading Companies & Distributors - 0.01% | ||
| United Rentals, Inc.* | 1,700 | 40,273 |
Total Industrials | 17,207,306 | |
Information Technology - 10.10% | ||
Communications Equipment - 2.51% | ||
| Blue Coat Systems, Inc.* | 12,575 | 280,422 |
| Cisco Systems, Inc.* | 153,695 | 3,708,660 |
| ECI Telecom Ltd.* (Israel) (Note 7) | 29,300 | 217,406 |
| Ixia* | 16,175 | 148,001 |
| Juniper Networks, Inc.* | 132,595 | 2,283,286 |
| Plantronics, Inc. | 2,375 | 50,136 |
| RADWARE Ltd.* (Israel) (Note 7) | 13,525 | 197,465 |
| Spirent Communications plc* (United Kingdom) (Note 7) | 254,575 | 274,337 |
| Tandberg ASA (Norway) (Note 7) | 24,375 | 281,656 |
| 7,441,369 | ||
Computers & Peripherals - 1.69% | ||
| Avid Technology, Inc.* | 4,800 | 173,376 |
| EMC Corp.* | 395,425 | 4,843,956 |
| 5,017,332 | ||
Electronic Equipment & Instruments - 0.12% | ||
| DTS, Inc.* | 6,400 | 136,896 |
| KEYENCE Corp. (Japan) (Note 7) | 110 | 24,363 |
The accompanying notes are an integral part of the financial statements.
33
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Information Technology (continued) | ||
Electronic equipment & Instruments (continued) | ||
| LoJack Corp.* | 10,375 | $207,085 |
| 368,344 | ||
IT Services - 3.32% | ||
| Automatic Data Processing, Inc. | 67,300 | 3,327,312 |
| CheckFree Corp.* | 57,345 | 2,263,981 |
| Fiserv, Inc.* | 900 | 44,460 |
| MoneyGram International, Inc. | 3,000 | 102,630 |
| Paychex, Inc. | 825 | 32,571 |
| RightNow Technologies, Inc.* | 18,925 | 312,641 |
| Western Union Co.* | 171,685 | 3,785,654 |
| 9,869,249 | ||
Semiconductors & Semiconductor Equipment - 0.10% | ||
| Cabot Microelectronics Corp.* | 3,250 | 92,787 |
| Genesis Microchip, Inc.* | 13,525 | 138,631 |
| Taiwan Semiconductor Manufacturing Co. Ltd. - ADR (Taiwan) (Note 7) | 7,626 | 73,972 |
| 305,390 | ||
Software - 2.36% | ||
| Agile Software Corp.* | 19,075 | 128,566 |
| Amdocs Ltd.* (Guernsey) (Note 7) | 11,175 | 433,143 |
| Borland Software Corp.* | 49,850 | 275,172 |
| Cognos, Inc.* (Canada) (Note 7) | 2,975 | 108,528 |
| Electronic Arts, Inc.* | 42,980 | 2,273,212 |
| Kronos, Inc.* | 6,350 | 215,265 |
| Misys plc (United Kingdom) (Note 7) | 16,850 | 65,481 |
| NAVTEQ Corp.* | 7,700 | 255,640 |
| Salesforce.com, Inc.* | 6,400 | 249,728 |
| SAP AG (Germany) (Note 7) | 500 | 99,216 |
| Symantec Corp.* | 124,675 | 2,473,552 |
| Take-Two Interactive Software, Inc.* | 5,800 | 81,142 |
| TIBCO Software, Inc.* | 24,125 | 223,156 |
| UbiSoft Entertainment S.A.* (France) (Note 7) | 2,175 | 134,224 |
| 7,016,025 | ||
Total Information Technology | 30,017,709 | |
Materials - 0.54% | ||
Chemicals - 0.53% | ||
| Arkema* (France) (Note 7) | 30 | 1,464 |
| Bayer AG (Germany) (Note 7) | 3,725 | 186,858 |
The accompanying notes are an integral part of the financial statements.
34
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Materials (continued) | ||
Chemicals(continued) | ||
| Lonza Group AG (Switzerland) (Note 7) | 17,300 | $1,335,370 |
| The Scotts Miracle-Gro Co. - Class A | 975 | 48,223 |
| 1,571,915 | ||
Paper & Forest Products - 0.01% | ||
| Louisiana-Pacific Corp. | 2,300 | 45,494 |
Total Materials | 1,617,409 | |
Telecommunication Services - 0.82% | ||
Diversified Telecommunication Services - 0.03% | ||
| Swisscom AG - ADR (Switzerland) (Note 7) | 2,625 | 91,796 |
Wireless Telecommunication Services - 0.79% | ||
| Vodafone Group plc - ADR (United Kingdom) (Note 7) | 90,181 | 2,331,179 |
Total Telecommunication Services | 2,422,975 | |
Utilities - 2.49% | ||
Electric Utilities - 1.59% | ||
| Allegheny Energy, Inc.* | 51,575 | 2,219,272 |
| American Electric Power Co., Inc. | 56,325 | 2,333,545 |
| E.ON AG (Germany) (Note 7) | 1,300 | 155,392 |
| Westar Energy, Inc. | 1,025 | 25,953 |
| 4,734,162 | ||
Multi-Utilities - 0.90% | ||
| Aquila, Inc.* | 21,325 | 97,882 |
| National Grid plc (United Kingdom) (Note 7) | 7,100 | 90,730 |
| Suez S.A. (France) (Note 7) | 1,475 | 65,991 |
| Xcel Energy, Inc. | 109,550 | 2,417,769 |
| 2,672,372 | ||
Total Utilities | 7,406,534 | |
TOTAL COMMON STOCKS | ||
| (Identified Cost $139,925,462) | 159,944,815 | |
WARRANTS - 0.01% | ||
Health Care - 0.01% | ||
Life Sciences Tools & Services - 0.01% | ||
| Caliper Life Sciences, Inc., 8/10/2011 | ||
| (Identified Cost $7,902) | 15,315 | 22,972 |
The accompanying notes are an integral part of the financial statements.
35
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS - 3.12% | ||
Convertible Corporate Bonds - 0.43% | ||
Consumer Discretionary - 0.18% | ||
Hotels, Restaurants & Leisure - 0.18% | ||
| Carnival Corp., 2.00%, 4/15/2021 | $175,000 | $223,125 |
| International Game Technology, 1/29/2033 | 340,000 | 307,275 |
Total Consumer Discretionary | 530,400 | |
Energy - 0.15% | ||
Energy Equipment & Services - 0.15% | ||
| Cooper Cameron Corp. (now known as Cameron International Corp.), 1.50%, 5/15/2024 | 95,000 | 145,588 |
| Pride International, Inc., 3.25%, 5/1/2033 | 95,000 | 114,950 |
| Schlumberger Ltd., 1.50%, 6/1/2023 | 105,000 | 185,194 |
Total Energy | 445,732 | |
Health Care - 0.02% | ||
Pharmaceuticals - 0.02% | ||
| Valeant Pharmaceuticals International, 4.00%, 11/15/2013 | 60,000 | 57,375 |
Industrials - 0.04% | ||
Trading Companies & Distributors - 0.04% | ||
| United Rentals North America, Inc., 1.875%, 10/15/2023 | 110,000 | 136,125 |
Utilities - 0.04% | ||
Multi-Utilities - 0.04% | ||
| Xcel Energy, Inc., 7.50%, 11/21/2007 | 65,000 | 117,081 |
Total Convertible Corporate Bonds | ||
| (Identified Cost $1,215,575) | 1,286,713 | |
Non-Convertible Corporate Bonds - 2.69% | ||
Consumer Discretionary - 0.78% | ||
Automobiles - 0.33% | ||
| General Motors Acceptance Corp. LLC, 6.125%, 1/22/2008 | 970,000 | 965,240 |
Media - 0.33% | ||
| AOL Time Warner (now known as Time Warner, Inc.), 6.75%, 4/15/2011 | 275,000 | 288,417 |
| Comcast Corp., 6.50%, 11/15/2035 | 410,000 | 418,644 |
| The Walt Disney Co., 7.00%, 3/1/2032 | 235,000 | 274,256 |
| 981,317 | ||
Multiline Retail - 0.07% | ||
| Target Corp., 5.875%, 3/1/2012 | 200,000 | 206,477 |
Specialty Retail - 0.05% | ||
| Lowe’s Companies, Inc., 8.25%, 6/1/2010 | 145,000 | 159,591 |
The accompanying notes are an integral part of the financial statements.
36
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS (continued) | ||
Non-Convertible Corporate Bonds (continued) | ||
Total Consumer Discretionary | $2,312,625 | |
Consumer Staples - 0.06% | ||
Food & Staples Retailing - 0.06% | ||
| The Kroger Co., 7.25%, 6/1/2009 | $80,000 | 83,473 |
| The Kroger Co., 6.80%, 4/1/2011 | 80,000 | 83,733 |
Total Consumer Staples | 167,206 | |
Energy - 0.12% | ||
Oil, Gas & Consumable Fuels - 0.12% | ||
| Anadarko Petroleum Corp., 5.95%, 9/15/2016 | 135,000 | 137,104 |
| Arch Western Finance, 6.75%, 7/1/2013 | 225,000 | 217,125 |
Total Energy | 354,229 | |
Financials - 0.76% | ||
Capital Markets - 0.18% | ||
| The Goldman Sachs Group, Inc., 6.345%, 2/15/2034 | 265,000 | 270,596 |
| Lehman Brothers Holdings, Inc., 6.625%, 1/18/2012 | 115,000 | 122,191 |
| Merrill Lynch & Co., Inc., 6.05%, 5/16/2016 | 125,000 | 129,807 |
| 522,594 | ||
Commercial Banks - 0.28% | ||
| PNC Funding Corp., 7.50%, 11/1/2009 | 155,000 | 164,507 |
| U.S. Bank National Association, 6.375%, 8/1/2011 | 315,000 | 330,860 |
| Wachovia Corp., 5.25%, 8/1/2014 | 335,000 | 332,084 |
| 827,451 | ||
Diversified Financial Services - 0.15% | ||
| Bank of America Corp. Capital Trust VI, 5.625%, 3/8/2035 | 350,000 | 329,921 |
| Citigroup, Inc., 5.00%, 9/15/2014 | 130,000 | 126,978 |
| 456,899 | ||
Insurance - 0.15% | ||
| Ambac Financial Group, Inc., 5.95%, 12/5/2035 | 270,000 | 272,979 |
| American International Group, Inc., 4.25%, 5/15/2013 | 180,000 | 169,594 |
| 442,573 | ||
Total Financials | 2,249,517 | |
Health Care - 0.09% | ||
Pharmaceuticals - 0.09% | ||
| Abbott Laboratories, 3.50%, 2/17/2009 | 135,000 | 130,444 |
The accompanying notes are an integral part of the financial statements.
37
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS (continued) | ||
Non - Convertible Corporate Bonds (continued) | ||
Health Care (continued) | ||
Pharmaceuticals (continued) | ||
Wyeth2, 5.50%, 3/15/2013 | $125,000 | $125,850 |
Total Health Care | 256,294 | |
Industrials - 0.49% | ||
Aerospace & Defense - 0.04% | ||
| Boeing Capital Corp., 6.50%, 2/15/2012 | 115,000 | 122,074 |
Air Freight & Logistics - 0.05% | ||
| FedEx Corp., 3.50%, 4/1/2009 | 135,000 | 129,735 |
Airlines - 0.09% | ||
| Southwest Airlines Co., 5.25%, 10/1/2014 | 275,000 | 269,787 |
Industrial Conglomerates - 0.11% | ||
| General Electric Capital Corp., 6.75%, 3/15/2032 | 290,000 | 334,856 |
Machinery - 0.04% | ||
| John Deere Capital Corp., 7.00%, 3/15/2012 | 115,000 | 124,249 |
Road & Rail - 0.09% | ||
| CSX Corp., 6.75%, 3/15/2011 | 165,000 | 174,204 |
| Union Pacific Corp., 6.65%, 1/15/2011 | 80,000 | 84,061 |
| 258,265 | ||
Trading Companies & Distributors - 0.07% | ||
| United Rentals North America, Inc., 7.00%, 2/15/2014 | 225,000 | 215,437 |
Total Industrials | 1,454,403 | |
Information Technology - 0.14% | ||
Communications Equipment - 0.14% | ||
| Cisco Systems, Inc., 5.25%, 2/22/2011 | 75,000 | 75,453 |
| Corning, Inc., 6.20%, 3/15/2016 | 340,000 | 348,705 |
Total Information Technology | 424,158 | |
Materials - 0.05% | ||
Metals & Mining - 0.05% | ||
| Alcoa, Inc., 7.375%, 8/1/2010 | 155,000 | 166,319 |
Telecommunication Services - 0.06% | ||
Diversified Telecommunication Services - 0.06% | ||
| Verizon Wireless Capital LLC, 5.375%, 12/15/2006 | 170,000 | 169,932 |
Utilities - 0.14% | ||
Electric Utilities - 0.07% | ||
Allegheny Energy Supply Co. LLC3, 8.25%, 4/15/2012 | 80,000 | 87,000 |
The accompanying notes are an integral part of the financial statements.
38
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS (continued) | ||
Non - Convertible Corporate Bonds (continued) | ||
Utilities (continued) | ||
Electric Utilities (continued) | ||
| American Electric Power Co., Inc., 5.375%, 3/15/2010 | $125,000 | $125,285 |
| 212,285 | ||
Independent Power Producers & Energy Traders - 0.04% | ||
| TXU Energy Co., 7.00%, 3/15/2013 | 120,000 | 126,404 |
Multi-Utilities - 0.03% | ||
| CenterPoint Energy Resources Corp., 7.875%, 4/1/2013 | 75,000 | 83,746 |
Total Utilities | 422,435 | |
Total Non-Convertible Corporate Bonds | ||
| (Identified Cost $7,981,482) | 7,977,118 | |
TOTAL CORPORATE BONDS | ||
| (Identified Cost $9,197,057) | 9,263,831 | |
U.S. TREASURY SECURITIES - 31.71% | ||
U.S. Treasury Bonds - 8.70% | ||
| U.S. Treasury Bond, 7.50%, 11/15/2024 | 360,000 | 475,678 |
| U.S. Treasury Bond, 6.00%, 2/15/2026 | 3,450,000 | 3,959,413 |
| U.S. Treasury Bond, 5.50%, 8/15/2028 | 19,575,000 | 21,425,445 |
Total U.S. Treasury Bonds | ||
| (Identified Cost $24,702,221) | 25,860,536 | |
U.S. Treasury Notes - 23.01% | ||
| U.S. Treasury Note, 3.625%, 4/30/2007 | 17,200,000 | 17,080,408 |
| U.S. Treasury Note, 3.00%, 2/15/2008 | 26,000,000 | 25,413,986 |
| U.S. Treasury Note, 5.625%, 5/15/2008 | 5,000 | 5,064 |
| U.S. Treasury Note, 3.25%, 8/15/2008 | 4,500,000 | 4,388,378 |
| U.S. Treasury Note, 3.875%, 5/15/2010 | 3,600,000 | 3,518,017 |
| U.S. Treasury Note, 4.50%, 11/15/2010 | 18,000,000 | 17,950,788 |
Total U.S. Treasury Notes | ||
| (Identified Cost $68,500,970) | 68,356,641 | |
TOTAL U.S. TREASURY SECURITIES | ||
| (Identified Cost $93,203,191) | 94,217,177 | |
U.S. GOVERNMENT AGENCIES - 4.53% | ||
Mortgage-Backed Securities - 4.50% | ||
| Fannie Mae, Pool #545883, 5.50%, 9/1/2017 | 159,436 | 159,965 |
| Fannie Mae, Pool #786281, 6.50%, 7/1/2034 | 151,338 | 154,483 |
Fannie Mae, TBA4, 4.50%, 11/15/2021 | 885,000 | 855,961 |
Fannie Mae, TBA4, 5.00%, 11/15/2021 | 800,000 | 787,750 |
| Fannie Mae, TBA4, 5.00%, 11/15/2036 | 1,697,000 | 1,638,134 |
Fannie Mae, TBA4, 5.50%, 11/15/2036 | 2,413,000 | 2,384,346 |
The accompanying notes are an integral part of the financial statements.
