Life Sciences Series (the "Series") is a no-load non-diversified series of Manning & Napier Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide long-term growth by investing principally in the common stocks of companies in the life sciences industry.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). On November 5, 1999, the Series resumed sales of shares to advisory clients and employees of the Advisor and its affiliates. On May 1, 2001, the Series began offering shares directly to investors. Previously, the Series was available from time to time to advisory clients and employees of the Advisor.
The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 100 million have been designated as Life Sciences Series Class A common stock.
Portfolio securities, including domestic equities, foreign equities, exchange-traded funds, warrants 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. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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, with the exception of exchange-traded funds as noted above.
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, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
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.
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.
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.
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 the Series’ Investment Portfolio.
A security may be considered illiquid if so deemed in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board. Securities that are illiquid are marked with the applicable footnote on the Investment Portfolio. As of June 30, 2007, the aggregate value of securities deemed illiquid was $2,504,665, representing 0.9% of the Series’ net assets.
The Investment Company Act of 1940 defines “affiliated companies” to include securities in which a series owns 5% or more of the outstanding voting securities of the issuer. Investments in “affiliated companies” of the Series for the six months ended June 30, 2007 are shown below:
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.
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 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.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund's shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
12
Notes to Financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
For fund accounting and transfer agent services, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $115,743,604 and $103,980,669, respectively. There were no purchases or sales of United States Government securities.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Life Sciences Series were:
| | For the Six Months | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | Shares | Amount | Shares | Amount |
| Sold | 3,185,855 | $37,401,806 | 2,965,428 | $36,398,370 |
| Reinvested | - | - | 3,177,635 | 37,129,391 |
| Repurchased | (685,951) | (7,989,494) | (4,007,781) | (50,760,765) |
| Total | 2,499,904 | $29,412,312 | 2,135,282 | $22,766,996 |
Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
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 June 30, 2007.
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.
13
Notes to Financial Statements (unaudited)
8. LIFE SCIENCES SECURITIES
The Series may focus its investments in certain related life sciences industries; hence, the Series may subject itself to a greater degree of risk than a series that is more diversified.
9. 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. 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 for the year ended December 31, 2006 were as follows:
| Ordinary income | $12,093,520 |
| Long-term capital gains | 25,741,568 |
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized appreciation were as follows:
| Cost for federal income tax purposes | $254,688,967 |
| | |
| Unrealized appreciation | $23,824,892 |
| Unrealized depreciation | (13,500,743) |
| | |
| Net unrealized appreciation | $10,324,149 |
10. 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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact on the Series’ results of operation and financial condition.
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.
14
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 |
15
Manning & Napier Fund, Inc.
Technology Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| | 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $1,150.80 | $5.97 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,019.24 | $5.61 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.12%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year.
1
Portfolio Composition as of June 30, 3007 (unaudited)
Data for pie chart to follow:
Sector Allocation1
| Consumer Discretionary | 5.3% |
| Industrials | 2.9% |
| Information Technology (Communications Equipment) | 17.5% |
| Information Technology (Computers & Peripherals) | 6.2% |
| Information Technology (Electronic Equipment & Instruments) | 10.6% |
| Information Technology (Internet Software & Services) | 3.9% |
| Information Technology (IT Services) | 8.4% |
| Information Technology (Semiconductors & Semiconductor Equipment) | 3.2% |
| Information Technology (Software) | 34.6% |
| Materials | 2.9% |
| Telecommunication Services | 0.7% |
| Cash, short-term investments, and liabilities, less other assets | 3.8% |
1As a percentage of net assets.
Top Ten Stock Holdings2
| Opsware, Inc. | 4.6% |
| LoJack Corp. | 4.5% |
| Aladdin Knowledge Systems Ltd. (Israel) | 4.1% |
| Cisco Systems, Inc. | 3.9% |
| TIBCO Software, Inc. | 3.9% |
| Amdocs Ltd. (Guernsey) | 3.9% |
| SAP AG - ADR (Germany) | 3.9% |
| iPass, Inc. | 3.8% |
| LG. Philips LCD Co. Ltd. - ADR (South Korea) | 3.6% |
| Salesforce.com, Inc. | 3.6% |
2As a percentage of total investments.
2
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
COMMON STOCKS - 96.2% | | |
| | | |
Consumer Discretionary - 5.3% | | |
Hotels, Restaurants & Leisure - 2.8% | | |
| International Game Technology | 147,000 | $5,835,900 |
| | | |
Internet & Catalog Retail - 2.5% | | |
| Audible, Inc.* | 500,000 | 5,040,000 |
Total Consumer Discretionary | | 10,875,900 |
| | | |
Industrials - 2.9% | | |
Industrial Conglomerates - 2.9% | | |
| 3M Co. | 67,500 | 5,858,325 |
| | | |
Information Technology - 84.4% | | |
Communications Equipment - 17.5% | | |
| Blue Coat Systems, Inc.* | 123,000 | 6,090,960 |
| Cisco Systems, Inc.* | 300,000 | 8,355,000 |
| ECI Telecom Ltd.* (Israel) (Note 7) | 815,984 | 7,466,254 |
| Harris Stratex Networks, Inc. - Class A* | 192,000 | 3,452,160 |
| Ixia* | 416,000 | 3,852,160 |
| Juniper Networks, Inc.* | 270,000 | 6,795,900 |
| | | 36,012,434 |
| | | |
Computers & Peripherals - 6.2% | | |
| EMC Corp.* | 364,000 | 6,588,400 |
| Rackable Systems, Inc.* | 507,000 | 6,266,520 |
| | | 12,854,920 |
| | | |
Electronic Equipment & Instruments - 10.6% | | |
| AU Optronics Corp. - ADR (Taiwan) (Note 7) | 248,000 | 4,265,600 |
| LG. Philips LCD Co. Ltd. - ADR* (South Korea) (Note 7) | 340,000 | 7,694,200 |
| LoJack Corp.* | 432,000 | 9,629,280 |
| Planar Systems, Inc.* | 34,800 | 260,652 |
| | | 21,849,732 |
| | | |
Internet Software & Services - 3.9% | | |
| iPass, Inc.* | 1,476,000 | 7,999,920 |
| | | |
IT Services - 8.4% | | |
| CheckFree Corp.* | 155,000 | 6,231,000 |
| Getronics N.V.* (Netherlands) (Note 7) | 565,000 | 4,205,405 |
| RightNow Technologies, Inc.* | 411,000 | 6,744,510 |
| | | 17,180,915 |
| | | |
Semiconductors & Semiconductor Equipment - 3.2% | | |
| Netlogic Microsystems, Inc.* | 207,000 | 6,590,880 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | Shares/ | Value |
| | Principal Amount | (Note 2) |
| | | |
Information Technology (continued) | | |
Software - 34.6% | | |
| Aladdin Knowledge Systems Ltd.* (Israel) (Note 7) | 420,000 | $8,710,800 |
| Amdocs Ltd.* (Guernsey) (Note 7) | 208,000 | 8,282,560 |
| Applix, Inc.* | 189,950 | 3,124,677 |
| Borland Software Corp.* | 1,234,000 | 7,329,960 |
| Opsware, Inc.* | 1,029,000 | 9,785,790 |
| Salesforce.com, Inc.* | 177,000 | 7,586,220 |
| SAP AG - ADR (Germany) (Note 7) | 162,000 | 8,273,340 |
| Sonic Solutions* | 366,000 | 4,615,260 |
| TIBCO Software, Inc.* | 923,000 | 8,353,150 |
| Utimaco Safeware AG (Germany) (Note 7) | 327,000 | 5,128,943 |
| | | 71,190,700 |
Total Information Technology | | 173,679,501 |
| | | |
Materials - 2.9% | | |
Chemicals - 2.9% | | |
| NITTO DENKO Corp. (Japan) (Note 7) | 120,000 | 6,062,871 |
| | | |
Telecommunication Services - 0.7% | | |
Wireless Telecommunication Services - 0.7% | | |
| SK Telecom Co. Ltd. (South Korea) (Note 7) | 6,638 | 1,531,017 |
| | | |
TOTAL COMMON STOCKS | | |
| (Identified Cost $169,747,777) | | 198,007,614 |
| | | |
SHORT-TERM INVESTMENTS - 7.2% | | |
| Dreyfus Treasury Cash Management - Institutional Shares | 5,893,406 | 5,893,406 |
| U.S. Treasury Bill, 7/5/2007 | $9,000,000 | 8,994,236 |
| | | |
TOTAL SHORT-TERM INVESTMENTS | | |
| (Identified Cost $14,888,733) | | 14,887,642 |
| | | |
TOTAL INVESTMENTS - 103.4% | | |
| (Identified Cost $184,636,510) | | 212,895,256 |
| | | |
LIABILITIES, LESS OTHER ASSETS - (3.4%) | | (6,983,613) |
| | | |
NET ASSETS - 100% | | $205,911,643 |
*Non-income producing security
ADR - American Depository Receipt
The accompanying notes are an integral part of the financial statements.
4
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost $184,636,510) (Note 2) | $212,895,256 |
| Cash | 3 |
| Receivable for securities sold | 1,014,989 |
| Receivable for fund shares sold | 176,111 |
| Dividends receivable | 27,838 |
| Foreign tax reclaims receivable | 953 |
| Prepaid expenses | 3,096 |
| | |
| TOTAL ASSETS | 214,118,246 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 166,626 |
| Accrued fund accounting and transfer agent fees (Note 3) | 14,836 |
| Accrued Chief Compliance Officer service fees (Note 3) | 394 |
| Accrued directors' fees (Note 3) | 282 |
| Payable for securities purchased | 7,101,549 |
| Payable for fund shares repurchased | 904,185 |
| Audit fees payable | 18,731 |
| | |
| TOTAL LIABILITIES | 8,206,603 |
| | |
TOTAL NET ASSETS | $205,911,643 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $171,911 |
| Additional paid-in-capital | 174,211,459 |
| Undistributed net investment loss | (532,842) |
| Accumulated net realized gain on investments, foreign currency, and other assets and liabilities | 3,802,369 |
| Net unrealized appreciation on investments | 28,258,746 |
| | |
TOTAL NET ASSETS | $205,911,643 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($205,911,643/17,191,051 shares) | $11.98 |
The accompanying notes are an integral part of the financial statements.
5
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Interest | $265,441 |
| Dividends (net of foreign tax withheld, $1,434) | 215,912 |
| | |
| Total Investment Income | 481,353 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 903,834 |
| Fund accounting and transfer agent fees (Note 3) | 63,781 |
| Directors' fees (Note 3) | 3,636 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Custodian fees | 5,887 |
| Miscellaneous | 34,222 |
| | |
| Total Expenses | 1,014,195 |
| | |
| NET INVESTMENT LOSS | (532,842) |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | |
| | |
| Net realized gain (loss) on - | |
| Investments | 14,452,037 |
| Foreign currency and other assets and liabilities | (7,452) |
| | 14,444,585 |
| | |
| Net change in unrealized appreciation on investments | 12,459,964 |
| | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 26,904,549 |
| | |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $26,371,707 |
The accompanying notes are an integral part of the financial statements.
6
Statements of Changes in Net Assets
| | For the Six | |
| | Months Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment loss | $(532,842) | $(197,990) |
| Net realized gain on investments and foreign currency | 14,444,585 | 16,097,774 |
| Net change in unrealized appreciation on investments | 12,459,964 | 14,064,805 |
| | | |
| Net increase from operations | 26,371,707 | 29,964,589 |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase from capital share transactions (Note 5) | 12,287,646 | 26,632,096 |
| | | |
| Net increase in net assets | 38,659,353 | 56,596,685 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 167,252,290 | 110,655,605 |
| | | |
End of period (including undistributed net investment loss of $532,842 and $0, respectively) | $205,911,643 | $167,252,290 |
The accompanying notes are an integral part of the financial statements.
7
| | For the Six | | | | | |
| | Months Ended | | | | | |
| | 6/30/07 | | | For the Years Ended | | |
| | (unaudited) | 12/31/06 | 12/31/05 | 12/31/04 | 12/31/03 | 12/31/02 |
| | | | | | | |
Per share data (for a share outstanding | | | | | | |
throughout each period): | | | | | | |
| | | | | | | |
Net asset value - Beginning of period | $10.41 | $8.37 | $8.19 | $7.44 | $3.73 | $5.91 |
| | | | | | | |
| Income (loss) from investment operations: | | | | | | |
| Net investment loss | (0.03) | (0.01) | (0.03) | (0.04)1 | (0.03) | (0.03)1 |
| Net realized and unrealized gain (loss) on investments | 1.60 | 2.05 | 0.21 | 0.79 | 3.74 | (2.15) |
| | | | | | | |
| Total from investment operations | 1.57 | 2.04 | 0.18 | 0.75 | 3.71 | (2.18) |
| | | | | | | |
Net asset value - End of period | $11.98 | $10.41 | $8.37 | $8.19 | $7.44 | $3.73 |
| | | | | | | |
Total return2 | 15.08% | 24.37% | 2.20% | 10.08% | 99.46% | (36.89%) |
| | | | | | | |
Ratios (to average net assets)/Supplemental Data: | | | | | | |
| Expenses* | 1.12%3 | 1.16% | 1.20% | 1.20% | 1.20% | 1.20% |
| Net investment loss | (0.59%)3 | (0.14%) | (0.48%) | (0.52%) | (0.58%) | (0.71%) |
| | | | | | | |
| Portfolio turnover | 41% | 83% | 116% | 50% | 83% | 137% |
| | | | | | | |
Net assets - End of period (000's omitted) | $205,912 | $167,252 | $110,656 | $63,321 | $20,032 | $10,178 |
*The investment advisor did not impose all of its management fee in some periods. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased as follows:
| | N/A | N/A | 0.03% | 0.16% | 0.81% | 0.41% |
1Calculated based on average shares outstanding during the period.
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 during certain periods. Periods less than one year are not annualized.
3Annualized.
The accompanying notes are an integral part of the financial statements.
8
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Technology Series (the "Series") is a no-load non-diversified series of Manning & Napier Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide long-term growth by investing principally in the common stocks of companies in technology-based industries.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). On August 8, 2000, the Series resumed sales of shares to advisory clients and employees of the Advisor and its affiliates. The Series resumed offering shares directly to investors on May 18, 2004, as it had done previously from time to time.
The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 100 million have been designated as Technology 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.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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, with the exception of exchange-traded funds as noted above.
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, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
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
9
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Security Transactions, Investment Income and Expenses (continued)
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.
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.
10
Notes to Financial Statements (unaudited)
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 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 April 30, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 1.20% of average daily net assets each year. For the six months ended June 30, 2007, the Advisor did not waive its management fee or reimburse any expenses of the Series. 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, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $92,013,836 and $69,383,188, respectively. There were no purchases or sales of United States Government securities.
11
Notes to Financial Statements (unaudited)
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Technology Series were:
| | For the Six Months | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | | | | |
| | Shares | Amount | Shares | Amount |
| | | | | |
| Sold | 1,604,164 | $17,547,495 | 3,714,032 | $34,727,879 |
| Repurchased | (477,109) | (5,259,849) | (863,035) | (8,095,783) |
| Total | 1,127,055 | $12,287,646 | 2,850,997 | $26,632,096 |
Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
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 June 30, 2007.
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. TECHNOLOGY SECURITIES
The Series may focus its investments in certain related technology industries; hence, the Series may subject itself to a greater degree of risk than a series that is more diversified.
9. 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. 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.
At December 31, 2006, the Series had a capital loss carryover of $10,360,989, available to the extent allowed by tax law to offset future net capital gain, if any, which will expire on December 31, 2010.
12
Notes to Financial Statements (unaudited)
9. FEDERAL INCOME TAX INFORMATION (continued)
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized appreciation were as follows:
| Cost for federal income tax purposes | $184,917,737 |
| | |
| Unrealized appreciation | $29,894,081 |
| Unrealized depreciation | (1,916,562) |
| | |
| Net unrealized appreciation | $27,977,519 |
10. 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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact on the Series’ results of operation and financial condition.
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.
13
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 informationavailable at www.manningnapieradvisors.com
| 1. | Fund Holdings - Month-End |
| 2. | Fund Holdings - Quarter-End |
| 3. | Shareholder Report - Annual |
| 4. | Shareholder Report - Semi-Annual |
14
Manning & Napier Fund, Inc.
Financial Services Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| | 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $1,028.00 | $5.73 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,019.14 | $5.71 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.14%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year.
1
Portfolio Composition as of June 30, 2007 (unaudited)
Data for pie chart to follow:
Sector Allocation1
| Financials (Capital Markets) | 15.4% |
| Financials (Commercial Banks) | 28.9% |
| Financials (Consumer Finance) | 2.8% |
| Financials (Diversified Financial Services) | 12.7% |
| Financials (Insurance) | 15.8% |
| Financials (Thifts & Mortgage Finance) | 2.7% |
| Industrials | 1.3% |
| Information Technology | 17.4% |
| Cash, short-term investments and liabilities, less other assets | 3.0% |
1As a percentage of net assets.
Top Ten Stock Holdings2
| CheckFree Corp. | 4.2% |
| Automatic Data Processing, Inc. | 4.1% |
| Western Union Co. | 4.0% |
| Bank of America Corp. | 4.0% |
| Wachovia Corp. | 4.0% |
| SEI Investments Co. | 3.7% |
| Citigroup, Inc. | 3.7% |
| PNC Financial Services Group, Inc. | 3.6% |
| JPMorgan Chase & Co. | 3.1% |
| U.S. Bancorp | 2.9% |
2As a percentage of total investments.
2
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
COMMON STOCKS - 97.0% | | |
| | | |
Financials - 78.3% | | |
Capital Markets - 15.4% | | |
| The Charles Schwab Corp. | 116,600 | $2,392,632 |
| Franklin Resources, Inc. | 21,200 | 2,808,364 |
| Janus Capital Group, Inc. | 133,000 | 3,702,720 |
Mellon Financial Corp.1(Now known as Bank of New York Mellon Corp.) | 55,000 | 2,420,000 |
| Merrill Lynch & Co., Inc. | 38,700 | 3,234,546 |
| Morgan Stanley | 31,600 | 2,650,608 |
| SEI Investments Co. | 194,000 | 5,633,760 |
| | | 22,842,630 |
| | | |
Commercial Banks - 28.9% | | |
| The Bancorp, Inc.* | 107,000 | 2,392,520 |
| Boston Private Financial Holdings, Inc. | 55,000 | 1,477,850 |
| HSBC Holdings plc - ADR (United Kingdom) (Note 7) | 32,700 | 3,000,879 |
| Huntington Bancshares, Inc. | 64,000 | 1,455,360 |
| KeyCorp | 56,000 | 1,922,480 |
| PNC Financial Services Group, Inc. | 77,000 | 5,511,660 |
| Royal Bank of Scotland Group plc (United Kingdom) (Note 7) | 286,000 | 3,635,082 |
| Societe Generale - ADR (France) (Note 7) | 37,500 | 1,393,057 |
| SunTrust Banks, Inc. | 30,600 | 2,623,644 |
| TCF Financial Corp. | 114,000 | 3,169,200 |
| U.S. Bancorp | 135,000 | 4,448,250 |
| Wachovia Corp. | 117,000 | 5,996,250 |
| Wells Fargo & Co. | 47,000 | 1,652,990 |
| Wilmington Trust Corp. | 30,850 | 1,280,584 |
| Zions Bancorporation | 37,200 | 2,861,052 |
| | | 42,820,858 |
| | | |
Consumer Finance - 2.8% | | |
| Capital One Financial Corp. | 24,000 | 1,882,560 |
| Nelnet, Inc. - Class A | 91,000 | 2,224,040 |
| | | 4,106,600 |
| | | |
Diversified Financial Services - 12.7% | | |
| Bank of America Corp. | 123,000 | 6,013,470 |
| Citigroup, Inc. | 108,000 | 5,539,320 |
| Financiere Marc de Lacharriere S.A. (Fimalac) (France) (Note 7) | 13,600 | 1,333,442 |
| JPMorgan Chase & Co. | 96,000 | 4,651,200 |
| Moody's Corp. | 21,600 | 1,343,520 |
| | | 18,880,952 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | Shares/ | Value |
| | Principal Amount | (Note 2) |
| | | |
Financials (continued) | | |
Insurance - 15.8% | | |
| Allianz SE (Germany) (Note 7) | 12,400 | $2,896,404 |
| Ambac Financial Group, Inc. | 35,200 | 3,069,088 |
| American International Group, Inc. | 63,000 | 4,411,890 |
| MBIA, Inc. | 48,000 | 2,986,560 |
| Principal Financial Group, Inc. | 51,500 | 3,001,935 |
| The Progressive Corp. | 127,000 | 3,039,110 |
| Torchmark Corp. | 22,000 | 1,474,000 |
| Willis Group Holdings Ltd. (United Kingdom) (Note 7) | 58,500 | 2,577,510 |
| | | 23,456,497 |
| | | |
Thrifts & Mortgage Finance - 2.7% | | |
| Countrywide Financial Corp. | 32,700 | 1,188,645 |
| Flagstar Bancorp, Inc. | 121,000 | 1,458,050 |
| IndyMac Bancorp, Inc. | 47,500 | 1,385,575 |
| | | 4,032,270 |
Total Financials | | 116,139,807 |
| | | |
Industrials - 1.3% | | |
Commercial Services & Supplies - 1.3% | | |
| ChoicePoint, Inc.* | 46,000 | 1,952,700 |
| | | |
Information Technology - 17.4% | | |
Internet Software & Services - 2.1% | | |
| Online Resources Corp.* | 285,500 | 3,134,790 |
| | | |
IT Services - 15.3% | | |
| Automatic Data Processing, Inc. | 129,000 | 6,252,630 |
| CheckFree Corp.* | 160,200 | 6,440,040 |
| Gevity HR, Inc. | 135,000 | 2,609,550 |
| Paychex, Inc. | 33,175 | 1,297,806 |
| Western Union Co. | 293,000 | 6,103,190 |
| | | 22,703,216 |
Total Information Technology | | 25,838,006 |
| | | |
TOTAL COMMON STOCKS | | |
| (Identified Cost $131,415,199) | | 143,930,513 |
| | | |
SHORT-TERM INVESTMENTS - 5.2% | | |
| Dreyfus Treasury Cash Management - Institutional Shares | 3,787,147 | 3,787,147 |
| Fannie Mae Discount Note, 7/5/2007 | $4,000,000 | 3,997,729 |
| | | |
TOTAL SHORT-TERM INVESTMENTS | | |
| (Identified Cost $7,784,876) | | 7,784,876 |
The accompanying notes are an integral part of the financial statements.
4
Investment Portfolio - June 30, 2007 (unaudited)
| | Value |
| | (Note 2) |
| | |
TOTAL INVESTMENTS - 102.2% | |
| (Identified Cost $139,200,075) | $151,715,389 |
| | |
LIABILITIES, LESS OTHER ASSETS - (2.2%) | (3,324,290) |
| | |
NET ASSETS - 100% | $148,391,099 |
*Non-income producing security
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.
5
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost $139,200,075) (Note 2) | $151,715,389 |
| Foreign currency, at value (cost $1) | 1 |
| Dividends receivable | 179,467 |
| Receivable for fund shares sold | 153,941 |
| Foreign tax reclaims receivable | 5,178 |
| | |
| TOTAL ASSETS | 152,053,976 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 123,699 |
| Accrued fund accounting and transfer agent fees (Note 3) | 11,145 |
| Accrued Chief Compliance Officer service fees (Note 3) | 404 |
| Accrued directors' fees (Note 3) | 291 |
| Payable for securities purchased | 3,033,553 |
| Payable for fund shares repurchased | 471,471 |
| Audit fees payable | 18,230 |
| Other payables and accrued expenses | 4,084 |
| | |
| TOTAL LIABILITIES | 3,662,877 |
| | |
TOTAL NET ASSETS | $148,391,099 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $115,427 |
| Additional paid-in-capital | 126,970,831 |
| Undistributed net investment income | 1,010,843 |
| Accumulated net realized gain on investments, foreign currency, and other assets and liabilities | 7,778,652 |
| Net unrealized appreciation on investments and other assets and liabilities | 12,515,346 |
| | |
TOTAL NET ASSETS | $148,391,099 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($148,391,099/11,542,670 shares) | $12.86 |
The accompanying notes are an integral part of the financial statements.
6
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Dividends (net of foreign tax withheld, $20,616) | $1,625,673 |
| Interest | 143,049 |
| | |
| Total Investment Income | 1,768,722 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 701,149 |
| Fund accounting and transfer agent fees (Note 3) | 50,623 |
| Directors' fees (Note 3) | 3,631 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Custodian fees | 4,612 |
| Miscellaneous | 35,498 |
| | |
| Total Expenses | 798,348 |
| | |
| NET INVESTMENT INCOME | 970,374 |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | |
| | |
| Net realized gain on - | |
| Investments | 5,898,390 |
| Foreign currency and other assets and liabilities | 2,465 |
| | |
| | 5,900,855 |
| | |
| Net change in unrealized appreciation on - | |
| Investments | (3,114,950) |
| Foreign currency and other assets and liabilities | (385) |
| | |
| | (3,115,335) |
| | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 2,785,520 |
| | |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $3,755,894 |
The accompanying notes are an integral part of the financial statements.
7
Statements of Changes in Net Assets
| | For the Six | |
| | Months Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment income | $970,374 | $1,092,834 |
| Net realized gain on investments and foreign currency | 5,900,855 | 3,533,109 |
| Net change in unrealized appreciation on investments and foreign currency | (3,115,335) | 12,688,149 |
| | | |
| Net increase from operations | 3,755,894 | 17,314,092 |
| | | |
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | | |
| | | |
| From net investment income | - | (1,089,560) |
| From net realized gain on investments | - | (1,860,551) |
| | | |
| Total distributions to shareholders | - | (2,950,111) |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase from capital share transactions (Note 5) | 11,779,836 | 68,817,354 |
| | | |
| Net increase in net assets | 15,535,730 | 83,181,335 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 132,855,369 | 49,674,034 |
| | | |
End of period (including undistributed net investment income of $1,010,843 and $40,469, respectively) | $148,391,099 | $132,855,369 |
The accompanying notes are an integral part of the financial statements.
8
Financial Highlights
| | For the Six | | |
| | Month Ended | For the | For the Period |
| | 6/30/07 | Year Ended | 7/1/051 to |
| | (unaudited) | 12/31/06 | 12/31/05 |
| | | | |
Per share data (for a share outstanding throughout | | | |
each period): | | | |
| | | | |
Net asset value - Beginning of period | $12.51 | $10.70 | $10.00 |
| | | | |
| Income from investment operations: | | | |
| Net investment income | 0.08 | 0.10 | 0.05 |
| Net realized and unrealized gain on investments | 0.27 | 2.00 | 0.69 |
| | | | |
| Total from investment operations | 0.35 | 2.10 | 0.74 |
| | | | |
| Less distributions to shareholders: | | | |
| From net investment income | - | (0.11) | (0.04) |
| From net realized gain on investments | - | (0.18) | - |
| | | | |
| Total distributions to shareholders | - | (0.29) | (0.04) |
| | | | |
Net asset value - End of period | $12.86 | $12.51 | $10.70 |
| | | | |
Total return2 | 2.80% | 19.62% | 7.39% |
| | | | |
Ratios (to average net assets)/Supplemental Data: | | | |
| Expenses | 1.14%3 | 1.18% | 1.20%3* |
| Net investment income | 1.38%3 | 1.14% | 0.95%3 |
| | | | |
| Portfolio turnover | 21% | 30% | 6% |
| | | | |
Net assets - End of period (000's omitted) | $148,391 | $132,855 | $49,674 |
*The investment advisor did not impose all of its management fee. If these expenses had been incurred by the Series, the expense ratio (to average net assets) for the period ended 12/31/05 would have been increased by 0.16%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 during the period ended December 31, 2005. Periods less than one year are not annualized.
3Annualized.
The accompanying notes are an integral part of the financial statements.
9
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Financial Services Series (the "Series") is a no-load non-diversified series of Manning & Napier Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide long-term growth by investing principally in the common stocks of companies in the financial services industry.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 100 million have been designated as Financial Services 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.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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, with the exception of exchange-traded funds as noted above.
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, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
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.
10
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Security Transactions, Investment Income and Expenses (continued)
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.
11
Notes to Financial Statements (unaudited)
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 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 April 30, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 1.20% of average daily net assets each year. For the six months ended June 30, 2007, the Advisor did not waive its management fee or reimburse any expenses of the Series. 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, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $41,660,984 and $27,262,027, respectively. There were no purchases or sales of United States Government securities.
12
Notes to Financial Statements (unaudited)
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Financial Services Series were:
| | For the Six Month | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | Shares | Amount | Shares | Amount |
| | | | | |
| Sold | 1,150,584 | $14,696,817 | 6,045,105 | $69,415,961 |
| Reinvested | - | - | 232,171 | 2,891,162 |
| Repurchased | (229,884) | (2,916,981) | (297,702) | (3,489,769) |
| Total | 920,700 | $11,779,836 | 5,979,574 | $68,817,354 |
Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
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 June 30, 2007.
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. FINANCIAL SERVICES SECURITIES
The Series may focus its investments in certain related financial services industries; hence, the Series may subject itself to a greater degree of risk than a series that is more diversified.
9. 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. 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 for the year ended December 31, 2006 were as follows:
| Ordinary income | $2,451,358 |
| Long-term capital gains | 498,753 |
13
Notes to Financial Statements (unaudited)
9. FEDERAL INCOME TAX INFORMATION (continued)
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized appreciation were as follows:
| Cost for federal income tax purposes | $139,200,075 |
| | |
| Unrealized appreciation | $14,237,922 |
| Unrealized depreciation | (1,722,608) |
| | |
| Net unrealized appreciation | $12,515,314 |
10. 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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact on the Series’ results of operation and financial condition.
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.
14
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 |
15
Manning & Napier Fund, Inc.
Small Cap Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| | 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $1,081.80 | $5.78 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,019.24 | $5.61 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.12%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year.
1
Portfolio Composition as of June 30, 2007 (unaudited)
Data for pie chart to follow:
Sector Allocation1
| Consumer Discretionary | 16.2% |
| Consumer Staples | 2.6% |
| Energy | 7.6% |
| Financials | 5.6% |
| Health Care | 19.2% |
| Industrials | 9.5% |
| Information Technology | 25.4% |
| Materials | 6.0% |
| Utilities | 2.6% |
| Cash, short-term investments, and liabilities, less other assets | 5.3% |
1As a percentage of net assets.
Market Capitalization
| Average | $1,257 Million |
| Median | 737 Million |
| Weighted Average | 1,240 Million |
Top Ten Stock Holdings2
| MoneyGram International, Inc. | 2.8% |
| JetBlue Airways Corp. | 2.7% |
| Mediacom Communications Corp. - Class A | 2.1% |
| Senomyx, Inc. | 2.1% |
| Pride International, Inc. | 2.1% |
| Borland Software Corp. | 2.0% |
| Charter Communications, Inc. - Class A | 2.0% |
| Wright Medical Group, Inc. | 1.9% |
| ECI Telecom Ltd. | 1.9% |
| Nelnet, Inc. - Class A | 1.9% |
2As a percentage of total investments.
2
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
COMMON STOCKS - 94.7% | | |
| | | |
Consumer Discretionary - 16.2% | | |
Auto Components - 3.2% | | |
| Azure Dynamics Corp.* (Canada) (Note 8) | 2,255,360 | $1,418,865 |
| Hankook Tire Co. Ltd. (South Korea) (Note 8) | 171,590 | 3,084,347 |
| Tenneco, Inc.* | 62,970 | 2,206,469 |
| | | 6,709,681 |
| | | |
Distributors - 1.0% | | |
| Building Materials Holding Corp. | 143,090 | 2,030,447 |
| | | |
Internet & Catalog Retail - 0.8% | | |
| Audible, Inc.* | 173,000 | 1,743,840 |
| | | |
Leisure Equipment & Products - 1.0% | | |
| Sturm, Ruger & Co., Inc.* | 127,210 | 1,974,299 |
| | | |
Media - 6.9% | | |
| Acme Communications, Inc. | 396,000 | 1,983,960 |
| Charter Communications, Inc. - Class A* | 1,014,770 | 4,109,818 |
| DreamWorks Animation SKG, Inc. - Class A* | 68,000 | 1,961,120 |
| Mediacom Communications Corp. - Class A* | 460,000 | 4,457,400 |
| Playboy Enterprises, Inc. - Class B* | 148,000 | 1,676,840 |
| | | 14,189,138 |
| | | |
Specialty Retail - 3.3% | | |
| Build-A-Bear Workshop, Inc.* | 147,000 | 3,842,580 |
| Tractor Supply Co.* | 56,690 | 2,950,715 |
| | | 6,793,295 |
Total Consumer Discretionary | | 33,440,700 |
| | | |
Consumer Staples - 2.6% | | |
Beverages - 1.2% | | |
| Hansen Natural Corp.* | 35,950 | 1,545,131 |
| National Beverage Corp.* | 74,400 | 856,344 |
| | | 2,401,475 |
| | | |
Food Products - 0.6% | | |
| Lancaster Colony Corp. | 12,200 | 511,058 |
| Tootsie Roll Industries, Inc. | 30,553 | 846,624 |
| | | 1,357,682 |
| | | |
Household Products - 0.8% | | |
| Central Garden & Pet Co.* | 135,550 | 1,661,843 |
Total Consumer Staples | | 5,421,000 |
| | | |
Energy - 7.6% | | |
Energy Equipment & Services - 3.5% | | |
| Calfrac Well Services Ltd. (Canada) (Note 8) | 141,250 | 2,779,906 |
| Pride International, Inc.* | 116,000 | 4,345,360 |
| | | 7,125,266 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
Energy (continued) | | |
Oil, Gas & Consumable Fuels - 4.1% | | |
| Edge Petroleum Corp.* | 144,750 | $2,027,947 |
| Evergreen Energy, Inc.* | 218,790 | 1,319,304 |
| Forest Oil Corp.* | 55,000 | 2,324,300 |
| Foundation Coal Holdings, Inc. | 44,490 | 1,808,074 |
| Mariner Energy, Inc.* | 44,511 | 1,079,392 |
| | | 8,559,017 |
Total Energy | | 15,684,283 |
| | | |
Financials - 5.6% | | |
Commercial Banks - 3.7% | | |
| The Bancorp, Inc.* | 73,840 | 1,651,062 |
| Boston Private Financial Holdings, Inc. | 92,830 | 2,494,342 |
| Citizens & Northern Corp. | 24,417 | 477,597 |
| National Bankshares, Inc. | 26,000 | 531,180 |
| Potomac Bancshares, Inc. | 28,592 | 444,320 |
| Tower Bancorp, Inc. | 8,825 | 386,094 |
| Wilmington Trust Corp. | 41,430 | 1,719,759 |
| | | 7,704,354 |
| | | |
Consumer Finance - 1.9% | | |
| Nelnet, Inc. - Class A | 161,110 | 3,937,528 |
Total Financials | | 11,641,882 |
| | | |
Health Care - 19.2% | | |
Biotechnology - 2.1% | | |
| Senomyx, Inc.* | 327,405 | 4,419,967 |
| | | |
Health Care Equipment & Supplies - 9.2% | | |
| The Cooper Companies, Inc. | 59,570 | 3,176,272 |
| Foxhollow Technologies, Inc.* | 99,260 | 2,108,282 |
| Inverness Medical Innovations, Inc.* | 42,960 | 2,191,819 |
| Kyphon, Inc.* | 41,720 | 2,008,818 |
| OraSure Technologies, Inc.* | 418,430 | 3,422,757 |
| SonoSite, Inc.* | 66,280 | 2,083,180 |
| Wright Medical Group, Inc.* | 167,000 | 4,028,040 |
| | | 19,019,168 |
| | | |
Health Care Providers & Services - 2.3% | | |
| AMN Healthcare Services, Inc.* | 100,000 | 2,200,000 |
| Cross Country Healthcare, Inc.* | 152,000 | 2,535,360 |
| | | 4,735,360 |
| | | |
Health Care Technology - 2.9% | | |
| AMICAS, Inc.* | 628,000 | 2,223,120 |
| Eclipsys Corp.* | 101,380 | 2,007,324 |
| WebMD Health Corp. - Class A* | 37,880 | 1,783,012 |
| | | 6,013,456 |
The accompanying notes are an integral part of the financial statements.
4
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
Health Care (continued) | | |
Life Sciences Tools & Services - 2.7% | | |
| Affymetrix, Inc.* | 113,140 | $2,816,055 |
| Caliper Life Sciences, Inc.* | 598,880 | 2,808,747 |
| | | 5,624,802 |
Total Health Care | | 39,812,753 |
| | | |
Industrials - 9.5% | | |
Airlines - 5.4% | | |
| AirTran Holdings, Inc.* | 359,890 | 3,929,999 |
| AMR Corp.* | 31,000 | 816,850 |
| Continental Airlines, Inc. - Class B* | 24,000 | 812,880 |
| JetBlue Airways Corp.* | 475,490 | 5,587,007 |
| | | 11,146,736 |
| | | |
Commercial Services & Supplies - 0.8% | | |
| Covanta Holding Corp.* | 71,200 | 1,755,080 |
| | | |
Electrical Equipment - 1.8% | | |
| Hubbell, Inc. - Class B | 33,000 | 1,789,260 |
| Hydrogenics Corp.* (Canada) (Note 8) | 601,110 | 775,432 |
| Plug Power, Inc.* | 390,050 | 1,224,757 |
| | | 3,789,449 |
| | | |
Machinery - 1.5% | | |
| FreightCar America, Inc. | 63,900 | 3,056,976 |
Total Industrials | | 19,748,241 |
| | | |
Information Technology - 25.4% | | |
Communications Equipment - 4.8% | | |
| Blue Coat Systems, Inc.* | 74,210 | 3,674,879 |
| ECI Telecom Ltd.* (Israel) (Note 8) | 435,000 | 3,980,250 |
| Plantronics, Inc. | 87,500 | 2,294,250 |
| | | 9,949,379 |
| | | |
Electronic Equipment & Instruments - 3.9% | | |
| LoJack Corp.* | 165,810 | 3,695,905 |
| Mechanical Technology, Inc.* | 519,740 | 654,872 |
| Planar Systems, Inc.* | 500,020 | 3,745,150 |
| | | 8,095,927 |
| | | |
Internet Software & Services - 1.6% | | |
| iPass, Inc.* | 365,950 | 1,983,449 |
| Online Resources Corp.* | 129,850 | 1,425,753 |
| | | 3,409,202 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
Information Technology (continued) | | |
IT Services - 5.1% | | |
| Gevity HR, Inc. | 154,740 | $2,991,124 |
| MoneyGram International, Inc. | 204,930 | 5,727,793 |
| RightNow Technologies, Inc.* | 113,880 | 1,868,771 |
| | | 10,587,688 |
Office Electronics - 0.9% | | |
| Boewe Systec AG (Germany) (Note 8) | 31,570 | 1,781,161 |
| | | |
Semiconductors & Semiconductor Equipment - 2.1% | | |
| Cabot Microelectronics Corp.* | 55,660 | 1,975,373 |
| Netlogic Microsystems, Inc.* | 71,390 | 2,273,058 |
| | | 4,248,431 |
| | | |
Software - 7.0% | | |
| Borland Software Corp.* | 707,950 | 4,205,223 |
| Sonic Solutions* | 125,010 | 1,576,376 |
| Take-Two Interactive Software, Inc.* | 161,140 | 3,217,966 |
| UbiSoft Entertainment S.A.* (France) (Note 8) | 57,450 | 3,043,817 |
| Utimaco Safeware AG (Germany) (Note 8) | 150,490 | 2,360,412 |
| | | 14,403,794 |
Total Information Technology | | 52,475,582 |
| | | |
Materials - 6.0% | | |
Chemicals - 3.2% | | |
| Calgon Carbon Corp.* | 286,000 | 3,317,600 |
| The Scotts Miracle-Gro Co. - Class A | 35,300 | 1,515,782 |
| Tronox, Inc. - Class A | 118,620 | 1,705,756 |
| | | 6,539,138 |
| | | |
Paper & Forest Products - 2.8% | | |
| Louisiana-Pacific Corp. | 187,840 | 3,553,933 |
| Norbord, Inc. (Canada) (Note 8) | 261,960 | 2,287,538 |
| | | 5,841,471 |
Total Materials | | 12,380,609 |
| | | |
Utilities - 2.6% | | |
Electric Utilities - 0.8% | | |
| Westar Energy, Inc. | 67,400 | 1,636,472 |
| | | |
Multi-Utilities - 1.8% | | |
| Aquila, Inc.* | 902,100 | 3,689,589 |
Total Utilities | | 5,326,061 |
| | | |
TOTAL COMMON STOCKS | | |
| (Identified Cost $178,742,074) | | 195,931,111 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - June 30, 2007 (unaudited)
| | Shares/ | Value |
| | Principal Amount | (Note 2) |
| | | |
SHORT-TERM INVESTMENTS - 5.5% | | |
| Dreyfus Treasury Cash Management - Institutional Shares | 5,425,797 | $5,425,797 |
| U.S. Treasury Bill, 7/5/2007 | $6,000,000 | 5,996,047 |
| | | |
TOTAL SHORT-TERM INVESTMENTS | | |
| (Identified Cost $11,422,698) | | 11,421,844 |
| | | |
TOTAL INVESTMENTS - 100.2% | | |
| (Identified Cost $190,164,772) | | 207,352,955 |
| | | |
LIABILITIES, LESS OTHER ASSETS - (0.2%) | | (338,747) |
| | | |
NET ASSETS - 100% | | $207,014,208 |
*Non-income producing security
The accompanying notes are an integral part of the financial statements.
7
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost $190,164,772) (Note 2) | $207,352,955 |
| Foreign currency, at value (cost $2) | 2 |
| Receivable for fund shares sold | 154,437 |
| Dividends receivable | 69,092 |
| Foreign tax reclaims receivable | 3,518 |
| Prepaid expenses | 3,834 |
| | |
| TOTAL ASSETS | 207,583,838 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 169,477 |
| Accrued fund accounting and transfer agent fees (Note 3) | 15,314 |
| Accrued Chief Compliance Officer service fees (Note 3) | 394 |
| Accrued directors' fees (Note 3) | 288 |
| Payable for fund shares repurchased | 364,610 |
| Audit fees payable | 19,547 |
| | |
| TOTAL LIABILITIES | 569,630 |
| | |
TOTAL NET ASSETS | $207,014,208 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $146,311 |
| Additional paid-in-capital | 169,976,859 |
| Undistributed net investment income | 132,684 |
| Accumulated net realized gain on investments, foreign currency, and other assets and liabilities | 19,570,115 |
| Net unrealized appreciation on investments, foreign currency, and other assets and liabilities | 17,188,239 |
| | |
TOTAL NET ASSETS | $207,014,208 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS A ($207,014,208/14,631,070 shares) | $14.15 |
The accompanying notes are an integral part of the financial statements.
8
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Dividends (net of foreign tax withheld, $13,038) | $981,489 |
| Interest | 212,816 |
| | |
| Total Investment Income | 1,194,305 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 944,853 |
| Fund accounting and transfer agent fees (Note 3) | 67,268 |
| Directors' fees (Note 3) | 3,631 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Custodian fees | 6,628 |
| Miscellaneous | 36,406 |
| | |
| Total Expenses | 1,061,621 |
| | |
| NET INVESTMENT INCOME | 132,684 |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | |
| | |
| Net realized gain on - | |
| Investments | 18,314,254 |
| Foreign currency and other assets and liabilities | 7,373 |
| | 18,321,627 |
| | |
| Net change in unrealized appreciation on - | |
| Investments | (3,546,063) |
| Written options | 11,524 |
| Foreign currency and other assets and liabilities | 31 |
| | (3,534,508) |
| | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 14,787,119 |
| | |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $14,919,803 |
The accompanying notes are an integral part of the financial statements.
9
Statements of Changes in Net Assets
| | For the Six | |
| | Months Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment income (loss) | $132,684 | $(641,385) |
| Net realized gain on investments and foreign currency | 18,321,627 | 35,004,998 |
| Net change in unrealized appreciation on investments, written options and foreign currency | (3,534,508) | (5,662,651) |
| | | |
| Net increase from operations | 14,919,803 | 28,700,962 |
| | | |
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | | |
| | | |
| From net realized gain on investments | - | (33,448,452) |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase from capital share transactions (Note 5) | 16,603,113 | 25,822,755 |
| | | |
| Net increase in net assets | 31,522,916 | 21,075,265 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 175,491,292 | 154,416,027 |
| | | |
End of period (including undistributed net investment income (loss) of $132,684 and $0, respectively) | $207,014,208 | $175,491,292 |
The accompanying notes are an integral part of the financial statements.
10
| | For the Six | | | | | |
| | Months Ended | | | | | |
| | 6/30/07 | | | For the Years Ended | | |
| | (unaudited) | 12/31/06 | 12/31/05 | 12/31/04 | 12/31/03 | 12/31/02 |
| | | | | | | |
Per share data (for a share outstanding | | | | | | |
throughout each period): | | | | | | |
| | | | | | | |
Net asset value - Beginning of period | $13.08 | $13.66 | $15.01 | $13.12 | $9.52 | $11.49 |
| | | | | | | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income (loss) | 0.01 | (0.05) | (0.07) | (0.07) | (0.04) | (0.03) |
| Net realized and unrealized gain (loss) on investments | 1.06 | 2.55 | 2.20 | 2.66 | 3.64 | (1.94) |
| | | | | | | |
| Total from investment operations | 1.07 | 2.50 | 2.13 | 2.59 | 3.60 | (1.97) |
| | | | | | | |
| Less distributions to shareholders: | | | | | | |
| From net realized gain on investments | - | (3.08) | (3.48) | (0.70) | - | - |
| | | | | | | |
Net asset value - End of period | $14.15 | $13.08 | $13.66 | $15.01 | $13.12 | $9.52 |
| | | | | | | |
Total return1 | 8.18% | 18.06% | 14.11% | 19.81% | 37.82% | (17.15%) |
| | | | | | | |
Ratios (to average net assets)/Supplemental Data: | | | | | | |
| Expenses* | 1.12%2 | 1.16% | 1.19% | 1.22% | 1.22% | 1.24% |
| Net investment income (loss) | 0.14%2 | (0.40%) | (0.51%) | (0.54%) | (0.39%) | (0.28%) |
| | | | | | | |
| Portfolio turnover | 34% | 85% | 55% | 61% | 42% | 70% |
| | | | | | | |
Net assets - End of period (000's omitted) | $207,014 | $175,491 | $154,416 | $169,438 | $139,909 | $95,772 |
*The investment advisor did not impose all of its management fee in some periods and is not eligible to recoup any expenses that have been waived or reimbursed in prior periods. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased as follows:
1Represents 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 during certain periods. Periods less than one year are not annualized.
2Annualized.
The accompanying notes are an integral part of the financial statements.
11
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Small Cap Series (the "Series") is a no-load diversified series of Manning & Napier Fund, Inc. (the "Fund"). 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' investment objective is to provide long-term growth by investing principally in the common stocks of companies with small market capitalizations.
The Series is authorized to issue five classes of shares (Class A, B, C, D and E). Currently, only Class A shares have been issued. Each class of shares is substantially the same, except that class-specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 87.5 million have been designated as Small Cap 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.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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, with the exception of exchange-traded funds as noted above.
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, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
12
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Security Transactions, Investment Income and Expenses (continued)
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.
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.
Option Contracts
The Series may write (sell) or buy call or put options on securities and other financial instruments. When the Series writes a call, the Series gives the purchaser the right to buy the underlying security from the Series at the price specified in the option contract (the “exercise price”) at any time during the option period. When the Series writes a put option, the Series gives the purchaser the right to sell to the Series the underlying security at the exercise price at any time during the option period. The Series will only write options on a “covered basis.” This means that the Series will own the underlying security when the Series writes a call or the Series will put aside cash, U.S. Government securities, or other liquid assets in an amount not less than the exercise price at all times the put option is outstanding.
When the Series writes an option, an amount equal to the premium received is reflected as a liability and is subsequently marked-to-market to reflect the current market value of the option. The Series, as a writer of an option, has no control over whether the underlying security or financial instrument may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the security or financial instrument underlying the written option. There is a risk that the Series may not be able to enter into a closing transaction because of an illiquid market.
The Series may also purchase options in an attempt to hedge against fluctuations in the value of its portfolio and to protect against declines in the value of the securities. The premium paid by the Series for the purchase of an option is reflected as an investment and subsequently marked-to-market to reflect the current market value of the option. The risk associated with purchasing options is limited to the premium paid.
13
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Option Contracts (continued)
When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premium received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received).
The measurement of the risks associated with option contracts is meaningful only when all related and offsetting transactions are considered.
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 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 of all Directors who are "affiliated persons" of the Fund, or of the Advisor, and all personnel of
14
Notes to Financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
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.
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, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $73,160,930 and $61,319,764, respectively. There were no purchases or sales of United States Government securities.
5. CAPITAL STOCK TRANSACTIONS
Transactions in Class A shares of Small Cap Series were:
| | For the Six Months | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | | | | |
| | Shares | Amount | Shares | Amount |
| | | | | |
| Sold | 1,519,067 | 20,757,576 | 2,333,662 | $34,715,820 |
| Reinvested | - | - | 2,454,854 | 32,569,872 |
| Repurchased | (304,785) | (4,154,463) | (2,677,271) | (41,462,937) |
| Total | 1,214,282 | 16,603,113 | 2,111,245 | $25,822,755 |
Approximately 79% of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
15
Notes to Financial Statements (unaudited)
6. OPTIONS WRITTEN
A summary of obligations for written option contracts for the six months ended June 30, 2007 is as follows:
| | Put Options | Call Options |
| | Number of Contracts | Premiums Received | Number of Contracts | Premiums Received |
| Balance at December 31, 2006 | - | $- | 640 | $116,476 |
| Options exercised during 2007 | - | - | (640) | (116,476) |
| Balance at June 30, 2007 | - | $- | - | $- |
7. 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 June 30, 2007.
8. 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.
9. 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. 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 for the year ended December 31, 2006 were as follows:
| Ordinary income | $5,103,422 |
| Long-term capital gains | 28,345,030 |
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized appreciation were as follows:
| Cost for federal income tax purposes | $190,164,772 |
| | |
| Unrealized appreciation | $26,628,971 |
| Unrealized depreciation | (9,440,788) |
| | |
| Net unrealized appreciation | $17,188,183 |
16
Notes to Financial Statements (unaudited)
10. 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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact on the Series’ results of operation and financial condition.
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
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 |
18
Manning & Napier Fund, Inc.
World Opportunities Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| | 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $1,121.10 | $5.84 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,019.29 | $5.56 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.11%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year.
1
Portfolio Composition as of June 30, 2007 (unaudited)
Data for pie chart to follow:
Country Allocation1
| Australia | 3.3% |
| Brazil | 4.6% |
| Canada | 3.6% |
| France | 14.3% |
| Germany | 5.6% |
| Guernsey | 3.2% |
| Israel | 3.7% |
| Japan | 4.7% |
| Netherlands | 5.8% |
| Switzerland | 16.6% |
| United Kingdom | 19.9% |
Miscellaneous2 | 4.8% |
| Cash, short-term investments, and liabilities, less other assets | 9.9% |
1As a percentage of net assets.
2Miscellaneous
Mexico (0.9%)
South Korea (1.9%)
Spain (1.0%)
Taiwan (1.0%)
Data for pie chart to follow:
Sector Allocation3
| Consumer Discretionary | 11.2% |
| Consumer Staples | 16.8% |
| Energy | 8.4% |
| Financials | 11.0% |
| Health Care | 9.7% |
| Industrials | 10.4% |
| Information Technology | 13.2% |
| Materials | 8.6% |
| Telecommunication Services | 0.8% |
| Cash, short-term investments, and liabilities, less other assets | 9.9% |
3As a percentage of net assets.