39
Investment Portfolio - October 31, 2006
Principal Amount/ | Value | |
Pro-Blend® Moderate Term Series | Shares | (Note 2) |
U.S. GOVERNMENT AGENCIES (continued) | ||
Mortgage - Backed Securities (continued) | ||
Fannie Mae, TBA4, 6.00%, 11/15/2036 | $918,000 | $923,451 |
| Federal Home Loan Mortgage Corp., Pool #B16835, 5.50%, 10/1/2019 | 155,634 | 155,910 |
| Federal Home Loan Mortgage Corp., Pool #G01736, 6.50%, 9/1/2034 | 111,344 | 113,830 |
Federal Home Loan Mortgage Corp., TBA4, 5.00%, 11/15/2021 | 657,000 | 646,529 |
Federal Home Loan Mortgage Corp., TBA4, 4.50%, 12/15/2021 | 991,000 | 956,934 |
Federal Home Loan Mortgage Corp., TBA4, 5.00%, 11/15/2036 | 1,100,000 | 1,062,532 |
Federal Home Loan Mortgage Corp., TBA4, 5.50%, 11/15/2036 | 1,406,000 | 1,390,182 |
Federal Home Loan Mortgage Corp., TBA4, 6.00%, 11/15/2036 | 523,000 | 526,432 |
| GNMA, Pool #286310, 9.00%, 2/15/2020 | 2,035 | 2,190 |
| GNMA, Pool #288873, 9.50%, 8/15/2020 | 266 | 291 |
| GNMA, Pool #550290, 6.50%, 8/15/2031 | 85,661 | 88,228 |
GNMA, TBA4, 5.00%, 11/15/2036 | 373,000 | 363,675 |
GNMA, TBA4, 5.50%, 11/15/2036 | 729,000 | 725,811 |
GNMA, TBA4, 6.00%, 11/15/2036 | 429,000 | 434,765 |
Total Mortgage-Backed Securities | ||
| (Identified Cost $13,242,326) | 13,371,399 | |
Other Agencies - 0.03% | ||
| Fannie Mae, 4.25%, 7/15/2007 | 5,000 | 4,966 |
| Fannie Mae, 5.75%, 2/15/2008 | 55,000 | 55,483 |
| Fannie Mae, 5.25%, 1/15/2009 | 5,000 | 5,037 |
| Fannie Mae, 6.375%, 6/15/2009 | 10,000 | 10,367 |
Total Other Agencies | ||
| (Identified Cost $76,230) | 75,853 | |
TOTAL U.S. GOVERNMENT AGENCIES | ||
| (Identified Cost $13,318,556) | 13,447,252 | |
SHORT-TERM INVESTMENTS - 10.43% | ||
| Dreyfus Treasury Cash Management - Institutional Shares | 8,103,977 | 8,103,977 |
| Fannie Mae Discount Note, 12/20/2006 | $15,000,000 | 14,899,574 |
| U.S. Treasury Bill, 11/9/2006 | 8,000,000 | 7,991,682 |
TOTAL SHORT-TERM INVESTMENTS | ||
| (Identified Cost $30,991,943) | 30,995,233 |
The accompanying notes are an integral part of the financial statements.
40
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Moderate Term Series | (Note 2) | |
TOTAL INVESTMENTS - 103.63% | ||
| (Identified Cost $286,644,111) | $307,891,280 | |
LIABILITIES, LESS OTHER ASSETS - (3.63%) | (10,795,190) | |
NET ASSETS - 100% | $297,096,090 |
*Non-income producing security
**Less than 0.01%
ADR - American Depository Receipt
1Mellon Financial Corp. is the parent company of Mellon Trust of New England N.A., the Fund's custodian.
2The coupon rate will increase with every ratings downgrade and decrease with every ratings upgrade. The coupon rate stated is the rate as of October 31, 2006.
3Restricted Securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. The Security has been sold under rule 144A and has been determined to be liquid under guidelines established by the Board of Directors. The security amounts to $87,000, or 0.03%, of the Series' net assets as of October 31, 2006.
4Securities purchased on a forward commitment or when-issued basis. TBA - to be announced.
The accompanying notes are an integral part of the financial statements.
41
Statement of Assets and Liabilities - Pro-Blend® Moderate Term Series
October 31, 2006
ASSETS: | |
| Investments, at value (identified cost $286,644,111) (Note 2) | $307,891,280 |
| Foreign currency, at value (cost $4,355) | 4,427 |
| Interest receivable | 1,071,477 |
| Receivable for securities sold | 655,341 |
| Receivable for fund shares sold | 477,702 |
| Dividends receivable | 120,173 |
| Foreign tax reclaims receivable | 44,571 |
| TOTAL ASSETS | 310,264,971 |
LIABILITIES: | |
| Accrued management fees (Note 3) | 246,176 |
| Accrued fund accounting and transfer agent fees (Note 3) | 23,111 |
| Accrued Chief Compliance Officer service fees (Note 3) | 570 |
| Payable for purchases of delayed delivery securities (Note 2) | 12,581,251 |
| Payable for fund shares repurchased | 169,148 |
| Payable for securities purchased | 98,615 |
| Audit fees payable | 33,452 |
| Other payables and accrued expenses | 16,558 |
| TOTAL LIABILITIES | 13,168,881 |
TOTAL NET ASSETS | $297,096,090 |
NET ASSETS CONSIST OF: | |
| Capital stock | $219,250 |
| Additional paid-in-capital | 260,458,504 |
| Undistributed net investment income | 2,923,571 |
| Accumulated net realized gain on investments, foreign currency and other assets and liabilities | 12,246,648 |
| Net unrealized appreciation on investments, foreign currency and other assets and liabilities | 21,248,117 |
TOTAL NET ASSETS | $297,096,090 |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS A ($297,096,090/21,925,017 shares) | $13.55 |
The accompanying notes are an integral part of the financial statements.
42
Statement of Operations - Pro-Blend® Moderate Term Series
For the Year Ended October 31, 2006
INVESTMENT INCOME: | |
| Interest | $4,540,763 |
| Dividends (net of foreign tax withheld, $60,611) | 2,486,137 |
| Total Investment Income | 7,026,900 |
EXPENSES: | |
| Management fees (Note 3) | 2,419,287 |
| Fund accounting and transfer agent fees (Note 3) | 226,795 |
| Directors' fees (Note 3) | 7,100 |
| Chief Compliance Officer service fees (Note 3) | 5,698 |
| Custodian fees | 34,250 |
| Miscellaneous | 102,158 |
| Total Expenses | 2,795,288 |
| NET INVESTMENT INCOME | 4,231,612 |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | |
| Net realized gain on - | |
| Investments | 12,427,577 |
| Foreign currency and other assets and liabilities | 2,284 |
| 12,429,861 | |
| Net change in unrealized appreciation on - | |
| Investments | 13,116,686 |
| Foreign currency and other assets and liabilities | 2,227 |
| 13,118,913 | |
| NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 25,548,774 |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $29,780,386 |
The accompanying notes are an integral part of the financial statements.
43
Statements of Changes in Net Assets - Pro-Blend® Moderate Term Series
For the | For the | |
Year Ended | Year Ended | |
10/31/06 | 10/31/05 | |
INCREASE (DECREASE) IN NET ASSETS: | ||
OPERATIONS: | ||
| Net investment income | $4,231,612 | $1,555,452 |
| Net realized gain on investments and foreign currency | 12,429,861 | 9,624,383 |
| Net change in unrealized appreciation on investments and foreign currency | 13,118,913 | 2,693,747 |
| Net increase from operations | 29,780,386 | 13,873,582 |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||
| From net investment income | (2,281,226) | (1,087,622) |
| From net realized gain on investments | (9,540,816) | (1,812,964) |
| Total distributions to shareholders | (11,822,042) | (2,900,586) |
CAPITAL STOCK ISSUED AND REPURCHASED: | ||
| Net increase from capital share transactions (Note 5) | 88,115,419 | 84,293,577 |
| Net increase in net assets | 106,073,763 | 95,266,573 |
NET ASSETS: | ||
| Beginning of year | 191,022,327 | 95,755,754 |
End of year (including undistributed net investment income of $2,923,571 and $970,003, respectively) | $297,096,090 | $191,022,327 |
The accompanying notes are an integral part of the financial statements.
44
Financial Highlights - Pro-Blend® Moderate Term Series
For the Years Ended | |||||
10/31/06 | 10/31/05 | 10/31/04 | 10/31/03 | 10/31/02 | |
Per share data (for a share outstanding | |||||
throughout each year): | |||||
Net asset value - Beginning of year | $12.75 | $11.81 | $11.07 | $10.05 | $11.06 |
| Income (loss) from investment operations: | |||||
| Net investment income | 0.20 | 0.11 | 0.11 | 0.10 | 0.18 |
| Net realized and unrealized gain (loss) on investments | 1.36 | 1.16 | 0.85 | 1.08 | (0.50) |
| Total from investment operations | 1.56 | 1.27 | 0.96 | 1.18 | (0.32) |
| Less distributions to shareholders: | |||||
| From net investment income | (0.14) | (0.11) | (0.10) | (0.16) | (0.26) |
| From net realized gain on investments | (0.62) | (0.22) | (0.12) | - | (0.43) |
| Total distributions to shareholders | (0.76) | (0.33) | (0.22) | (0.16) | (0.69) |
Net asset value - End of year | $13.55 | $12.75 | $11.81 | $11.07 | $10.05 |
Total return1 | 12.88% | 10.94% | 8.76% | 11.87% | (3.32%) |
Ratios (to average net assets)/Supplemental Data: | |||||
| Expenses* | 1.16% | 1.20% | 1.20% | 1.20% | 1.20% |
| Net investment income | 1.75% | 1.09% | 1.00% | 1.05% | 1.80% |
| Portfolio turnover | 72% | 77% | 42% | 60% | 67% |
Net assets - End of year (000's omitted) | $297,096 | $191,022 | $95,756 | $69,393 | $47,671 |
*The investment advisor did not impose all of its management fee in some years. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased as follows:
| N/A | 0.01% | 0.08% | 0.13% | 0.23% |
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during certain years.
The accompanying notes are an integral part of the financial statements.
45
Performance Update - Pro-Blend® Extended Term Series (unaudited)
| Average Annual Total Returns | ||||
| As of October 31, 2006 | ||||
| One | Five | Ten | Since | |
| Year | Year | Year | Inception1 | |
Manning & Napier Fund, Inc. - Pro-Blend® Extended Term Series2 | 16.03% | 9.72% | 9.68% | 10.76% |
Lehman Brothers U.S. Aggregate Bond Index3,6 | 5.19% | 4.51% | 6.26% | 6.12% |
Lehman Brothers U.S. Government/Credit Bond Index4,6 | 4.88% | 4.57% | 6.29% | 6.06% |
15%/40%/45% Blended Index3,5,6,7 | 12.98% | 8.04% | 7.93% | 8.45% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Pro-Blend® Extended Term Series for the ten years ended October 31, 2006 to the Lehman Brothers U.S. Aggregate Bond Index, the Lehman Brothers U.S. Government/Credit Bond Index and a 15%/40%/45% Blended Index.
Data for line graph to follow:
| Manning & Napier Fund, Inc. | Lehman Brothers | Lehman Brothers | 15%/40%/45% | |
| Date | Pro-Blend® Extended Term Series2 | U.S. Aggregate Bond Index | U.S. Government/Credit Bond Index | Blended Index |
| 11/1/96 | $10,000 | $10,000 | $10,000 | $10,000 |
| 10/31/97 | 11,969 | 10,889 | 10,881 | 11,716 |
| 10/31/98 | 11,902 | 11,906 | 11,999 | 13,145 |
| 10/31/99 | 13,147 | 11,969 | 11,920 | 14,922 |
| 10/31/00 | 15,623 | 12,843 | 12,769 | 15,970 |
| 10/31/01 | 15,838 | 14,713 | 14,726 | 14,569 |
| 10/31/02 | 14,929 | 15,579 | 15,535 | 13,901 |
| 10/31/03 | 17,236 | 16,343 | 16,494 | 16,139 |
| 10/31/04 | 19,222 | 17,247 | 17,412 | 17,619 |
| 10/31/05 | 21,705 | 17,443 | 17,555 | 18,984 |
| 10/31/06 | 25,185 | 18,348 | 18,412 | 21,449 |
1Performance numbers for the Series are calculated from October 12, 1993, the Series' inception date. The Lehman Brothers U.S. Aggregate Bond Index and the Lehman Brothers U.S. Government/Credit Bond Index only publish month-end numbers; therefore, performance numbers for the Indices are calculated from October 31, 1993.
2The Series' performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series' performance is historical and may not be indicative of future results.
3The primary index has been changed from the Lehman Brothers U.S. Government/Credit Bond Index to. the Lehman Brothers U.S. Aggregate Bond Index because it more closely represents the fixed income universe of the Series. The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
4The Lehman Brothers U.S. Government/Credit Bond Index is a market value weighted measure of over 4,000 investment grade corporate and government securities with maturities greater than one year. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
5The 15%/40%/45% Blended Index is 15% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 40% Russell 3000® Index, and 45% Lehman Brothers U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series (see note 1 above) through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). The Russell 3000® Index is an unmanaged, market-capitalization weighted index of the 3,000 largest U.S. domiciled companies. The Index returns assume reinvestment of income. Both Indices' returns, unlike Series returns, do not reflect any fees or expenses.
6Because the Series' asset allocation will vary over time, the composition of the Series' portfolio may not match the composition of the comparative Indices' portfolios.
7The components of the Blended Index have been broadened to more closely represent the investment universe for this series. The new index components take into account the Advisor’s all-capitalization and all-country equity investment approach, as well as the ability to invest across multiple fixed income sectors.
46
Shareholder Expense Example - Pro-Blend® Extended Term Series (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as potential wire charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Account Value | Account Value | During Period* | |
5/1/06 | 10/31/06 | 5/1/06-10/31/06 | |
| Actual | $1,000.00 | $1,062.80 | $5.88 |
| Hypothetical | |||
| (5% return before expenses) | $1,000.00 | $1,019.51 | $5.75 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.13%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data.
47
Portfolio Composition - Pro-Blend® Extended Term Series (unaudited)
As of October 31, 2006
Data for pie chart to follow:
Asset Allocation*
| Common Stocks | 66.14% |
| Corporate Bonds | 3.33% |
| U.S. Government Agencies | 4.71% |
U.S. Treasury Bonds1 | 9.31% |
U.S. Treasury Notes2 | 8.22% |
| Cash, warrants, short-term investments, and liabilities, less other assets | 8.29% |
*As a percentage of net assets.
1A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years.
2A U.S. Treasury Note is an intermediate-term obligation of the U.S. Treasury issued with a maturity period between one and ten years.
Sector Allocation*
| Information Technology | 12.77% |
| Health Care | 10.25% |
| Consumer Discretionary | 8.78% |
| Consumer Staples | 8.09% |
| Financials | 7.79% |
| Industrials | 7.58% |
| Energy | 6.63% |
| Utilities | 3.35% |
| Telecommunication Services | 0.97% |
| Materials | 0.74% |
*Including Common Stocks, Warrants and Corporate Bonds, as a percentage of total investments.
Top Ten Stock Holdings*
| Time Warner, Inc. | 2.08% |
| EMC Corp. | 2.08% |
| Novartis AG - ADR (Switzerland) | 2.02% |
| Unilever plc - ADR (United Kingdom) | 1.89% |
| The Coca-Cola Co. | 1.78% |
| Western Union Co. | 1.63% |
| Schlumberger Ltd. | 1.52% |
| Carnival Corp. | 1.50% |
| Automatic Data Processing, Inc. | 1.43% |
| Cisco Systems, Inc. | 1.42% |
*As a percentage of total investments.
48
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS - 66.14% | ||
Consumer Discretionary - 8.12% | ||
Auto Components - 0.09% | ||
| Autoliv, Inc. (Sweden) (Note 7) | 2,175 | $123,692 |
| Azure Dynamics Corp.* (Canada) (Note 7) | 114,825 | 91,025 |
| Superior Industries International, Inc. | 5,050 | 85,345 |
| Tenneco, Inc.* | 6,150 | 139,605 |
| 439,667 | ||
Diversified Consumer Services - 0.05% | ||
| Corinthian Colleges, Inc.* | 7,725 | 94,631 |
| Universal Technical Institute, Inc.* | 7,700 | 153,846 |
| 248,477 | ||
Hotels, Restaurants & Leisure - 2.58% | ||
| Carnival Corp. | 154,560 | 7,545,619 |
| Club Mediterranee S.A.* (France) (Note 7) | 5,750 | 309,718 |
| International Game Technology | 109,050 | 4,635,715 |
| 12,491,052 | ||
Internet & Catalog Retail - 0.06% | ||
| Audible, Inc.* | 36,450 | 272,646 |
Leisure Equipment & Products - 0.00%** | ||
| K2, Inc.* | 2,175 | 29,710 |
Media - 5.02% | ||
| Acme Communications, Inc.* | 20,450 | 107,976 |
| Comcast Corp. - Class A* | 132,025 | 5,369,457 |
| DreamWorks Animation SKG, Inc. - Class A* | 3,825 | 101,171 |
| The E.W. Scripps Co. - Class A | 137,375 | 6,794,567 |
| Impresa S.A. (SGPS)* (Portugal) (Note 7) | 16,400 | 91,665 |
| Pearson plc (United Kingdom) (Note 7) | 19,550 | 288,421 |
| Playboy Enterprises, Inc. - Class B* | 8,600 | 91,246 |
| Reed Elsevier plc - ADR (United Kingdom) (Note 7) | 8,525 | 386,268 |
| Reuters Group plc (United Kingdom) (Note 7) | 34,675 | 295,792 |
| Scholastic Corp.* | 3,050 | 95,831 |
| Time Warner, Inc. | 523,050 | 10,466,231 |
| Wolters Kluwer N.V. (Netherlands) (Note 7) | 7,425 | 204,092 |
| 24,292,717 | ||
Multiline Retail - 0.04% | ||
| PPR (France) (Note 7) | 1,200 | 179,011 |
Specialty Retail - 0.25% | ||
| Build-A-Bear Workshop, Inc.* | 8,900 | 259,702 |
| Douglas Holding AG (Germany) (Note 7) | 6,900 | 333,712 |
The accompanying notes are an integral part of the financial statements.