2
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
COMMON STOCKS - 90.1% | | |
| | | |
Consumer Discretionary - 11.2% | | |
Hotels, Restaurants & Leisure - 3.5% | | |
| Club Mediterranee S.A.* (France) | 263,000 | $18,721,394 |
| | | |
Leisure Equipment & Products - 1.8% | | |
| Sankyo Co. Ltd. (Japan) | 122,000 | 5,143,205 |
| Sega Sammy Holdings, Inc. (Japan) | 278,000 | 4,504,996 |
| | | 9,648,201 |
| | | |
Media - 0.9% | | |
| Grupo Televisa S.A. - ADR (Mexico) | 169,870 | 4,690,111 |
| | | |
Specialty Retail - 4.0% | | |
| Kingfisher plc (United Kingdom) | 3,603,020 | 16,386,242 |
| Valora Holding AG (Switzerland) | 19,400 | 5,083,524 |
| | | 21,469,766 |
| | | |
Textiles, Apparel & Luxury Goods - 1.0% | | |
| Adidas AG (Germany) | 84,100 | 5,371,984 |
Total Consumer Discretionary | | 59,901,456 |
| | | |
Consumer Staples - 16.8% | | |
Beverages - 1.0% | | |
| Scottish & Newcastle plc (United Kingdom) | 419,160 | 5,390,679 |
| | | |
Food & Staples Retailing - 1.4% | | |
| Carrefour S.A. (France) | 107,200 | 7,564,192 |
| | | |
Food Products - 9.7% | | |
| Cadbury Schweppes plc (United Kingdom) | 780,000 | 10,649,961 |
| Nestle S.A. (Switzerland) | 32,800 | 12,516,214 |
| Royal Numico N.V. (Koninklijke Numico N.V.) (Netherlands) | 166,700 | 8,692,232 |
| Unilever plc - ADR (United Kingdom) | 620,000 | 20,001,200 |
| | | 51,859,607 |
| | | |
Personal Products - 4.7% | | |
| Clarins S.A. (France) | 146,000 | 12,925,879 |
| L’Oreal S.A. (France) | 51,490 | 6,118,065 |
| Natura Cosmeticos S.A. (Brazil) | 398,800 | 5,760,674 |
| | | 24,804,618 |
Total Consumer Staples | | 89,619,096 |
| | | |
Energy - 8.4% | | |
Energy Equipment & Services - 7.4% | | |
| Abbot Group plc (United Kingdom) | 3,859,230 | 20,786,668 |
| Calfrac Well Services Ltd. (Canada) | 378,750 | 7,454,085 |
| Compagnie Generale de Geophysique - Veritas (CGG - Veritas)* (France) | 44,000 | 11,071,901 |
| | | 39,312,654 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
Energy (continued) | | |
Oil, Gas & Consumable Fuels - 1.0% | | |
| Petroleo Brasileiro S.A. (Petrobras) - ADR (Brazil) | 50,300 | $5,366,004 |
Total Energy | | 44,678,658 |
| | | |
Financials - 11.0% | | |
Capital Markets - 1.4% | | |
| Macquarie Bank Ltd. (Australia) | 100,200 | 7,219,020 |
| | | |
Commercial Banks - 5.1% | | |
| HSBC Holdings plc (United Kingdom) | 565,000 | 10,380,399 |
| Royal Bank of Scotland Group plc (United Kingdom) | 991,000 | 12,595,687 |
| Societe Generale (France) | 23,620 | 4,396,166 |
| | | 27,372,252 |
| | | |
Diversified Financial Services - 1.8% | | |
| Financiere Marc de Lacharriere S.A. (Fimalac) (France) | 96,910 | 9,501,752 |
| | | |
Insurance - 2.7% | | |
| Allianz SE (Germany) | 41,400 | 9,670,253 |
| Willis Group Holdings Ltd. (United Kingdom) | 111,000 | 4,890,660 |
| | | 14,560,913 |
Total Financials | | 58,653,937 |
| | | |
Health Care - 9.7% | | |
Health Care Equipment & Supplies - 2.1% | | |
| Straumann Holding AG (Switzerland) | 39,400 | 11,098,592 |
| | | |
Health Care Providers & Services - 2.3% | | |
| BML, Inc. (Japan) | 117,200 | 2,037,267 |
| Sonic Healthcare Ltd. (Australia) | 818,600 | 10,449,327 |
| | | 12,486,594 |
| | | |
Life Sciences Tools & Services - 1.0% | | |
| QIAGEN N.V.* (Netherlands) | 297,000 | 5,283,630 |
| | | |
Pharmaceuticals - 4.3% | | |
| Novartis AG - ADR (Switzerland) | 409,000 | 22,932,630 |
Total Health Care | | 51,801,446 |
| | | |
Industrials - 10.4% | | |
Aerospace & Defense - 2.5% | | |
| Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) | 273,650 | 13,192,667 |
| | | |
Air Freight & Logistics - 3.9% | | |
| Deutsche Post AG (Germany) | 291,000 | 9,427,875 |
| TNT N.V. (Netherlands) | 253,000 | 11,445,996 |
| | | 20,873,871 |
The accompanying notes are an integral part of the financial statements.
4
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
Industrials (continued) | | |
Electrical Equipment - 2.0% | | |
| ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) | 244,925 | $5,535,305 |
| Gamesa Corporacion Tecnologica S.A. (Spain) | 140,000 | 5,115,505 |
| | | 10,650,810 |
| | | |
Machinery - 2.0% | | |
| Heidelberger Druckmaschinen AG (Germany) | 109,000 | 5,270,553 |
| Schindler Holding AG (Switzerland) | 85,200 | 5,686,047 |
| | | 10,956,600 |
Total Industrials | | 55,673,948 |
| | | |
Information Technology - 13.2% | | |
Communications Equipment - 3.3% | | |
| ECI Telecom Ltd.* (Israel) | 1,921,000 | 17,577,150 |
| | | |
Electronic Equipment & Instruments - 2.1% | | |
| AU Optronics Corp. - ADR (Taiwan) | 325,000 | 5,590,000 |
| LG. Philips LCD Co. Ltd. - ADR* (South Korea) | 263,000 | 5,951,690 |
| | | 11,541,690 |
| | | |
IT Services - 1.1% | | |
| Getronics N.V.* (Netherlands) | 762,830 | 5,677,892 |
| | | |
Software - 6.7% | | |
| Aladdin Knowledge Systems Ltd.* (Israel) | 111,210 | 2,306,495 |
| Amdocs Ltd.* (Guernsey) | 435,000 | 17,321,700 |
| Misys plc (United Kingdom) | 1,091,600 | 5,139,855 |
| Square Enix Co. Ltd. (Japan) | 190,000 | 4,799,773 |
| UbiSoft Entertainment S.A.* (France) | 113,200 | 5,997,564 |
| | | 35,565,387 |
Total Information Technology | | 70,362,119 |
| | | |
Materials - 8.6% | | |
Chemicals - 6.4% | | |
| Lonza Group AG (Switzerland) | 278,000 | 25,632,820 |
| NITTO DENKO Corp. (Japan) | 168,400 | 8,508,228 |
| | | 34,141,048 |
Paper & Forest Products - 2.2% | | |
| Norbord, Inc. (Canada) | 1,331,560 | 11,627,707 |
Total Materials | | 45,768,755 |
| | | |
Telecommunication Services - 0.8% | | |
Wireless Telecommunication Services - 0.8% | | |
| SK Telecom Co. Ltd. - ADR (South Korea) | 149,400 | 4,086,090 |
| | | |
TOTAL COMMON STOCKS | | |
| (Identified Cost $402,466,019) | | 480,545,505 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - June 30, 2007 (unaudited)
| | Shares/ | Value |
| | Principal Amount | (Note 2) |
| | | |
| | | |
SHORT-TERM INVESTMENTS - 10.1% | | |
| Dreyfus Treasury Cash Management - Institutional Shares | 6,789,820 | $6,789,820 |
| Fannie Mae Discount Note, 7/5/2007 | $15,000,000 | 14,991,467 |
| U.S. Treasury Bill, 7/5/2007 | 32,000,000 | 31,979,918 |
| | | |
TOTAL SHORT-TERM INVESTMENTS | | |
| (Identified Cost $53,765,221) | | 53,761,205 |
| | | |
TOTAL INVESTMENTS - 100.2% | | |
| (Identified Cost $456,231,240) | | 534,306,710 |
| | | |
LIABILITIES, LESS OTHER ASSETS - (0.2%) | | (1,134,228) |
| | | |
NET ASSETS - 100% | | $533,172,482 |
*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 - 19.9%; Switzerland - 16.6%; France - 14.3%.
The accompanying notes are an integral part of the financial statements.
6
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost $456,231,240) (Note 2) | $534,306,710 |
| Foreign currency, at value (cost $1) | 1 |
| Receivable for fund shares sold | 1,077,312 |
| Dividends receivable | 354,631 |
| Foreign tax reclaims receivable | 303,562 |
| | |
| TOTAL ASSETS | 536,042,216 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 423,768 |
| Accrued fund accounting and transfer agent fees (Note 3) | 27,992 |
| Accrued Chief Compliance Officer service fees (Note 3) | 395 |
| Accrued directors' fees (Note 3) | 260 |
| Payable for securities purchased | 1,325,141 |
| Payable for fund shares repurchased | 1,079,039 |
| Other payables and accrued expenses | 13,139 |
| | |
| TOTAL LIABILITIES | 2,869,734 |
| | |
TOTAL NET ASSETS | $533,172,482 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $496,578 |
| Additional paid-in-capital | 417,874,109 |
| Undistributed net investment income | 4,084,756 |
| Accumulated net realized gain on investments, foreign currency, and other assets and liabilities | 32,631,391 |
| Net unrealized appreciation on investments, foreign currency, and other assets and liabilities | 78,085,648 |
| | |
TOTAL NET ASSETS | $533,172,482 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS A ($533,172,482/49,657,837 shares) | $10.74 |
The accompanying notes are an integral part of the financial statements.
7
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Dividends (net of foreign tax withheld, $415,032) | $5,347,108 |
| Interest | 874,241 |
| | |
| Total Investment Income | 6,221,349 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 2,098,322 |
| Fund accounting and transfer agent fees (Note 3) | 148,855 |
| Directors' fees (Note 3) | 3,636 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Custodian fees | 28,101 |
| Miscellaneous | 53,475 |
| | |
| Total Expenses | 2,335,224 |
| | |
| NET INVESTMENT INCOME | 3,886,125 |
| | |
REALIZED AND UNREALIZED GAIN ON INVESTMENTS: | |
| | |
| Net realized gain on - | |
| Investments | 27,824,432 |
| Foreign currency and other assets and liabilities | 2,628 |
| | 27,827,060 |
| | |
| Net change in unrealized appreciation on - | |
| Investments | 16,647,850 |
| Foreign currency and other assets and liabilities | 2,024 |
| | 16,649,874 |
| | |
| NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 44,476,934 |
| | |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $48,363,059 |
The accompanying notes are an integral part of the financial statements.
8
Statements of Changes in Net Assets
| | For the Six | |
| | Months Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment income | $3,886,125 | $3,357,023 |
| Net realized gain on investments and foreign currency | 27,827,060 | 41,288,613 |
| Net change in unrealized appreciation on investments and foreign currency | 16,649,874 | 29,930,018 |
| | | |
| Net increase from operations | 48,363,059 | 74,575,654 |
| | | |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | | |
| | | |
| From net investment income | - | (3,785,787) |
| From net realized gain on investments | - | (43,381,288) |
| | | |
| Total distributions to shareholders | - | (47,167,075) |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase from capital share transactions (Note 5) | 167,688,047 | 83,077,241 |
| | | |
| Net increase in net assets | 216,051,106 | 110,485,820 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 317,121,376 | 206,635,556 |
| | | |
End of period (including undistributed net investment income of $4,084,756 and $198,631, respectively) | $533,172,482 | $317,121,376 |
The accompanying notes are an integral part of the financial statements.
9
| | For the Six | | | | | |
| | Months Ended | | | | | |
| | 6/30/07 | | | For the Years Ended | | |
| | (unaudited) | 12/31/06 | 12/31/05 | 12/31/04 | 12/31/03 | 12/31/02 |
| | | | | | | |
Per share data (for a share outstanding | | | | | | |
throughout each period): | | | | | | |
| | | | | | | |
Net asset value - Beginning of period | $9.58 | $8.46 | $8.33 | $6.84 | $5.28 | $5.98 |
| | | | | | | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income | 0.08 | 0.12 | 0.07 | 0.05 | 0.06 | 0.06 |
| Net realized and unrealized gain (loss) on investments | 1.08 | 2.71 | 0.87 | 1.68 | 1.56 | (0.71) |
| | | | | | | |
| Total from investment operations | 1.16 | 2.83 | 0.94 | 1.73 | 1.62 | (0.65) |
| | | | | | | |
| Less distributions to shareholders: | | | | | | |
| From net investment income | - | (0.14) | (0.07) | (0.06) | (0.06) | - |
| From net realized gain on investments | - | (1.57) | (0.74) | (0.18) | -2 | (0.05) |
| | | | | | | |
| Total distributions to shareholders | - | (1.71) | (0.81) | (0.24) | (0.06) | (0.05) |
| | | | | | | |
Net asset value - End of period | $10.74 | $9.58 | $8.46 | $8.33 | $6.84 | $5.28 |
| | | | | | | |
Total return1 | 12.11% | 33.88% | 11.33% | 25.42% | 30.80% | (10.78%) |
| | | | | | | |
Ratios (to average net assets)/Supplemental Data: | | | | | | |
| Expenses | 1.11%3 | 1.16% | 1.21% | 1.26% | 1.27%* | 1.30% |
| Net investment income | 1.85%3 | 1.35% | 0.95% | 0.75% | 1.25% | 1.10% |
| | | | | | | |
| Portfolio turnover | 25% | 64% | 46% | 42% | 31% | 41% |
| | | | | | | |
Net assets - End of period (000's omitted) | $533,172 | $317,121 | $206,636 | $160,895 | $119,845 | $78,772 |
| | | | | | | |
*The investment advisor did not impose all of its management fee and is not eligible to recoup any expenses that have been waived or reimbursed in prior periods. If these expenses had been incurred by the Series, the expense ratio (to average net assets) for the year ended 12/31/03 would have been increased by 0.01%.
1Represents 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 during the year ended 12/31/03. Periods less than one year are not annualized.
2Less than $0.01 per share.
3Annualized.
The accompanying notes are an integral part of the financial statements.
10
Notes to Financial Statements (unaudited)
1. ORGANIZATION
World Opportunities Series (the "Series") is a no-load diversified series of Manning & Napier Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide long-term growth by investing principally in the common stocks of companies located around the world.
The Series is authorized to issue five classes of shares (Class A, B, C, D and E). Currently, only Class A shares have been issued. Each class of shares is substantially the same, except that class-specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 150 million have been designated as World Opportunities 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.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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, with the exception of exchange-traded funds as noted above.
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, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
11
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Security Transactions, Investment Income and Expenses (continued)
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.
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.
12
Notes to Financial Statements (unaudited)
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 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.
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, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $244,973,386 and $92,313,842, respectively. There were no purchases or sales of United States Government securities.
13
Notes to Financial Statements (unaudited)
5. CAPITAL STOCK TRANSACTIONS
Transactions in Class A shares of World Opportunities Series were:
| | For the Six Months | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | | | | |
| | Shares | Amount | Shares | Amount |
| | | | | |
| Sold | 19,810,330 | $200,785,846 | 11,822,192 | $114,767,511 |
| Reinvested | - | - | 4,599,718 | 44,020,070 |
| Repurchased | (3,249,602) | (33,097,799) | (7,744,452) | (75,710,340) |
| Total | 16,560,728 | $167,688,047 | 8,677,458 | $83,077,241 |
Approximately 39% of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
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 June 30, 2007.
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. 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 for the year ended December 31, 2006 were as follows:
| Ordinary income | $11,373,017 |
| Long-term capital gains | 35,794,058 |
14
Notes to Financial Statements (unaudited)
8. FEDERAL INCOME TAX INFORMATION (continued)
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized appreciation were as follows:
| Cost for federal income tax purposes | $456,257,970 |
| | |
| Unrealized appreciation | $82,411,595 |
| Unrealized depreciation | (4,362,855) |
| | |
| Net unrealized appreciation | $78,048,740 |
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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact on the Series’ results of operation and financial condition.
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.
15
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16
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17
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 |
18
Manning & Napier Fund, Inc.
International Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| | 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $1,115.90 | $6.03 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,019. 09 | $5.76 |
*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 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year.
1
Portfolio Composition as of June 30, 2007 (unaudited)
Data for pie chart to follow:
Country Allocation1
| Brazil | 5.5% |
| France | 12.3% |
| Germany | 21.6% |
| Italy | 5.4% |
| Japan | 7.8% |
| Malaysia | 2.6% |
| Netherlands | 2.4% |
| South Korea | 3.9% |
| Switzerland | 3.9% |
| Taiwan | 4.7% |
| United Kingdom | 20.1% |
Miscellaneous2 | 3.6% |
| Cash, short-term investments, and other assets, less liabilities | 6.2% |
1As a percentage of net assets.
2Miscellaneous
Norway (0.8%)
Poland (0.6%)
Portugal (1.7%)
Spain (0.5%)
Data for pie chart to follow:
Sector Allocation3
| Consumer Discretionary | 8.3% |
| Consumer Staples | 16.2% |
| Energy | 5.6% |
| Financials | 30.8% |
| Health Care | 7.2% |
| Industrials | 4.8% |
| Information Technology | 5.7% |
| Materials | 3.8% |
| Telecommunication Services | 4.1% |
| Utilities | 7.3% |
| Cash, short-term investments, and other assets, less liabilities | 6.2% |
3As a percentage of net assets.
2
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
COMMON STOCKS - 93.8% | | |
| | | |
Consumer Discretionary - 8.3% | | |
Auto Components - 1.0% | | |
| Hankook Tire Co. Ltd. (South Korea) | 143,000 | $2,570,439 |
| | | |
Household Durables - 1.1% | | |
| LG Electronics, Inc. (South Korea) | 35,000 | 2,895,506 |
| | | |
Media - 3.6% | | |
| Impresa S.A. (SGPS)* (Portugal) | 338,000 | 1,257,900 |
| Mediaset S.p.A. (Italy) | 175,000 | 1,812,925 |
| Reed Elsevier plc - ADR (United Kingdom) | 55,600 | 2,874,520 |
| Wolters Kluwer N.V. (Netherlands) | 105,037 | 3,219,639 |
| | | 9,164,984 |
| | | |
Multiline Retail - 1.2% | | |
| PPR (France) | 18,300 | 3,208,623 |
| | | |
Specialty Retail - 0.7% | | |
| KOMERI Co. Ltd. (Japan) | 67,000 | 1,785,070 |
| | | |
Textiles, Apparel & Luxury Goods - 0.7% | | |
| LVMH S.A. (Louis Vuitton Moet Hennessy) (France) | 14,920 | 1,727,169 |
Total Consumer Discretionary | | 21,351,791 |
| | | |
Consumer Staples - 16.2% | | |
Beverages - 3.2% | | |
| Diageo plc (United Kingdom) | 130,000 | 2,706,865 |
| Kirin Brewery Co. Ltd. (now known as Kirin Holdings Co. Ltd.) (Japan) | 173,000 | 2,589,871 |
| Scottish & Newcastle plc (United Kingdom) | 229,000 | 2,945,094 |
| | | 8,241,830 |
| | | |
Food & Staples Retailing - 3.4% | | |
| Carrefour S.A. (France) | 38,832 | 2,740,044 |
| President Chain Store Corp. (Taiwan) | 495,000 | 1,409,939 |
| Tesco plc (United Kingdom) | 533,000 | 4,478,857 |
| | | 8,628,840 |
| | | |
Food Products - 6.6% | | |
| Cadbury Schweppes plc (United Kingdom) | 358,000 | 4,888,059 |
| Groupe Danone (France) | 31,952 | 2,595,319 |
| Nestle S.A. (Switzerland) | 8,400 | 3,205,372 |
| Suedzucker AG (Germany) | 72,400 | 1,607,844 |
| Unilever plc - ADR (United Kingdom) | 148,000 | 4,774,480 |
| | | 17,071,074 |
| | | |
Household Products - 1.8% | | |
| Kao Corp. (Japan) | 47,000 | 1,217,854 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
Consumer Staples (continued) | | |
Household Products (continued) | | |
| Reckitt Benckiser plc (United Kingdom) | 62,500 | $3,432,273 |
| | | 4,650,127 |
| | | |
Personal Products - 1.2% | | |
| Clarins S.A. (France) | 35,777 | 3,167,460 |
Total Consumer Staples | | 41,759,331 |
| | | |
Energy - 5.6% | | |
Oil, Gas & Consumable Fuels - 5.6% | | |
| BP plc (United Kingdom) | 205,000 | 2,482,079 |
| Eni S.p.A. (Italy) | 143,154 | 5,211,377 |
| Royal Dutch Shell plc - Class B (United Kingdom) | 70,500 | 2,948,648 |
| Total S.A. (France) | 45,160 | 3,682,814 |
Total Energy | | 14,324,918 |
| | | |
Financials - 30.8% | | |
Capital Markets - 3.0% | | |
| Daiwa Securities Group, Inc. (Japan) | 79,000 | 842,555 |
| Deutsche Bank AG (Germany) | 30,000 | 4,352,239 |
| Nomura Holdings, Inc. (Japan) | 63,000 | 1,228,170 |
| OSK Holdings Berhad (Malaysia) | 1,337,000 | 1,170,359 |
| | | 7,593,323 |
| | | |
Commercial Banks - 14.8% | | |
| Aareal Bank AG (Germany) | 92,000 | 4,805,868 |
| Banca Monte dei Paschi di Siena S.p.A. (Italy) | 181,000 | 1,228,418 |
| Bank Handlowy w Warszawie S.A. (Poland) | 24,000 | 1,077,470 |
| BNP Paribas (France) | 26,000 | 3,109,036 |
| The Chugoku Bank Ltd. (Japan) | 137,000 | 1,905,158 |
| Commerzbank AG (Germany) | 62,500 | 2,981,507 |
| Credit Agricole S.A. (France) | 57,900 | 2,365,584 |
| The Hachijuni Bank Ltd. (Japan) | 244,000 | 1,718,366 |
| Hong Leong Financial Group Berhad (Malaysia) | 653,000 | 1,220,826 |
| HSBC Holdings plc (United Kingdom) | 153,000 | 2,810,975 |
| Intesa Sanpaolo (Italy) | 159,799 | 1,195,903 |
| Mitsubishi UFJ Financial Group, Inc. (Japan) | 170 | 1,877,995 |
| Royal Bank of Scotland Group plc (United Kingdom) | 248,100 | 3,153,370 |
| Societe Generale (France) | 11,312 | 2,105,395 |
| The Sumitomo Trust & Banking Co. Ltd. (Japan) | 247,000 | 2,357,445 |
| UniCredito Italiano S.p.A. (Italy) | 489,000 | 4,387,520 |
| | | 38,300,836 |
| | | |
Diversified Financial Services - 1.1% | | |
| ING Groep N.V. (Netherlands) | 65,395 | 2,901,901 |
The accompanying notes are an integral part of the financial statements.
4
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
Financials (continued) | | |
Insurance - 6.0% | | |
| Allianz SE (Germany) | 32,620 | $7,619,412 |
| Axa (France) | 44,892 | 1,944,694 |
| Muenchener Rueckver AG (Germany) | 32,400 | 5,950,063 |
| | | 15,514,169 |
| | | |
Real Estate Management & Development - 5.9% | | |
| Alstria Office AG* (Germany) | 250,000 | 5,159,487 |
| IOI Properties Berhad (Malaysia) | 372,000 | 1,434,087 |
| Klabin Segall S.A. (Brazil) | 140,000 | 1,451,556 |
| Rodobens Negocios Imobiliarios S.A. (Brazil) | 259,000 | 3,524,979 |
| Rossi Residencial S.A. (Brazil) | 170,000 | 3,606,328 |
| | | 15,176,437 |
Total Financials | | 79,486,666 |
| | | |
Health Care - 7.2% | | |
Health Care Equipment & Supplies - 0.5% | | |
| Straumann Holding AG (Switzerland) | 4,580 | 1,290,141 |
| | | |
Pharmaceuticals - 6.7% | | |
| AstraZeneca plc (United Kingdom) | 22,300 | 1,201,351 |
| AstraZeneca plc - ADR (United Kingdom) | 37,000 | 1,978,760 |
| GlaxoSmithKline plc (United Kingdom) | 138,000 | 3,616,047 |
| Novartis AG - ADR (Switzerland) | 49,000 | 2,747,430 |
| Sanofi-Aventis (France) | 21,083 | 1,714,761 |
| Shire plc (United Kingdom) | 170,000 | 4,236,090 |
| Takeda Pharmaceutical Co. Ltd. (Japan) | 28,000 | 1,810,413 |
| | | 17,304,852 |
Total Health Care | | 18,594,993 |
| | | |
Industrials - 4.8% | | |
Airlines - 1.8% | | |
| Deutsche Lufthansa AG (Germany) | 164,800 | 4,603,240 |
| | | |
Commercial Services & Supplies - 0.4% | | |
| Taiwan Secom Co. Ltd. (Taiwan) | 627,210 | 1,068,859 |
| | | |
Electrical Equipment - 0.7% | | |
| Teco Electric & Machinery Co. Ltd. (Taiwan) | 3,280,000 | 1,866,529 |
| | | |
Industrial Conglomerates - 0.7% | | |
| Sonae S.A. (SGPS) (Portugal) | 669,100 | 1,901,547 |
| | | |
Machinery - 0.6% | | |
| FANUC Ltd. (Japan) | 15,500 | 1,601,495 |
| | | |
Transportation Infrastructure - 0.6% | | |
| Malaysia Airports Holdings Berhad (Malaysia) | 1,716,000 | 1,437,461 |
Total Industrials | | 12,479,131 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - June 30, 2007 (unaudited)
| | | Value |
| | Shares | (Note 2) |
| | | |
Information Technology - 5.7% | | |
Communications Equipment - 0.9% | | |
| D-Link Corp. (Taiwan) | 946,000 | $2,245,458 |
| | | |
Electronic Equipment & Instruments - 1.8% | | |
| KEYENCE Corp. (Japan) | 4,950 | 1,082,800 |
| Samsung SDI Co. Ltd. (South Korea) | 34,200 | 2,221,982 |
| Yageo Corp.* (Taiwan) | 2,690,000 | 1,289,294 |
| | | 4,594,076 |
| | | |
Semiconductors & Semiconductor Equipment - 1.8% | | |
| Hynix Semiconductor, Inc.* (South Korea) | 66,000 | 2,383,433 |
| Taiwan Semiconductor Manufacturing Co. Ltd. - ADR (Taiwan) | 217,378 | 2,419,423 |
| | | 4,802,856 |
| | | |
Software - 1.2% | | |
| SAP AG (Germany) | 61,400 | 3,145,906 |
Total Information Technology | | 14,788,296 |
| | | |
Materials - 3.8% | | |
Chemicals - 3.2% | | |
| Arkema* (France) | 1,129 | 74,087 |
| Bayer AG (Germany) | 107,350 | 8,107,945 |
| | | 8,182,032 |
| | | |
Construction Materials - 0.6% | | |
| Taiwan Cement Corp. (Taiwan) | 1,488,901 | 1,726,275 |
Total Materials | | 9,908,307 |
| | | |
Telecommunication Services - 4.1% | | |
Diversified Telecommunication Services - 3.5% | | |
| France Telecom S.A. - ADR (France) | 31,000 | 851,880 |
| Portugal Telecom S.A. (SGPS) - ADR (Portugal) | 94,250 | 1,309,132 |
| Swisscom AG - ADR (Switzerland) | 85,000 | 2,898,500 |
| Telefonica S.A. - ADR (Spain) | 18,250 | 1,218,370 |
| Telekomunikacja Polska S.A. (Poland) | 64,000 | 560,859 |
| Telenor ASA - ADR (Norway) | 36,250 | 2,132,406 |
| | | 8,971,147 |
Wireless Telecommunication Services - 0.6% | | |
| Digi.com Berhad (Malaysia) | 227,000 | 1,513,333 |
Total Telecommunication Services | | 10,484,480 |
| | | |
Utilities - 7.3% | | |
Electric Utilities - 2.8% | | |
| E.ON AG (Germany) | 43,737 | 7,315,247 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - June 30, 2007 (unaudited)
| | Shares/ | Value |
| | Principal Amount | (Note 2) |
| | | |
Utilities (continued) | | |
Multi-Utilities - 2.3% | | |
| National Grid plc (United Kingdom) | 229,000 | $3,393,410 |
| Suez S.A. (France) | 43,340 | 2,492,139 |
| | | 5,885,549 |
| | | |
Water Utilities - 2.2% | | |
| Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) (Brazil) | 135,040 | 2,978,164 |
| Companhia de Saneamento de Minas Gerais - Copasa MG (Brazil) | 182,000 | 2,728,112 |
| | | 5,706,276 |
Total Utilities | | 18,907,072 |
| | | |
TOTAL COMMON STOCKS | | |
| (Identified Cost $155,523,147) | | 242,084,985 |
| | | |
SHORT-TERM INVESTMENTS - 5.8% | | |
| Dreyfus Treasury Cash Management - Institutional Shares | 6,014,027 | 6,014,027 |
| Fannie Mae Discount Note, 7/5/2007 | $3,000,000 | 2,998,293 |
| U.S. Treasury Bill, 8/9/2007 | 6,000,000 | 5,971,433 |
| | | |
TOTAL SHORT-TERM INVESTMENTS | | |
| (Identified Cost $14,983,753) | | 14,983,753 |
| | | |
TOTAL INVESTMENTS - 99.6% | | |
| (Identified Cost $170,506,900) | | 257,068,738 |
| | | |
OTHER ASSETS, LESS LIABILITIES - 0.4% | | 1,146,747 |
| | | |
NET ASSETS - 100% | | $258,215,485 |
*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: Germany - 21.6%; United Kingdom - 20.1%; France - 12.3%.