49
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Consumer Discretionary (continued) | ||
Specialty Retail (continued) | ||
| Kingfisher plc (United Kingdom) (Note 7) | 77,200 | $387,620 |
| KOMERI Co. Ltd. (Japan) (Note 7) | 3,900 | 134,402 |
| Tractor Supply Co.* | 1,800 | 87,156 |
| 1,202,592 | ||
Textiles, Apparel & Luxury Goods - 0.03% | ||
| LVMH S.A. (Louis Vuitton Moet Hennessy) (France) (Note 7) | 1,575 | 164,104 |
Total Consumer Discretionary | 39,319,976 | |
Consumer Staples - 8.34% | ||
Beverages - 1.97% | ||
| The Coca-Cola Co. | 191,400 | 8,942,208 |
| Diageo plc (United Kingdom) (Note 7) | 8,825 | 163,270 |
| Heineken N.V. (Netherlands) (Note 7) | 2,275 | 103,090 |
| Kirin Brewery Co. Ltd. (Japan) (Note 7) | 12,000 | 159,672 |
| Scottish & Newcastle plc (United Kingdom) (Note 7) | 15,150 | 162,972 |
| 9,531,212 | ||
Food & Staples Retailing - 1.70% | ||
| Carrefour S.A. (France) (Note 7) | 54,040 | 3,292,162 |
| Pathmark Stores, Inc.* | 9,625 | 97,501 |
| Tesco plc (United Kingdom) (Note 7) | 36,650 | 275,067 |
| Wal-Mart Stores, Inc. | 92,250 | 4,546,080 |
| 8,210,810 | ||
Food Products - 3.57% | ||
| Cadbury Schweppes plc (United Kingdom) (Note 7) | 41,500 | 417,533 |
| Groupe Danone (France) (Note 7) | 2,050 | 300,316 |
| Nestle S.A. (Switzerland) (Note 7) | 20,350 | 6,954,048 |
| Suedzucker AG (Germany) (Note 7) | 4,250 | 104,834 |
| Unilever plc - ADR (United Kingdom) (Note 7) | 391,518 | 9,506,057 |
| 17,282,788 | ||
Household Products - 0.05% | ||
| Kao Corp. (Japan) (Note 7) | 3,000 | 78,758 |
| Reckitt Benckiser plc (United Kingdom) (Note 7) | 4,125 | 179,461 |
| 258,219 | ||
Personal Products - 1.05% | ||
| Clarins S.A. (France) (Note 7) | 4,710 | 326,065 |
The accompanying notes are an integral part of the financial statements.
50
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Consumer Staples (continued) | ||
Personal Products (continued) | ||
| The Estee Lauder Companies, Inc. - Class A | 117,360 | $4,740,170 |
| 5,066,235 | ||
Total Consumer Staples | 40,349,264 | |
Energy - 6.61% | ||
Energy Equipment & Services - 5.49% | ||
| Abbot Group plc (United Kingdom) (Note 7) | 58,300 | 334,700 |
| APL ASA* (Norway) (Note 7) | 11,950 | 83,033 |
| Baker Hughes, Inc. | 68,520 | 4,731,306 |
| Cameron International Corp.* | 71,850 | 3,599,685 |
| Compagnie Generale de Geophysique S.A. (CGG)* (France) (Note 7) | 3,175 | 536,838 |
| Hydril Co.* | 3,450 | 207,172 |
| National-Oilwell Varco, Inc.* | 76,284 | 4,607,554 |
| Pride International, Inc.* | 12,075 | 333,391 |
| Schlumberger Ltd. | 120,800 | 7,620,064 |
| Weatherford International Ltd.* | 110,295 | 4,530,919 |
| 26,584,662 | ||
Oil, Gas & Consumable Fuels - 1.12% | ||
| BP plc (United Kingdom) (Note 7) | 13,825 | 153,728 |
| Eni S.p.A. (Italy) (Note 7) | 10,575 | 318,880 |
| Forest Oil Corp.* | 3,200 | 104,448 |
| Hess Corp. | 101,270 | 4,293,848 |
| Mariner Energy, Inc.* | 2,589 | 51,314 |
| Petroleo Brasileiro S.A. (Petrobras) - ADR (Brazil) (Note 7) | 1,650 | 133,584 |
| Royal Dutch Shell plc - Class B (United Kingdom) (Note 7) | 4,679 | 167,598 |
| Total S.A. (France) (Note 7) | 2,700 | 182,782 |
| 5,406,182 | ||
Total Energy | 31,990,844 | |
Financials - 7.27% | ||
Capital Markets - 1.81% | ||
| The Bank of New York Co., Inc. | 116,700 | 4,010,979 |
| The Charles Schwab Corp. | 6,300 | 114,786 |
| Daiwa Securities Group, Inc. (Japan) (Note 7) | 6,000 | 68,086 |
| Deutsche Bank AG (Germany) (Note 7) | 2,400 | 301,363 |
| Franklin Resources, Inc. | 875 | 99,715 |
| Janus Capital Group, Inc. | 6,925 | 139,054 |
| Macquarie Bank Ltd. (Australia) (Note 7) | 3,275 | 188,998 |
The accompanying notes are an integral part of the financial statements.
51
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Financials (continued) | ||
Capital Markets (continued) | ||
Mellon Financial Corp.1 | 4,400 | $170,720 |
| Merrill Lynch & Co., Inc. | 1,875 | 163,912 |
| Morgan Stanley | 2,425 | 185,343 |
| SEI Investments Co. | 58,950 | 3,317,706 |
| 8,760,662 | ||
Commercial Banks - 3.86% | ||
| Aareal Bank AG* (Germany) (Note 7) | 6,525 | 277,856 |
| ABN AMRO Holding N.V. (Netherlands) (Note 7) | 16,750 | 488,410 |
| Banca Monte dei Paschi di Siena S.p.A. (Italy) (Note 7) | 10,950 | 67,211 |
| Barclays plc (United Kingdom) (Note 7) | 45,525 | 614,323 |
| BNP Paribas (France) (Note 7) | 1,550 | 170,400 |
| Boston Private Financial Holdings, Inc. | 6,775 | 187,261 |
| The Chugoku Bank Ltd. (Japan) (Note 7) | 10,000 | 131,349 |
| Commerzbank AG (Germany) (Note 7) | 4,775 | 169,030 |
| Credit Agricole S.A. (France) (Note 7) | 3,800 | 161,526 |
| The Hachijuni Bank Ltd. (Japan) (Note 7) | 18,000 | 127,450 |
| HSBC Holdings plc (United Kingdom) (Note 7) | 16,425 | 311,395 |
| HSBC Holdings plc - ADR (United Kingdom) (Note 7) | 2,550 | 243,448 |
| Huntington Bancshares, Inc. | 1,650 | 40,277 |
| KeyCorp | 2,075 | 77,066 |
| Marshall & Ilsley Corp. | 2,325 | 111,461 |
| Mitsubishi UFJ Financial Group, Inc. (Japan) (Note 7) | 12 | 150,847 |
| PNC Financial Services Group, Inc. | 61,450 | 4,303,344 |
| Royal Bank of Scotland Group plc (United Kingdom) (Note 7) | 19,925 | 709,897 |
| SanPaolo IMI S.p.A. (Italy) (Note 7) | 3,025 | 64,581 |
| Societe Generale (France) (Note 7) | 675 | 112,150 |
| The Sumitomo Trust & Banking Co. Ltd. (Japan) (Note 7) | 18,000 | 193,638 |
| SunTrust Banks, Inc. | 2,300 | 181,677 |
| TCF Financial Corp. | 5,125 | 133,404 |
| U.S. Bancorp | 133,225 | 4,508,334 |
| UniCredito Italiano S.p.A. (Italy) (Note 7) | 29,175 | 241,810 |
| Wachovia Corp. | 82,850 | 4,598,175 |
| Wells Fargo & Co. | 3,600 | 130,644 |
| Zions Bancorporation | 2,225 | 178,890 |
| 18,685,854 |
The accompanying notes are an integral part of the financial statements.
52
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Financials (continued) | ||
Consumer Finance - 0.01% | ||
| Capital One Financial Corp. | 875 | $69,414 |
Diversified Financial Services - 1.13% | ||
| Bank of America Corp. | 86,225 | 4,644,941 |
| Citigroup, Inc. | 3,725 | 186,846 |
| ING Groep N.V. (Netherlands) (Note 7) | 4,650 | 205,964 |
| JPMorgan Chase & Co. | 7,275 | 345,126 |
| Moody's Corp. | 1,500 | 99,450 |
| 5,482,327 | ||
Insurance - 0.42% | ||
| Allianz SE (Germany) (Note 7) | 4,150 | 767,573 |
| Ambac Financial Group, Inc. | 1,975 | 164,893 |
| American International Group, Inc. | 2,925 | 196,472 |
| Axa (France) (Note 7) | 4,550 | 173,316 |
| MBIA, Inc. | 1,175 | 72,873 |
| Muenchener Rueckver AG (Germany) (Note 7) | 2,275 | 368,057 |
| Principal Financial Group, Inc. | 825 | 46,604 |
| Torchmark Corp. | 675 | 41,634 |
| Willis Group Holdings Ltd. (United Kingdom) (Note 7) | 5,125 | 194,904 |
| 2,026,326 | ||
Thrifts & Mortgage Finance - 0.04% | ||
| BankAtlantic Bancorp, Inc. - Class A | 6,375 | 83,513 |
| Flagstar Bancorp, Inc. | 6,025 | 90,556 |
| 174,069 | ||
Total Financials | 35,198,652 | |
Health Care - 10.52% | ||
Biotechnology - 0.20% | ||
| Amgen, Inc.* | 4,225 | 320,720 |
| Monogram Biosciences, Inc.* | 107,025 | 194,785 |
| Senomyx, Inc.* | 12,075 | 186,197 |
| Solexa, Inc.* | 24,825 | 254,208 |
| 955,910 | ||
Health Care Equipment & Supplies - 4.32% | ||
| Align Technology, Inc.* | 11,775 | 163,201 |
| Bausch & Lomb, Inc. | 67,475 | 3,612,612 |
| Biomet, Inc. | 6,075 | 229,878 |
| The Cooper Companies, Inc. | 88,365 | 5,092,475 |
| Cyberonics, Inc.* | 15,925 | 287,128 |
| Dexcom, Inc.* | 34,625 | 304,700 |
The accompanying notes are an integral part of the financial statements.
53
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Health Care (continued) | ||
Health Care Equipment & Supplies (continued) | ||
| Edwards Lifesciences Corp.* | 7,300 | $313,389 |
| Foxhollow Technologies, Inc.* | 18,425 | 645,059 |
| IntraLase Corp.* | 32,700 | 642,882 |
| Inverness Medical Innovations, Inc.* | 19,200 | 723,648 |
| Kyphon, Inc.* | 8,275 | 326,863 |
| Medtronic, Inc. | 124,600 | 6,065,528 |
| Mentor Corp. | 5,275 | 246,870 |
| OraSure Technologies, Inc.* | 63,500 | 492,760 |
| ResMed, Inc.* | 9,475 | 416,805 |
| Respironics, Inc.* | 5,950 | 210,154 |
| Straumann Holding AG (Switzerland) (Note 7) | 1,075 | 244,397 |
| Wright Medical Group, Inc.* | 35,525 | 877,823 |
| 20,896,172 | ||
Health Care Providers & Services - 0.45% | ||
| AMN Healthcare Services, Inc.* | 24,275 | 613,915 |
| Cross Country Healthcare, Inc.* | 24,350 | 471,416 |
| Healthways, Inc.* | 3,175 | 134,461 |
| Patterson Companies, Inc.* | 7,625 | 250,481 |
| Tenet Healthcare Corp.* | 61,525 | 434,366 |
| Triad Hospitals, Inc.* | 7,575 | 280,502 |
| 2,185,141 | ||
Health Care Technology - 1.19% | ||
| AMICAS, Inc.* | 153,900 | 484,785 |
| Emdeon Corp.* | 372,890 | 4,344,169 |
| iSOFT Group plc (United Kingdom) (Note 7) | 333,000 | 288,985 |
| Merge Technologies, Inc.* | 31,875 | 245,756 |
| WebMD Health Corp. - Class A* | 11,050 | 402,883 |
| 5,766,578 | ||
Life Sciences Tools & Services - 1.89% | ||
| Affymetrix, Inc.* | 118,190 | 3,013,845 |
| Caliper Life Sciences, Inc.* | 71,700 | 365,670 |
| Charles River Laboratories International, Inc.* | 8,625 | 370,185 |
| Invitrogen Corp.* | 3,575 | 207,386 |
| PerkinElmer, Inc. | 241,900 | 5,166,984 |
| 9,124,070 | ||
Pharmaceuticals - 2.47% | ||
| AstraZeneca plc (United Kingdom) (Note 7) | 1,450 | 85,678 |
| AstraZeneca plc - ADR (United Kingdom) (Note 7) | 2,475 | 145,283 |
The accompanying notes are an integral part of the financial statements.
54
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Health Care (continued) | ||
Pharmaceuticals (continued) | ||
| GlaxoSmithKline plc (United Kingdom) (Note 7) | 9,025 | $240,988 |
| Novartis AG - ADR (Switzerland) (Note 7) | 166,975 | 10,140,392 |
| Sanofi-Aventis (France) (Note 7) | 1,250 | 106,235 |
| Sanofi-Aventis - ADR (France) (Note 7) | 9,125 | 389,546 |
| Shire plc (United Kingdom) (Note 7) | 11,175 | 203,870 |
| Takeda Pharmaceutical Co. Ltd. (Japan) (Note 7) | 1,700 | 109,176 |
| Valeant Pharmaceuticals International | 29,350 | 548,258 |
| 11,969,426 | ||
Total Health Care | 50,897,297 | |
Industrials - 7.27% | ||
Aerospace & Defense - 1.08% | ||
| Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) (Note 7) | 121,975 | 5,077,819 |
| Hexcel Corp.* | 9,500 | 153,805 |
| 5,231,624 | ||
Air Freight & Logistics - 1.07% | ||
| Deutsche Post AG (Germany) (Note 7) | 7,175 | 198,410 |
| TNT N.V. (Netherlands) (Note 7) | 10,175 | 391,606 |
| United Parcel Service, Inc. - Class B | 61,010 | 4,597,103 |
| 5,187,119 | ||
Airlines - 1.44% | ||
| AirTran Holdings, Inc.* | 15,500 | 154,535 |
| AMR Corp.* | 1,825 | 51,720 |
| Continental Airlines, Inc. - Class B* | 1,475 | 54,398 |
| Deutsche Lufthansa AG (Germany) (Note 7) | 11,325 | 260,566 |
| JetBlue Airways Corp.* | 221,260 | 2,779,026 |
| Southwest Airlines Co. | 243,950 | 3,666,569 |
| 6,966,814 | ||
Commercial Services & Supplies - 1.00% | ||
| ChoicePoint, Inc.* | 1,725 | 62,773 |
| Covanta Holding Corp.* | 4,375 | 88,944 |
| The Dun & Bradstreet Corp.* | 60,925 | 4,705,847 |
| 4,857,564 | ||
Construction & Engineering - 0.02% | ||
| Quanta Services, Inc.* | 5,750 | 105,225 |
Electrical Equipment - 0.17% | ||
| ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) (Note 7) | 25,575 | 381,579 |
The accompanying notes are an integral part of the financial statements.
55
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Industrials (continued) | ||
Electrical Equipment (continued) | ||
| Gamesa Corporacion Tecnologica S.A. (Spain) (Note 7) | 13,425 | $308,197 |
| Hubbell, Inc. - Class B | 1,950 | 96,564 |
| Plug Power, Inc.* | 16,425 | 65,536 |
| 851,876 | ||
Industrial Conglomerates - 2.39% | ||
| 3M Co. | 86,375 | 6,809,805 |
| Sonae S.A. (SGPS) (Portugal) (Note 7) | 61,250 | 116,460 |
| Tyco International Ltd. (Bermuda) (Note 7) | 157,125 | 4,624,189 |
| 11,550,454 | ||
Machinery - 0.08% | ||
| Bucyrus International, Inc. - Class A | 2,300 | 96,370 |
| FANUC Ltd. (Japan) (Note 7) | 1,000 | 86,797 |
| Heidelberger Druckmaschinen AG (Germany) (Note 7) | 2,075 | 94,530 |
| Wabtec Corp. | 3,150 | 98,878 |
| 376,575 | ||
Trading Companies & Distributors - 0.02% | ||
| United Rentals, Inc.* | 3,675 | 87,061 |
Total Industrials | 35,214,312 | |
Information Technology - 13.10% | ||
Communications Equipment - 3.10% | ||
| Blue Coat Systems, Inc.* | 23,625 | 526,837 |
| Cisco Systems, Inc.* | 296,355 | 7,151,046 |
| ECI Telecom Ltd.* (Israel) (Note 7) | 64,475 | 478,405 |
| Ixia* | 34,500 | 315,675 |
| Juniper Networks, Inc.* | 287,825 | 4,956,347 |
| Plantronics, Inc. | 5,175 | 109,244 |
| RADWARE Ltd.* (Israel) (Note 7) | 33,225 | 485,085 |
| Spirent Communications plc* (United Kingdom) (Note 7) | 490,075 | 528,118 |
| Tandberg ASA (Norway) (Note 7) | 40,350 | 466,249 |
| 15,017,006 | ||
Computers & Peripherals - 2.23% | ||
| Avid Technology, Inc.* | 10,450 | 377,454 |
| EMC Corp.* | 851,750 | 10,433,937 |
| 10,811,391 |
The accompanying notes are an integral part of the financial statements.