The accompanying notes are an integral part of the financial statements.
7
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost $170,506,900) (Note 2) | $257,068,738 |
| Foreign currency, at value (cost $128,754) | 129,224 |
| Receivable for securities sold | 1,237,094 |
| Dividends receivable | 417,819 |
| Receivable for fund shares sold | 208,658 |
| Foreign tax reclaims receivable | 138,523 |
| Prepaid expenses | 1,924 |
| | |
| TOTAL ASSETS | 259,201,980 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 208,550 |
| Accrued fund accounting and transfer agent fees (Note 3) | 17,682 |
| Accrued Chief Compliance Officer service fees (Note 3) | 395 |
| Accrued directors' fees (Note 3) | 288 |
| Payable for fund shares repurchased | 737,176 |
| Audit fees payable | 22,404 |
| | |
| TOTAL LIABILITIES | 986,495 |
| | |
TOTAL NET ASSETS | $258,215,485 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $235,196 |
| Additional paid-in-capital | 166,835,334 |
| Undistributed net investment income | 3,068,062 |
| Accumulated net realized gain on investments, foreign currency, and other assets and liabilities | 1,509,411 |
| Net unrealized appreciation on investments, foreign currency, and other assets and liabilities | 86,567,482 |
| | |
TOTAL NET ASSETS | $258,215,485 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($258,215,485/23,519,617 shares) | $10.98 |
The accompanying notes are an integral part of the financial statements.
8
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Dividends (net of foreign tax withheld, $506,040) | $4,088,683 |
| Interest | 231,979 |
| | |
| Total Investment Income | 4,320,662 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 1,162,080 |
| Fund accounting and transfer agent fees (Note 3) | 80,858 |
| Directors' fees (Note 3) | 3,631 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Custodian fees | 40,192 |
| Miscellaneous | 43,923 |
| | |
| Total Expenses | 1,333,519 |
| | |
| NET INVESTMENT INCOME | 2,987,143 |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | |
| | |
| Net realized gain (loss) on - | |
| Investments | 1,747,391 |
| Foreign currency and other assets and liabilities | (237,980) |
| | 1,509,411 |
| | |
| Net change in unrealized appreciation on - | |
| Investments | 21,587,065 |
| Foreign currency and other assets and liabilities | (3,613) |
| | 21,583,452 |
| | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 23,092,863 |
| | |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $26,080,006 |
The accompanying notes are an integral part of the financial statements.
9
Statements of Changes in Net Assets
| | For the Six | |
| | Months Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment income | $2,987,143 | $2,730,077 |
| Net realized gain on investments and foreign currency | 1,509,411 | 35,089,156 |
| Net change in unrealized appreciation on investments and foreign currency | 21,583,452 | 3,929,198 |
| | | |
| Net increase from operations | 26,080,006 | 41,748,431 |
| | | |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | | |
| | | |
| From net investment income | - | (2,592,847) |
| From net realized gain on investments | - | (36,732,750) |
| | | |
| Total distributions to shareholders | - | (39,325,597) |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase from capital share transactions (Note 5) | 16,154,791 | 20,390,350 |
| | | |
| Net increase in net assets | 42,234,797 | 22,813,184 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 215,980,688 | 193,167,504 |
| | | |
End of period (including undistributed net investment income of $3,068,062 and $80,919, respectively) | $258,215,485 | $215,980,688 |
The accompanying notes are an integral part of the financial statements.
10
| | For the Six | | | | | |
| | Months Ended | | | | | |
| | 6/30/07 | | | For the Years Ended | | |
| | (unaudited) | 12/31/06 | 12/31/05 | 12/31/04 | 12/31/03 | 12/31/02 |
| | | | | | | |
Per share data (for a share outstanding | | | | | | |
throughout each period): | | | | | | |
| | | | | | | |
Net asset value - Beginning of period | $9.84 | $9.90 | $9.52 | $8.83 | $6.67 | $7.89 |
| | | | | | | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income | 0.13 | 0.15 | 0.11 | 0.08 | 0.07 | 0.07 |
| Net realized and unrealized gain (loss) on investments | 1.01 | 2.01 | 1.21 | 1.44 | 2.72 | (1.20) |
| | | | | | | |
| Total from investment operations | 1.14 | 2.16 | 1.32 | 1.52 | 2.79 | (1.13) |
| | | | | | | |
| Less distributions to shareholders: | | | | | | |
| From net investment income | - | (0.15) | (0.11) | (0.08) | (0.06) | (0.07) |
| From net realized gain on investments | - | (2.07) | (0.83) | (0.75) | (0.57) | (0.02) |
| | | | | | | |
| Total distributions to shareholders | - | (2.22) | (0.94) | (0.83) | (0.63) | (0.09) |
| | | | | | | |
Net asset value - End of period | $10.98 | $9.84 | $9.90 | $9.52 | $8.83 | $6.67 |
| | | | | | | |
Total return1 | 11.59% | 21.96% | 13.99% | 17.67% | 42.10% | (14.30%) |
| | | | | | | |
Ratios (to average net assets)/Supplemental Data: | | | | | | |
| Expenses | 1.15%2 | 1.18% | 1.24% | 1.29% | 1.30%* | 1.32% |
| Net investment income | 2.57%2 | 1.39% | 1.10% | 0.86% | 0.94% | 0.96% |
| | | | | | | |
| Portfolio turnover | 15% | 30% | 35% | 19% | 46% | 5% |
| | | | | | | |
Net assets - End of period (000's omitted) | $258,215 | $215,981 | $193,168 | $165,917 | $129,479 | $80,945 |
*The investment advisor did not impose all of its management fee and is not eligible to recoup any expenses that have been waived or reimbursed in prior periods. If these expenses had been incurred by the Series, the expense ratio (to average net assets) for the year ended 12/31/03 would have been increased by 0.02%.
1Represents 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 during the year ended 12/31/03. Periods less than one year are not annualized.
2Annualized.
The accompanying notes are an integral part of the financial statements.
11
Notes to Financial Statements (unaudited)
1. ORGANIZATION
International Series (the "Series") is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide long-term growth by investing principally in the common stocks of companies located outside the United States.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The Series resumed offering shares directly to investors on May 18, 2004, as it had done previously from time to time. The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 100 million have been designated as International 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.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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, with the exception of exchange-traded funds as noted above.
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, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
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.
12
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Security Transactions, Investment Income and Expenses (continued)
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.
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.
13
Notes to Financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
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 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.
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, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $59,641,702 and $33,014,245, respectively. There were no purchases or sales of United States Government securities.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of International Series were:
| | For the Six Months | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | Shares | Amount | Shares | Amount |
| | | | | |
| Sold | 2,023,532 | $20,848,729 | 3,790,447 | $40,831,406 |
| Reinvested | - | - | 3,944,903 | 38,787,300 |
| Repurchased | (451,222) | (4,693,938) | (5,307,703) | (59,228,356) |
| Total | 1,572,310 | $16,154,791 | 2,427,647 | $20,390,350 |
Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
14
Notes to Financial Statements (unaudited)
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 June 30, 2007.
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. 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 for the year ended December 31, 2006 were as follows:
| Ordinary income | $5,289,902 |
| Long-term capital gains | 34,035,695 |
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized appreciation were as follows:
| Cost for federal income tax purposes | $170,506,900 |
| | |
| Unrealized appreciation | $87,686,161 |
| Unrealized depreciation | (1,124,323) |
| | |
| Net unrealized appreciation | $86,561,838 |
9. RECENT ACCOUTING 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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the entity 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
15
Notes to Financial Statements (unaudited)
9. RECENT ACCOUNTING PRONOUNCEMENTS (continued)
positions not deemed to meet the more likely than not threshold would be recorded as a tax benefit or expense in the current year. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact on the Series’ results of operation and financial condition.
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
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17
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 |
18
Manning & Napier Fund, Inc.
Core Plus Bond Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| | 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $1,008.00 | $4.03 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,020.78 | $4.06 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.81%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year.
1
Portfolio Composition as of June 30, 2007 (unaudited)
Data for pie chart to follow:
Sector Allocation1
| Consumer Discretionary | 8.84% |
| Consumer Staples | 0.65% |
| Energy | 2.13% |
| Financials | 9.42% |
| Health Care | 1.77% |
| Industrials | 6.63% |
| Information Technology | 2.61% |
| Materials | 0.57% |
| Utilities | 3.06% |
| Asset-Backed Securities | 0.54% |
| Special Purpose Entities | 1.98% |
| Supranational Obligations | 0.62% |
| U.S. Government Agencies | 51.23% |
| Cash, short-term investments, and liabilities, less other assets | 9.95% |
1As a percentage of net assets
Data for pie chart to follow:
Credit Quality Ratings2,3
| Aaa | 13.07% |
| Aa | 8.09% |
| A | 32.97% |
| Baa | 30.18% |
| Ba | 9.79% |
| B | 2.11% |
| Caa | 3.79% |
2As a percentage of total corporate bonds, foreign bonds, asset-backed securities, special purpose entities and supranational obligations.
3Based on ratings from Moody's, or the S&P equivalent. The Series may use different ratings provided by other rating agencies for purposes of determining compliance with the Series' investment policies.
2
Investment Portfolio - June 30, 2007 (unaudited)
| | Credit | | |
| | Rating1 | Principal | Value |
| | (unaudited) | Amount | (Note 2) |
| | | | |
CORPORATE BONDS - 34.37% | | | |
Convertible Corporate Bonds - 4.92% | | | |
Consumer Discretionary - 1.36% | | | |
Hotels, Restaurants & Leisure - 0.63% | | | |
| Carnival Corp., 2.00%, 4/15/2021 | A3 | $1,250,000 | $1,578,125 |
| | | | |
Media - 0.73% | | | |
| Charter Communications, Inc., 5.875%, 11/16/2009 | Caa3 | 1,015,000 | 1,814,312 |
Total Consumer Discretionary | | | 3,392,437 |
| | | | |
Energy - 1.12% | | | |
Energy Equipment & Services - 1.12% | | | |
| Pride International, Inc., 3.25%, 5/1/2033 | BB2 | 675,000 | 1,008,281 |
| Schlumberger Ltd., 1.50%, 6/1/2023 | A1 | 760,000 | 1,783,150 |
Total Energy | | | 2,791,431 |
| | | | |
Health Care - 0.20% | | | |
Pharmaceuticals - 0.20% | | | |
| Valeant Pharmaceuticals International, 4.00%, 11/15/2013 | B2 | 540,000 | 500,850 |
| | | | |
Industrials - 0.75% | | | |
Airlines - 0.75% | | | |
| JetBlue Airways Corp., 3.75%, 3/15/2035 | Caa2 | 1,900,000 | 1,864,375 |
| | | | |
Information Technology - 1.09% | | | |
Computers & Peripherals - 1.09% | | | |
| EMC Corp., 1.75%, 12/1/2013 | BBB2 | 2,150,000 | 2,738,563 |
| | | | |
Utilities - 0.40% | | | |
Multi-Utilities - 0.40% | | | |
| Xcel Energy, Inc., 7.50%, 11/21/2007 | Baa1 | 595,000 | 1,001,088 |
| | | | |
Total Convertible Corporate Bonds | | | |
| (Identified Cost $10,647,906) | | | 12,288,744 |
| | | | |
Non-Convertible Corporate Bonds - 29.45% | | | |
Consumer Discretionary - 7.48% | | | |
Automobiles - 2.89% | | | |
| General Motors Acceptance Corp. LLC, 6.125%, 1/22/2008 | Ba1 | 7,240,000 | 7,238,979 |
| | | | |
Media - 3.14% | | | |
| AOL Time Warner (now known as Time Warner, Inc.), 7.625%, 4/15/2031 | Baa2 | 2,725,000 | 2,919,486 |
| Comcast Corp., 6.50%, 11/15/2035 | Baa2 | 3,105,000 | 3,009,829 |
| The Walt Disney Co., 7.00%, 3/1/2032 | A2 | 1,720,000 | 1,911,180 |
| | | | 7,840,495 |
| | | | |
Multiline Retail - 0.82% | | | |
| Target Corp., 5.875%, 3/1/2012 | A1 | 2,020,000 | 2,052,108 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | Credit | | |
| | Rating1 | Principal | Value |
| | (unaudited) | Amount | (Note 2) |
| | | | |
CORPORATE BONDS (continued) | | | |
Non-Convertible Corporate Bonds (continued) | | | |
Consumer Discretionary (continued) | | | |
Specialty Retail - 0.63% | | | |
| Lowe's Companies, Inc., 8.25%, 6/1/2010 | A1 | $1,470,000 | $1,577,889 |
Total Consumer Discretionary | | | 18,709,471 |
| | | | |
Consumer Staples - 0.65% | | | |
Food & Staples Retailing - 0.64% | | | |
| The Kroger Co., 7.25%, 6/1/2009 | Baa2 | 775,000 | 796,702 |
| The Kroger Co., 6.80%, 4/1/2011 | Baa2 | 775,000 | 801,135 |
| | | | 1,597,837 |
| | | | |
Household Products - 0.01% | | | |
| The Procter & Gamble Co., 4.85%, 12/15/2015 | Aa3 | 25,000 | 23,760 |
Total Consumer Staples | | | 1,621,597 |
| | | | |
Energy - 1.01% | | | |
Oil, Gas & Consumable Fuels - 1.01% | | | |
| Anadarko Petroleum Corp., 5.95%, 9/15/2016 | Baa3 | 1,015,000 | 991,069 |
| Arch Western Finance LLC, 6.75%, 7/1/2013 | B1 | 1,615,000 | 1,550,400 |
Total Energy | | | 2,541,469 |
| | | | |
Financials - 8.11% | | | |
Capital Markets - 2.10% | | | |
| The Goldman Sachs Group, Inc., 6.345%, 2/15/2034 | A1 | 1,920,000 | 1,831,137 |
| Lehman Brothers Holdings, Inc., 6.625%, 1/18/2012 | A1 | 1,155,000 | 1,198,021 |
| Merrill Lynch & Co., Inc., 6.00%, 2/15/2017 | Aa3 | 1,165,000 | 1,145,524 |
| Merrill Lynch & Co., Inc., 6.11%, 1/29/2037 | A1 | 1,145,000 | 1,074,380 |
| | | | 5,249,062 |
| | | | |
Commercial Banks - 2.43% | | | |
Commonwealth Bank of Australia3,4, 4/30/2010 (Australia) (Note 7) | Aa3 | 1,000,000 | 943,800 |
| PNC Bank National Association, 5.25%, 1/15/2017 | A1 | 1,895,000 | 1,805,431 |
| U.S. Bank National Association, 6.375%, 8/1/2011 | Aa2 | 85,000 | 87,563 |
| Wachovia Corp., 5.25%, 8/1/2014 | A1 | 3,340,000 | 3,244,429 |
| | | | 6,081,223 |
| | | | |
Consumer Finance - 1.71% | | | |
| Toyota Motor Credit Corp., 0.75%, 6/9/2008 (JPY) (Note 7) | Aaa | 235,000,000 | 1,905,739 |
| Toyota Motor Credit Corp., 10.00%, 5/4/2022 | Aaa | 2,400,000 | 2,376,000 |
| | | | 4,281,739 |
| | | | |
Diversified Financial Services - 0.43% | | | |
| Citigroup, Inc., 6.625%, 6/15/2032 | Aa2 | 1,040,000 | 1,083,520 |
The accompanying notes are an integral part of the financial statements.
4
Investment Portfolio - June 30, 2007 (unaudited)
| | Credit | | |
| | Rating1 | Principal | Value |
| | (unaudited) | Amount | (Note 2) |
| | | | |
CORPORATE BONDS (continued) | | | |
Non-Convertible Corporate Bonds (continued) | | | |
Financials (continued) | | | |
Insurance - 1.44% | | | |
| Ambac Financial Group, Inc., 5.95%, 12/5/2035 | Aa2 | $1,965,000 | $1,871,951 |
| American International Group, Inc., 4.25%, 5/15/2013 | Aa2 | 1,840,000 | 1,716,354 |
| | | | 3,588,305 |
Total Financials | | | 20,283,849 |
| | | | |
Health Care - 1.57% | | | |
Pharmaceuticals - 1.57% | | | |
| Abbott Laboratories, 3.50%, 2/17/2009 | A1 | 1,305,000 | 1,268,387 |
| Abbott Laboratories, 5.875%, 5/15/2016 | A1 | 500,000 | 500,128 |
| Wyeth, 6.50%, 2/1/2034 | A3 | 2,100,000 | 2,159,210 |
Total Health Care | | | 3,927,725 |
| | | | |
Industrials - 5.88% | | | |
Aerospace & Defense - 0.49% | | | |
| Boeing Capital Corp., 6.50%, 2/15/2012 | A2 | 1,175,000 | 1,224,900 |
| | | | |
Air Freight & Logistics - 0.51% | | | |
| FedEx Corp., 3.50%, 4/1/2009 | Baa2 | 1,310,000 | 1,266,309 |
| | | | |
Airlines - 0.99% | | | |
| Southwest Airlines Co., 5.25%, 10/1/2014 | Baa1 | 2,630,000 | 2,489,605 |
| | | | |
Industrial Conglomerates - 1.29% | | | |
| General Electric Capital Corp., 3.75%, 4/9/2008 (EUR) (Note 7) | Aaa | 1,215,000 | 1,635,213 |
| General Electric Capital Corp., 6.75%, 3/15/2032 | Aaa | 1,460,000 | 1,584,053 |
| | | | 3,219,266 |
| | | | |
Machinery - 0.48% | | | |
| John Deere Capital Corp., 5.50%, 4/13/2017 | A2 | 1,240,000 | 1,208,339 |
| | | | |
Road & Rail - 2.12% | | | |
| CSX Corp., 6.00%, 10/1/2036 | Baa3 | 3,725,000 | 3,477,571 |
| Union Pacific Corp., 5.65%, 5/1/2017 | Baa2 | 1,870,000 | 1,817,653 |
| | | | 5,295,224 |
Total Industrials | | | 14,703,643 |
| | | | |
Information Technology - 1.52% | | | |
Communications Equipment - 1.52% | | | |
| Cisco Systems, Inc., 5.50%, 2/22/2016 | A1 | 1,240,000 | 1,210,002 |
| Corning, Inc., 6.20%, 3/15/2016 | Baa1 | 2,590,000 | 2,596,604 |
Total Information Technology | | | 3,806,606 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - June 30, 2007 (unaudited)
| | Credit | | |
| | Rating1 | Principal | Value |
| | (unaudited) | Amount | (Note 2) |
| | | | |
CORPORATE BONDS (continued) | | | |
Non-Convertible Corporate Bonds (continued) | | | |
Materials - 0.57% | | | |
Metals & Mining - 0.57% | | | |
| Alcoa, Inc., 5.87%, 2/23/2022 | A2 | $1,505,000 | $1,428,439 |
| | | | |
Utilities - 2.66% | | | |
Electric Utilities - 2.30% | | | |
Allegheny Energy Supply Co. LLC3,5, 8.25%, 4/15/2012 | Ba3 | 1,180,000 | 1,256,700 |
| American Electric Power Co., Inc., 5.375%, 3/15/2010 | Baa2 | 1,275,000 | 1,270,854 |
| Exelon Generation Co. LLC, 5.35%, 1/15/2014 | Baa1 | 3,355,000 | 3,214,999 |
| | | | 5,742,553 |
| | | | |
Multi-Utilities - 0.36% | | | |
| CenterPoint Energy Resources Corp., 7.875%, 4/1/2013 | Baa3 | 770,000 | 840,482 |
| Duke Energy Field Services LLC (now known as DCP Midstream LP), 7.875%, 8/16/2010 | Baa2 | 30,000 | 31,859 |
| Sempra Energy, 7.95%, 3/1/2010 | Baa1 | 30,000 | 31,719 |
| | | | 904,060 |
Total Utilities | | | 6,646,613 |
| | | | |
Total Non-Convertible Corporate Bonds | | | |
| (Identified Cost $75,346,042) | | | 73,669,412 |
| | | | |
TOTAL CORPORATE BONDS | | | |
| (Identified Cost $85,993,948) | | | 85,958,156 |
| | | | |
FOREIGN BONDS - 1.31% | | | |
Financials - 1.31% | | | |
Commercial Banks - 1.31% | | | |
| Depfa ACS Bank, 0.75%, 9/22/2008 (Ireland) (JPY) (Note 7) | Aaa | 180,000,000 | 1,459,186 |
| MBNA Europe Funding plc, 3.00%, 2/7/2008 (United Kingdom) (EUR) (Note 7) | Aaa | 1,350,000 | 1,811,767 |
| | | | |
TOTAL FOREIGN BONDS | | | |
| (Identified Cost $3,263,247) | | | 3,270,953 |
| | | | |
ASSET BACKED SECURITIES - 0.54% | | | |
| Onyx Acceptance Owner Trust 2003-D A4, 3.20%, 3/15/2010 | Aaa | 369,323 | 365,466 |
Terra 2007-1A B1 Static Synthetic CDO3,6, 6.355%, 3/20/2015 | AA2 | 1,000,000 | 981,900 |
| | | | |
TOTAL ASSET BACKED SECURITIES | | | |
| (Identified Cost $1,367,581) | | | 1,347,366 |
| | | | |
SPECIAL PURPOSE ENTITIES - 1.98% | | | |
Parcs Master Trust, Series 2007-23, 6.32%3,7, 6/20/2014 | | | |
| (Identified Cost $5,000,000) | A2 | 5,000,000 | 4,950,000 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - June 30, 2007 (unaudited)
| | Credit | | |
| | Rating1 | Principal | Value |
| | (unaudited) | Amount | (Note 2) |
| | | | |
SUPRANATIONAL OBLIGATIONS - 0.62% | | | |
| International Bank for Reconstruction and Development, 2.00%, 2/18/2008 (JPY) (Note 7) | | | |
| (Identified Cost $1,713,226) | Aaa | $190,000,000 | $1,553,700 |
| | | | |
U.S. GOVERNMENT AGENCIES - 51.23% | | | |
Mortgage-Backed Securities - 47.97% | | | |
| Fannie Mae, Pool #244510, 5.50%, 12/1/2008 | | 4,747 | 4,731 |
| Fannie Mae, Pool #190549, 5.50%, 1/1/2009 | | 5,787 | 5,768 |
| Fannie Mae, Pool #050972, 5.50%, 1/1/2009 | | 5,796 | 5,776 |
| Fannie Mae, Pool #663794, 5.50%, 9/1/2017 | | 122,524 | 121,158 |
| Fannie Mae, Pool #555389, 5.50%, 4/1/2018 | | 508,522 | 502,855 |
| Fannie Mae, Pool #697020, 5.50%, 5/1/2018 | | 40,543 | 40,084 |
| Fannie Mae, Pool #741610, 5.50%, 9/1/2018 | | 392,381 | 387,941 |
| Fannie Mae, Pool #761280, 5.50%, 2/1/2019 | | 120,743 | 119,233 |
| Fannie Mae, Pool #725793, 5.50%, 9/1/2019 | | 573,427 | 566,938 |
| Fannie Mae, Pool #815122, 5.50%, 4/1/2020 | | 114,976 | 113,358 |
| Fannie Mae, Pool #829068, 4.50%, 8/1/2020 | | 92,305 | 87,628 |
| Fannie Mae, Pool #825922, 4.50%, 9/1/2020 | | 771,085 | 732,016 |
| Fannie Mae, Pool #829070, 4.50%, 9/1/2020 | | 88,601 | 84,111 |
| Fannie Mae, Pool #829702, 4.50%, 10/1/2020 | | 98,346 | 93,363 |
| Fannie Mae, Pool #844909, 4.50%, 10/1/2020 | | 97,706 | 92,756 |
| Fannie Mae, Pool #813954, 4.50%, 12/1/2020 | | 871,293 | 827,147 |
| Fannie Mae, Pool #837186, 4.50%, 12/1/2020 | | 312,940 | 297,084 |
| Fannie Mae, Pool #256114, 4.50%, 1/1/2021 | | 209,176 | 198,577 |
| Fannie Mae, Pool #852931, 4.50%, 4/1/2021 | | 442,207 | 419,588 |
| Fannie Mae, Pool #869204, 4.50%, 5/1/2021 | | 425,998 | 404,208 |
| Fannie Mae, Pool #256543, 5.00%, 11/1/2021 | | 758,559 | 733,259 |
| Fannie Mae, Pool #900880, 5.00%, 12/1/2021 | | 778,845 | 752,869 |
| Fannie Mae, Pool #904409, 5.00%, 12/1/2021 | | 712,915 | 689,138 |
| Fannie Mae, Pool #905666, 5.00%, 12/1/2021 | | 314,819 | 304,319 |
| Fannie Mae, Pool #906708, 5.00%, 12/1/2021 | | 776,040 | 750,157 |
| Fannie Mae, Pool #907113, 5.00%, 12/1/2021 | | 776,232 | 750,343 |
| Fannie Mae, Pool #899017, 5.00%, 1/1/2022 | | 723,197 | 699,076 |
| Fannie Mae, Pool #818020, 4.50%, 2/1/2022 | | 1,145,163 | 1,086,671 |
| Fannie Mae, Pool #912557, 4.50%, 2/1/2022 | | 1,193,717 | 1,132,744 |
| Fannie Mae, Pool #909352, 5.00%, 2/1/2022 | | 26,145 | 25,267 |
| Fannie Mae, Pool #912415, 5.00%, 2/1/2022 | | 779,130 | 753,144 |
| Fannie Mae, Pool #741552, 6.50%, 9/1/2033 | | 474,196 | 481,833 |
| Fannie Mae, Pool #747607, 6.50%, 11/1/2033 | | 81,854 | 83,172 |
| Fannie Mae, Pool #776452, 6.50%, 1/1/2034 | | 43,577 | 44,278 |
| Fannie Mae, Pool #765848, 6.50%, 2/1/2034 | | 53,129 | 53,898 |
| Fannie Mae, Pool #766304, 6.50%, 3/1/2034 | | 69,366 | 70,369 |
| Fannie Mae, Pool #725686, 6.50%, 7/1/2034 | | 140,045 | 142,526 |
| Fannie Mae, Pool #782769, 6.50%, 7/1/2034 | | 580,361 | 588,757 |
| Fannie Mae, Pool #786281, 6.50%, 7/1/2034 | | 49,004 | 49,713 |
| Fannie Mae, Pool #786692, 6.50%, 8/1/2034 | | 57,206 | 58,034 |
The accompanying notes are an integral part of the financial statements.