56
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Information Technology (continued) | ||
Electronic Equipment & Instruments - 0.17% | ||
| DTS, Inc.* | 13,275 | $283,952 |
| KEYENCE Corp. (Japan) (Note 7) | 330 | 73,089 |
| LoJack Corp.* | 22,450 | 448,102 |
| 805,143 | ||
IT Services - 4.40% | ||
| Automatic Data Processing, Inc. | 145,725 | 7,204,644 |
| CheckFree Corp.* | 124,620 | 4,919,998 |
| Fiserv, Inc.* | 1,950 | 96,330 |
| MoneyGram International, Inc. | 6,500 | 222,365 |
| RightNow Technologies, Inc.* | 40,875 | 675,255 |
| Western Union Co.* | 370,600 | 8,171,730 |
| 21,290,322 | ||
Semiconductors & Semiconductor Equipment - 0.13% | ||
| Cabot Microelectronics Corp.* | 6,575 | 187,716 |
| Genesis Microchip, Inc.* | 28,875 | 295,969 |
| Taiwan Semiconductor Manufacturing Co. Ltd. - ADR (Taiwan) (Note 7) | 14,070 | 136,479 |
| 620,164 | ||
Software - 3.07% | ||
| Agile Software Corp.* | 36,500 | 246,010 |
| Amdocs Ltd.* (Guernsey) (Note 7) | 19,400 | 751,944 |
| Borland Software Corp.* | 97,825 | 539,994 |
| Cognos, Inc.* (Canada) (Note 7) | 6,900 | 251,712 |
| Electronic Arts, Inc.* | 93,360 | 4,937,810 |
| Kronos, Inc.* | 13,325 | 451,718 |
| Misys plc (United Kingdom) (Note 7) | 27,900 | 108,423 |
| NAVTEQ Corp.* | 17,425 | 578,510 |
| Salesforce.com, Inc.* | 12,000 | 468,240 |
| SAP AG (Germany) (Note 7) | 1,300 | 257,963 |
| Symantec Corp.* | 269,250 | 5,341,920 |
| Take-Two Interactive Software, Inc.* | 12,475 | 174,525 |
| TIBCO Software, Inc.* | 52,300 | 483,775 |
| UbiSoft Entertainment S.A.* (France) (Note 7) | 4,700 | 290,046 |
| 14,882,590 | ||
Total Information Technology | 63,426,616 | |
Materials - 0.71% | ||
Chemicals - 0.69% | ||
| Arkema* (France) (Note 7) | 67 | 3,270 |
The accompanying notes are an integral part of the financial statements.
57
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Materials (continued) | ||
Chemicals (continued) | ||
| Bayer AG (Germany) (Note 7) | 6,775 | $339,857 |
| Lonza Group AG (Switzerland) (Note 7) | 37,475 | 2,892,659 |
| The Scotts Miracle-Gro Co. - Class A | 2,125 | 105,102 |
| 3,340,888 | ||
Paper & Forest Products - 0.02% | ||
| Louisiana-Pacific Corp. | 4,975 | 98,406 |
Total Materials | 3,439,294 | |
Telecommunication Services - 0.95% | ||
Diversified Telecommunication Services - 0.04% | ||
| Swisscom AG - ADR (Switzerland) (Note 7) | 5,650 | 197,580 |
Wireless Telecommunication Services - 0.91% | ||
| Vodafone Group plc - ADR (United Kingdom) (Note 7) | 169,793 | 4,389,149 |
Total Telecommunication Services | 4,586,729 | |
Utilities - 3.25% | ||
Electric Utilities - 2.14% | ||
| Allegheny Energy, Inc.* | 111,425 | 4,794,618 |
| American Electric Power Co., Inc. | 122,050 | 5,056,531 |
| E.ON AG (Germany) (Note 7) | 3,300 | 394,455 |
| Westar Energy, Inc. | 3,850 | 97,482 |
| 10,343,086 | ||
Multi-Utilities - 1.11% | ||
| Aquila, Inc.* | 46,175 | 211,943 |
| National Grid plc (United Kingdom) (Note 7) | 15,275 | 195,198 |
| Suez S.A. (France) (Note 7) | 2,575 | 115,205 |
| Xcel Energy, Inc. | 219,750 | 4,849,882 |
| 5,372,228 | ||
Total Utilities | 15,715,314 | |
TOTAL COMMON STOCKS | ||
| (Identified Cost $267,508,161) | 320,138,298 | |
WARRANTS - 0.00%** | ||
Health Care - 0.00%** | ||
Life Sciences Tools & Services - 0.00%** | ||
| Caliper Life Sciences, Inc., 8/10/2011 | ||
| (Identified Cost $5,289) | 8,377 | 12,565 |
The accompanying notes are an integral part of the financial statements.
58
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS - 3.33% | ||
Convertible Corporate Bonds - 0.44% | ||
Consumer Discretionary - 0.18% | ||
Hotels, Restaurants & Leisure - 0.18% | ||
| Carnival Corp., 2.00%, 4/15/2021 | $285,000 | $363,375 |
| International Game Technology, 1/29/2033 | 555,000 | 501,581 |
Total Consumer Discretionary | 864,956 | |
Energy - 0.15% | ||
Energy Equipment & Services - 0.15% | ||
| Cooper Cameron Corp. (now known as Cameron International Corp.), 1.50%, 5/15/2024 | 155,000 | 237,537 |
| Pride International, Inc., 3.25%, 5/1/2033 | 155,000 | 187,550 |
| Schlumberger Ltd., 1.50%, 6/1/2023 | 170,000 | 299,838 |
Total Energy | 724,925 | |
Health Care - 0.02% | ||
Pharmaceuticals - 0.02% | ||
| Valeant Pharmaceuticals International, 4.00%, 11/15/2013 | 115,000 | 109,969 |
Industrials - 0.04% | ||
Trading Companies & Distributors - 0.04% | ||
| United Rentals North America, Inc., 1.875%, 10/15/2023 | 180,000 | 222,750 |
Utilities - 0.05% | ||
Multi-Utilities - 0.05% | ||
| Xcel Energy, Inc., 7.50%, 11/21/2007 | 130,000 | 234,163 |
Total Convertible Corporate Bonds | ||
| (Identified Cost $2,031,026) | 2,156,763 | |
Non-Convertible Corporate Bonds - 2.89% | ||
Consumer Discretionary - 0.80% | ||
Automobiles - 0.32% | ||
| General Motors Acceptance Corp. LLC, 6.125%, 1/22/2008 | 1,580,000 | 1,572,247 |
Media - 0.34% | ||
| AOL Time Warner (now known as Time Warner, Inc.), 6.75%, 4/15/2011 | 500,000 | 524,395 |
| Comcast Corp., 6.50%, 11/15/2035 | 670,000 | 684,126 |
| The Walt Disney Co., 7.00%, 3/1/2032 | 380,000 | 443,477 |
| 1,651,998 | ||
Multiline Retail - 0.08% | ||
| Target Corp., 5.875%, 3/1/2012 | 365,000 | 376,820 |
Specialty Retail - 0.06% | ||
| Lowe's Companies, Inc., 8.25%, 6/1/2010 | 265,000 | 291,666 |
Total Consumer Discretionary | 3,892,731 |
The accompanying notes are an integral part of the financial statements.
59
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS (continued) | ||
Non - Convertible Corporate Bonds (continued) | ||
Consumer Staples - 0.06% | ||
Food & Staples Retailing - 0.06% | ||
| The Kroger Co., 7.25%, 6/1/2009 | $140,000 | $146,079 |
| The Kroger Co., 6.80%, 4/1/2011 | 145,000 | 151,766 |
Total Consumer Staples | 297,845 | |
Energy - 0.12% | ||
Oil, Gas & Consumable Fuels - 0.12% | ||
| Anadarko Petroleum Corp., 5.95%, 9/15/2016 | 220,000 | 223,429 |
| Arch Western Finance, 6.75%, 7/1/2013 | 365,000 | 352,225 |
Total Energy | 575,654 | |
Financials - 0.81% | ||
Capital Markets - 0.18% | ||
| The Goldman Sachs Group, Inc., 6.345%, 2/15/2034 | 425,000 | 433,974 |
| Lehman Brothers Holdings, Inc., 6.625%, 1/18/2012 | 215,000 | 228,444 |
| Merrill Lynch & Co., Inc., 6.05%, 5/16/2016 | 225,000 | 233,652 |
| 896,070 | ||
Commercial Banks - 0.31% | ||
| PNC Funding Corp., 7.50%, 11/1/2009 | 280,000 | 297,173 |
| U.S. Bank National Association, 6.375%, 8/1/2011 | 575,000 | 603,951 |
| Wachovia Corp., 5.25%, 8/1/2014 | 615,000 | 609,648 |
| 1,510,772 | ||
Diversified Financial Services - 0.16% | ||
| Bank of America Corp. Capital Trust VI, 5.625%, 3/8/2035 | 565,000 | 532,587 |
| Citigroup, Inc., 5.00%, 9/15/2014 | 235,000 | 229,538 |
| 762,125 | ||
Insurance - 0.16% | ||
| Ambac Financial Group, Inc., 5.95%, 12/5/2035 | 435,000 | 439,799 |
| American International Group, Inc., 4.25%, 5/15/2013 | 345,000 | 325,055 |
| 764,854 | ||
Total Financials | 3,933,821 | |
Health Care - 0.10% | ||
Pharmaceuticals - 0.10% | ||
| Abbott Laboratories, 3.50%, 2/17/2009 | 240,000 | 231,900 |
Wyeth2, 5.50%, 3/15/2013 | 225,000 | 226,530 |
Total Health Care | 458,430 |
The accompanying notes are an integral part of the financial statements.
60
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS (continued) | ||
Non-Convertible Corporate Bonds (continued) | ||
Industrials - 0.55% | ||
Aerospace & Defense - 0.05% | ||
| Boeing Capital Corp., 6.50%, 2/15/2012 | $215,000 | $228,226 |
Air Freight & Logistics - 0.05% | ||
| FedEx Corp., 3.50%, 4/1/2009 | 240,000 | 230,640 |
Airlines - 0.11% | ||
| Southwest Airlines Co., 5.25%, 10/1/2014 | 525,000 | 515,047 |
Industrial Conglomerates - 0.13% | ||
| General Electric Capital Corp., 6.75%, 3/15/2032 | 535,000 | 617,752 |
Machinery - 0.04% | ||
| John Deere Capital Corp., 7.00%, 3/15/2012 | 205,000 | 221,487 |
Road & Rail - 0.10% | ||
| CSX Corp., 6.75%, 3/15/2011 | 320,000 | 337,851 |
| Union Pacific Corp., 6.65%, 1/15/2011 | 145,000 | 152,360 |
| 490,211 | ||
Trading Companies & Distributors - 0.07% | ||
| United Rentals North America, Inc., 7.00%, 2/15/2014 | 365,000 | 349,488 |
Total Industrials | 2,652,851 | |
Information Technology - 0.15% | ||
Communications Equipment - 0.15% | ||
| Cisco Systems, Inc., 5.25%, 2/22/2011 | 140,000 | 140,845 |
| Corning, Inc., 6.20%, 3/15/2016 | 560,000 | 574,338 |
Total Information Technology | 715,183 | |
Materials - 0.06% | ||
Metals & Mining - 0.06% | ||
| Alcoa, Inc., 7.375%, 8/1/2010 | 275,000 | 295,083 |
Telecommunication Services - 0.06% | ||
Diversified Telecommunication Services - 0.06% | ||
| Verizon Wireless Capital LLC, 5.375%, 12/15/2006 | 300,000 | 299,879 |
Utilities - 0.18% | ||
Electric Utilities - 0.10% | ||
Allegheny Energy Supply Co. LLC3, 8.25%, 4/15/2012 | 220,000 | 239,250 |
| American Electric Power Co., Inc., 5.375%, 3/15/2010 | 230,000 | 230,524 |
| 469,774 | ||
Independent Power Producers & Energy Traders - 0.05% | ||
| TXU Energy Co., 7.00%, 3/15/2013 | 215,000 | 226,473 |
The accompanying notes are an integral part of the financial statements.
61
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Extended Term Series | Principal Amount | (Note 2) |
CORPORATE BONDS (continued) | ||
Non - Convertible Corporate Bonds (continued) | ||
Utilities (continued) | ||
Multi-Utilities - 0.03% | ||
| CenterPoint Energy Resources Corp., 7.875%, 4/1/2013 | $135,000 | $150,743 |
Total Utilities | 846,990 | |
Total Non-Convertible Corporate Bonds | ||
| (Identified Cost $13,990,960) | 13,968,467 | |
TOTAL CORPORATE BONDS | ||
| (Identified Cost $16,021,986) | 16,125,230 | |
U.S. TREASURY SECURITIES - 17.53% | ||
U.S. Treasury Bonds - 9.31% | ||
| U.S. Treasury Bond, 7.25%, 8/15/2022 | 5,000 | 6,342 |
| U.S. Treasury Bond, 6.00%, 2/15/2026 | 6,035,000 | 6,926,104 |
| U.S. Treasury Bond, 5.50%, 8/15/2028 | 34,810,000 | 38,100,624 |
Total U.S. Treasury Bonds | ||
| (Identified Cost $42,109,412) | 45,033,070 | |
U.S. Treasury Notes - 8.22% | ||
| U.S. Treasury Note, 3.00%, 2/15/2008 | 20,000,000 | 19,549,220 |
| U.S. Treasury Note, 4.875%, 4/30/2011 | 20,000,000 | 20,238,280 |
Total U.S. Treasury Notes | ||
| (Identified Cost $39,464,367) | 39,787,500 | |
TOTAL U.S. TREASURY SECURITIES | ||
| (Identified Cost $81,573,779) | 84,820,570 | |
U.S. GOVERNMENT AGENCIES - 4.71% | ||
Mortgage-Backed Securities - 4.67% | ||
| Fannie Mae, Pool #621881, 5.50%, 1/1/2017 | 2,744 | 2,753 |
| Fannie Mae, Pool #725793, 5.50%, 9/1/2019 | 437,712 | 439,012 |
| Fannie Mae, Pool #725686, 6.50%, 7/1/2034 | 507,518 | 519,907 |
Fannie Mae, TBA4, 4.50%, 11/15/2021 | 1,444,000 | 1,396,620 |
Fannie Mae, TBA4, 5.00%, 11/15/2021 | 1,303,000 | 1,283,049 |
Fannie Mae, TBA4, 5.00%, 11/15/2036 | 2,780,000 | 2,683,567 |
Fannie Mae, TBA4, 5.50%, 11/15/2036 | 3,938,000 | 3,891,236 |
Fannie Mae, TBA4, 6.00%, 11/15/2036 | 1,497,000 | 1,505,889 |
| Federal Home Loan Mortgage Corp., Pool #B16835, 5.50%, 10/1/2019 | 427,993 | 428,753 |
| Federal Home Loan Mortgage Corp., Pool #A22067, 6.50%, 5/1/2034 | 272,335 | 278,067 |
Federal Home Loan Mortgage Corp., TBA4, 5.00%, 11/15/2021 | 1,070,000 | 1,052,946 |
The accompanying notes are an integral part of the financial statements.
62
Investment Portfolio - October 31, 2006
Principal Amount/ | Value | |
Pro-Blend® Extended Term Series | Shares | (Note 2) |
U.S. GOVERNMENT AGENCIES (continued) | ||
Mortgage - Backed Securities (continued) | ||
Federal Home Loan Mortgage Corp., TBA4, 4.50%, 12/15/2021 | $1,617,000 | $1,561,416 |
Federal Home Loan Mortgage Corp., TBA4, 5.00%, 11/15/2036 | 1,795,000 | 1,733,859 |
Federal Home Loan Mortgage Corp., TBA4, 5.50%, 11/15/2036 | 2,295,000 | 2,269,181 |
Federal Home Loan Mortgage Corp., TBA4, 6.00%, 11/15/2036 | 854,000 | 859,604 |
| GNMA, Pool #631703, 6.50%, 9/15/2034 | 197,232 | 202,802 |
GNMA, TBA4, 5.00%, 11/15/2036 | 607,000 | 591,825 |
GNMA, TBA4, 5.50%, 11/15/2036 | 1,186,000 | 1,180,811 |
GNMA, TBA4, 6.00%, 11/15/2036 | 697,000 | 706,366 |
Total Mortgage-Backed Securities | ||
| (Identified Cost $22,390,514) | 22,587,663 | |
Other Agencies - 0.04% | ||
| Fannie Mae, 4.25%, 7/15/2007 | 190,000 | 188,712 |
| Fannie Mae, 5.75%, 2/15/2008 | 5,000 | 5,044 |
Total Other Agencies | ||
| (Identified Cost $196,891) | 193,756 | |
TOTAL U.S. GOVERNMENT AGENCIES | ||
| (Identified Cost $22,587,405) | 22,781,419 | |
SHORT-TERM INVESTMENTS - 12.06% | ||
| Dreyfus Treasury Cash Management - Institutional Shares | 13,631,276 | 13,631,276 |
| Fannie Mae Discount Note, 12/20/2006 | $25,000,000 | 24,832,623 |
| U.S. Treasury Bill, 11/9/2006 | 10,000,000 | 9,989,867 |
| U.S. Treasury Bill, 12/21/2006 | 10,000,000 | 9,930,158 |
TOTAL SHORT-TERM INVESTMENTS | ||
| (Identified Cost $58,379,809) | 58,383,924 | |
TOTAL INVESTMENTS - 103.77% | ||
| (Identified Cost $446,076,429) | 502,262,006 | |
LIABILITIES, LESS OTHER ASSETS - (3.77%) | (18,259,092) | |
NET ASSETS - 100% | $484,002,914 |
The accompanying notes are an integral part of the financial statements.
63
Investment Portfolio - October 31, 2006
Pro-Blend® Extended Term Series
*Non-income producing security
**Less than 0.01%
ADR - American Depository Receipt
1Mellon Financial Corp. is the parent company of Mellon Trust of New England N.A., the Fund's custodian.
2The coupon rate will increase with every ratings downgrade and decrease with every ratings upgrade. The coupon rate stated is the rate as of October 31, 2006.
3Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. This security has been sold under rule 144A and has been determined to be liquid under guidelines established by the Board of Directors. This security amounts to $239,250, or 0.05%, of the Series' net assets as of October 31, 2006.
4Securities purchased on a forward commitment or when-issued basis. TBA - to be announced.
The accompanying notes are an integral part of the financial statements.
64
Statement of Assets and Liabilities - Pro-Blend® Extended Term Series
October 31, 2006
ASSETS: | |
| Investments, at value (identified cost $446,076,429) (Note 2) | $502,262,006 |
| Foreign currency, at value (cost $10,042) | 10,217 |
| Receivable for securities sold | 1,464,808 |
| Interest receivable | 873,992 |
| Receivable for fund shares sold | 477,151 |
| Dividends receivable | 147,185 |
| Foreign tax reclaims receivable | 125,027 |
| TOTAL ASSETS | 505,360,386 |
LIABILITIES: | |
| Accrued management fees (Note 3) | 399,698 |
| Accrued fund accounting and transfer agent fees (Note 3) | 35,807 |
| Accrued Chief Compliance Officer service fees (Note 3) | 570 |
| Payable for purchases of delayed delivery securities (Note 2) | 20,528,358 |
| Payable for securities purchased | 211,435 |
| Payable for fund shares repurchased | 118,174 |
| Audit fees payable | 35,996 |
| Other payables and accrued expenses | 27,434 |
| TOTAL LIABILITIES | 21,357,472 |
TOTAL NET ASSETS | $484,002,914 |
NET ASSETS CONSIST OF: | |
| Capital stock | $282,635 |
| Additional paid-in-capital | 390,513,246 |
| Undistributed net investment income | 4,302,040 |
| Accumulated net realized gain on investments, foreign currency and other assets and liabilities | 32,717,783 |
| Net unrealized appreciation on investments, foreign currency and other assets and liabilities | 56,187,210 |
TOTAL NET ASSETS | $484,002,914 |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTIONPRICE PER SHARE - CLASS A ($484,002,914/28,263,473 shares) | $17.12 |
The accompanying notes are an integral part of the financial statements.
65
Statement of Operations - Pro-Blend® Extended Term Series
For the Year Ended October 31, 2006
INVESTMENT INCOME: | |
| Interest | $5,424,302 |
| Dividends (net of foreign tax withheld, $135,607) | 5,226,978 |
| Total Investment Income | 10,651,280 |
EXPENSES: | |
| Management fees (Note 3) | 4,162,506 |
| Fund accounting and transfer agent fees (Note 3) | 397,144 |
| Directors' fees (Note 3) | 7,100 |
| Chief Compliance Officer service fees (Note 3) | 5,698 |
| Custodian fees | 49,499 |
| Miscellaneous | 121,164 |
| Total Expenses | 4,743,111 |
| NET INVESTMENT INCOME | 5,908,169 |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | |
| Net realized gain on - | |
| Investments | 32,782,858 |
| Foreign currency and other assets and liabilities | 4,162 |
| 32,787,020 | |
| Net change in unrealized appreciation on - | |
| Investments | 24,448,988 |
| Foreign currency and other assets and liabilities | 5,432 |
| 24,454,420 | |
| NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 57,241,440 |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $63,149,609 |
The accompanying notes are an integral part of the financial statements.
66
Statements of Changes in Net Assets - Pro-Blend® Extended Term Series
For the | For the | |
Year Ended | Year Ended | |
10/31/06 | 10/31/05 | |
INCREASE (DECREASE) IN NET ASSETS: | ||
OPERATIONS: | ||
| Net investment income | $5,908,169 | $2,882,358 |
| Net realized gain on investments and foreign currency | 32,787,020 | 22,836,407 |
| Net change in unrealized appreciation on investments and foreign currency | 24,454,420 | 12,297,476 |
| Net increase from operations | 63,149,609 | 38,016,241 |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||
| From net investment income | (3,291,554) | (2,277,777) |
| From net realized gain on investments | (22,198,806) | (6,925,216) |
| Total distributions to shareholders | (25,490,360) | (9,202,993) |
CAPITAL STOCK ISSUED AND REPURCHASED: | ||
| Net increase from capital share transactions (Note 5) | 80,617,845 | 61,315,353 |
| Net increase in net assets | 118,277,094 | 90,128,601 |
NET ASSETS: | ||
| Beginning of year | 365,725,820 | 275,597,219 |
End of year (including undistributed net investment income of $4,302,040 and $1,677,462, respectively) | $484,002,914 | $365,725,820 |
The accompanying notes are an integral part of the financial statements.
67
Financial Highlights - Pro-Blend® Extended Term Series
For the Years Ended | |||||
10/31/06 | 10/31/05 | 10/31/04 | 10/31/03 | 10/31/02 | |
Per share data (for a share outstanding | |||||
throughout each year): | |||||
Net asset value - Beginning of year | $15.82 | $14.45 | $13.14 | $11.55 | $13.09 |
| Income (loss) from investment operations: | |||||
| Net investment income | 0.21 | 0.13 | 0.11 | 0.11 | 0.19 |
| Net realized and unrealized gain (loss) on investments | 2.18 | 1.71 | 1.39 | 1.66 | (0.86) |
| Total from investment operations | 2.39 | 1.84 | 1.50 | 1.77 | (0.67) |
| Less distributions to shareholders: | |||||
| From net investment income | (0.14) | (0.11) | (0.10) | (0.18) | (0.25) |
| From net realized gain on investments | (0.95) | (0.36) | (0.09) | - | (0.62) |
| Total distributions to shareholders | (1.09) | (0.47) | (0.19) | (0.18) | (0.87) |
Net asset value - End of year | $17.12 | $15.82 | $14.45 | $13.14 | $11.55 |
Total return1 | 16.03% | 12.92% | 11.52% | 15.45% | (5.74%) |
Ratios (to average net assets)/Supplemental Data: | |||||
| Expenses* | 1.14% | 1.17% | 1.17% | 1.17% | 1.19% |
| Net investment income | 1.42% | 0.89% | 0.86% | 0.90% | 1.61% |
| Portfolio turnover | 82% | 71% | 50% | 67% | 82% |
Net assets - End of year (000's omitted) | $484,003 | $365,726 | $275,597 | $209,038 | $156,182 |
*The investment advisor did not impose all of its management fee in some years. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased as follows:
| N/A | 0.01% | 0.04% | N/A | N/A |
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during certain years.
The accompanying notes are an integral part of the financial statements.
68
Performance Update - Pro-Blend® Maximum Term Series (unaudited)
| Average Annual Total Returns | ||||
| As of October 31, 2006 | ||||
| One | Five | Ten | Since | |
| Year | Year | Year | Inception1 | |
Manning & Napier Fund, Inc. - Pro-Blend® Maximum Term Series2 | 18.87% | 11.23% | 11.95% | 12.24% |
Russell 3000® Index3,6 | 16.37% | 8.35% | 8.89% | 10.04% |
Standard & Poor's (S&P) 500 Total Return Index4,6 | 16.33% | 7.25% | 8.64% | 9.96% |
20%/65%/15% Blended Index3,5,6,7 | 17.00% | 9.48% | 8.53% | 9.30% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Pro-Blend® Maximum Term Series for the ten years ended October 31, 2006 to the Russell 3000® Index, the S&P 500 Total Return Index and an 20%/65%/15% Blended Index.
Data for line graph to follow:
| Manning & Napier Fund, Inc. | S&P 500 | |||
| Date | Pro-Blend® Maximum Term Series2 | Russell®3000 | Total Return Index | 20%/65%/15% Blended Index |
| 11/1/96 | $10,000 | $10,000 | $10,000 | $10,000 |
| 10/31/97 | 12,677 | 13,160 | 13,210 | 12,254 |
| 10/31/98 | 11,918 | 15,331 | 16,116 | 13,904 |
| 10/31/99 | 15,056 | 19,129 | 20,251 | 16,831 |
| 10/31/00 | 19,324 | 20,971 | 21,483 | 18,007 |
| 10/31/01 | 18,165 | 15,693 | 16,136 | 14,416 |
| 10/31/02 | 16,225 | 13,441 | 13,700 | 12,893 |
| 10/31/03 | 19,666 | 16,625 | 16,548 | 15,741 |
| 10/31/04 | 22,655 | 18,205 | 18,104 | 17,446 |
| 10/31/05 | 26,017 | 20,136 | 19,682 | 19,377 |
| 10/31/06 | 30,927 | 23,432 | 22,895 | 22,670 |
1Performance numbers for the Series and Indices are calculated from November 1, 1995, the Series' inception date.
2The Series' performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series' performance is historical and may not be indicative of future results.
3The primary index has been changed from the S&P 500 Total Return Index to the Russell 3000® Index, because it more accurately reflects the Advisor’s all-capitalization equity investment approach. The Russell 3000® Index is an unmanaged, market-capitalization weighted index of the 3,000 largest U.S. domiciled companies. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
4The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the Over-the-Counter market. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
5The 20%/65%/15% Blended Index is 20% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 65% Russell 3000® Index, and 15% Lehman Brothers U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). The Lehman Brothers U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income. Both Indices' returns, unlike Series returns, do not reflect any fees or expenses.
6Because the Series' asset allocation will vary over time, the composition of the Series' portfolio may not match the composition of the comparative Indices' portfolios.
7The components of the Blended Index have been broadened to more closely represent the investment universe for this series. The new index components take into account the Advisor’s all-capitalization and all-country equity investment approach, as well as the ability to invest across multiple fixed income sectors.
69
Shareholder Expense Example - Pro-Blend® Maximum Term Series (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2006 to October 31, 2006).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as potential wire charges on redemptions. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | |
Account Value | Account Value | During Period* | |
5/1/06 | 10/31/06 | 5/1/06-10/31/06 | |
| Actual | $1,000.00 | $1,067.60 | $5.99 |
| Hypothetical | |||
| (5% return before expenses) | $1,000.00 | $1,019.41 | $5.85 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.15%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data.
70
Portfolio Composition - Pro-Blend® Maximum Term Series (unaudited)
As of October 31, 2006
Data for pie chart to follow:
Asset Allocation*
| Common Stocks | 84.66% |
U.S. Treasury Bonds1 | 8.70% |
| Cash, warrants, short-term investments, and liabilities, less other assets | 6.64% |
*As a percentage of net assets.
1A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years.
Stock Sector Allocation*
| Information Technology | 16.84% |
| Health Care | 13.76% |
| Consumer Discretionary | 10.29% |
| Consumer Staples | 9.59% |
| Financials | 9.35% |
| Industrials | 8.59% |
| Energy | 8.04% |
| Utilities | 3.85% |
| Materials | 3.09% |
| Telecommunication Services | 1.14% |
*Including Common Stocks and Warrants, as a percentage of total investments.
Top Ten Stock Holdings*
| Novartis AG - ADR (Switzerland) | 2.48% |
| Unilever plc - ADR (United Kingdom) | 2.46% |
| EMC Corp. | 2.43% |
| Time Warner, Inc. | 2.33% |
| The Coca-Cola Co. | 2.32% |
| Western Union Co. | 1.83% |
| Schlumberger Ltd. | 1.80% |
| Cisco Systems, Inc. | 1.79% |
| The E.W. Scripps Co. - Class A | 1.72% |
| Carnival Corp. | 1.72% |
* As a percentage of total investments.
71
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Maximum Term Series | Shares | (Note 2) |
COMMON STOCKS - 84.66% | ||
Consumer Discretionary - 10.31% | ||
Auto Components - 0.08% | ||
| Autoliv, Inc. (Sweden) (Note 7) | 1,325 | $75,353 |
| Azure Dynamics Corp.* (Canada) (Note 7) | 56,675 | 44,928 |
| Superior Industries International, Inc. | 3,100 | 52,390 |
| Tenneco, Inc.* | 3,100 | 70,370 |
| 243,041 | ||
Diversified Consumer Services - 0.05% | ||
| Corinthian Colleges, Inc.* | 4,850 | 59,413 |
| Universal Technical Institute, Inc.* | 4,775 | 95,404 |
| 154,817 | ||
Hotels, Restaurants & Leisure - 3.06% | ||
| Carnival Corp. | 100,870 | 4,924,473 |
| Club Mediterranee S.A.* (France) (Note 7) | 3,775 | 203,337 |
| International Game Technology | 84,800 | 3,604,848 |
| 8,732,658 | ||
Internet & Catalog Retail - 0.07% | ||
| Audible, Inc.* | 26,625 | 199,155 |
Leisure Equipment & Products - 0.01% | ||
| K2, Inc.* | 1,475 | 20,149 |
Media - 5.73% | ||
| Acme Communications, Inc.* | 12,250 | 64,680 |
| Comcast Corp. - Class A* | 94,450 | 3,841,281 |
| DreamWorks Animation SKG, Inc. - Class A* | 1,875 | 49,594 |
| The E.W. Scripps Co. - Class A | 99,700 | 4,931,162 |
| Impresa S.A. (SGPS)* (Portugal) (Note 7) | 9,075 | 50,723 |
| Pearson plc (United Kingdom) (Note 7) | 11,750 | 173,348 |
| Playboy Enterprises, Inc. - Class B* | 5,175 | 54,907 |
| Reed Elsevier plc - ADR (United Kingdom) (Note 7) | 4,500 | 203,895 |
| Reuters Group plc (United Kingdom) (Note 7) | 18,375 | 156,746 |
| Scholastic Corp.* | 1,900 | 59,698 |
| Time Warner, Inc. | 332,850 | 6,660,329 |
| Wolters Kluwer N.V. (Netherlands) (Note 7) | 4,150 | 114,072 |
| 16,360,435 | ||
Multiline Retail - 0.03% | ||
| PPR (France) (Note 7) | 625 | 93,235 |
Specialty Retail - 1.24% | ||
| Build-A-Bear Workshop, Inc.* | 5,500 | 160,490 |
| Douglas Holding AG (Germany) (Note 7) | 3,825 | 184,992 |
The accompanying notes are an integral part of the financial statements.
72
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Maximum Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Consumer Discretionary (continued) | ||
Specialty Retail (continued) | ||
| Kingfisher plc (United Kingdom) (Note 7) | 610,250 | $3,064,053 |
| KOMERI Co. Ltd. (Japan) (Note 7) | 2,500 | 86,155 |
| Tractor Supply Co.* | 1,125 | 54,472 |
| 3,550,162 | ||
Textiles, Apparel & Luxury Goods - 0.04% | ||
| LVMH S.A. (Louis Vuitton Moet Hennessy) (France) (Note 7) | 1,000 | 104,193 |
Total Consumer Discretionary | 29,457,845 | |
Consumer Staples - 9.60% | ||
Beverages - 2.43% | ||
| The Coca-Cola Co. | 141,875 | 6,628,400 |
| Diageo plc (United Kingdom) (Note 7) | 4,650 | 86,029 |
| Heineken N.V. (Netherlands) (Note 7) | 1,350 | 61,174 |
| Kirin Brewery Co. Ltd. (Japan) (Note 7) | 6,000 | 79,836 |
| Scottish & Newcastle plc (United Kingdom) (Note 7) | 8,150 | 87,671 |
| 6,943,110 | ||
Food & Staples Retailing - 1.82% | ||
| Carrefour S.A. (France) (Note 7) | 38,750 | 2,360,682 |
| Pathmark Stores, Inc.* | 6,075 | 61,540 |
| Tesco plc (United Kingdom) (Note 7) | 20,250 | 151,981 |
| Wal-Mart Stores, Inc. | 53,550 | 2,638,944 |
| 5,213,147 | ||
Food Products - 4.19% | ||
| Cadbury Schweppes plc (United Kingdom) (Note 7) | 27,750 | 279,194 |
| Groupe Danone (France) (Note 7) | 1,250 | 183,120 |
| Lancaster Colony Corp. | 375 | 15,206 |
| Nestle S.A. (Switzerland) (Note 7) | 12,825 | 4,382,588 |
| Suedzucker AG (Germany) (Note 7) | 2,600 | 64,134 |
| Unilever plc - ADR (United Kingdom) (Note 7) | 290,122 | 7,044,162 |
| 11,968,404 | ||
Household Products - 0.05% | ||
| Kao Corp. (Japan) (Note 7) | 2,000 | 52,506 |
| Reckitt Benckiser plc (United Kingdom) (Note 7) | 2,200 | 95,712 |
| 148,218 |
The accompanying notes are an integral part of the financial statements.