7
Investment Portfolio - June 30, 2007 (unaudited)
| | | |
| | Principal | Value |
| | Amount | (Note 2) |
| | | |
U.S. GOVERNMENT AGENCIES (continued) | | |
Mortgage-Backed Securities (continued) | | |
| Fannie Mae, Pool #799657, 6.50%, 11/1/2034 | $339,343 | $344,252 |
| Fannie Mae, Pool #812185, 4.50%, 2/1/2035 | 405,229 | 368,859 |
| Fannie Mae, Pool #815409, 4.50%, 2/1/2035 | 212,531 | 193,456 |
| Fannie Mae, Pool #815926, 4.50%, 4/1/2035 | 964,868 | 878,270 |
| Fannie Mae, Pool #745147, 4.50%, 12/1/2035 | 17,600,016 | 16,020,393 |
| Fannie Mae, Pool #745876, 6.50%, 9/1/2036 | 180,346 | 182,100 |
| Fannie Mae, Pool #900357, 6.50%, 9/1/2036 | 927,058 | 936,074 |
| Fannie Mae, Pool #902295, 6.50%, 11/1/2036 | 1,845,531 | 1,863,480 |
| Fannie Mae, Pool #905210, 6.50%, 11/1/2036 | 1,825,401 | 1,843,155 |
| Fannie Mae, Pool #920084, 6.50%, 11/1/2036 | 963,330 | 972,700 |
| Fannie Mae, Pool #894774, 6.50%, 12/1/2036 | 906,454 | 915,270 |
| Fannie Mae, Pool #902858, 6.50%, 12/1/2036 | 1,911,082 | 1,929,669 |
Fannie Mae, TBA8, 5.50%, 7/15/2022 | 4,867,000 | 4,793,995 |
Fannie Mae, TBA8, 5.00%, 7/15/2037 | 2,428,000 | 2,274,733 |
Fannie Mae, TBA8, 5.50%, 7/15/2037 | 2,506,000 | 2,416,724 |
Fannie Mae, TBA8, 6.00%, 7/15/2037 | 9,409,000 | 9,306,084 |
Fannie Mae, TBA8, 6.50%, 7/15/2037 | 4,654,000 | 4,697,631 |
| Federal Home Loan Mortgage Corp., Pool #M90974, 4.50%, 3/1/2010 | 488,691 | 480,613 |
| Federal Home Loan Mortgage Corp., Pool #E00593, 5.50%, 11/1/2013 | 15,299 | 15,195 |
| Federal Home Loan Mortgage Corp., Pool #E91213, 5.50%, 9/1/2017 | 77,631 | 76,739 |
| Federal Home Loan Mortgage Corp., Pool #E01488, 5.00%, 10/1/2018 | 14,403 | 13,972 |
| Federal Home Loan Mortgage Corp., Pool #B11112, 5.50%, 11/1/2018 | 430,078 | 425,032 |
| Federal Home Loan Mortgage Corp., Pool #B11862, 5.50%, 1/1/2019 | 214,694 | 212,175 |
| Federal Home Loan Mortgage Corp., Pool #B16144, 5.50%, 8/1/2019 | 155,499 | 153,505 |
| Federal Home Loan Mortgage Corp., Pool #B16835, 5.50%, 10/1/2019 | 1,053,341 | 1,039,830 |
| Federal Home Loan Mortgage Corp., Pool #J02511, 5.00%, 9/1/2020 | 194,927 | 188,526 |
| Federal Home Loan Mortgage Corp., Pool #J00774, 5.00%, 12/1/2020 | 75,687 | 73,202 |
| Federal Home Loan Mortgage Corp., Pool #G11896, 4.50%, 1/1/2021 | 5,745,804 | 5,455,889 |
| Federal Home Loan Mortgage Corp., Pool #G11981, 5.00%, 4/1/2021 | 75,373 | 72,855 |
| Federal Home Loan Mortgage Corp., Pool #G18160, 5.00%, 11/1/2021 | 90,216 | 87,202 |
The accompanying notes are an integral part of the financial statements.
8
Investment Portfolio - June 30, 2007 (unaudited)
| | | |
| | Principal | Value |
| | Amount | (Note 2) |
| | | |
U.S. GOVERNMENT AGENCIES (continued) | | |
Mortgage-Backed Securities (continued) | | |
| Federal Home Loan Mortgage Corp., Pool #G18156, 5.00%, 12/1/2021 | $3,539,926 | $3,421,649 |
| Federal Home Loan Mortgage Corp., Pool #G12491, 5.00%, 1/1/2022 | 77,934 | 75,330 |
| Federal Home Loan Mortgage Corp., Pool #J04222, 5.00%, 1/1/2022 | 914,467 | 883,762 |
| Federal Home Loan Mortgage Corp., Pool #G18168, 5.00%, 2/1/2022 | 675,065 | 652,398 |
| Federal Home Loan Mortgage Corp., Pool #G18182, 5.50%, 5/1/2022 | 4,169,108 | 4,105,987 |
| Federal Home Loan Mortgage Corp., Pool #A22067, 6.50%, 5/1/2034 | 896,858 | 910,588 |
| Federal Home Loan Mortgage Corp., Pool #A25775, 6.50%, 8/1/2034 | 614,462 | 623,869 |
| Federal Home Loan Mortgage Corp., Pool #G01741, 6.50%, 10/1/2034 | 522,063 | 531,700 |
| Federal Home Loan Mortgage Corp., Pool #G01782, 6.50%, 2/1/2035 | 426,588 | 433,819 |
| Federal Home Loan Mortgage Corp., Pool #G08141, 6.50%, 7/1/2036 | 28,517 | 28,824 |
| Federal Home Loan Mortgage Corp., Pool #G02327, 6.50%, 8/1/2036 | 37,551 | 37,955 |
| Federal Home Loan Mortgage Corp., Pool #A52364, 6.50%, 9/1/2036 | 15,460 | 15,627 |
| Federal Home Loan Mortgage Corp., Pool #A52428, 6.50%, 9/1/2036 | 871,807 | 881,181 |
| Federal Home Loan Mortgage Corp., Pool #A54391, 6.50%, 9/1/2036 | 20,186 | 20,404 |
| Federal Home Loan Mortgage Corp., Pool #A61160, 6.50%, 9/1/2036 | 27,889 | 28,188 |
| Federal Home Loan Mortgage Corp., Pool #A52716, 6.50%, 10/1/2036 | 5,587,386 | 5,647,466 |
| Federal Home Loan Mortgage Corp., Pool #A52888, 6.50%, 10/1/2036 | 226,702 | 229,140 |
| Federal Home Loan Mortgage Corp., Pool #G02433, 6.50%, 11/1/2036 | 883,279 | 892,777 |
| Federal Home Loan Mortgage Corp., Pool #A55847, 6.50%, 12/1/2036 | 24,314 | 24,576 |
Federal Home Loan Mortgage Corp., TBA8, 5.00%, 7/15/2022 | 2,483,000 | 2,399,199 |
Federal Home Loan Mortgage Corp., TBA8, 5.50%, 7/15/2022 | 3,654,000 | 3,598,050 |
Federal Home Loan Mortgage Corp., TBA8, 5.00%, 7/15/2037 | 2,580,000 | 2,417,945 |
The accompanying notes are an integral part of the financial statements.
9
Investment Portfolio - June 30, 2007 (unaudited)
| | Principal | |
| | Amount/ | Value |
| | Shares | (Note 2) |
| | | |
U.S. GOVERNMENT AGENCIES (continued) | | |
Mortgage-Backed Securities (continued) | | |
Federal Home Loan Mortgage Corp., TBA8, 5.50%, 7/15/2037 | $2,504,000 | $2,414,795 |
Federal Home Loan Mortgage Corp., TBA8, 6.00%, 7/15/2037 | 9,411,000 | 9,322,772 |
Federal Home Loan Mortgage Corp., TBA8, 6.50%, 7/15/2037 | 5,816,000 | 5,875,975 |
| GNMA, Pool #487193, 5.00%, 4/15/2020 | 598,532 | 580,748 |
| GNMA, Pool #563559, 6.50%, 4/15/2032 | 586,732 | 598,491 |
| GNMA, Pool #552765, 6.50%, 9/15/2032 | 740,320 | 755,157 |
| | | |
Total Mortgage-Backed Securities | | |
| (Identified Cost $121,331,794) | | 119,993,839 |
| | | |
Other Agencies - 3.26% | | |
| Federal Home Loan Mortgage Corp., 6.25%, 7/15/2032 | | |
| (Identified Cost $8,289,335) | 7,525,000 | 8,157,725 |
| | | |
TOTAL U.S. GOVERNMENT AGENCIES | | |
| (Identified Cost $129,621,129) | | 128,151,564 |
| | | |
SHORT-TERM INVESTMENTS - 32.91% | | |
| Dreyfus Treasury Cash Management - Institutional Shares | 4,487,819 | 4,487,819 |
| Fannie Mae Discount Note, 7/2/2007 | $10,000,000 | 9,998,578 |
| Fannie Mae Discount Note, 7/11/2007 | 38,000,000 | 37,945,955 |
| Fannie Mae Discount Note, 7/20/2007 | 16,000,000 | 15,956,764 |
| Fannie Mae Discount Note, 7/31/2007 | 14,000,000 | 13,941,817 |
| | | |
TOTAL SHORT-TERM INVESTMENTS | | |
| (Identified Cost $82,330,933) | | 82,330,933 |
| | | |
TOTAL INVESTMENTS - 122.96% | | |
| (Identified Cost $309,290,064) | | 307,562,672 |
| | | |
LIABILITIES, LESS OTHER ASSETS - (22.96%) | | (57,423,315) |
| | | |
NET ASSETS - 100% | | $250,139,357 |
1Credit ratings from Moody's (unaudited).
2Credit ratings from S&P (unaudited).
3Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. These securities amount to $8,132,400, or 3.3%, of the Series' net assets as of June 30, 2007 (see Note 2 to the financial statements).
4This security was acquired April 13, 2007 at a cost of $1,000,000 ($100.00 per share) and has been determined to be illiquid under guidelines established by the Board of Directors (See Note 2 to the financial statements).
5This security has been sold under rule 144A and has been determined to be liquid under guidelines established by the Board of Directors (See Note 2 to the financial statements).
6This security was acquired on February 28, 2007 at a cost of $1,000,000 ($100.00 per share) and has been determined to be illiquid under guidelines established by the Board of Directors (See Note 2 to the financial statements).
7This security was acquired on May 31, 2007 at a cost of $5,000,000 ($100.00 per share) and has been determined to be illiquid under guidelines established by the Board of Directors (See Note 2 to the financial statements).
8Securities purchased on a forward commitment or when-issued basis. TBA - to be announced (See Note 2 to the financial statements).
The accompanying notes are an integral part of the financial statements.
10
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost, $309,290,064) (Note 2) | $307,562,672 |
| Receivable for securities sold | 2,399,983 |
| Interest receivable | 2,035,368 |
| Receivable for fund shares sold | 233,577 |
| Dividends receivable | 14,151 |
| Prepaid expenses | 5,304 |
| | |
| TOTAL ASSETS | 312,251,055 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 141,188 |
| Accrued fund accounting and transfer agent fees (Note 3) | 13,785 |
| Accrued Chief Compliance Officer service fees (Note 3) | 402 |
| Accrued directors' fees (Note 3) | 276 |
| Payable for purchases of delayed delivery securities (Note 2) | 51,887,903 |
| Payable for securities purchased | 9,958,916 |
| Payable for fund shares repurchased | 89,835 |
| Audit fees payable | 19,393 |
| | |
| TOTAL LIABILITIES | 62,111,698 |
| | |
TOTAL NET ASSETS | $250,139,357 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $248,743 |
| Additional paid-in-capital | 248,599,167 |
| Undistributed net investment income | 4,961,926 |
| Accumulated net realized loss on investments, foreign currency, and other assets and liabilities | (1,942,790) |
| Net unrealized depreciation on investments and other assets and liabilities | (1,727,689) |
| | |
TOTAL NET ASSETS | $250,139,357 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($250,139,357/24,874,322 shares) | $10.06 |
The accompanying notes are an integral part of the financial statements.
11
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Interest | $5,781,376 |
| Dividends | 133,509 |
| | |
| Total Investment Income | 5,914,885 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 824,355 |
| Fund accounting and transfer agent fees (Note 3) | 79,989 |
| Directors' fees (Note 3) | 3,636 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Custodian fees | 8,167 |
| Miscellaneous | 33,977 |
| | |
| Total Expenses | 952,959 |
| | |
| NET INVESTMENT INCOME | 4,961,926 |
| | |
REALIZED AND UNREALIZED LOSS ON INVESTMENTS: | |
| | |
| Net realized loss on - | |
| Investments | (1,719,896) |
| Foreign currency and other assets and liabilities | (40,130) |
| | (1,760,026) |
| | |
| Net change in unrealized depreciation on - | |
| Investments | (1,368,498) |
| Foreign currency and other assets and liabilities | (1,564) |
| | (1,370,062) |
| | |
| NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (3,130,088) |
| | |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $1,831,838 |
The accompanying notes are an integral part of the financial statements.
12
Statements of Changes in Net Assets
| | For the Six | |
| | Months Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment income | $4,961,926 | $7,885,174 |
| Net realized gain (loss) on investments and foreign currency | (1,760,026) | 1,021,783 |
| Net change in unrealized depreciation on investments and foreign currency | (1,370,062) | 296,345 |
| | | |
| Net increase from operations | 1,831,838 | 9,203,302 |
| | | |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | | |
| | | |
| From net investment income | - | (7,841,271) |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase from capital share transactions (Note 5) | 24,162,725 | 47,188,672 |
| | | |
| Net increase in net assets | 25,994,563 | 48,550,703 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 224,144,794 | 175,594,091 |
| | | |
End of period (including undistributed net investment income of $4,961,926 and $0, respectively) | $250,139,357 | $224,144,794 |
The accompanying notes are an integral part of the financial statements.
13
| | For the Six | | |
| | Months Ended | For the | For the Period |
| | 6/30/07 | Year Ended | 4/21/051 to |
| | (unaudited) | 12/31/06 | 12/31/05 |
| | | | |
Per share data (for a share outstanding throughout | | | |
each period): | | | |
| | | | |
Net asset value - Beginning of period | $9.98 | $9.89 | $10.00 |
| | | | |
| Income (loss) from investment operations: | | | |
| Net investment income | 0.20 | 0.37 | 0.22 |
| Net realized and unrealized gain (loss) on investments | (0.12) | 0.08 | (0.12) |
| | | | |
| Total from investment operations | 0.08 | 0.45 | 0.10 |
| | | | |
| Less distributions to shareholders: | | | |
| From net investment income | - | (0.36) | (0.21) |
| | | | |
Net asset value - End of period | $10.06 | $9.98 | $9.89 |
| | | | |
Total return2 | 0.80% | 4.59% | 1.04% |
| | | | |
Ratios (to average net assets)/Supplemental Data: | | | |
| Expenses | 0.81%3 | 0.83% | 0.88%3 |
| Net investment income | 4.21%3 | 3.95% | 3.12%3 |
| | | | |
| Portfolio turnover | 183% | 315% | 290% |
| | | | |
Net assets - End of period (000's omitted) | $250,139 | $224,145 | $175,594 |
| | | | |
| | | | |
| | | | |
1Commencement of operations.
2Represents aggregate total return for the period indicated, and assumes reinvestment of all distributions. Periods less than one year are not annualized.
3Annualized.
The accompanying notes are an integral part of the financial statements.
14
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Core Plus Bond Series (the "Series") is a no-load non-diversified series of Manning & Napier Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide long-term total return by investing primarily in bonds and other financial instruments, including derivatives, with economic characteristics similar to bonds.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 125 million have been designated as Core Plus Bond Series Class A common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation
Debt securities, including government bonds, foreign bonds, asset-backed securities, structured notes, supranational obligations, sovereign 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. Certain investments in securities held by the Series were valued on a basis of a price provided by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily. Dividend income is recorded on an accrual basis.
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.
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.
15
Notes to Financial Statements (unaudited)
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.
Securities Purchased on a When-Issued Basis or Forward Commitment
The 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 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 accounts for such dollar rolls as purchases and sales. The Series had TBA dollar rolls outstanding as of June 30, 2007, 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 the Series’ Investment Portfolio.
Illiquid Securities
A security may be considered illiquid if so deemed in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board. Securities that are illiquid are marked with the applicable footnote on the Investment Portfolio. As of June 30, 2007, the aggregate value of securities deemed illiquid was $6,875,700, representing 2.7% of the Series’ net assets.
16
Notes to Financial Statements (unaudited)
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.
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 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 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 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 April 30, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.90% of average daily net assets each year. For the six months ended June 30, 2007, the Advisor did not waive its management fee or reimburse any expenses of the Series. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.
17
Notes to Financial Statements (unaudited)
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, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $32,041,249 and $16,782,002, respectively. Purchases and sales of United States Government securities, other than short-term securities, were $397,811,086 and $386,851,636, respectively.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Core Plus Bond Series were:
| | For the Six Months | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | Shares | Amount | Shares | Amount |
| Sold | 2,628,491 | $26,425,357 | 4,918,606 | $49,160,159 |
| Reinvested | - | - | 767,956 | 7,681,140 |
| Repurchased | (224,462) | (2,262,632) | (968,235) | (9,652,627) |
| Total | 2,404,029 | $24,162,725 | 4,718,327 | $47,188,672 |
Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
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 June 30, 2007.
18
Notes to Financial Statements (unaudited)
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. 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 for the year ended December 31, 2006 were as follows:
| Ordinary income | $7,841,271 |
For the year ended December 31, 2006, the Series elected to defer $67,185 of capital losses attributable to Post-October losses.
At December 31, 2006, the Series had a capital loss carryover of $115,579, available to the extent allowed by tax law to offset future net capital gain, if any, which will expire on December 31, 2013.
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
| Cost for federal income tax purposes | $309,290,064 |
| | |
| Unrealized appreciation | $2,136,504 |
| Unrealized depreciation | (3,863,896) |
| | |
| Net unrealized depreciation | $(1,727,392) |
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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact on the Series’ results of operation and financial condition.
19
Notes to Financial Statements (unaudited)
9. RECENT ACCOUNTING PRONOUNCEMENTS (continued)
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.
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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.
Core Bond Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| | 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $1,006.00 | $3.98 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,020.83 | $4.01 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.80%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year. The Series’ total return would have been lower had certain expenses not been waived during the period.
1
Portfolio Composition as of June 30, 2007 (unaudited)
Data for pie chart to follow:
Sector Allocation1
| Consumer Discretionary | 5.9% |
| Consumer Staples | 1.0% |
| Energy | 1.9% |
| Financials | 10.8% |
| Health Care | 1.5% |
| Industrials | 6.2% |
| Information Technology | 3.2% |
| Materials | 0.5% |
| Utilities | 4.6% |
| U.S. Government Agencies | 53.3% |
| Cash, short-term investments, and liabilities, less other assets | 11.1% |
1As a percentage of net assets.
Data for pie chart to follow:
Credit Quality Ratings2,3
| Aaa | 8.7% |
| Aa | 15.3% |
| A | 34.3% |
| Baa | 41.7% |
2As a percentage of total corporate bonds.
3Based on ratings from Moody's, or the S&P equivalent. The Series may use different ratings provided by other rating agencies for purposes of determining compliance with the Series' investment policies.
2
Investment Portfolio - June 30, 2007 (unaudited)
| | Credit | | |
| | Rating1 | Principal | Value |
| | (unaudited) | Amount | (Note 2) |
| | | | |
CORPORATE BONDS - 35.6% | | | |
Convertible Corporate Bonds - 3.6% | | | |
Consumer Discretionary - 0.9% | | | |
Hotels, Restaurants & Leisure - 0.9% | | | |
| Carnival Corp., 2.00%, 4/15/2021 | A3 | $305,000 | $385,062 |
| | | | |
Energy - 0.9% | | | |
Energy Equipment & Services - 0.9% | | | |
| Schlumberger Ltd., 1.50%, 6/1/2023 | A1 | 170,000 | 398,863 |
| | | | |
Information Technology - 1.1% | | | |
Computers & Peripherals - 1.1% | | | |
| EMC Corp., 1.75%, 12/1/2013 | BBB2 | 395,000 | 503,131 |
| | | | |
Utilities - 0.7% | | | |
Multi-Utilities - 0.7% | | | |
| Xcel Energy, Inc., 7.50%, 11/21/2007 | Baa1 | 195,000 | 328,088 |
| | | | |
Total Convertible Corporate Bonds | | | |
| (Identified Cost $1,293,510) | | | 1,615,144 |
| | | | |
Non-Convertible Corporate Bonds - 32.0% | | | |
Consumer Discretionary - 5.0% | | | |
Media - 3.2% | | | |
| AOL Time Warner (now known as Time Warner, Inc.), 7.625%, 4/15/2031 | Baa2 | 510,000 | 546,399 |
| Comcast Corp., 6.50%, 11/15/2035 | Baa2 | 570,000 | 552,529 |
| The Walt Disney Co., 7.00%, 3/1/2032 | A2 | 280,000 | 311,122 |
| | | | 1,410,050 |
| | | | |
Multiline Retail - 1.1% | | | |
| Target Corp., 5.875%, 3/1/2012 | A1 | 485,000 | 492,709 |
| | | | |
Specialty Retail - 0.7% | | | |
| Lowe’s Companies, Inc., 8.25%, 6/1/2010 | A1 | 300,000 | 322,018 |
Total Consumer Discretionary | | | 2,224,777 |
| | | | |
Consumer Staples - 1.0% | | | |
Food & Staples Retailing - 1.0% | | | |
| The Kroger Co., 7.25%, 6/1/2009 | Baa2 | 215,000 | 221,021 |
| The Kroger Co., 5.50%, 2/1/2013 | Baa2 | 230,000 | 223,994 |
Total Consumer Staples | | | 445,015 |
| | | | |
Energy - 1.0% | | | |
Oil, Gas & Consumable Fuels - 1.0% | | | |
| Anadarko Petroleum Corp., 5.95%, 9/15/2016 | Baa3 | 455,000 | 444,273 |
| | | | |
Financials - 10.8% | | | |
Capital Markets - 2.2% | | | |
| The Goldman Sachs Group, Inc., 6.345%, 2/15/2034 | A1 | 310,000 | 295,652 |
| Lehman Brothers Holdings, Inc., 6.625%, 1/18/2012 | A1 | 240,000 | 248,940 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | Credit | | |
| | Rating1 | Principal | Value |
| | (unaudited) | Amount | (Note 2) |
| | | | |
CORPORATE BONDS (continued) | | | |
Non-Convertible Corporate Bonds (continued) | | | |
Financials (continued) | | | |
Capital Markets (continued) | | | |
| Merrill Lynch & Co., Inc., 6.00%, 2/15/2017 | Aa3 | $235,000 | $231,071 |
| Merrill Lynch & Co., Inc., 6.11%, 1/29/2037 | A1 | 230,000 | 215,814 |
| | | | 991,477 |
| | | | |
Commercial Banks - 4.2% | | | |
Commonwealth Bank of Australia3, 4/30/2010 (Australia) (Note 7) | Aaa | 400,000 | 377,520 |
| PNC Bank National Association, 5.25%, 1/15/2017 | A1 | 340,000 | 323,930 |
| U.S. Bank National Association, 6.375%, 8/1/2011 | Aa2 | 625,000 | 643,845 |
| Wachovia Corp., 5.25%, 8/1/2014 | A1 | 590,000 | 573,118 |
| | | | 1,918,413 |
| | | | |
Consumer Finance - 0.9% | | | |
| Toyota Motor Credit Corp., 10.00%, 5/4/2022 | Aaa | 400,000 | 396,000 |
| | | | |
Diversified Financial Services - 1.4% | | | |
| Bank of America Corp. Capital Trust VI, 5.625%, 3/8/2035 | Aa2 | 455,000 | 406,263 |
| Citigroup, Inc., 6.625%, 6/15/2032 | Aa2 | 210,000 | 218,788 |
| | | | 625,051 |
| | | | |
Insurance - 2.1% | | | |
| Ambac Financial Group, Inc., 5.95%, 12/5/2035 | Aa2 | 345,000 | 328,663 |
| American International Group, Inc., 4.25%, 5/15/2013 | Aa2 | 660,000 | 615,649 |
| | | | 944,312 |
Total Financials | | | 4,875,253 |
| | | | |
Health Care - 1.5% | | | |
Pharmaceuticals - 1.5% | | | |
| Abbott Laboratories, 3.50%, 2/17/2009 | A1 | 265,000 | 257,565 |
| Wyeth, 6.50%, 2/1/2034 | A3 | 420,000 | 431,842 |
Total Health Care | | | 689,407 |
| | | | |
Industrials - 6.2% | | | |
Aerospace & Defense - 0.7% | | | |
| Boeing Capital Corp., 6.50%, 2/15/2012 | A2 | 310,000 | 323,165 |
| | | | |
Air Freight & Logistics - 0.4% | | | |
| FedEx Corp., 3.50%, 4/1/2009 | Baa2 | 210,000 | 202,996 |
| | | | |
Airlines - 1.0% | | | |
| Southwest Airlines Co., 5.25%, 10/1/2014 | Baa1 | 475,000 | 449,644 |
| | | | |
Industrial Conglomerates - 1.4% | | | |
| General Electric Capital Corp., 6.75%, 3/15/2032 | Aaa | 570,000 | 618,432 |
| | | | |
Machinery - 0.5% | | | |
| John Deere Capital Corp., 5.50%, 4/13/2017 | A2 | 225,000 | 219,255 |
The accompanying notes are an integral part of the financial statements.