73
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Maximum Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Consumer Staples (continued) | ||
Personal Products - 1.11% | ||
| Clarins S.A. (France) (Note 7) | 3,695 | $255,798 |
| The Estee Lauder Companies, Inc. - Class A | 71,880 | 2,903,233 |
| 3,159,031 | ||
Total Consumer Staples | 27,431,910 | |
Energy - 8.05% | ||
Energy Equipment & Services - 6.69% | ||
| Abbot Group plc (United Kingdom) (Note 7) | 36,775 | 211,125 |
| APL ASA* (Norway) (Note 7) | 7,175 | 49,855 |
| Baker Hughes, Inc. | 60,480 | 4,176,144 |
| Cameron International Corp.* | 48,275 | 2,418,577 |
| Compagnie Generale de Geophysique S.A. (CGG)* (France) (Note 7) | 2,600 | 439,615 |
| Hydril Co.* | 2,200 | 132,110 |
| National-Oilwell Varco, Inc.* | 54,836 | 3,312,094 |
| Pride International, Inc.* | 8,625 | 238,136 |
| Schlumberger Ltd. | 81,520 | 5,142,282 |
| Weatherford International Ltd.* | 73,170 | 3,005,824 |
| 19,125,762 | ||
Oil, Gas & Consumable Fuels - 1.36% | ||
| BP plc (United Kingdom) (Note 7) | 7,350 | 81,729 |
| Eni S.p.A. (Italy) (Note 7) | 6,075 | 183,186 |
| Forest Oil Corp.* | 1,700 | 55,488 |
| Hess Corp. | 76,790 | 3,255,896 |
| Mariner Energy, Inc.* | 1,375 | 27,252 |
| Petroleo Brasileiro S.A. (Petrobras) - ADR (Brazil) (Note 7) | 1,000 | 80,960 |
| Royal Dutch Shell plc - Class B (United Kingdom) (Note 7) | 2,514 | 90,049 |
| Total S.A. (France) (Note 7) | 1,600 | 108,315 |
| 3,882,875 | ||
Total Energy | 23,008,637 | |
Financials - 9.36% | ||
Capital Markets - 2.80% | ||
| The Bank of New York Co., Inc. | 137,275 | 4,718,142 |
| The Charles Schwab Corp. | 5,400 | 98,388 |
| Daiwa Securities Group, Inc. (Japan) (Note 7) | 4,000 | 45,391 |
| Deutsche Bank AG (Germany) (Note 7) | 1,425 | 178,934 |
| Franklin Resources, Inc. | 975 | 111,111 |
| Janus Capital Group, Inc. | 6,225 | 124,998 |
| Macquarie Bank Ltd. (Australia) (Note 7) | 2,050 | 118,304 |
The accompanying notes are an integral part of the financial statements.
74
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Maximum Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Financials (continued) | ||
Capital Markets (continued) | ||
Mellon Financial Corp.1 | 2,550 | $98,940 |
| Merrill Lynch & Co., Inc. | 1,800 | 157,356 |
| Morgan Stanley | 1,450 | 110,823 |
| Nomura Holdings, Inc. (Japan) (Note 7) | 2,300 | 40,615 |
| SEI Investments Co. | 38,005 | 2,138,921 |
| W.P. Stewart & Co. Ltd. (Bermuda) (Note 7) | 4,775 | 65,895 |
| 8,007,818 | ||
Commercial Banks - 4.70% | ||
| Aareal Bank AG* (Germany) (Note 7) | 3,950 | 168,204 |
| ABN AMRO Holding N.V. (Netherlands) (Note 7) | 11,625 | 338,971 |
| Barclays plc (United Kingdom) (Note 7) | 28,250 | 381,211 |
| BNP Paribas (France) (Note 7) | 1,050 | 115,432 |
| Boston Private Financial Holdings, Inc. | 4,225 | 116,779 |
| The Chugoku Bank Ltd. (Japan) (Note 7) | 5,000 | 65,675 |
| Commerzbank AG (Germany) (Note 7) | 3,075 | 108,852 |
| Credit Agricole S.A. (France) (Note 7) | 1,950 | 82,888 |
| The Hachijuni Bank Ltd. (Japan) (Note 7) | 9,000 | 63,725 |
| HSBC Holdings plc (United Kingdom) (Note 7) | 10,050 | 190,534 |
| HSBC Holdings plc - ADR (United Kingdom) (Note 7) | 1,575 | 150,365 |
| Huntington Bancshares, Inc. | 2,075 | 50,651 |
| KeyCorp | 2,625 | 97,492 |
| Marshall & Ilsley Corp. | 2,175 | 104,270 |
| Mitsubishi UFJ Financial Group, Inc. (Japan) (Note 7) | 6 | 75,423 |
| PNC Financial Services Group, Inc. | 48,375 | 3,387,701 |
| Royal Bank of Scotland Group plc (United Kingdom) (Note 7) | 13,200 | 470,296 |
| Societe Generale (France) (Note 7) | 300 | 49,844 |
| The Sumitomo Trust & Banking Co. Ltd. (Japan) (Note 7) | 9,000 | 96,819 |
| SunTrust Banks, Inc. | 1,500 | 118,485 |
| TCF Financial Corp. | 5,150 | 134,055 |
| U.S. Bancorp | 111,275 | 3,765,546 |
| UniCredito Italiano S.p.A. (Italy) (Note 7) | 17,750 | 147,116 |
| Wachovia Corp. | 52,975 | 2,940,113 |
| Wells Fargo & Co. | 2,150 | 78,024 |
| Zions Bancorporation | 1,675 | 134,670 |
| 13,433,141 |
The accompanying notes are an integral part of the financial statements.
75
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Maximum Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Financials (continued) | ||
Consumer Finance - 0.03% | ||
| Capital One Financial Corp. | 1,125 | $89,246 |
Diversified Financial Services - 1.29% | ||
| Bank of America Corp. | 58,500 | 3,151,395 |
| Citigroup, Inc. | 3,000 | 150,480 |
| ING Groep N.V. (Netherlands) (Note 7) | 2,575 | 114,055 |
| JPMorgan Chase & Co. | 4,325 | 205,178 |
| Moody’s Corp. | 900 | 59,670 |
| 3,680,778 | ||
Insurance - 0.51% | ||
| Allianz SE (Germany) (Note 7) | 2,750 | 508,633 |
| Ambac Financial Group, Inc. | 1,175 | 98,101 |
| American International Group, Inc. | 2,225 | 149,453 |
| Axa (France) (Note 7) | 2,675 | 101,895 |
| MBIA, Inc. | 1,575 | 97,681 |
| Muenchener Rueckver AG (Germany) (Note 7) | 1,300 | 210,319 |
| Principal Financial Group, Inc. | 975 | 55,078 |
| Torchmark Corp. | 825 | 50,886 |
| Willis Group Holdings Ltd. (United Kingdom) (Note 7) | 4,675 | 177,790 |
| 1,449,836 | ||
Thrifts & Mortgage Finance - 0.03% | ||
| BankAtlantic Bancorp, Inc. - Class A | 3,025 | 39,627 |
| Flagstar Bancorp, Inc. | 3,025 | 45,466 |
| 85,093 | ||
Total Financials | 26,745,912 | |
Health Care - 13.78% | ||
Biotechnology - 0.20% | ||
| Amgen, Inc.* | 2,575 | 195,468 |
| Monogram Biosciences, Inc.* | 64,300 | 117,026 |
| Senomyx, Inc.* | 5,750 | 88,665 |
| Solexa, Inc.* | 17,800 | 182,272 |
| 583,431 | ||
Health Care Equipment & Supplies - 4.89% | ||
| Align Technology, Inc.* | 6,675 | 92,515 |
| Bausch & Lomb, Inc. | 47,675 | 2,552,520 |
| Biomet, Inc. | 3,875 | 146,630 |
| The Cooper Companies, Inc. | 62,490 | 3,601,299 |
| Cyberonics, Inc.* | 9,800 | 176,694 |
The accompanying notes are an integral part of the financial statements.
76
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Maximum Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Health Care (continued) | ||
Health Care Equipment & Supplies (continued) | ||
| Dexcom, Inc.* | 21,750 | $191,400 |
| Edwards Lifesciences Corp.* | 4,725 | 202,844 |
| Foxhollow Technologies, Inc.* | 11,350 | 397,364 |
| IntraLase Corp.* | 17,150 | 337,169 |
| Inverness Medical Innovations, Inc.* | 12,325 | 464,529 |
| Kyphon, Inc.* | 5,000 | 197,500 |
| Medtronic, Inc. | 84,210 | 4,099,343 |
| Mentor Corp. | 3,400 | 159,120 |
| OraSure Technologies, Inc.* | 39,000 | 302,640 |
| ResMed, Inc.* | 5,950 | 261,741 |
| Respironics, Inc.* | 3,725 | 131,567 |
| Straumann Holding AG (Switzerland) (Note 7) | 675 | 153,458 |
| Wright Medical Group, Inc.* | 19,700 | 486,787 |
| 13,955,120 | ||
Health Care Providers & Services - 0.44% | ||
| AMN Healthcare Services, Inc.* | 15,500 | 391,995 |
| Cross Country Healthcare, Inc.* | 14,950 | 289,432 |
| Healthways, Inc.* | 1,550 | 65,643 |
| Patterson Companies, Inc.* | 2,750 | 90,338 |
| Tenet Healthcare Corp.* | 36,825 | 259,985 |
| Triad Hospitals, Inc.* | 4,625 | 171,264 |
| 1,268,657 | ||
Health Care Technology - 2.60% | ||
| AMICAS, Inc.* | 100,550 | 316,732 |
| Eclipsys Corp.* | 140,560 | 2,978,466 |
| Emdeon Corp.* | 305,905 | 3,563,793 |
| iSOFT Group plc (United Kingdom) (Note 7) | 210,000 | 182,243 |
| Merge Technologies, Inc.* | 20,225 | 155,935 |
| WebMD Health Corp. - Class A* | 6,500 | 236,990 |
| 7,434,159 | ||
Life Sciences Tools & Services - 2.78% | ||
| Affymetrix, Inc.* | 79,205 | 2,019,727 |
| Caliper Life Sciences, Inc.* | 42,717 | 217,857 |
| Charles River Laboratories International, Inc.* | 6,050 | 259,666 |
| Invitrogen Corp.* | 32,400 | 1,879,524 |
| PerkinElmer, Inc. | 166,825 | 3,563,382 |
| 7,940,156 |
The accompanying notes are an integral part of the financial statements.
77
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Maximum Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Health Care (continued) | ||
Pharmaceuticals - 2.87% | ||
| AstraZeneca plc (United Kingdom) (Note 7) | 675 | $39,885 |
| AstraZeneca plc - ADR (United Kingdom) (Note 7) | 1,500 | 88,050 |
| GlaxoSmithKline plc (United Kingdom) (Note 7) | 5,575 | 148,865 |
| Novartis AG - ADR (Switzerland) (Note 7) | 117,075 | 7,109,965 |
| Sanofi-Aventis (France) (Note 7) | 837 | 71,135 |
| Sanofi-Aventis - ADR (France) (Note 7) | 5,675 | 242,266 |
| Shire plc (United Kingdom) (Note 7) | 5,850 | 106,724 |
| Takeda Pharmaceutical Co. Ltd. (Japan) (Note 7) | 800 | 51,377 |
| Valeant Pharmaceuticals International | 17,525 | 327,367 |
| 8,185,634 | ||
Total Health Care | 39,367,157 | |
Industrials - 8.60% | ||
Aerospace & Defense - 1.22% | ||
| Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) (Note 7) | 81,425 | 3,389,723 |
| Hexcel Corp.* | 6,000 | 97,140 |
| 3,486,863 | ||
Air Freight & Logistics - 1.25% | ||
| Deutsche Post AG (Germany) (Note 7) | 3,975 | 109,921 |
| TNT N.V. (Netherlands) (Note 7) | 4,850 | 186,662 |
| United Parcel Service, Inc. - Class B | 43,645 | 3,288,651 |
| 3,585,234 | ||
Airlines - 1.80% | ||
| AirTran Holdings, Inc.* | 7,650 | 76,270 |
| AMR Corp.* | 1,275 | 36,134 |
| Continental Airlines, Inc. - Class B* | 900 | 33,192 |
| Deutsche Lufthansa AG (Germany) (Note 7) | 6,550 | 150,702 |
| JetBlue Airways Corp.* | 163,125 | 2,048,850 |
| Southwest Airlines Co. | 185,350 | 2,785,811 |
| 5,130,959 | ||
Commercial Services & Supplies - 1.15% | ||
| ChoicePoint, Inc.* | 2,150 | 78,238 |
| Covanta Holding Corp.* | 2,700 | 54,891 |
| The Dun & Bradstreet Corp.* | 40,875 | 3,157,185 |
| 3,290,314 | ||
Construction & Engineering - 0.02% | ||
| Quanta Services, Inc.* | 3,450 | 63,135 |
The accompanying notes are an integral part of the financial statements.
78
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Maximum Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Industrials (continued) | ||
Electrical Equipment - 0.13% | ||
| ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) (Note 7) | 13,400 | $199,928 |
| Gamesa Corporacion Tecnologica S.A. (Spain) (Note 7) | 3,225 | 74,036 |
| Hubbell, Inc. - Class B | 1,200 | 59,424 |
| Plug Power, Inc.* | 8,200 | 32,718 |
| 366,106 | ||
Industrial Conglomerates - 2.91% | ||
| 3M Co. | 61,925 | 4,882,167 |
| Sonae S.A. (SGPS) (Portugal) (Note 7) | 33,275 | 63,269 |
| Tyco International Ltd. (Bermuda) (Note 7) | 114,525 | 3,370,471 |
| 8,315,907 | ||
Machinery - 0.10% | ||
| AGCO Corp.* | 2,125 | 56,844 |
| Bucyrus International, Inc. - Class A | 1,500 | 62,850 |
| FANUC Ltd. (Japan) (Note 7) | 500 | 43,398 |
| Heidelberger Druckmaschinen AG (Germany) (Note 7) | 1,275 | 58,085 |
| Wabtec Corp. | 1,975 | 61,995 |
| 283,172 | ||
Trading Companies & Distributors - 0.02% | ||
| United Rentals, Inc.* | 2,300 | 54,487 |
Total Industrials | 24,576,177 | |
Information Technology - 16.87% | ||
Communications Equipment - 3.66% | ||
| Blue Coat Systems, Inc.* | 15,975 | 356,242 |
| Cisco Systems, Inc.* | 212,275 | 5,122,196 |
| ECI Telecom Ltd.* (Israel) (Note 7) | 37,200 | 276,024 |
| Ixia* | 20,725 | 189,634 |
| Juniper Networks, Inc.* | 201,570 | 3,471,035 |
| Plantronics, Inc. | 3,250 | 68,608 |
| RADWARE Ltd.* (Israel) (Note 7) | 20,325 | 296,745 |
| Spirent Communications plc* (United Kingdom) (Note 7) | 344,400 | 371,135 |
| Tandberg ASA (Norway) (Note 7) | 26,125 | 301,878 |
| 10,453,497 | ||
Computers & Peripherals - 2.51% | ||
| Avid Technology, Inc.* | 6,425 | 232,071 |
| EMC Corp.* | 566,900 | 6,944,525 |
| 7,176,596 |
The accompanying notes are an integral part of the financial statements.
79
Investment Portfolio - October 31, 2006
Value | ||
Pro-Blend® Maximum Term Series | Shares | (Note 2) |
COMMON STOCKS (continued) | ||
Information Technology (continued) | ||
Electronic Equipment & Instruments - 0.11% | ||
| KEYENCE Corp. (Japan) (Note 7) | 220 | $48,726 |
| LoJack Corp.* | 13,725 | 273,951 |
| 322,677 | ||
IT Services - 4.78% | ||
| Automatic Data Processing, Inc. | 95,750 | 4,733,880 |
| CheckFree Corp.* | 78,475 | 3,098,193 |
| Fiserv, Inc.* | 1,300 | 64,220 |
| MoneyGram International, Inc. | 4,000 | 136,840 |
| RightNow Technologies, Inc.* | 24,600 | 406,392 |
| Western Union Co.* | 236,915 | 5,223,976 |
| 13,663,501 | ||
Semiconductors & Semiconductor Equipment - 0.14% | ||
| Cabot Microelectronics Corp.* | 4,175 | 119,196 |
| Genesis Microchip, Inc.* | 17,350 | 177,837 |
| Taiwan Semiconductor Manufacturing Co. Ltd. - ADR (Taiwan) (Note 7) | 9,905 | 96,079 |
| 393,112 | ||
Software - 5.67% | ||
| Agile Software Corp.* | 27,750 | 187,035 |
| Amdocs Ltd.* (Guernsey) (Note 7) | 16,675 | 646,323 |
| Borland Software Corp.* | 64,225 | 354,522 |
| Cognos, Inc.* (Canada) (Note 7) | 3,925 | 143,184 |
| Electronic Arts, Inc.* | 56,180 | 2,971,360 |
| Kronos, Inc.* | 7,975 | 270,352 |
| Misys plc (United Kingdom) (Note 7) | 14,250 | 55,377 |
| NAVTEQ Corp.* | 96,700 | 3,210,440 |
| Salesforce.com, Inc.* | 86,025 | 3,356,696 |
| SAP AG (Germany) (Note 7) | 800 | 158,746 |
| Symantec Corp.* | 214,175 | 4,249,232 |
| Take-Two Interactive Software, Inc.* | 7,500 | 104,925 |
| TIBCO Software, Inc.* | 32,825 | 303,631 |
| UbiSoft Entertainment S.A.* (France) (Note 7) | 2,850 | 175,879 |
| 16,187,702 | ||
Total Information Technology | 48,197,085 | |
Materials - 3.09% | ||
Chemicals - 3.07% | ||
| Arkema* (France) (Note 7) | 40 | 1,952 |
| Bayer AG (Germany) (Note 7) | 3,900 | 195,637 |
| Lonza Group AG (Switzerland) (Note 7) | 27,550 | 2,126,558 |
| Minerals Technologies, Inc. | 43,750 | 2,413,250 |
The accompanying notes are an integral part of the financial statements.