4
Investment Portfolio - June 30, 2007 (unaudited)
| | Credit | | |
| | Rating1 | Principal | Value |
| | (unaudited) | Amount | (Note 2) |
| | | | |
CORPORATE BONDS (continued) | | | |
Non-Convertible Corporate Bonds (continued) | | | |
Industrials (continued) | | | |
Road & Rail - 2.2% | | | |
| CSX Corp., 6.00%, 10/1/2036 | Baa3 | $705,000 | $658,171 |
| Union Pacific Corp., 5.65%, 5/1/2017 | Baa2 | 340,000 | 330,482 |
| | | | 988,653 |
Total Industrials | | | 2,802,145 |
| | | | |
Information Technology - 2.1% | | | |
Communications Equipment - 2.1% | | | |
| Cisco Systems, Inc., 5.25%, 2/22/2011 | A1 | 205,000 | 203,771 |
| Cisco Systems, Inc., 5.50%, 2/22/2016 | A1 | 250,000 | 243,952 |
| Corning, Inc., 6.20%, 3/15/2016 | Baa1 | 475,000 | 476,211 |
Total Information Technology | | | 923,934 |
| | | | |
Materials - 0.5% | | | |
Metals & Mining - 0.5% | | | |
| Alcoa, Inc., 5.87%, 2/23/2022 | A2 | 250,000 | 237,282 |
| | | | |
Utilities - 3.9% | | | |
Electric Utilities - 1.9% | | | |
| American Electric Power Co., Inc., 5.375%, 3/15/2010 | Baa2 | 305,000 | 304,008 |
| Exelon Generation Co. LLC, 5.35%, 1/15/2014 | Baa1 | 580,000 | 555,797 |
| | | | 859,805 |
| | | | |
Multi-Utilities - 2.0% | | | |
| CenterPoint Energy Resources Corp., 7.875%, 4/1/2013 | Baa3 | 335,000 | 365,664 |
| Duke Energy Field Services LLC (now known as DCP Midstream LP), 7.875%, 8/16/2010 | Baa2 | 280,000 | 297,347 |
| Sempra Energy, 7.95%, 3/1/2010 | Baa1 | 210,000 | 222,034 |
| | | | 885,045 |
Total Utilities | | | 1,744,850 |
| | | | |
Total Non-Convertible Corporate Bonds | | | |
| (Identified Cost $14,805,719) | | | 14,386,936 |
| | | | |
TOTAL CORPORATE BONDS | | | |
| (Identified Cost $16,099,229) | | | 16,002,080 |
| | | | |
U.S. GOVERNMENT AGENCIES - 53.3% | | | |
Mortgage-Backed Securities - 50.2% | | | |
| Fannie Mae, Pool #762352, 5.00%, 4/1/2019 | | 18,618 | 18,039 |
| Fannie Mae, Pool #255274, 5.00%, 6/1/2019 | | 18,235 | 17,668 |
| Fannie Mae, Pool #795855, 5.50%, 9/1/2019 | | 329,513 | 325,392 |
| Fannie Mae, Pool #840165, 4.50%, 11/1/2020 | | 159,082 | 151,022 |
| Fannie Mae, Pool #813938, 4.50%, 12/1/2020 | | 205,604 | 195,187 |
| Fannie Mae, Pool #256114, 4.50%, 1/1/2021 | | 416,900 | 395,777 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - June 30, 2007 (unaudited)
| | | |
| | Principal | Value |
| | Amount | (Note 2) |
| | | |
U.S. GOVERNMENT AGENCIES (continued) | | |
Mortgage-Backed Securities (continued) | | |
| Fannie Mae, Pool #881624, 4.50%, 1/1/2021 | $401,251 | $380,921 |
| Fannie Mae, Pool #902047, 5.00%, 11/1/2021 | 945,571 | 914,034 |
| Fannie Mae, Pool #912409, 5.00%, 2/1/2022 | 184,813 | 178,649 |
| Fannie Mae, Pool #254375, 6.50%, 7/1/2022 | 4,360 | 4,456 |
| Fannie Mae, Pool #786281, 6.50%, 7/1/2034 | 289,136 | 293,318 |
| Fannie Mae, Pool #815409, 4.50%, 2/1/2035 | 231,286 | 210,527 |
| Fannie Mae, Pool #745147, 4.50%, 12/1/2035 | 3,603,114 | 3,279,730 |
| Fannie Mae, Pool #872535, 6.50%, 6/1/2036 | 785,895 | 793,538 |
| Fannie Mae, Pool #898299, 6.50%, 10/1/2036 | 915,787 | 924,694 |
Fannie Mae, TBA4, 5.50%, 7/15/2022 | 878,000 | 864,830 |
Fannie Mae, TBA4, 5.00%, 7/15/2037 | 439,000 | 411,288 |
Fannie Mae, TBA4, 5.50%, 7/15/2037 | 453,000 | 436,862 |
Fannie Mae, TBA4, 6.00%, 7/15/2037 | 1,701,000 | 1,682,394 |
Fannie Mae, TBA4, 6.50%, 7/15/2037 | 841,000 | 848,884 |
| Federal Home Loan Mortgage Corp., Pool #M90974, 4.50%, 3/1/2010 | 73,638 | 72,421 |
| Federal Home Loan Mortgage Corp., Pool #B16835, 5.50%, 10/1/2019 | 300,380 | 296,527 |
| Federal Home Loan Mortgage Corp., Pool #G11896, 4.50%, 1/1/2021 | 1,170,763 | 1,111,690 |
| Federal Home Loan Mortgage Corp., Pool #G12419, 5.00%, 10/1/2021 | 207,780 | 200,837 |
| Federal Home Loan Mortgage Corp., Pool #G18168, 5.00%, 2/1/2022 | 943,363 | 911,688 |
| Federal Home Loan Mortgage Corp., Pool #G18182, 5.50%, 5/1/2022 | 789,529 | 777,575 |
| Federal Home Loan Mortgage Corp., Pool #A27705, 6.50%, 10/1/2034 | 97,627 | 99,122 |
| Federal Home Loan Mortgage Corp., Pool #G01782, 6.50%, 2/1/2035 | 75,280 | 76,556 |
| Federal Home Loan Mortgage Corp., Pool #A52716, 6.50%, 10/1/2036 | 1,746,658 | 1,765,440 |
Federal Home Loan Mortgage Corp., TBA4, 5.00%, 7/15/2022 | 448,000 | 432,880 |
Federal Home Loan Mortgage Corp., TBA4, 5.50%, 7/15/2022 | 659,000 | 648,909 |
Federal Home Loan Mortgage Corp., TBA4, 5.00%, 7/15/2037 | 466,000 | 436,730 |
Federal Home Loan Mortgage Corp., TBA4, 5.50%, 7/15/2037 | 453,000 | 436,862 |
Federal Home Loan Mortgage Corp.,TBA4, 6.00%, 7/15/2037 | 1,701,000 | 1,685,053 |
Federal Home Loan Mortgage Corp., TBA4, 6.50%, 7/15/2037 | 1,051,000 | 1,061,838 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - June 30, 2007 (unaudited)
| | | |
| | Principal Amount/ | Value |
| | Shares | (Note 2) |
| | | |
U.S. GOVERNMENT AGENCIES (continued) | | |
Mortgage-Backed Securities (continued) | | |
| GNMA, Pool #487193, 5.00%, 4/15/2020 | $91,817 | $89,089 |
| GNMA, Pool #563559, 6.50%, 4/15/2032 | 56,599 | 57,734 |
| GNMA, Pool #631703, 6.50%, 9/15/2034 | 94,481 | 96,221 |
| | | |
Total Mortgage-Backed Securities | | |
| (Identified Cost $22,841,946) | | 22,584,382 |
| | | |
Other Agencies - 3.1% | | |
| Federal Home Loan Mortgage Corp., 6.25%, 7/15/2032 | | |
| (Identified Cost $1,407,185) | 1,275,000 | 1,382,206 |
| | | |
TOTAL U.S. GOVERNMENT AGENCIES | | |
| (Identified Cost $24,249,131) | | 23,966,588 |
| | | |
SHORT-TERM INVESTMENTS - 36.9% | | |
| Dreyfus Treasury Cash Management - Institutional Shares | 1,120,330 | 1,120,330 |
| Fannie Mae Discount Note, 7/2/2007 | $3,000,000 | 2,999,573 |
| Fannie Mae Discount Note, 7/11/2007 | 8,500,000 | 8,487,911 |
| Fannie Mae Discount Note, 7/31/2007 | 4,000,000 | 3,983,400 |
| | | |
TOTAL SHORT-TERM INVESTMENTS | | |
| (Identified Cost $16,591,214) | | 16,591,214 |
| | | |
TOTAL INVESTMENTS - 125.8% | | |
| (Identified Cost $56,939,574) | | 56,559,882 |
| | | |
LIABILITIES, LESS OTHER ASSETS - (25.8%) | | (11,595,034) |
| | | |
NET ASSETS - 100% | | $44,964,848 |
1Credit ratings from Moody's (unaudited).
2Credit ratings from S&P (unaudited).
3Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. This security was aquired on April 13, 2007 at a cost of $400,000 ($100.00 per share) and has been determined to be illiquid under guidelines established by the Board of Directors. This security amounts to $377,520, or 0.8%, of the Series' net assets as of June 30, 2007 (See Note 2 to the financial statements).
4Securities purchased on a forward commitment or when-issued basis. TBA - to be announced (See Note 2 to the financial statements).
The accompanying notes are an integral part of the financial statements.
7
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost, $56,939,574) (Note 2) | $56,559,882 |
| Receivable for securities sold | 447,871 |
| Interest receivable | 370,862 |
| Dividends receivable | 5,162 |
| Prepaid expenses | 440 |
| | |
| TOTAL ASSETS | 57,384,217 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 20,864 |
| Accrued fund accounting and transfer agent fees (Note 3) | 2,803 |
| Accrued Chief Compliance Officer service fees (Note 3) | 402 |
| Accrued directors' fees (Note 3) | 236 |
| Payable for purchases of delayed delivery securities (Note 2) | 9,389,380 |
| Payable for securities purchased | 2,987,675 |
| Audit fees payable | 18,009 |
| | |
| TOTAL LIABILITIES | 12,419,369 |
| | |
TOTAL NET ASSETS | $44,964,848 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $44,794 |
| Additional paid-in-capital | 44,609,458 |
| Undistributed net investment income | 960,145 |
| Accumulated net realized loss on investments | (269,857) |
| Net unrealized depreciation on investments | (379,692) |
| | |
TOTAL NET ASSETS | $44,964,848 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($44,964,848/4,479,387 shares) | $10.04 |
The accompanying notes are an integral part of the financial statements.
8
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Interest | $1,094,876 |
| Dividends | 37,291 |
| | |
| Total Investment Income | 1,132,167 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 134,885 |
| Fund accounting and transfer agent fees (Note 3) | 16,923 |
| Directors' fees (Note 3) | 3,646 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Audit fees | 14,628 |
| Custodian fees | 2,126 |
| Miscellaneous | 9,169 |
| | |
| Total Expenses | 184,212 |
| Less reduction of expenses (Note 3) | (4,284) |
| | |
| Net Expenses | 179,928 |
| | |
| NET INVESTMENT INCOME | 952,239 |
| | |
REALIZED AND UNREALIZED LOSS ON INVESTMENTS: | |
| | |
| Net realized loss on investments | (295,467) |
| Net change in unrealized depreciation on investments | (352,810) |
| | |
| NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (648,277) |
| | |
| NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $303,962 |
The accompanying notes are an integral part of the financial statements.
9
Statements of Changes in Net Assets
| | For the Six | |
| | Months Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment income | 952,239 | 1,329,985 |
| Net realized gain (loss) on investments | (295,467) | 225,664 |
| Net change in unrealized depreciation on investments | (352,810) | 123,352 |
| | | |
| Net increase from operations | 303,962 | 1,679,001 |
| | | |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | | |
| | | |
| From net investment income | - | (1,327,178) |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase (decrease) from capital share transactions (Note 5) | (1,035,190) | 16,766,575 |
| | | |
| Net increase (decrease) in net assets | (731,228) | 17,118,398 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 45,696,076 | 28,577,678 |
| | | |
End of period (including undistributed net investment income of $960,145 and $7,906, respectively) | $44,964,848 | $45,696,076 |
The accompanying notes are an integral part of the financial statements.
10
Financial Highlights
| | For the Six | | |
| | Months Ended | For the | For the |
| | 6/30/07 | Year Ended | Period 4/21/051 |
| | (unaudited) | 12/31/06 | to 12/31/05 |
| | | | |
Per share data (for a share outstanding throughout | | | |
each period): | | | |
| | | | |
Net asset value - Beginning of period | $9.98 | $9.89 | $10.00 |
| | | | |
| Income gain (loss) from investment operations: | | | |
| Net investment income | 0.21 | 0.36 | 0.21 |
| Net realized and unrealized gain (loss) on investments | (0.15) | 0.09 | (0.11) |
| | | | |
| Total from investment operations | 0.06 | 0.45 | 0.10 |
| | | | |
| Less distributions to shareholders: | | | |
| From net investment income | - | (0.36) | (0.21) |
| | | | |
Net asset value - End of period | $10.04 | $9.98 | $9.89 |
| | | | |
Total return2 | 0.60% | 4.51% | 0.98% |
| | | | |
Ratios (to average net assets)/Supplemental Data: | | | |
| Expenses* | 0.80%3 | 0.80% | 0.80%3 |
| Net investment income | 4.23%3 | 3.87% | 3.08%3 |
| | | | |
| Portfolio turnover | 188% | 313% | 293% |
| | | | |
Net assets - End of period (000's omitted) | $44,965 | $45,696 | $28,578 |
*The investment advisor did not impose all of its management fee. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased as follows:
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 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 (unaudited)
Core Bond Series (the "Series") is a no-load non-diversified series of Manning & Napier Fund, Inc. (the "Fund"). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide long-term total return by investing primarily in investment grade bonds and other financial instruments, including derivatives, with economic characteristics similar to bonds.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 125 million have been designated as Core Bond Series Class A common stock.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Security Valuation
Debt securities, including government bonds, sovereign 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. Certain investments in securities held by the Series were valued on a basis of a price provided by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily. Dividend income is recorded on an accrual basis.
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.
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 (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Securities Purchased on a When-Issued Basis or Forward Commitment
The 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 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 accounts for such dollar rolls as purchases and sales. The Series had TBA dollar rolls outstanding as of June 30, 2007, 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 the Series’ Investment Portfolio.
Illiquid Securities
A security may be considered illiquid if so deemed in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board. Securities that are illiquid are marked with the applicable footnote on the Investment Portfolio.
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
13
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Indemnifications (continued)
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 pays a fee, computed daily and payable monthly, at an annual rate of 0.60% 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 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 April 30, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.80% of average daily net assets each year. Accordingly, the Advisor waived fees of $4,284 for the six months ended June 30, 2007, 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, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as
14
Notes to Financial Statements (unaudited)
| 3. | TRANSACTIONS WITH AFFILIATES (continued) |
sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered
into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
| 4. | PURCHASES AND SALES OF SECURITIES |
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $5,569,100 and $2,970,236, respectively. Purchases and sales of United States Government securities, other than short-term securities, were $76,660,424 and $72,804,940, respectively.
| 5. | CAPITAL STOCK TRANSACTIONS |
Transactions in shares of Core Bond Series were:
| | For the Six Months | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | | | | |
| | Shares | Amount | Shares | Amount |
| | | | | |
| Sold | 249,069 | $2,493,449 | 1,637,576 | $16,250,398 |
| Reinvested | - | - | 130,284 | 1,304,357 |
| Repurchased | (348,575) | (3,528,639) | (79,452) | (788,180) |
| Total | (99,506) | $(1,035,190) | 1,688,408 | $16,766,575 |
Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
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 June 30, 2007.
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.
15
Notes to Financial Statements (unaudited)
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. 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 for the year ended December 31, 2006 were as follows:
| Ordinary income | $1,327,178 |
For the year ended December 31, 2006, the Series elected to defer $9,026 of capital losses attributable to Post-October losses.
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
| Cost for federal income tax purposes | $56,939,574 |
| | |
| Unrealized appreciation | $372,210 |
| Unrealized depreciation | (751,902) |
| | |
| Net unrealized depreciation | $(379,692) |
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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact on the Series’ results of operation and financial condition.
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
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17
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 |
18
Manning & Napier Fund, Inc.
Ohio Tax Exempt Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| | 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $997.10 | $4.21 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,020.58 | $4.26 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.85%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year. The Series’ total return would have been lower had certain expenses not been waived during the period.
1
Portfolio Composition as of June 30, 2007 (unaudited)
Data for pie chart to follow:
Bond Types1
| General Obligation Bonds | 88.0% |
| Revenue Bonds | 8.8% |
| Cash, short-term investments, and other assets, less liabilities | 3.2% |
1As a percentage of net assets.
Data for pie chart to follow:
Credit Quality Ratings2,3
| Aaa | 89.3% |
| Aa | 7.5% |
| Unrated investments, such as cash, short-term investments, and other assets, less liabilities | 3.2% |
2As a percentage of net assets.
3Based on ratings from Moody's, or the S&P equivalent. The Series may use different ratings provided by other rating agencies for purposes of determining compliance with the Series' investment policies.
2
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| Coupon | Maturity | Rating1 | Principal | Value |
| Rate | Date | (unaudited) | Amount | (Note 2) |
OHIO MUNICIPAL SECURITIES - 96.8% | | | | | |
| | | | | | |
| Amherst Exempt Village School District, G.O. Bond, FGIC | 4.750% | 12/1/2010 | Aaa | $200,000 | $205,456 |
| Avon Lake City School District, Prerefunded Balance, G.O. Bond, FGIC | 5.750% | 12/1/2014 | Aaa | 500,000 | 530,870 |
| Bedford Heights, Series A, G.O. Bond, AMBAC | 5.650% | 12/1/2014 | Aaa | 40,000 | 41,883 |
| Big Walnut Local School District, Delaware County, School Facilities Construction & Impt., G.O. Bond, FSA | 4.500% | 12/1/2029 | Aaa | 200,000 | 194,162 |
| Canal Winchester Local School District, Prerefunded Balance, G.O. Bond, MBIA | 5.000% | 12/1/2025 | Aaa | 355,000 | 376,907 |
| Canal Winchester Local School District, G.O. Bond, FSA | 4.250% | 12/1/2027 | Aaa | 500,000 | 466,045 |
| Chagrin Falls Exempt Village School District, Prerefunded Balance, G.O. Bond | 5.550% | 12/1/2022 | Aa3 | 100,000 | 101,722 |
| Chillicothe Water System, Revenue Bond, MBIA | 4.000% | 12/1/2009 | Aaa | 125,000 | 125,521 |
| Cincinnati, Various Purposes, Series A, G.O. Bond | 5.000% | 12/1/2011 | Aa1 | 200,000 | 208,520 |
| Cleveland Heights & University Heights County School District, Library Impt., G.O. Bond | 5.125% | 12/1/2026 | Aa3 | 200,000 | 208,586 |
| Cleveland Waterworks, Prerefunded Balance, Series I, Revenue Bond, FSA | 5.000% | 1/1/2028 | Aaa | 110,000 | 111,767 |
| Cleveland Waterworks, Unrefunded Balance, Series I, Revenue Bond, FSA | 5.000% | 1/1/2028 | Aaa | 155,000 | 157,123 |
| Columbus, Limited Tax, Series 2, G.O. Bond | 5.000% | 7/1/2017 | Aaa | 250,000 | 264,282 |
| Columbus City School District, School Facilities Construction & Impt., G.O. Bond, FSA | 4.250% | 12/1/2032 | Aaa | 500,000 | 461,575 |
| Delaware City School District, Prerefunded Balance, G.O. Bond, FSA | 5.000% | 12/1/2025 | Aaa | 200,000 | 205,202 |
| Delaware City School District, Prerefunded Balance, G.O. Bond, FSA | 5.000% | 12/1/2025 | Aaa | 100,000 | 102,601 |
| Dublin City School District, School Facilities Construction & Impt., Prerefunded Balance, G.O. Bond | 5.375% | 12/1/2017 | Aa1 | 350,000 | 373,240 |
| Eaton City School District, Prerefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2029 | Aaa | 200,000 | 211,270 |
| Eaton Community City Schools, School Impt., G.O. Bond, FGIC | 4.125% | 12/1/2026 | Aaa | 500,000 | 461,465 |
| Erie County, G.O. Bond, FGIC | 4.750% | 10/1/2019 | Aaa | 175,000 | 176,500 |
| Euclid, G.O. Bond, MBIA | 4.250% | 12/1/2023 | Aaa | 465,000 | 446,888 |
| Fairbanks Local School District, School Facilities Construction & Impt., G.O. Bond, FSA | 4.500% | 12/1/2028 | Aaa | 400,000 | 388,364 |
| Fairfield County, Building Impt., G.O. Bond | 5.000% | 12/1/2018 | Aa3 | 250,000 | 258,090 |
| Fairview Park City School District, School Impt., G.O. Bond, MBIA | 5.000% | 12/1/2029 | Aaa | 315,000 | 325,600 |
| Field Local School District, School Facilities Construction & Impt., G.O. Bond, AMBAC | 5.000% | 12/1/2026 | Aaa | 200,000 | 207,270 |
| Garfield Heights City School District, School Impt., Prerefunded Balance, G.O. Bond, MBIA | 5.000% | 12/15/2026 | Aaa | 250,000 | 260,532 |
| Genoa Area Local School District, Prerefunded Balance, G.O. Bond, FGIC | 5.400% | 12/1/2027 | Aaa | 150,000 | 158,650 |
| Granville Exempt Village School District, G.O. Bond, FSA | 4.375% | 12/1/2031 | Aaa | 500,000 | 473,050 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
OHIO MUNICIPAL SECURITIES (continued) | | | | | |
| | | | | | |
| Greater Cleveland Regional Transit Authority, Capital Impts., G.O. Bond, FGIC | 4.125% | 12/1/2023 | Aaa | $450,000 | $423,553 |
| Greene County Sewer System, Governmental Enterprise, Prerefunded Balance, Revenue Bond, AMBAC | 5.625% | 12/1/2025 | Aaa | 235,000 | 249,765 |
| Hamilton City School District, School Impt., G.O. Bond, FSA | 4.250% | 12/1/2030 | Aaa | 500,000 | 463,680 |
| Hancock County, Various Purposes, G.O. Bond, MBIA | 4.000% | 12/1/2016 | Aaa | 200,000 | 197,552 |
| Highland Local School District, School Impt., G.O. Bond, FSA | 5.000% | 12/1/2009 | Aaa | 190,000 | 195,060 |
| Ironton City School District, G.O. Bond, MBIA | 4.250% | 12/1/2028 | Aaa | 500,000 | 466,605 |
| Jackson Local School District, Stark & Summit Counties, Construction & Impt., Prerefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2030 | Aaa | 200,000 | 211,488 |
| Jackson Local School District, Stark & Summit Counties, G.O. Bond, FGIC | 3.500% | 12/1/2011 | Aaa | 210,000 | 205,945 |
| Kettering City School District, School Impt., G.O. Bond, FSA | 4.250% | 12/1/2025 | Aaa | 750,000 | 709,567 |
| Lakewood, Water System, Revenue Bond, AMBAC | 4.500% | 7/1/2028 | Aaa | 500,000 | 485,830 |
| Licking County Joint Vocational School District, School Facilities Construction & Impt., G.O. Bond, MBIA | 5.000% | 12/1/2007 | Aaa | 300,000 | 301,578 |
| Licking Heights Local School District, School Facilities Construction & Impt., Series A, G.O. Bond, MBIA | 5.000% | 12/1/2022 | Aaa | 250,000 | 260,612 |
| Lorain City School District, Classroom Facilities Impt., G.O. Bond, MBIA | 4.750% | 12/1/2025 | Aaa | 400,000 | 404,728 |
| Loveland City School District, Prerefunded Balance, Series A, G.O. Bond, MBIA | 5.000% | 12/1/2024 | Aaa | 200,000 | 207,088 |
| Mansfield City School District, Various Purposes, Prerefunded Balance, G.O. Bond, MBIA | 5.750% | 12/1/2022 | Aaa | 250,000 | 262,508 |
| Marysville Exempt Village School District, G.O. Bond, FSA | 5.000% | 12/1/2023 | Aaa | 500,000 | 521,620 |
| Maumee, G.O. Bond, MBIA | 4.125% | 12/1/2018 | Aaa | 375,000 | 369,814 |
| Maumee City School District, School Facilities Construction & Impt., G.O. Bond, FSA | 4.600% | 12/1/2031 | Aaa | 260,000 | 255,497 |
| Medina City School District, G.O. Bond, FGIC | 5.000% | 12/1/2018 | Aaa | 150,000 | 152,031 |
| Minster Local School District, G.O. Bond, FSA | 4.250% | 12/1/2018 | AAA2 | 250,000 | 248,228 |
| Mississinawa Valley Local School District, Classroom Facilities, G.O. Bond, FSA | 5.750% | 12/1/2022 | Aaa | 205,000 | 220,145 |
| New Albany Plain Local School District, Prerefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2025 | Aaa | 45,000 | 46,991 |
| New Albany Plain Local School District, Prerefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2029 | Aaa | 95,000 | 99,204 |
| New Albany Plain Local School District, Unrefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2029 | Aaa | 130,000 | 133,472 |
| New Albany Plain Local School District, Prerefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2025 | Aaa | 85,000 | 88,761 |
| New Albany Plain Local School District, Unrefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2025 | Aaa | 185,000 | 190,171 |
| North Olmsted, Prerefunded Balance, G.O. Bond, AMBAC | 5.000% | 12/1/2016 | Aaa | 125,000 | 126,868 |
The accompanying notes are an integral part of the financial statements.
4
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
OHIO MUNICIPAL SECURITIES (continued) | | | | | |
| | | | | | |
| Ohio State, Common Schools Capital Facilities, Prerefunded Balance, Series A, G.O. Bond | 4.750% | 6/15/2020 | Aa1 | $250,000 | $255,745 |
| Ohio State, Infrastructure Impt., Prerefunded Balance, G.O. Bond | 5.200% | 8/1/2010 | Aa1 | 50,000 | 50,558 |
| Ohio State, Infrastructure Impt., Series A, G.O. Bond | 5.000% | 3/1/2017 | Aa1 | 250,000 | 264,900 |
| Ohio State Water Development Authority, Pure Water, Series I, Revenue Bond, AMBAC | 6.000% | 12/1/2016 | Aaa | 40,000 | 43,578 |
| Ohio State Water Development Authority, Fresh Water, Prerefunded Balance, Revenue Bond, FSA | 5.125% | 12/1/2023 | Aaa | 300,000 | 306,621 |
| Ohio State Water Development Authority, Pollution Control, Revenue Bond | 5.250% | 12/1/2015 | Aaa | 200,000 | 216,708 |
| Ohio State Water Development Authority, Water Quality, Revenue Bond | 5.000% | 12/1/2012 | Aaa | 350,000 | 367,455 |
| Olentangy Local School District, Series A, G.O. Bond, FSA | 4.500% | 12/1/2032 | Aaa | 800,000 | 772,120 |
| Ontario Local School District, Prerefunded Balance, G.O. Bond, FSA | 5.000% | 12/1/2023 | Aaa | 350,000 | 359,104 |
| Orange City School District, Prerefunded Balance, G.O. Bond | 5.000% | 12/1/2023 | Aaa | 305,000 | 314,263 |
| Painesville City School District, School Impt., G.O. Bond, FGIC | 4.500% | 12/1/2025 | Aaa | 170,000 | 166,862 |
| Pickerington Local School District, G.O. Bond, MBIA | 4.300% | 12/1/2024 | Aaa | 300,000 | 287,064 |
| Plain Local School District, G.O. Bond, FGIC | 5.000% | 12/1/2030 | Aaa | 140,000 | 143,599 |
| Sidney City School District, School Impt., Series B, G.O. Bond, FGIC | 5.100% | 12/1/2019 | Aaa | 150,000 | 156,495 |
| South-Western City School District, Franklin & Pickway County, Prerefunded Balance, G.O. Bond, AMBAC | 4.750% | 12/1/2026 | Aaa | 175,000 | 178,605 |
| South-Western City School District, Franklin & Pickway County, G.O. Bond, FSA | 4.250% | 12/1/2026 | Aaa | 600,000 | 564,306 |
| Springboro Community City School District, School Impt., Prerefunded Balance, G.O. Bond, MBIA | 5.000% | 12/1/2025 | Aaa | 280,000 | 296,083 |
| Tallmadge City School District, School Facilities, G.O. Bond, FSA | 5.000% | 12/1/2031 | AAA2 | 200,000 | 206,596 |
| Tecumseh Local School District, School Impt., G.O. Bond, FGIC | 4.750% | 12/1/2027 | Aaa | 195,000 | 196,449 |
| Trotwood-Madison City School District, School Impt., G.O. Bond, FSA | 4.250% | 12/1/2022 | Aaa | 250,000 | 242,015 |
| Troy City School District, School Impt., G.O. Bond, FSA | 4.000% | 12/1/2014 | Aaa | 250,000 | 248,913 |
| Van Buren Local School District, School Facilities Construction & Impt., G.O. Bond, FSA | 5.250% | 12/1/2016 | Aaa | 300,000 | 315,051 |
| Van Wert City School District, School Impt., Prerefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2020 | Aaa | 500,000 | 524,140 |
| Vandalia, G.O. Bond, AMBAC | 5.000% | 12/1/2015 | Aaa | 235,000 | 248,440 |
| Washington Court House City School District, School Impt., G.O. Bond, FGIC | 5.000% | 12/1/2029 | Aaa | 500,000 | 517,700 |
| Westerville City School District, Prerefunded Balance, G.O. Bond, MBIA | 5.000% | 12/1/2027 | Aaa | 200,000 | 207,556 |
| Wood County, G.O. Bond | 5.400% | 12/1/2013 | Aa3 | 40,000 | 40,040 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | Principal | |
| Coupon | Maturity | Rating1 | | Value |
| | Rate | Date | (unaudited) | Shares | (Note 2) |
OHIO MUNICIPAL SECURITIES (continued) | | | | | |
| | | | | | |
| Wyoming City School District, Prerefunded Balance, Series B, G.O. Bond, FGIC | 5.150% | 12/1/2027 | Aaa | $300,000 | $308,418 |
| | | | | | |
TOTAL OHIO MUNICIPAL SECURITIES | | | | | |
| (Identified Cost $22,899,405) | | | | | 22,800,886 |
| | | | | | |
SHORT-TERM INVESTMENTS - 2.8% | | | | | |
| Dreyfus Municipal Reserves - Class R | | | | | |
| (Identified Cost $664,444) | | | | 664,444 | 664,444 |
| | | | | | |
TOTAL INVESTMENTS - 99.6% | | | | | |
| (Identified Cost $23,563,849) | | | | | 23,465,330 |
| | | | | | |
OTHER ASSETS, LESS LIABILITIES - 0.4% | | | | | 87,387 |
| | | | | | |
NET ASSETS - 100% | | | | | $23,552,717 |
| | | | | | |
KEY:
G.O. Bond - General Obligation Bond
Impt. - Improvement
Scheduled principal and interest payments are guaranteed by:
AMBAC (AMBAC Assurance Corp.)