80
Investment Portfolio - October 31, 2006
| Shares/ | Value | |
Pro-Blend® Maximum Term Series | Principal Amount | (Note 2) |
COMMON STOCKS (continued) | ||
Materials (continued) | ||
Chemicals (continued) | ||
| The Scotts Miracle-Gro Co. - Class A | 81,510 | $4,031,485 |
| 8,768,882 | ||
Paper & Forest Products - 0.02% | ||
| Louisiana-Pacific Corp. | 3,125 | 61,813 |
Total Materials | 8,830,695 | |
Telecommunication Services - 1.14% | ||
Diversified Telecommunication Services - 0.06% | ||
| Swisscom AG - ADR (Switzerland) (Note 7) | 3,425 | 119,772 |
| Telenor ASA - ADR (Norway) (Note 7) | 1,300 | 61,971 |
| 181,743 | ||
Wireless Telecommunication Services - 1.08% | ||
| Vodafone Group plc - ADR (United Kingdom) (Note 7) | 119,096 | 3,078,632 |
Total Telecommunication Services | 3,260,375 | |
Utilities - 3.86% | ||
Electric Utilities - 2.54% | ||
| Allegheny Energy, Inc.* | 78,775 | 3,389,688 |
| American Electric Power Co., Inc. | 86,245 | 3,573,130 |
| E.ON AG (Germany) (Note 7) | 2,075 | 248,029 |
| Westar Energy, Inc. | 1,825 | 46,209 |
| 7,257,056 | ||
Multi-Utilities - 1.32% | ||
| Aquila, Inc.* | 29,950 | 137,470 |
| National Grid plc (United Kingdom) (Note 7) | 9,300 | 118,844 |
| Suez S.A. (France) (Note 7) | 1,725 | 77,176 |
| Xcel Energy, Inc. | 155,350 | 3,428,575 |
| 3,762,065 | ||
Total Utilities | 11,019,121 | |
TOTAL COMMON STOCKS | ||
| (Identified Cost $209,160,149) | 241,894,914 | |
WARRANTS - 0.00%** | ||
Health Care - 0.00%** | ||
Life Sciences Tools & Services - 0.00%** | ||
| Caliper Life Sciences, Inc., 8/10/2011 | ||
| (Identified Cost $2,672) | 4,132 | 6,198 |
U.S. TREASURY BONDS - 8.70% | ||
| U.S. Treasury Bond, 5.50%, 8/15/2028 | ||
| (Identified Cost $23,248,284) | $22,705,000 | 24,851,326 |
The accompanying notes are an integral part of the financial statements.
81
Investment Portfolio - October 31, 2006
| Shares/ | Value | |
Pro-Blend® Maximum Term Series | Principal Amount | (Note 2) |
SHORT-TERM INVESTMENTS - 6.79% | ||
| Dreyfus Treasury Cash Management - Institutional Shares | 9,451,855 | $9,451,855 |
| Fannie Mae Discount Note, 12/20/2006 | $5,000,000 | 4,966,525 |
| U.S. Treasury Bill, 12/21/2006 | 5,000,000 | 4,965,079 |
TOTAL SHORT-TERM INVESTMENTS | ||
| (Identified Cost $19,383,047) | 19,383,459 | |
TOTAL INVESTMENTS - 100.15% | ||
| (Identified Cost $251,794,152) | 286,135,897 | |
LIABILITIES, LESS OTHER ASSETS - (0.15%) | (421,821) | |
NET ASSETS - 100% | $285,714,076 |
*Non-income producing security
**Less than 0.01%
ADR - American Depository Receipt
1Mellon Financial Corp. is the parent company of Mellon Trust of New England N.A., the Fund's custodian.
The accompanying notes are an integral part of the financial statements.
82
Statement of Assets and Liabilities - Pro Blend® Maximum Term Series
October 31, 2006
ASSETS: | |
| Investments, at value (identified cost $251,794,152) (Note 2) | $286,135,897 |
| Foreign currency, at value (cost $5,075) | 5,161 |
| Receivable for securities sold | 1,037,919 |
| Receivable for fund shares sold | 301,379 |
| Interest receivable | 264,686 |
| Dividends receivable | 147,063 |
| Foreign tax reclaims receivable | 80,599 |
| TOTAL ASSETS | 287,972,704 |
LIABILITIES: | |
| Accrued management fees (Note 3) | 230,103 |
| Accrued fund accounting and transfer agent fees (Note 3) | 20,850 |
| Accrued Chief Compliance Officer service fees (Note 3) | 570 |
| Payable for securities purchased | 1,878,058 |
| Payable for fund shares repurchased | 79,217 |
| Audit fees payable | 33,692 |
| Other payables and accrued expenses | 16,138 |
| TOTAL LIABILITIES | 2,258,628 |
TOTAL NET ASSETS | $285,714,076 |
NET ASSETS CONSIST OF: | |
| Capital stock | $155,686 |
| Additional paid-in-capital | 231,055,807 |
| Undistributed net investment income | 1,606,945 |
| Accumulated net realized gain on investments, foreign currency and other assets and liabilities | 18,552,920 |
| Net unrealized appreciation on investments, foreign currency and other assets and liabilities | 34,342,718 |
TOTAL NET ASSETS | $285,714,076 |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS A ($285,714,076/15,568,579 shares) | $18.35 |
The accompanying notes are an integral part of the financial statements.
83
Statement of Operations - Pro Blend® Maximum Term Series
For the Year Ended October 31, 2006
INVESTMENT INCOME: | |
| Dividends (net of foreign tax withheld, $80,509) | $3,291,111 |
| Interest | 1,422,677 |
| Total Investment Income | 4,713,788 |
EXPENSES: | |
| Management fees (Note 3) | 2,244,690 |
| Fund accounting and transfer agent fees (Note 3) | 216,083 |
| Directors' fees (Note 3) | 7,100 |
| Chief Compliance Officer service fees (Note 3) | 5,698 |
| Custodian fees | 34,099 |
| Miscellaneous | 92,516 |
| Total Expenses | 2,600,186 |
| NET INVESTMENT INCOME | 2,113,602 |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | |
| Net realized gain on - | |
| Investments | 18,901,827 |
| Foreign currency and other assets and liabilities | 1,803 |
| 18,903,630 | |
| Net change in unrealized appreciation on - | |
| Investments | 18,945,704 |
| Foreign currency and other assets and liabilities | 3,782 |
| 18,949,486 | |
| NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 37,853,116 |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $39,966,718 |
The accompanying notes are an integral part of the financial statements.
84
Statements of Changes in Net Assets - Pro-Blend® Maximum Term Series
For the | For the | |
Year Ended | Year Ended | |
10/31/06 | 10/31/05 | |
INCREASE (DECREASE) IN NET ASSETS: | ||
OPERATIONS: | ||
| Net investment income | $2,113,602 | $819,906 |
| Net realized gain on investments and foreign currency | 18,903,630 | 14,702,711 |
| Net change in unrealized appreciation on investments and foreign currency | 18,949,486 | 5,487,987 |
| Net increase from operations | 39,966,718 | 21,010,604 |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||
| From net investment income | (1,013,785) | (510,850) |
| From net realized gain on investments | (14,737,690) | (3,198,199) |
| Total distributions to shareholders | (15,751,475) | (3,709,049) |
CAPITAL STOCK ISSUED AND REPURCHASED: | ||
| Net increase from capital share transactions (Note 5) | 74,951,894 | 37,498,088 |
| Net increase in net assets | 99,167,137 | 54,799,643 |
NET ASSETS: | ||
| Beginning of year | 186,546,939 | 131,747,296 |
End of year (including undistributed net investment income of $1,606,945 and $505,400, respectively) | $285,714,076 | $186,546,939 |
The accompanying notes are an integral part of the financial statements.
85
Financial Highlights - Pro-Blend® Maximum Term Series
For the Years Ended | |||||
10/31/06 | 10/31/05 | 10/31/04 | 10/31/03 | 10/31/02 | |
Per share data (for a share outstanding | |||||
throughout each year): | |||||
Net asset value - Beginning of year | $16.79 | $15.00 | $13.05 | $10.86 | $12.85 |
| Income (loss) from investment operations: | |||||
| Net investment income | 0.14 | 0.08 | 0.04 | 0.04 | 0.11 |
| Net realized and unrealized gain (loss) on investments | 2.80 | 2.11 | 1.94 | 2.25 | (1.36) |
| Total from investment operations | 2.94 | 2.19 | 1.98 | 2.29 | (1.25) |
| Less distributions to shareholders: | |||||
| From net investment income | (0.08) | (0.05) | (0.03) | (0.10) | (0.15) |
| From net realized gain on investments | (1.30) | (0.35) | - | - | (0.59) |
| Total distributions to shareholders | (1.38) | (0.40) | (0.03) | (0.10) | (0.74) |
Net asset value - End of year | $18.35 | $16.79 | $15.00 | $13.05 | $10.86 |
Total return1 | 18.87% | 14.84% | 15.20% | 21.20% | (10.68%) |
Ratios (to average net assets)/Supplemental Data: | |||||
| Expenses* | 1.16% | 1.20% | 1.20% | 1.20% | 1.20% |
| Net investment income | 0.94% | 0.51% | 0.31% | 0.37% | 0.97% |
| Portfolio turnover | 56% | 61% | 68% | 73% | 99% |
Net assets - End of year (000's omitted) | $285,714 | $186,547 | $131,747 | $91,859 | $62,482 |
*The investment advisor did not impose all of its management fee in some years. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased as follows:
| N/A | 0.02% | 0.06% | 0.09% | 0.16% |
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during certain years.
The accompanying notes are an integral part of the financial statements.
86
Notes to Financial Statements
1. ORGANIZATION
Pro-Blend® Conservative Term Series, Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series (each the "Series") are no-load diversified series of Manning & Napier Fund, Inc. (the "Fund"), formerly Exeter Fund, Inc. The Fund is organized in Maryland and is registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as an open-end management investment company.
The Series are asset allocation funds. Each invests in a combination of stocks, bonds and cash, and is managed according to specific goals. The goals are as follows: Pro-Blend® Conservative Term Series - primary goal is preservation of capital; secondary goal is long-term growth of capital. Pro-Blend® Moderate Term Series - equal emphasis on long-term growth of capital and preservation of capital. Pro-Blend® Extended Term Series - primary goal is long-term growth of capital; secondary goal is preservation of capital. Pro-Blend® Maximum Term Series - primary goal is long-term growth of capital.
Each Series is authorized to issue five classes of shares (Class A, B, C, D and E). Currently, only Class A shares have been issued. Each class of shares is substantially the same, except that class-specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate.
Shares of each Series are offered to investors and employees of Manning & Napier Advisors, Inc. (the “Advisor”) and its affiliates. The total authorized capital stock of the Fund consists of 1.7 billion shares of common stock each having a par value of $0.01. As of October 31, 2006, 1.16 billion shares have been designated in total among 21 series, of which 37.5 million each have been designated as Pro-Blend® Conservative Term Series Class A, Pro-Blend® Moderate Term Series Class A and Pro-Blend® Extended Term Series Class A common stock, and 75 million have been designated as Pro-Blend® Maximum Term Series Class A common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation
Portfolio securities, including domestic equities, foreign equities, exchange-traded funds and options, listed on an exchange other than the NASDAQ National Market System are valued at the latest quoted sales price of the exchange on which the security is primarily traded. Securities not traded on valuation date or securities not listed on an exchange are valued at the latest quoted bid price provided by the Fund's pricing service. Securities listed on the NASDAQ National Market System are valued in accordance with the NASDAQ Official Closing Price.
Debt securities, including government bonds, corporate bonds and mortgage-backed securities will normally be valued on the basis of evaluated bid prices provided by the Fund's pricing service.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account. Fair value is determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund's Board of Directors (the “Board”).
87
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Security Valuation (continued)
Short-term investments that mature in sixty days or less are valued at amortized cost, which approximates market value. Investments in open-end investment companies are valued at their net asset value per share on valuation date, with the exception of exchange-traded funds as noted previously.
Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received. Interest income and expenses are recorded on an accrual basis.
Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund's Board, taking into consideration, among other things, the nature and type of expense.
Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
The Series use the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
Foreign Currency Translation
The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series do not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized foreign currency gains and losses represent foreign currency gains and losses between trade date and settlement date on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.
Securities Purchased on a When-Issued Basis or Forward Commitment
Each Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss.
In connection with its ability to purchase or sell securities on a forward commitment basis, the Series may enter into forward roll transactions principally using To Be Announced (TBA) securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement to repurchase substantially similar (same type, coupon and
88
Notes to Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Securities Purchased on a When-Issued Basis or Forward Commitment (continued)
maturity) securities on a specified future date. Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Series to receive inferior securities at redelivery as compared to the securities sold to the counterparty; counterparty credit risk; and the potential pay down speed variance between the mortgage-backed pools. During the roll period, the Series forgoes principal and interest paid on the securities. The Series account for such dollar rolls as purchases and sales. Pro-Blend® Conservative Term Series, Pro-Blend® Moderate Term Series and Pro-Blend® Extended Term Series had TBA dollar rolls outstanding as of October 31, 2006, which are included in Payable for Purchases of Delayed Delivery Securities on the Statement of Assets and Liabilities.
Restricted Securities
Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of each applicable Series’ Investment Portfolio.
Federal Taxes
Each Series' policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series are not subject to federal income or excise tax to the extent that each Series distributes to shareholders each year its taxable income, including any net realized gains on investments, in accordance with requirements of the Internal Revenue Code. Accordingly, no provision for federal income tax or excise tax has been made in the financial statements.
Distributions of Income and Gains
Distributions to shareholders of net investment income are made semi-annually. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of a Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which each Series pays a fee, computed daily and payable monthly, at an annual rate of 0.80% for Pro-Blend® Conservative Term Series and 1.00% for Pro-Blend® Moderate Term Series,
89
Notes to Financial Statements
3. TRANSACTIONS WITH AFFILIATES (continued)
Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series, of the Series' average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series' organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund, and the Special Assistant Secretary’s salary, which is paid by BISYS Fund Services Ohio, Inc. (“BISYS”)), and of all Directors who are "affiliated persons" of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each "non-affiliated" Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended for each active series of the Fund plus a fee for each committee meeting attended.
The Advisor has contractually agreed, until at least February 28, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total expenses for the Series at no more than 1.00% for Pro-Blend® Conservative Term Series Class A and 1.20% for Pro-Blend® Moderate Term Series Class A, Pro-Blend® Extended Term Series Class A and Pro-Blend® Maximum Term Series Class A, of average daily net assets each year. Accordingly, the Advisor waived fees of $42,292 for the Pro-Blend® Conservative Term Series Class A for the year ended October 31, 2006, which is reflected as a reduction of expenses on the Statement of Operations. For the year ended October 31, 2006, the Advisor did not waive its management fee or reimburse any expenses of the Pro-Blend® Moderate Term Series Class A, Pro-Blend® Extended Term Series Class A or the Pro-Blend® Maximum Term Series Class A. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund's shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
For fund accounting and transfer agent services, through October 31, 2006, the Fund paid the Advisor an annual fee of 0.12% of the Fund’s average daily net assets up to $900 million, 0.09% of the Fund’s average daily net assets between $900 million and $1.5 billion, and 0.05% of the Fund’s average daily net assets over $1.5 billion. Effective November 1, 2006, the fee rates were reduced as follows: 0.11% of the Fund’s average daily net assets up to $900 million, 0.07% of the Fund’s average daily net assets between $900 million and $1.5 billion, and 0.04% of the Fund’s average daily net assets over $1.5 billion. Additionally, certain transaction and account-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense. The Advisor has an agreement with BISYS under which BISYS serves as sub-accounting services and sub-transfer agent.
90
Notes to Financial Statements
4. PURCHASES AND SALES OF SECURITIES
For the year ended October 31, 2006, purchases and sales of securities, other than short-term securities, were as follows:
Purchases | Sales | |||
Other | Other | |||
Series | Issuers | Government | Issuers | Government |
Pro-Blend® Conservative Term Series | $14,700,384 | $39,992,935 | $9,374,427 | $13,447,246 |
Pro-Blend® Moderate Term Series | 121,370,989 | 127,853,141 | 83,339,768 | 75,627,251 |
Pro-Blend® Extended Term Series | 203,827,176 | 163,701,274 | 184,229,948 | 135,966,370 |
Pro-Blend® Maximum Term Series | 163,231,722 | 13,285,215 | 117,927,914 | - |
An employee of The BISYS Group, Inc. serves as an officer of the Fund. Therefore, The BISYS Group, Inc. is considered an “affiliated company”, as defined in the 1940 Act. The following transactions were effected in shares of The BISYS Group, Inc. for the year ended October 31, 2006:
Purchases | Sales | |||||
Series | Shares | Cost | Shares | Proceeds | Realized Gain | Income |
Pro-Blend® Conservative Term Series | 525 | $8,063 | 900 | $13,898 | $299 | $- |
Pro-Blend® Moderate Term Series | 4,675 | 71,780 | 7,800 | 120,451 | 2,562 | - |
Pro-Blend® Extended Term Series | 1,700 | 21,610 | 11,675 | 180,290 | 11,294 | - |
Pro-Blend® Maximum Term Series | 5,125 | 78,114 | 10,150 | 156,747 | 4,312 | - |
As of October 31, 2006, the Series did not hold any shares of affiliated companies.