FGIC (Financial Guaranty Insurance Co.)
FSA (Financial Security Assurance)
MBIA (MBIA, Inc.)
The insurance does not guarantee the market value of the municipal bonds.
1Credit ratings from Moody’s (unaudited).
2Credit ratings from S&P (unaudited).
The Series' portfolio holds, as a percentage of net assets, greater than 10% in bonds insured by the following companies: FSA - 34.8%; FGIC - 22.5%; MBIA - 20.4%.
The accompanying notes are an integral part of the financial statements.
6
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost $23,563,849) (Note 2) | $23,465,330 |
| Interest receivable | 121,849 |
| Dividends receivable | 3,596 |
| | |
| TOTAL ASSETS | 23,590,775 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 16,761 |
| Accrued fund accounting and transfer agent fees (Note 3) | 2,169 |
| Accrued Chief Compliance Officer service fees (Note 3) | 395 |
| Accrued directors' fees (Note 3) | 263 |
| Audit fees payable | 16,810 |
| Other payables and accrued expenses | 1,660 |
| | |
| TOTAL LIABILITIES | 38,058 |
| | |
TOTAL NET ASSETS | $23,552,717 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $22,986 |
| Additional paid-in-capital | 23,515,370 |
| Undistributed net investment income | 113,922 |
| Accumulated net realized loss on investments | (1,042) |
| Net unrealized depreciation on investments | (98,519) |
| | |
TOTAL NET ASSETS | $23,552,717 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($23,552,717/2,298,649 shares) | $10.25 |
The accompanying notes are an integral part of the financial statements.
7
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Interest | $456,804 |
| Dividends | 13,208 |
| | |
| Total Investment Income | 470,012 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 54,094 |
| Fund accounting and transfer agent fees (Note 3) | 13,193 |
| Directors' fees (Note 3) | 3,636 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Audit fees | 13,836 |
| Custodian fees | 596 |
| Miscellaneous | 4,173 |
| | |
| Total Expenses | 92,363 |
| Less reduction of expenses (Note 3) | (334) |
| | |
| Net Expenses | 92,029 |
| | |
| NET INVESTMENT INCOME | 377,983 |
| | |
UNREALIZED LOSS ON INVESTMENTS: | |
| | |
| Net change in unrealized appreciation (depreciation) on investments | (464,609) |
| | |
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $(86,626) |
The accompanying notes are an integral part of the financial statements.
8
Statements of Changes in Net Assets
| | For the Six | |
| | Month Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment income | $377,983 | $683,416 |
| Net realized (loss) on investments | - | (1,042) |
| Net change in unrealized appreciation (depreciation) on investments | (464,609) | (117,339) |
| | | |
| Net increase (decrease) from operations | (86,626) | 565,035 |
| | | |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | | |
| | | |
| From net investment income | (381,034) | (666,971) |
| From net realized gain on investments | - | (10,640) |
| | | |
| Total distributions to shareholders | (381,034) | (677,611) |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase from capital share transactions (Note 5) | 3,408,705 | 4,735,810 |
| | | |
| Net increase in net assets | 2,941,045 | 4,623,234 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 20,611,672 | 15,988,438 |
| | | |
End of period (including undistributed net investment income of $113,922 and $116,973, respectively) | $23,552,717 | $20,611,672 |
The accompanying notes are an integral part of the financial statements.
9
Financial Highlights
| | For the Six | | | | | |
| | Months Ended | | | | | |
| | | For the Years Ended |
| | (unaudited) | 12/31/06 | 12/31/05 | 12/31/04 | 12/31/03 | 12/31/02 |
| | | | | | | |
Per share data (for a share outstanding | | | | | | |
throughout each period): | | | | | | |
| | | | | | | |
Net asset value - Beginning of period | $10.46 | $10.52 | $10.59 | $10.75 | $10.74 | $10.31 |
| | | | | | | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income | 0.17 | 0.38 | 0.38 | 0.38 | 0.42 | 0.41 |
| Net realized and unrealized gain (loss) on investments | (0.20) | (0.05) | (0.08) | (0.04) | 0.03 | 0.43 |
| | | | | | | |
| Total from investment operations | (0.03) | 0.33 | 0.30 | 0.34 | 0.45 | 0.84 |
| | | | | | | |
| Less distributions to shareholders: | | | | | | |
| From net investment income | (0.18) | (0.38) | (0.36) | (0.49) | (0.39) | (0.40) |
| From net realized gain on investments | - | (0.01) | (0.01) | (0.01) | (0.05) | (0.01) |
| | | | | | | |
| Total distributions to shareholders | (0.18) | (0.39) | (0.37) | (0.50) | (0.44) | (0.41) |
| | | | | | | |
Net asset value - End of period | $10.25 | $10.46 | $10.52 | $10.59 | $10.75 | $10.74 |
| | | | | | | |
Total return1 | (0.29%) | 3.19% | 2.85% | 3.28% | 4.23% | 8.22% |
| | | | | | | |
Ratios (to average net assets)/Supplemental Data: | | | | | | |
| Expenses* | 0.85%2 | 0.85% | 0.85% | 0.85% | 0.85% | 0.85% |
| Net investment income | 3.49%2 | 3.81% | 3.65% | 3.64% | 3.91% | 4.09% |
| | | | | | | |
| Portfolio turnover | 0% | 9% | 9% | 7% | 14% | 8% |
| | | | | | | |
Net assets - End of period (000’s omitted) | $23,553 | $20,612 | $15,988 | $14,120 | $12,092 | $11,785 |
| | | | | | | |
*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:
| | 0.00%2,3 | 0.07% | 0.15% | 0.20% | 0.59% | 0.68% |
1Represents 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.
2Annualized.
3Less than 0.01%.
The accompanying notes are an integral part of the financial statements.
10
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Ohio Tax Exempt Series (the "Series") is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide as high a level of current income exempt from federal income tax and Ohio State personal income tax as the Advisor believes is consistent with the preservation of capital.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 100 million have been designated as Ohio Tax Exempt Series Class A common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation
Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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.
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. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily. Dividend income is recorded on an accrual basis.
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.
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.
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
11
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Federal Taxes (continued)
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 quarterly. Distributions of 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 pays a fee, computed daily and payable monthly, at an annual rate of 0.50% 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 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 April 30, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.85% of average daily net assets each year. Accordingly, the Advisor waived fees of $334 for the six months ended June 30, 2007, 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.
12
Notes to Financial Statements (unaudited)
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, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $3,332,844 and $0, respectively. There were no purchases or sales of United States Government securities.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Ohio Tax Exempt Series were:
| | For the Six Months | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | Shares | Amount | Shares | Amount |
| Sold | 355,790 | $3,698,117 | 537,520 | $5,640,792 |
| Reinvested | 36,711 | 379,280 | 64,255 | 671,426 |
| Repurchased | (63,764) | (668,692) | (151,462) | (1,576,408) |
| Total | 328,737 | $3,408,705 | 450,313 | $4,735,810 |
Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on June 30, 2007.
13
Notes to Financial Statements (unaudited)
7. | CONCENTRATION OF CREDIT |
The Series primarily invests in debt obligations issued by the State of Ohio and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Series is more susceptible to factors adversely affecting issues of Ohio municipal securities than is a municipal bond fund that is not concentrated in these issues to the same extent.
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. 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 final determination of the tax character of current year distributions will be made at the conclusion of the fiscal year. The tax character of distributions paid for the year ended December 31, 2006 were as follows:
| Ordinary income | $43,306 |
| Tax exempt income | 623,690 |
| Long-term capital gains | 10,615 |
At December 31, 2006, the Series had a capital loss carryover of $1,042, available to the extent allowed by the tax law to offset future net capital gain, if any, which will expire on December 31, 2014.
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
| Cost for federal income tax purposes | $23,534,747 |
| | |
| Unrealized appreciation | $268,332 |
| Unrealized depreciation | (337,749) |
| | |
| Net unrealized depreciation | $(69,417) |
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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax
positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact
on the Series’ results of operation and financial condition.
14
Notes to Financial Statements (unaudited)
9. RECENT ACCOUNTING PRONOUNCEMENTS (continued)
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.
15
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16
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17
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 |
18
Manning & Napier Fund, Inc.
New York Tax Exempt Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $999.00 | $3.22 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,021.57 | $3.26 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.65%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year.
1
Portfolio Composition as of June 30, 2007 (unaudited)
Data for pie chart to follow:
Bond Types1
| General Obligation Bonds | 64.8% |
| Revenue Bonds | 30.6% |
| Cash, short-term investments, and other assets, less liabilities | 4.6% |
1As a percentage of net assets.
Data for pie chart to follow:
Credit Quality Ratings2,3
| Aaa | 87.9% |
| Aa | 7.0% |
| A | 0.3% |
| Baa | 0.2% |
| Unrated investments, such as cash, short-term investments, and other assets, less liabilities | 4.6% |
2As a percentage of net assets.
3Based on ratings from Moody's, or the S&P equivalent. The Series may use different ratings provided by other rating agencies for purposes of determining compliance with the Series' investment policies.
2
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
NEW YORK MUNICIPAL SECURITIES - 95.4% | | | | | |
| | | | | | |
| Arlington Central School District, G.O. Bond, MBIA | 4.625% | 12/15/2024 | Aaa | $845,000 | $850,847 |
| Arlington Central School District, G.O. Bond, MBIA | 4.625% | 12/15/2025 | Aaa | 365,000 | 366,511 |
| Beacon City School District, G.O. Bond, MBIA | 5.600% | 7/15/2019 | Aaa | 500,000 | 522,465 |
| Brookhaven, Public Impt., G.O. Bond, FGIC | 4.000% | 5/1/2023 | Aaa | 900,000 | 848,403 |
| Brookhaven, Public Impt., G.O. Bond, FGIC | 4.000% | 5/1/2024 | Aaa | 815,000 | 761,715 |
| Buffalo Fiscal Stability Authority, Sales Tax & State Aid, Series B, Revenue Bond, MBIA | 5.000% | 9/1/2016 | Aaa | 525,000 | 557,014 |
| Buffalo Municipal Water Finance Authority, Water Systems, Prerefunded Balance, Series A, Revenue Bond, FGIC | 5.000% | 7/1/2028 | Aaa | 750,000 | 767,137 |
| Chautauqua County, Public Impt., Series B, G.O. Bond, MBIA | 4.500% | 12/15/2018 | Aaa | 485,000 | 496,257 |
| Clyde-Savannah Central School District, G.O. Bond, FGIC | 5.000% | 6/1/2013 | Aaa | 500,000 | 526,120 |
| Colonie, G.O. Bond, MBIA | 5.200% | 8/15/2008 | Aaa | 40,000 | 40,069 |
| Dryden Central School District, G.O. Bond, FSA | 5.500% | 6/15/2011 | Aaa | 200,000 | 201,168 |
| Dutchess County, Public Impt., Prerefunded Balance, G.O. Bond, MBIA | 4.000% | 12/15/2016 | Aaa | 315,000 | 314,209 |
| Dutchess County, Public Impt., Unrefunded Balance, G.O. Bond, MBIA | 4.000% | 12/15/2016 | Aaa | 360,000 | 359,460 |
| East Aurora Union Free School District, G.O. Bond, FGIC | 5.200% | 6/15/2011 | Aaa | 300,000 | 301,935 |
| Eastchester, Public Impt., Series B, G.O. Bond, FSA | 4.900% | 10/15/2011 | Aaa | 385,000 | 386,197 |
| Ellenville Central School District, G.O. Bond, FSA | 5.375% | 5/1/2009 | Aaa | 210,000 | 212,747 |
| Ellenville Central School District, G.O. Bond, AMBAC | 5.700% | 5/1/2011 | Aaa | 700,000 | 718,263 |
| Erie County, Public Impt., Series A, G.O. Bond, FGIC | 4.750% | 10/1/2016 | Aaa | 550,000 | 563,475 |
| Erie County, Public Impt., Series A, G.O. Bond, FGIC | 5.000% | 9/1/2014 | Aaa | 500,000 | 523,675 |
| Fairport Central School District, G.O. Bond, FSA | 5.000% | 6/1/2019 | Aaa | 500,000 | 519,630 |
| Franklin Square Union Free School District, G.O. Bond, FGIC | 5.000% | 1/15/2021 | Aaa | 520,000 | 534,591 |
| Freeport, Series A, G.O. Bond, FGIC | 4.000% | 1/15/2014 | Aaa | 540,000 | 539,347 |
| Greece Central School District, G.O. Bond, FSA | 4.600% | 6/15/2018 | Aaa | 180,000 | 185,297 |
| Greece Central School District, G.O. Bond, FSA | 4.000% | 6/15/2019 | Aaa | 2,675,000 | 2,598,334 |
| Hampton Bays Union Free School District, G.O. Bond, FSA | 4.250% | 9/15/2026 | Aaa | 1,140,000 | 1,102,118 |
| Haverstraw-Stony Point Central School District, G.O. Bond, FSA | 4.500% | 10/15/2032 | Aaa | 2,000,000 | 1,941,040 |
| Hempstead Town, Unrefunded Balance, Series B, G.O. Bond, FGIC | 5.625% | 2/1/2010 | Aaa | 165,000 | 166,761 |
| Huntington, G.O. Bond, MBIA | 5.875% | 9/1/2009 | Aaa | 45,000 | 45,157 |
| Islip, Public Impt., G.O. Bond, FGIC | 5.375% | 6/15/2015 | Aaa | 1,555,000 | 1,632,626 |
| Jamesville-Dewitt Central School District, G.O. Bond, AMBAC | 5.750% | 6/15/2009 | Aaa | 420,000 | 435,569 |
| Johnson City Central School District, G.O. Bond, FGIC | 4.250% | 6/15/2024 | Aaa | 500,000 | 480,680 |
| Johnson City Central School District, G.O. Bond, FGIC | 4.375% | 6/15/2028 | Aaa | 1,000,000 | 957,720 |
| Johnson City Central School District, G.O. Bond, FGIC | 4.375% | 6/15/2030 | Aaa | 985,000 | 938,577 |
| Le Roy Central School District, G.O. Bond, FGIC | 0.100% | 6/15/2008 | Aaa | 350,000 | 337,445 |
| Long Island Power Authority, Electric Systems, Series F, Revenue Bond, MBIA | 4.500% | 5/1/2028 | Aaa | 1,880,000 | 1,835,162 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
NEW YORK MUNICIPAL SECURITIES (continued) | | | | | |
| | | | | | |
| Long Island Power Authority, Electric Systems, Series A, Revenue Bond, FGIC | 5.000% | 12/1/2019 | Aaa | $1,000,000 | $1,052,970 |
| Long Island Power Authority, Electric Systems, Series A, Revenue Bond, FGIC | 5.000% | 12/1/2025 | Aaa | 1,690,000 | 1,755,251 |
| Longwood Central School District at Middle Island, G.O. Bond, FSA | 5.000% | 6/15/2017 | Aaa | 250,000 | 257,985 |
| Longwood Central School District at Middle Island, G.O. Bond, FSA | 5.000% | 6/15/2018 | Aaa | 250,000 | 257,985 |
| Metropolitan Transportation Authority, Transportation Facilities, Prerefunded Balance, Series B, Revenue Bond, AMBAC | 5.000% | 7/1/2018 | Aaa | 1,500,000 | 1,565,685 |
| Metropolitan Transportation Authority, Dedicated Tax Fund, Series A, Revenue Bond, MBIA | 5.000% | 11/15/2030 | Aaa | 750,000 | 769,500 |
| Metropolitan Transportation Authority, Series A, Revenue Bond, FGIC | 5.000% | 11/15/2025 | Aaa | 1,500,000 | 1,541,835 |
| Metropolitan Transportation Authority, Series A, Revenue Bond, FSA | 5.000% | 11/15/2030 | Aaa | 500,000 | 512,280 |
| Metropolitan Transportation Authority, Series B, Revenue Bond, FSA | 4.500% | 11/15/2032 | Aaa | 500,000 | 483,805 |
| Monroe County, Water Impt., G.O. Bond | 5.250% | 2/1/2017 | Baa1 | 240,000 | 242,558 |
| Monroe County, Public Impt., G.O. Bond, AMBAC | 4.125% | 6/1/2020 | Aaa | 1,000,000 | 975,490 |
| Monroe County Water Authority, Revenue Bond | 5.000% | 8/1/2019 | Aa3 | 1,700,000 | 1,735,700 |
| Mount Morris Central School District, G.O. Bond, FGIC | 4.125% | 6/15/2013 | Aaa | 790,000 | 797,473 |
| Nassau County, Combined Sewer Districts, Series F, G.O. Bond, MBIA | 5.350% | 7/1/2008 | Aaa | 1,500,000 | 1,523,460 |
| Nassau County, General Impt., Series C, G.O. Bond, FSA | 5.125% | 1/1/2014 | Aaa | 500,000 | 523,610 |
| Nassau County Interim Finance Authority, Sales Tax Secured, Series A, Revenue Bond, AMBAC | 4.750% | 11/15/2023 | Aaa | 1,000,000 | 1,018,120 |
| New Hyde Park Garden City Park, Union Free School District, G.O. Bond, FSA | 4.125% | 6/15/2023 | Aaa | 200,000 | 191,258 |
| New Hyde Park Garden City Park, Union Free School District, G.O. Bond, FSA | 4.125% | 6/15/2024 | Aaa | 250,000 | 237,445 |
| New York, Series I, G.O. Bond, MBIA | 5.000% | 5/15/2028 | Aaa | 1,900,000 | 1,931,844 |
| New York, Series K, G.O. Bond, FSA | 5.375% | 8/1/2020 | Aaa | 1,000,000 | 1,038,500 |
| New York City, Series A, G.O. Bond, CIFG | 5.000% | 8/1/2024 | Aaa | 1,000,000 | 1,036,980 |
| New York City, G.O. Bond, XLCA | 5.000% | 9/1/2019 | Aaa | 500,000 | 523,980 |
| New York City Municipal Water Finance Authority, Water & Sewer Systems, Series A, Revenue Bond, AMBAC | 5.000% | 6/15/2035 | Aaa | 750,000 | 767,437 |
| New York City Transitional Finance Authority, Future Tax Secured, Prerefunded Balance, Series A, Revenue Bond | 5.500% | 2/15/2011 | Aa1 | 1,000,000 | 1,049,860 |
| New York City Municipal Water Finance Authority, Series E, Revenue Bond, FGIC | 5.000% | 6/15/2026 | Aaa | 750,000 | 768,645 |
The accompanying notes are an integral part of the financial statements.