5. CAPITAL STOCK TRANSACTIONS
Transactions in Class A Shares:
For the Year | For the Year | |||
Ended 10/31/06 | Ended 10/31/05 | |||
Shares | Amount | Shares | Amount | |
Pro-Blend® Conservative Term Series: | ||||
| Sold | 3,009,966 | $35,659,270 | 2,486,041 | $29,174,655 |
| Reinvested | 184,871 | 2,139,923 | 62,395 | 725,869 |
| Repurchased | (1,238,815) | (14,659,968) | (1,017,739) | (11,922,975) |
| Total | 1,956,022 | $23,139,225 | 1,530,697 | $17,977,549 |
91
Notes to Financial Statements
5. CAPITAL STOCK TRANSACTIONS (continued)
Transactions in Class A Shares:
For the Year | For the Year | |||
Ended 10/31/06 | Ended 10/31/05 | |||
Pro-Blend® Moderate Term Series: | Shares | Amount | Shares | Amount |
| Sold | 9,634,665 | $122,654,372 | 9,434,594 | $116,071,318 |
| Reinvested | 959,265 | 11,751,483 | 237,797 | 2,888,656 |
| Repurchased | (3,647,779) | (46,290,436) | (2,803,293) | (34,666,397) |
| Total | 6,946,151 | $88,115,419 | 6,869,098 | $84,293,577 |
Pro-Blend® Extended Term Series: | ||||
| Sold | 7,260,181 | $115,245,329 | 6,716,503 | $102,280,390 |
| Reinvested | 1,665,492 | 25,152,958 | 612,734 | 9,149,153 |
| Repurchased | (3,779,043) | (59,780,442) | (3,290,122) | (50,114,190) |
| Total | 5,146,630 | $80,617,845 | 4,039,115 | $61,315,353 |
Pro-Blend® Maximum Term Series: | ||||
| Sold | 6,055,159 | $102,468,626 | 4,007,333 | $64,636,511 |
| Reinvested | 992,699 | 15,692,899 | 235,083 | 3,705,502 |
| Repurchased | (2,592,617) | (43,209,631) | (1,912,268) | (30,843,925) |
| Total | 4,455,241 | $74,951,894 | 2,330,148 | $37,498,088 |
The Advisor owned 28,906 shares of the Pro-Blend® Conservative Term Series (0.5% of shares outstanding) valued at $356,989 and 24,250 shares of the Pro-Blend® Maximum Term Series (0.2% of shares outstanding) valued at $444,988 on October 31, 2006.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the normal course of their investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on October 31, 2006.
7. FOREIGN SECURITIES
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the United States Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the United States Government.
92
Notes to Financial Statements
8. FEDERAL INCOME TAX INFORMATION
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses, losses deferred due to wash sales, investments in passive foreign investment companies and market discount. Each Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series' net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
Pro-Blend® Conservative Term Series | Pro-Blend® Moderate Term Series | |||
For the Year | For the Year | For the Year | For the Year | |
Ended 10/31/06 | Ended 10/31/05 | Ended 10/31/06 | Ended 10/31/05 | |
| Ordinary income | $1,193,410 | $555,021 | $4,957,551 | $1,601,784 |
| Long-term capital gains | 960,513 | 173,416 | 6,864,491 | 1,298,802 |
Pro-Blend® Extended Term Series | Pro-Blend® Maximum Term Series | |||
For the Year | For the Year | For the Year | For the Year | |
Ended 10/31/06 | Ended 10/31/05 | Ended 10/31/06 | Ended 10/31/05 | |
| Ordinary income | $9,116,789 | $3,536,372 | $6,006,845 | $489,376 |
| Long-term capital gains | 16,373,571 | 5,666,621 | 9,744,630 | 3,219,673 |
Pursuant to Section 852 of the Internal Revenue Code, as amended, each Series hereby designates the long-term capital gains disclosed above as capital gains for its taxable year ended October 31, 2006.
93
Notes to Financial Statements
8. FEDERAL INCOME TAX INFORMATION (continued)
At October 31, 2006, the tax basis components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:
Pro-Blend® | Pro-Blend® | Pro-Blend® | Pro-Blend® | |
Conservative | Moderate | Extended | Maximum | |
Term Series | Term Series | Term Series | Term Series | |
| Cost for federal income tax purposes | $69,784,790 | $286,916,596 | $446,784,803 | $252,388,190 |
| Unrealized appreciation | $3,154,933 | $22,649,873 | $58,187,493 | $35,347,059 |
| Unrealized depreciation | (302,761) | (1,675,189) | (2,710,290) | (1,599,352) |
| Net unrealized appreciation | $2,852,172 | $20,974,684 | $55,477,203 | $33,747,707 |
| Undistributed ordinary income | 1,704,778 | 7,952,966 | 13,548,884 | 6,767,262 |
| Undistributed long-term capital gains | 922,945 | 7,489,738 | 24,179,313 | 13,986,641 |
9. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109. FIN 48 supplements FASB Statement 109, Accounting for Income Taxes, by defining the confidence level that a tax position must meet in order to be recognized in the financial statements. FIN 48 provides guidance for how a fund should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the fund has taken or expects to take on a tax return. FIN 48 requires that the tax effects of a position be recognized only if it is “more likely than not” to be sustained based solely on its technical merits. Tax positions not deemed to meet the more likely than not threshold would be recorded as a tax benefit or expense in the current year. FIN 48 is effective for fiscal periods beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. At adoption, the financial statements must be adjusted to reflect only those tax positions that are more likely than not to be sustained as of the adoption date. Management of the Fund is currently evaluating the impact that FIN 48 will have on the financial statements.
In addition, in September 2006, FASB Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”) was issued, and is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. The standard does not expand the use of fair value in any new circumstances, but provides clarification on acceptable fair value methods and applications. At this time, management is evaluating the implications of FAS 157, but it is not expected to materially impact the Series’ financial statements.
94
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of - Pro-Blend® Conservative Term Series, Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series:
In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Pro-Blend® Conservative Term Series, Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series (each a Series of Manning & Napier Fund, Inc., hereafter collectively referred to as the "Series") at October 31, 2006, and the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
December 13, 2006
95
Supplemental Tax Information (unaudited)
For federal income tax purposes, each of the Series designate for the current fiscal year the amount disclosed below or, if different, the maximum amount allowable under the tax law as qualified dividend income (“QDI”).
Series | QDI |
Pro-Blend® Conservative Term Series | $380,805 |
Pro-Blend® Moderate Term Series | 1,538,042 |
Pro-Blend® Extended Term Series | 3,484,081 |
Pro-Blend® Maximum Term Series | 2,178,868 |
For corporate shareholders, the percentage of investment income (dividend income plus short-term gain, if any) that qualifies for the dividends received deduction (DRD) for the current fiscal year is as follows:
Series | DRD% |
Pro-Blend® Conservative Term Series | 5.8% |
Pro-Blend® Moderate Term Series | 12.2% |
Pro-Blend® Extended Term Series | 18.6% |
Pro-Blend® Maximum Term Series | 43.4% |
96
Directors' and Officers' Information (unaudited)
The Statement of Additional Information provides additional information about the Fund's directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:\\www.sec.gov). The following chart shows certain information about the Fund's officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.
INTERESTED DIRECTOR/OFFICER | |
| Name: | B. Reuben Auspitz* |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 59 |
| Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1& Length of Time Served: | Indefinite - Director since 1984; Vice President 1984 - 2003; President since 2004; |
| Principal Executive Officer Since 2002 | |
| Principal Occupation(s) During Past 5 Years: | Executive Vice President; Co-Executive Director; Executive Group Member**; Chief |
| Compliance Officer since 2004 - Manning & Napier Advisors, Inc.; President; Director - | |
| Manning & Napier Investor Services, Inc.; Holds or has held one or more of | |
| the following titles for various subsidiaries and affiliates: President, Vice President, | |
| Director, Chairman, Treasurer, Chief Compliance Officer or Member | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
INDEPENDENT DIRECTORS | |
| Name: | Stephen B. Ashley |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 66 |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1996 |
| Principal Occupation(s) During Past 5 Years: | Chairman, Director, President & Chief Executive Officer, |
| The Ashley Group (property management and investment) | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | Genesee Corp. |
| The Ashley Group | |
| Fannie Mae | |
| Name: | Peter L. Faber |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 68 |
| Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1987 |
| Principal Occupation(s) During Past 5 Years: | Partner, McDermott, Will & Emery LLP (law firm) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | Partnership for New York City, Inc. |
| New York Collegium | |
| Name: | Harris H. Rusitzky |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 71 |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member |
| Term of Office & Length of Time Served: | Indefinite - Since 1985 |
| Principal Occupation(s) During Past 5 Years: | President, The Greening Group (business consultants) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
97
Directors' and Officers' Information (unaudited)
OFFICERS | |
| Name: | Jeffrey S. Coons, Ph.D., CFA |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 43 |
| Current Position(s) Held with Fund: | Vice President |
Term of Office1& Length of Time Served: | Since 2004 |
| Principal Occupation(s) During Past 5 Years: | Co-Director of Research since 2002 & Executive Group Member**, |
| Manning & Napier Advisors, Inc.; Managing Director - Risk Management, Manning & | |
| Napier Advisors, Inc., 1993-2002; Holds one or more of the following titles for various | |
| subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer | |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Christine Glavin |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 40 |
| Current Position(s) Held with Fund: | Principal Financial Officer, Chief Financial Officer |
Term of Office1& Length of Time Served: | Principal Financial Officer since 2002; Chief Financial Officer since 2001 |
| Principal Occupation(s) During Past 5 Years: | Fund Accounting Manager, Manning & Napier Advisors, Inc. |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Jodi L. Hedberg |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 38 |
| Current Position(s) Held with Fund: | Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance |
| Officer | |
Term of Office1& Length of Time Served: | Corporate Secretary since 1997; Chief Compliance Officer since 2004 |
| Principal Occupation(s) During Past 5 Years: | Director of Compliance, Manning & Napier Advisors, Inc. and affiliates |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
| Name: | Alaina V. Metz |
| Address: | 290 Woodcliff Drive |
| Fairport, NY 14450 | |
| Age: | 39 |
| Current Position(s) Held with Fund: | Special Assistant Secretary |
| Term of Office & Length of Time Served: | Indefinite - Since 2002 |
| Principal Occupation(s) During Past 5 Years: | Vice President, BISYS Fund Services Ohio, Inc. (mutual fund servicing company) |
| Number of Portfolios Overseen within Fund Complex: | 21 |
| Other Directorships Held Outside Fund Complex: | N/A |
*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund's investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, Inc. and President and Director, Manning & Napier Investor Services, Inc., the Fund's distributor.
**The Executive Group performs the duties of the Office of the Chief Executive of Manning & Napier Advisors, Inc.
1The term of office for President, Vice President, Chief Financial Officer, and Corporate Secretary is one year and until their respective successors are chosen and qualified. All other officers' terms are indefinite.
98
Literature Requests (unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone 1-800-466-3863
On the Securities and Exchange
Commission’s (SEC) web site http://www.sec.gov
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-Q, and are available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Prospectus and Statement of Additional Information (SAI)
The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:
By phone 1-800-466-3863
On the SEC’s web site http://www.sec.gov
On the Advisor’s web site http://www.manningnapieradvisors.com
Additional information available at www.manningnapieradvisors.com
| 1. | Fund Holdings - Month-End |
| 2. | Fund Holdings - Quarter-End |
| 3. | Shareholder Report - Annual |
| 4. | Shareholder Report - Semi-Annual |
99
ITEM 2: CODE OF ETHICS
(a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrant's code of ethics is filed herewith as Exhibit 12(a)(1).
(b) During the period covered by this report, no amendments were made to the provisions of the code of ethics adopted in 2 (a) above.
(c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2 (a) above were granted.
(d) Not applicable to the registrant due to the response given in 2 (c) above.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT
All of the members of the Audit committee have been determined by the Registrant's Board of Directors to be Audit Committee Financial Experts. The members of the Audit Committee are: Harris H. Rusitzky and Stephen B. Ashley. All Audit Committee members are independent under applicable rules. This designation will not increase the designee's duties, obligations or liability as compared to their duties, obligations and liability as a member of the Audit Committee and of the Board.
ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES:
Principal Accountant Fees and Services
Aggregate fees for professional services rendered for the Manning & Napier Fund, Inc. (Pro-Blend® Conservative Term Series, Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series, Pro-Blend® Maximum Term Series, Tax Managed Series, Equity Series, and Overseas Series, collectively the “Fund”) by PricewaterhouseCoopers LLP (“PwC”) as of and for the years ended October 31, 2006 and 2005 were:
| 2006 | 2005 | |
| Audit Fees (a) | $183,215 | $172,024 |
| Audit Related Fees (b) | - | - |
| Tax Fees (c) | 43,225 | 41,150 |
| All Other Fees (d) | - | - |
| $226,440 | $213,174 |
| (a) | Audit Fees |
These fees relate to professional services rendered by PwC for the audit of the Fund’s annual financial statements or services normally provided by the accountant in connection with statutory and regulatory filing or engagements. These services include the audits of the financial statements of the Fund, issuance of consents, income tax provision procedures and assistance with review of documents filed with the SEC.
| (b) | Audit-Related Fees |
These fees relate to assurance and related services by PwC that are reasonably related to the performance of the audit of the Fund’s financial statements and are not reported under “Audit Fees” above.
| (c) | Tax Fees |
These fees relate to professional services rendered by PwC for tax compliance, tax advice and tax planning. The tax services provided by PwC related to the preparation of the Fund’s federal and state income tax returns, excise tax calculations and returns, a review of the Fund’s calculations of capital gain and income distributions, and additional tax research for compliance purposes.
| (d) | All Other Fees |
These fees relate to products and services provided by PwC other than those reported above under “Audit Fees,” “Audit-Related Fees,” and “Tax Fees” above.
There were no amounts that were approved by the Audit Committee pursuant to the de minimus exception (Rule 2-01(c)(7) of Regulation S-X) for the fiscal years ended October 31, 2006 and 2005.
Non-Audit Services to the Fund’s Service Affiliates that were Pre-Approved by the Fund’s Audit Committee
The Fund’s Audit Committee is required to pre-approve non-audit services which meet both the following criteria:
| i) | Directly relate to the Fund’s operations and financial reporting; and |
| ii) | Rendered by PwC to the Fund’s advisor, Manning & Napier Advisors, Inc., and entities in a control relationship with the advisor (“service affiliate”) that provide ongoing services to the Fund. For purposes of disclosure, Manning & Napier Investor Services, Inc. is considered to be a service affiliate. |
| 2006 | 2005 | |
| Audit Related Fees | $9,317 | $6,024 |
| Tax Fees | - | - |
| $9,317 | $6,024 |
The Audit Related fees for the years ended October 31, 2006 and 2005 were for 17Ad-13 internal control examinations, a license for proprietary automated financial statement disclosure software and a license for proprietary authoritative financial reporting and assurance literature library software.
There were no amounts that were approved by the Audit Committee pursuant to the de minimus exception (Rule 2-01(c)(7) of Regulation S-X) for the fiscal years ended October 31, 2006 and 2005.
Aggregate Fees
Aggregate fees billed to the Fund for non-audit services for 2006 and 2005 were $43,225 and $41,150, respectively. Aggregate fees billed to the Fund’s advisor and service affiliates for non-audit services were $9,317 and $51,129, respectively. These amounts include fees for non-audit services required to be pre-approved and fees for non-audit services that did not require pre-approval since they did not relate to the Fund’s operations and financial reporting.
The Fund’s Audit Committee has considered whether the provisions for non-audit services to the Fund’s advisor and service affiliates, that did not require pre-approval, is compatible with maintaining PwC’s independence.
ITEM 5: AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable.
ITEM 6: SCHEDULE OF INVESTMENTS
See Investment Portfolios under Item 1 on this Form N-CSR.
ITEM 7: DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8: PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9: PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no material changes to the procedure by which shareholders may recommend nominees to the registrant's board of directors.
ITEM 11: CONTROLS AND PROCEDURES
(a) Based on their evaluation of the Funds' disclosure controls and procedures, as of a date within 90 days of the filing date, the Funds' Principal Executive Officer and Principal Financial Officer have concluded that the Funds' disclosure controls and procedures are: (i) reasonably designed to ensure that information required to be disclosed in this report is appropriately communicated to the Funds' officers to allow timely decisions regarding disclosures required in this report; (ii) reasonably designed to ensure that information required to be disclosed in this report is recorded, processed, summarized and reported in a timely manner; and (iii) are effective in achieving the goals described in (i) and (ii) above.
(b) During the second fiscal quarter of the period covered by this report, there have been no changes in the Funds' internal control over financial reporting that the above officers believe to have materially affected, or to be reasonably likely to materially affect, the Funds' internal control over financial reporting.
ITEM 12: EXHIBITS
(a)(1) Code of ethics that is subject to the disclosure of Item 2 above.
(a)(2) Separate certifications for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as Ex-99.CERT.
(a)(3) Not applicable.
(b) A certification of the Registrant's principal executive officer and principal financial officer, as required by 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as Ex-99.906CERT. The certification furnished pursuant to this paragraph is not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Manning & Napier Fund, Inc.
/s/ B. Reuben Auspitz
B. Reuben Auspitz
President & Principal Executive Officer of Manning & Napier Fund, Inc.
December 28, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ B. Reuben Auspitz
B. Reuben Auspitz
President & Principal Executive Officer of Manning & Napier Fund, Inc.
December 28, 2006
/s/ Christine Glavin
Christine Glavin
Chief Financial Officer & Principal Financial Officer of Manning & Napier Fund, Inc.
December 28, 2006