4
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
NEW YORK MUNICIPAL SECURITIES (continued) | | | | | |
| | | | | | |
| New York City Municipal Water Finance Authority, Water & Sewer Systems, Series D, Revenue Bond, AMBAC | 4.500% | 6/15/2036 | Aaa | $500,000 | $481,880 |
| New York City Municipal Water Finance Authority, Water & Sewer Systems, Series A, Revenue Bond | 4.500% | 6/15/2037 | Aa2 | 1,000,000 | 954,100 |
| New York State, Series C, G.O. Bond, FSA | 5.000% | 4/15/2012 | Aa3 | 700,000 | 733,145 |
| New York State, Prerefunded Balance, Series B, G.O. Bond | 5.125% | 3/1/2018 | Aa3 | 1,000,000 | 1,019,410 |
| New York State, Series A, G.O. Bond | 4.500% | 3/15/2019 | Aa3 | 500,000 | 505,100 |
| New York State, Prerefunded Balance, Series D, G.O. Bond, AMBAC | 5.000% | 7/15/2015 | Aaa | 500,000 | 511,630 |
| New York State, Series A, G.O. Bond | 4.600% | 3/15/2013 | Aa3 | 475,000 | 487,103 |
| New York State Dormitory Authority, Columbia University, Series A, Revenue Bond | 5.000% | 7/1/2025 | Aaa | 500,000 | 513,790 |
| New York State Environmental Facilities Corp., Pollution Control, Unrefunded Balance, Series B, Revenue Bond | 5.200% | 5/15/2014 | Aaa | 440,000 | 461,925 |
| New York State Environmental Facilities Corp., Pollution Control, Series A, Revenue Bond | 5.200% | 6/15/2015 | Aaa | 25,000 | 25,277 |
| New York State Environmental Facilities Corp., Clean Water & Drinking, Series B, Revenue Bond | 5.000% | 6/15/2027 | Aaa | 1,000,000 | 1,025,120 |
| New York State Environmental Facilities Corp., Clean Water & Drinking, Revenue Bond | 4.500% | 6/15/2022 | Aaa | 300,000 | 299,994 |
| New York State Environmental Facilities Corp., Clean Water & Drinking, Revenue Bond, MBIA | 5.000% | 6/15/2021 | Aaa | 600,000 | 622,098 |
| New York State Environmental Facilities Corp., Personal Income Tax, Series A, Revenue Bond | 5.000% | 12/15/2019 | AAA2 | 750,000 | 788,527 |
| New York State Housing Finance Agency, State University Construction, Series A, Revenue Bond | 8.000% | 5/1/2011 | A1 | 225,000 | 243,342 |
| New York State Thruway Authority, Series F, Revenue Bond, AMBAC | 5.000% | 1/1/2026 | Aaa | 340,000 | 352,039 |
| New York State Thruway Authority, Highway & Bridge, Series C, Revenue Bond, MBIA | 5.250% | 4/1/2011 | Aaa | 1,000,000 | 1,046,140 |
| New York State Thruway Authority, Highway & Bridge, Series C, Revenue Bond, AMBAC | 5.000% | 4/1/2020 | Aaa | 750,000 | 776,557 |
| New York State Thruway Authority, Highway & Bridge, Prerefunded Balance, Series A, Revenue Bond, FGIC | 5.500% | 4/1/2015 | Aaa | 320,000 | 340,704 |
| New York State Thruway Authority, Highway & Bridge, Prerefunded Balance, Series B, Revenue Bond, MBIA | 5.250% | 4/1/2016 | Aaa | 300,000 | 315,840 |
| New York State Thruway Authority, Personal Income Tax, Series A, Revenue Bond, FSA | 5.000% | 3/15/2014 | Aaa | 500,000 | 524,495 |
| New York State Thruway Authority, Personal Income Tax, Series A, Revenue Bond, MBIA | 5.000% | 3/15/2016 | Aaa | 300,000 | 314,229 |
| New York State Urban Development Corp., Prerefunded Balance, Revenue Bond | 5.375% | 7/1/2022 | Aaa | 195,000 | 198,233 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
NEW YORK MUNICIPAL SECURITIES (continued) | | | | | |
| | | | | | |
| New York State Urban Development Corp., Unrefunded Balance, Revenue Bond | 5.375% | 7/1/2022 | Aaa | $205,000 | $207,302 |
| New York State Urban Development Corp., Correctional Capital Facilities, Series A, Revenue Bond, FSA | 5.250% | 1/1/2014 | Aaa | 500,000 | 526,960 |
| Niagara County, Series B, G.O. Bond, MBIA | 5.200% | 1/15/2011 | Aaa | 400,000 | 403,048 |
| Niagara Falls City School District, G.O. Bond, FSA | 4.375% | 9/15/2029 | AAA2 | 885,000 | 849,096 |
| Niagara-Wheatfield Central School District, G.O. Bond, FGIC | 4.125% | 2/15/2019 | Aaa | 610,000 | 600,234 |
| Niagara-Wheatfield Central School District, G.O. Bond, FGIC | 4.125% | 2/15/2020 | Aaa | 850,000 | 830,323 |
| North Hempstead, Series A, G.O. Bond, FGIC | 4.750% | 1/15/2023 | Aaa | 1,000,000 | 1,015,660 |
| Norwich City School District, G.O. Bond, FSA | 5.000% | 6/15/2010 | Aaa | 250,000 | 257,828 |
| Panama Central School District, G.O. Bond, FGIC | 5.000% | 6/15/2019 | Aaa | 595,000 | 616,914 |
| Patchogue-Medford Union Free School District, Series A, G.O. Bond, FGIC | 3.500% | 7/1/2012 | Aaa | 805,000 | 791,202 |
| Pavilion Central School District, G.O. Bond, FSA | 5.625% | 6/15/2018 | Aaa | 880,000 | 918,403 |
| Phelps-Clifton Springs Central School District, Series B, G.O. Bond, MBIA | 5.000% | 6/15/2021 | Aaa | 850,000 | 885,751 |
| Phelps-Clifton Springs Central School District, Series B, G.O. Bond, MBIA | 5.000% | 6/15/2022 | Aaa | 450,000 | 469,305 |
| Pulaski Central School District, Series A, G.O. Bond, FGIC | 4.500% | 6/15/2026 | Aaa | 425,000 | 423,381 |
| Ramapo, Public Impt., Series B, G.O. Bond, MBIA | 4.375% | 5/1/2031 | Aaa | 435,000 | 418,701 |
| Ramapo, Public Impt., Series B, G.O. Bond, MBIA | 4.375% | 5/1/2032 | Aaa | 510,000 | 490,023 |
| Ramapo, Public Impt., Series B, G.O. Bond, MBIA | 4.500% | 5/1/2033 | Aaa | 410,000 | 403,206 |
| Ravena Coeymans Selkirk Central School District, G.O. Bond, FSA | 4.250% | 6/15/2014 | Aaa | 1,180,000 | 1,194,962 |
| Rochester, Series A, G.O. Bond, AMBAC | 5.000% | 8/15/2020 | Aaa | 250,000 | 267,663 |
| Rochester, Series A, G.O. Bond, AMBAC | 5.000% | 8/15/2022 | Aaa | 95,000 | 101,788 |
| Rondout Valley Central School District, G.O. Bond, FSA | 5.375% | 3/1/2020 | Aaa | 500,000 | 523,635 |
| Sachem Central School District of Holbrook, G.O. Bond, FGIC | 4.250% | 10/15/2028 | Aaa | 330,000 | 313,675 |
| Sachem Central School District of Holbrook, G.O. Bond, FGIC | 4.375% | 10/15/2030 | Aaa | 1,000,000 | 961,070 |
| Sachem Central School District of Holbrook, Series B, G.O. Bond, FGIC | 4.250% | 10/15/2026 | Aaa | 1,200,000 | 1,142,160 |
| St. Lawrence County, Public Impt., G.O. Bond, FGIC | 4.500% | 5/15/2031 | Aaa | 1,185,000 | 1,161,146 |
| St. Lawrence County, Public Impt., G.O. Bond, FGIC | 4.500% | 5/15/2032 | Aaa | 1,000,000 | 977,970 |
| Schenectady, G.O. Bond, MBIA | 5.300% | 2/1/2011 | Aaa | 250,000 | 255,305 |
| Scotia Glenville Central School District, G.O. Bond, FGIC | 5.500% | 6/15/2020 | Aaa | 1,025,000 | 1,067,732 |
| South Glens Falls Central School District, G.O. Bond, FGIC | 5.375% | 6/15/2018 | Aaa | 605,000 | 628,801 |
| South Glens Falls Central School District, Unrefunded Balance, G.O. Bond, FGIC | 5.375% | 6/15/2018 | Aaa | 95,000 | 98,628 |
| South Huntington Union Free School District, G.O. Bond, FGIC | 5.000% | 9/15/2016 | Aaa | 325,000 | 335,702 |
| South Huntington Union Free School District, G.O. Bond, FGIC | 5.100% | 9/15/2017 | Aaa | 100,000 | 103,442 |
| Suffolk County, Series A, G.O. Bond, FGIC | 4.750% | 8/1/2019 | Aaa | 895,000 | 913,867 |
| Suffolk County, Public Impt., Series A, G.O. Bond, MBIA | 4.250% | 5/1/2024 | Aaa | 1,000,000 | 968,360 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | Principal | |
| | Coupon | Maturity | Rating1 | | Value |
| | Rate | Date | (unaudited) | Shares | (Note 2) |
NEW YORK MUNICIPAL SECURITIES (continued) | | | | | |
| | | | | | |
| Suffolk County Water Authority, Revenue Bond, MBIA | 4.500% | 6/1/2027 | Aaa | $1,160,000 | $1,136,046 |
| Suffolk County Water Authority, Revenue Bond, MBIA | 5.100% | 6/1/2009 | Aaa | 55,000 | 56,343 |
| Suffolk County Water Authority, Unrefunded Balance, Revenue Bond, MBIA | 5.100% | 6/1/2009 | Aaa | 195,000 | 199,688 |
| Syracuse, Public Impt., Series C, G.O. Bond, AMBAC | 5.400% | 8/1/2017 | Aaa | 700,000 | 737,303 |
| Syracuse, Public Impt., Series C, G.O. Bond, AMBAC | 5.500% | 8/1/2018 | Aaa | 850,000 | 897,745 |
| Syracuse, Public Impt., Series A, G.O. Bond, MBIA | 4.250% | 6/15/2023 | Aaa | 690,000 | 671,260 |
| Syracuse, Public Impt., Series A, G.O. Bond, MBIA | 4.375% | 6/15/2025 | Aaa | 990,000 | 966,497 |
| Syracuse, Public Impt., Series A, G.O. Bond, FGIC | 4.250% | 12/1/2028 | Aaa | 600,000 | 568,428 |
| Syracuse, Public Impt., Series A, G.O. Bond, FGIC | 4.250% | 12/1/2029 | Aaa | 600,000 | 566,784 |
| Tarrytown Union Free School District, G.O. Bond, AMBAC | 4.375% | 1/15/2032 | Aaa | 1,090,000 | 1,035,664 |
| Triborough Bridge & Tunnel Authority, General Purposes, Series B, Revenue Bond | 5.000% | 11/15/2020 | Aa2 | 750,000 | 778,215 |
| Triborough Bridge & Tunnel Authority, General Purposes, Prerefunded Balance, Series A, Revenue Bond, MBIA | 4.750% | 1/1/2019 | Aaa | 300,000 | 313,191 |
| Triborough Bridge & Tunnel Authority, Subordinate Bonds, Revenue Bond, FGIC | 5.000% | 11/15/2032 | Aaa | 1,000,000 | 1,026,290 |
| Triborough Bridge & Tunnel Authority, General Purposes, Prerefunded Balance, Series A, Revenue Bond, MBIA | 5.000% | 1/1/2032 | Aaa | 1,695,000 | 1,769,224 |
| Triborough Bridge & Tunnel Authority, General Purposes, Unrefunded Balance, Series A, Revenue Bond, MBIA | 5.000% | 1/1/2032 | Aaa | 305,000 | 312,845 |
| Ulster County, Public Impt., G.O. Bond, XLCA | 4.500% | 11/15/2026 | AAA2 | 560,000 | 557,822 |
| Union Endicott Central School District, G.O. Bond, FGIC | 4.125% | 6/15/2014 | Aaa | 605,000 | 612,339 |
| Union Endicott Central School District, G.O. Bond, FGIC | 4.125% | 6/15/2015 | Aaa | 865,000 | 875,008 |
| Warwick Valley Central School District, G.O. Bond, FSA | 5.600% | 1/15/2018 | Aaa | 575,000 | 604,475 |
| Warwick Valley Central School District, G.O. Bond, FSA | 5.625% | 1/15/2022 | Aaa | 380,000 | 399,707 |
| Wayne County, Public Impt., G.O. Bond, MBIA | 4.125% | 6/1/2024 | Aaa | 500,000 | 477,310 |
| West Seneca Central School District, G.O. Bond, FSA | 5.000% | 5/1/2011 | Aaa | 300,000 | 311,460 |
| Westchester County, Series B, G.O. Bond | 4.300% | 12/15/2011 | Aaa | 15,000 | 15,262 |
| Westchester County, Series B, G.O. Bond | 3.700% | 12/15/2015 | Aaa | 1,000,000 | 976,460 |
| Westchester County, Unrefunded Balance, Series A, G.O. Bond | 4.750% | 12/15/2008 | Aaa | 5,000 | 5,023 |
| Westchester County, Unrefunded Balance, Series A, G.O. Bond | 4.750% | 12/15/2009 | Aaa | 5,000 | 5,021 |
| Westhampton Beach Union Free School District, G.O. Bond, MBIA | 4.000% | 7/15/2018 | Aaa | 726,000 | 712,947 |
| Williamsville Central School District, G.O. Bond, MBIA | 5.000% | 6/15/2012 | Aaa | 490,000 | 512,765 |
| Yonkers, Series B, G.O. Bond, MBIA | 5.000% | 8/1/2023 | Aaa | 1,125,000 | 1,168,155 |
| Yonkers, Series B, G.O. Bond, MBIA | 5.000% | 8/1/2030 | Aaa | 1,095,000 | 1,127,992 |
| | | | | | |
TOTAL NEW YORK MUNICIPAL SECURITIES | | | | | |
| (Identified Cost $99,160,091) | | | | | 99,188,567 |
| | | | | | |
SHORT-TERM INVESTMENTS - 3.7% | | | | | |
| Dreyfus BASIC New York Municipal Money Market Fund | | | | | |
| (Identified Cost $3,832,229) | | | | 3,832,229 | 3,832,229 |
The accompanying notes are an integral part of the financial statements.
7
Investment Portfolio - June 30, 2007 (unaudited)
| | |
| | Value |
| | (Note 2) |
| | |
TOTAL INVESTMENTS - 99.1% | |
| (Identified Cost $102,992,320) | $103,020,796 |
| | |
OTHER ASSETS, LESS LIABILITIES - 0.9% | 985,064 |
| | |
NET ASSETS - 100% | $104,005,860 |
KEY:
G.O. Bond - General Obligation Bond
Impt. - Improvement
Scheduled principal and interest payments are guaranteed by:
AMBAC (AMBAC Assurance Corp.)
CIFG (CIFG North America, Inc.)
FGIC (Financial Guaranty Insurance Co.)
FSA (Financial Security Assurance)
MBIA (MBIA, Inc.)
XLCA (XL Capital Assurance)
The insurance does not guarantee the market value of the municipal bonds.
1Credit ratings from Moody's (unaudited).
2Credit ratings from S&P (unaudited).
The Series' portfolio holds, as a percentage of net assets, greater than 10% in bonds insured by the following companies: FGIC - 30.6%; MBIA - 24.7%; FSA - 16.8%; AMBAC - 10.2%.
The accompanying notes are an integral part of the financial statements.
8
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost $102,992,320) (Note 2) | $103,020,796 |
| Interest receivable | 1,052,553 |
| Receivable for fund shares sold | 86,463 |
| Dividends receivable | 15,372 |
| | |
| TOTAL ASSETS | 104,175,184 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 42,383 |
| Accrued fund accounting and transfer agent fees (Note 3) | 8,161 |
| Accrued Chief Compliance Officer service fees (Note 3) | 394 |
| Accrued directors' fees (Note 3) | 261 |
| Payable for fund shares repurchased | 99,661 |
| Audit fees payable | 17,473 |
| Other payables and accrued expenses | 991 |
| | |
| TOTAL LIABILITIES | 169,324 |
| | |
TOTAL NET ASSETS | $104,005,860 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $101,462 |
| Additional paid-in-capital | 103,048,999 |
| Undistributed net investment income | 657,367 |
| Accumulated net realized gain on investments | 169,556 |
| Net unrealized appreciation on investments | 28,476 |
| | |
TOTAL NET ASSETS | $104,005,860 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($104,005,860/10,146,239 shares) | $10.25 |
The accompanying notes are an integral part of the financial statements.
9
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Interest | $2,083,080 |
| Dividends | 62,263 |
| | |
| Total Investment Income | 2,145,343 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 246,663 |
| Fund accounting and transfer agent fees (Note 3) | 43,265 |
| Directors' fees (Note 3) | 3,636 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Custodian fees | 2,728 |
| Miscellaneous | 20,906 |
| | |
| Total Expenses | 320,033 |
| | |
| NET INVESTMENT INCOME | 1,825,310 |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | |
| | |
| Net realized gain on investments | 145,866 |
| Net change in unrealized appreciation on investments | (2,111,513) |
| | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | (1,965,647) |
| | |
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $(140,337) |
The accompanying notes are an integral part of the financial statements.
10
Statements of Changes in Net Assets
| | For the Six | |
| | Months Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment income | $1,825,310 | $3,249,762 |
| Net realized gain on investments | 145,866 | 47,602 |
| Net change in unrealized appreciation on investments | (2,111,513) | (158,257) |
| | | |
| Net increase (decrease) from operations | (140,337) | 3,139,107 |
| | | |
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | | |
| | | |
| From net investment income | (1,747,823) | (3,059,006) |
| From net realized gain on investments | - | 48,419) |
| | | |
| Total distributions to shareholders | (1,747,823) | (3,107,425) |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase from capital share transactions (Note 5) | 12,983,764 | 10,473,150 |
| | | |
| Net increase in net assets | 11,095,604 | 10,504,832 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 92,910,256 | 82,405,424 |
| | | |
End of period (including undistributed net investment income of $657,367 and $579,880, respectively) | $104,005,860 | $92,910,256 |
The accompanying notes are an integral part of the financial statements.
11
| | For the Six | | | | | |
| | Months Ended | | | | | |
| | 6/30/07 | For the Years Ended |
| | (unaudited) | 12/31/06 | 12/31/05 | 12/31/04 | 12/31/03 | 12/31/02 |
| | | | | | | |
Per share data (for a share outstanding | | | | | | |
throughout each period): | | | | | | |
| | | | | | | |
Net asset value - Beginning of period | $10.44 | $10.45 | $10.58 | $10.77 | $10.89 | $10.36 |
| | | | | | | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income | 0.18 | 0.38 | 0.37 | 0.36 | 0.42 | 0.46 |
| Net realized and unrealized gain (loss) on investments | (0.19) | (0.02) | (0.13) | (0.07) | -2 | 0.54 |
| | | | | | | |
| Total from investment operations | (0.01) | 0.36 | 0.24 | 0.29 | 0.42 | 1.00 |
| | | | | | | |
| Less distributions to shareholders: | | | | | | |
| From net investment income | (0.18) | (0.36) | (0.36) | (0.45) | (0.41) | (0.42) |
| From net realized gain on investments | - | (0.01) | (0.01) | (0.03) | (0.13) | (0.05) |
| | | | | | | |
| Total distributions to shareholders | (0.18) | (0.37) | (0.37) | (0.48) | (0.54) | (0.47) |
| | | | | | | |
Net asset value - End of period | $10.25 | $10.44 | $10.45 | $10.58 | $10.77 | $10.89 |
| | | | | | | |
Total return1 | (0.10%) | 3.48% | 2.33% | 2.83% | 3.90% | 9.81% |
| | | | | | | |
Ratios (to average net assets)/Supplemental Data: | | | | | | |
| Expenses | 0.65%3 | 0.68% | 0.72% | 0.75% | 0.75%* | 0.73% |
| Net investment income | 3.70%3 | 3.68% | 3.55% | 3.57% | 3.80% | 4.20% |
| | | | | | | |
| Portfolio turnover | 7% | 8% | 6% | 7% | 17% | 6% |
| | | | | | | |
Net assets - End of period (000's omitted) | $104,006 | $92,910 | $82,405 | $75,820 | $64,193 | $63,961 |
*The investment advisor did not impose all of its management fee. If these expenses had been incurred by the Series, the expense ratio (to average net assets) for the year ended 12/31/03 would have been increased by 0.00%4.
1Represents 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 during the year ended 12/31/03. Periods less than one year are not annualized.
2Less than $0.01 per share.
3Annualized.
4Less than 0.01%.
The accompanying notes are an integral part of the financial statements.
12
Notes to Financial Statements (unaudited)
1. ORGANIZATION
New York Tax Exempt Series (the "Series") is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide as high a level of current income exempt from federal income tax and New York State personal income tax as the Advisor believes is consistent with the preservation of capital.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 100 million have been designated as New York Tax Exempt Series Class A common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation
Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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.
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. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily. Dividend income is recorded on an accrual basis.
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.
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.
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.
13
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Distributions of Income and Gains
Distributions to shareholders of net investment income are made quarterly. Distributions of 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 pays a fee, computed daily and payable monthly, at an annual rate of 0.50% 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 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 April 30, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.85% of average daily net assets each year. For the six months ended June 30, 2007, the Advisor did not waive its management fee or reimburse any expenses of the Series. 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, the Fund pays the Advisor an annual fee of 0.11% of the Fund’s average daily net assets up to $900 million, 0.07% of the Fund’s average
14
Notes to Financial Statements (unaudited)
3. TRANSACTIONS WITH AFFILIATES (continued)
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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $18,248,154 and $6,687,763, respectively. There were no purchases or sales of United States Government securities.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of New York Tax Exempt Series were:
| | For the Six Months | For the Year |
| | Ended 6/30/07 | Ended 12/31/06 |
| | Shares | Amount | Shares | Amount |
| | | | | |
| Sold | 1,776,161 | $18,494,637 | 1,332,286 | $13,874,257 |
| Reinvested | 163,724 | 1,687,895 | 283,436 | 2,944,568 |
| Repurchased | (690,618) | (7,198,768) | (608,138) | (6,345,675) |
| Total | 1,249,267 | $12,983,764 | 1,007,584 | $10,473,150 |
Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on June 30, 2007.
7. | CONCENTRATION OF CREDIT |
The Series primarily invests in debt obligations issued by the State of New York and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Series is more susceptible to factors adversely affecting issues of New York municipal securities than is a municipal bond fund that is not concentrated in these issues to the same extent.
15
Notes to Financial Statements (unaudited)
| 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. 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 final determination of the tax character of current year distributions will be made at the conclusion of the fiscal year. The tax character of distributions paid for the year ended December 31, 2006 were as follows:
| Ordinary Income | $10,775 |
| Tax exempt income | 3,048,231 |
| Long-term capital gains | 48,419 |
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized appreciation were as follows:
| Cost for federal income tax purposes | $102,956,975 |
| | |
| Unrealized appreciation | $1,315,673 |
| Unrealized depreciation | (1,251,852) |
| | |
| Net unrealized appreciation | $63,821 |
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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax
positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact
on the Series’ results of operation and financial condition.
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
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17
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 |
18
Manning & Napier Fund, Inc.
Diversified Tax Exempt Series
Semi-Annual Report
June 30, 2007
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 (January 1, 2007 to June 30, 2007).
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* |
| | 1/1/07 | 6/30/07 | 1/1/07-6/30/07 |
| Actual | $1,000.00 | $993.50 | $3.06 |
| Hypothetical | | | |
| (5% return before expenses) | $1,000.00 | $1,021.72 | $3.11 |
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.62%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year.
1
Portfolio Composition as of June 30, 2007 (unaudited)
Data for pie chart to follow:
Bond Types1
| Certificate of Participation | 1.3% |
| General Obligation Bonds | 69.8% |
| Revenue Bonds | 22.8% |
| Special Assessment | 0.9% |
| Special Tax Warrants | 0.2% |
| Tax Allocation | 0.8% |
| Cash, short-term investments, and liabilities, less other assets | 4.2% |
1As a percentage of net assets.
Credit Quality Ratings2,3
| Aaa | 86.4% |
| Aa | 8.8% |
| A | 0.6% |
| Unrated investments, such as cash, short-term investments, and liabilities, less other assets | 4.2% |
2As a percentage of net assets.
3Based on ratings from Moody’s, or the S&P equivalent. The Series may use different ratings provided by other rating agencies for purposes of determining compliance with the Series’ investment policies.
Top Ten States4
| Texas | 5.9% |
| California | 4.9% |
| Ohio | 4.7% |
| Washington | 4.6% |
| Michigan | 4.2% |
| Illinois | 4.1% |
| New York | 4.0% |
| South Carolina | 3.6% |
| New Jersey | 3.5% |
| Oregon | 3.4% |
4As a percentage of total investments.
2
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
MUNICIPAL SECURITIES - 95.8% | | | | | |
| | | | | | |
Alabama - 1.7% | | | | | |
| Bessemer Governmental Utility Services Corp., Water Supply, Revenue Bond, MBIA | 5.200% | 6/1/2024 | Aaa | $500,000 | $514,375 |
| Birmingham, Capital Impt., Prerefunded Balance, Series B, G.O. Bond, AMBAC | 5.000% | 12/1/2032 | Aaa | 1,005,000 | 1,053,521 |
| Fort Payne Waterworks Board, Revenue Bond, AMBAC | 3.500% | 7/1/2015 | Aaa | 665,000 | 630,154 |
| Hoover Board of Education, Capital Outlay Warrants, Special Tax Warrants, MBIA | 5.250% | 2/15/2017 | Aaa | 500,000 | 520,715 |
| Mobile County Board of School Commissioners, Capital Outlay Warrants, Prerefunded Balance, Series B, G.O. Bond, AMBAC | 5.000% | 3/1/2018 | Aaa | 500,000 | 517,585 |
| Odenville Utilities Board Water, Revenue Bond, MBIA | 4.300% | 8/1/2028 | Aaa | 500,000 | 496,555 |
| | | | | | 3,732,905 |
| | | | | | |
Alaska - 0.2% | | | | | |
| Alaska Municipal Banking Authority, Revenue Bond, MBIA | 4.100% | 6/1/2017 | Aaa | 455,000 | 449,217 |
| | | | | | |
| | | | | | |
Arizona - 3.2% | | | | | |
| Goodyear, G.O. Bond, MBIA | 4.375% | 7/1/2020 | Aaa | 680,000 | 675,002 |
| Mesa, G.O. Bond, FGIC | 4.125% | 7/1/2027 | Aaa | 2,215,000 | 2,033,193 |
| Phoenix, Series B, G.O. Bond | 4.200% | 7/1/2021 | Aa1 | 1,500,000 | 1,453,920 |
| Salt River Project, Agricultural Impt. & Power District, Certificate of Participation, MBIA | 5.000% | 12/1/2011 | Aaa | 1,500,000 | 1,562,670 |
| Yuma County Library District, Series A, G.O. Bond, AMBAC | 4.500% | 7/1/2035 | Aaa | 1,200,000 | 1,150,212 |
| | | | | | 6,874,997 |
| | | | | | |
California - 4.9% | | | | | |
| California State, G.O. Bond | 4.750% | 12/1/2028 | A1 | 795,000 | 794,968 |
| California State, G.O. Bond | 5.250% | 2/1/2023 | A1 | 500,000 | 540,500 |
| California State, Unrefunded Balance, G.O. Bond, MBIA | 5.000% | 6/1/2012 | Aaa | 1,300,000 | 1,351,987 |
| California State, Various Purposes, G.O. Bond, AMBAC | 4.250% | 12/1/2035 | Aaa | 1,140,000 | 1,035,052 |
| Campbell Union School District, G.O. Bond, FSA | 4.375% | 8/1/2027 | Aaa | 1,810,000 | 1,729,002 |
| Chula Vista Elementary School District, Series F, G.O. Bond, MBIA | 4.800% | 8/1/2024 | Aaa | 435,000 | 442,408 |
| Chula Vista Elementary School District, Series F, G.O. Bond, MBIA | 4.875% | 8/1/2025 | Aaa | 425,000 | 433,275 |
| Los Angeles Unified School District, Series B, G.O. Bond, AMBAC | 4.500% | 7/1/2027 | Aaa | 840,000 | 817,303 |
| Oak Valley Hospital District, G.O. Bond, FGIC | 4.500% | 7/1/2025 | Aaa | 1,395,000 | 1,353,108 |
| Richmond Joint Powers Financing Authority, Series A, Tax Allocation, MBIA | 5.250% | 9/1/2025 | Aaa | 1,570,000 | 1,638,766 |
| Wiseburn School District, Prerefunded Balance, Series A, G.O. Bond, FGIC | 5.250% | 8/1/2016 | Aaa | 330,000 | 337,009 |
| | | | | | 10,473,378 |
| | | | | | |
Colorado - 2.0% | | | | | |
| Broomfield Water Activity, Enterprise Water, Revenue Bond, MBIA | 5.000% | 12/1/2015 | Aaa | 700,000 | 731,752 |
The accompanying notes are an integral part of the financial statements.
3
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
| | | | | | |
Colorado (continued) | | | | | |
| Colorado Water Resources & Power Development Authority, Water Resource, Series D, Revenue Bond, FSA | 4.375% | 8/1/2035 | Aaa | $1,420,000 | $1,330,100 |
| Commerce City, Certificate of Participation, AMBAC | 4.750% | 12/15/2032 | AAA2 | 1,000,000 | 1,000,740 |
| Denver City & County School District No. 1, Prerefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2023 | Aaa | 895,000 | 926,513 |
| Denver City & County School District No. 1, Unrefunded Balance, G.O. Bond, FGIC | 5.000% | 12/1/2023 | Aaa | 105,000 | 107,935 |
| El Paso County School District No. 020, Series A, G.O. Bond, MBIA | 6.200% | 12/15/2007 | Aaa | 160,000 | 161,773 |
| | | | | | 4,258,813 |
| | | | | | |
Connecticut - 0.7% | | | | | |
| Stamford, G.O. Bond | 4.400% | 2/15/2026 | Aaa | 1,545,000 | 1,519,075 |
| | | | | | |
Delaware - 1.7% | | | | | |
| Delaware Transportation Authority, Revenue Bond, MBIA | 5.000% | 7/1/2011 | Aaa | 1,000,000 | 1,039,670 |
| New Castle County, Series A, G.O. Bond | 4.250% | 7/15/2025 | Aaa | 1,500,000 | 1,439,625 |
| New Castle County, Series A, G.O. Bond | 4.250% | 7/15/2026 | Aaa | 1,265,000 | 1,209,201 |
| | | | | | 3,688,496 |
| | | | | | |
Florida - 3.0% | | | | | |
| Cape Coral Utility Impt. Assessment, Special Assessment, MBIA | 4.500% | 7/1/2021 | Aaa | 2,000,000 | 1,969,360 |
| Florida State, Jacksonville Transportation, Prerefunded Balance, Series A, G.O. Bond | 5.000% | 7/1/2027 | Aa1 | 710,000 | 717,143 |
| Florida State Department of Transportation, G.O. Bond | 5.000% | 7/1/2027 | Aa1 | 1,000,000 | 1,027,110 |
| Florida State Board of Education, Capital Outlay, Public Education, Series A, G.O. Bond, FSA | 4.500% | 6/1/2025 | Aaa | 1,280,000 | 1,246,157 |
| Florida State Board of Education, Capital Outlay, Public Education, Series C, G.O. Bond, AMBAC | 5.000% | 6/1/2011 | Aaa | 425,000 | 441,086 |
| Miami-Dade County, Educational Facilities Authority, Prerefunded Balance, Series A, Revenue Bond, AMBAC | 5.000% | 4/1/2015 | Aaa | 510,000 | 536,816 |
| Tohopekaliga Water Authority, Utility System, Series A, Revenue Bond, FSA | 5.000% | 10/1/2028 | Aaa | 510,000 | 524,015 |
| | | | | | 6,461,687 |
| | | | | | |
Georgia - 2.4% | | | | | |
| Atlanta, Prerefunded Balance, G.O. Bond | 5.600% | 12/1/2018 | Aa3 | 350,000 | 357,455 |
| Atlanta, Water & Wastewater, Series A, Revenue Bond, MBIA | 5.000% | 11/1/2033 | Aaa | 310,000 | 316,854 |
| Atlanta, Water & Wastewater, Revenue Bond, FSA | 5.000% | 11/1/2043 | Aaa | 1,500,000 | 1,533,165 |
| Georgia State, Series B, G.O. Bond | 5.650% | 3/1/2012 | Aaa | 200,000 | 214,718 |
| Georgia State, Series B, G.O. Bond | 4.000% | 3/1/2022 | Aaa | 1,270,000 | 1,215,453 |
| Madison Water & Sewer, Revenue Bond, AMBAC | 4.625% | 7/1/2030 | Aaa | 1,000,000 | 981,250 |
| Rockdale County, Water & Sewer Authority, Prerefunded Balance, Revenue Bond, FSA | 5.000% | 7/1/2022 | Aaa | 450,000 | 459,027 |
| | | | | | 5,077,922 |
The accompanying notes are an integral part of the financial statements.
4
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
| | | | | | |
Hawaii - 0.1% | | | | | |
| Hawaii State, Series CH, G.O. Bond | 6.000% | 11/1/2007 | Aa2 | $260,000 | $261,934 |
| | | | | | |
Illinois - 4.1% | | | | | |
| Chicago Neighborhoods Alive 21 Program, Prerefunded Balance, G.O. Bond, FGIC | 5.375% | 1/1/2026 | Aaa | 500,000 | 522,945 |
| Chicago, Prerefunded Balance, G.O. Bond, FGIC | 5.250% | 1/1/2027 | Aaa | 250,000 | 256,780 |
| Chicago, Series A, G.O. Bond, MBIA | 5.000% | 1/1/2034 | Aaa | 830,000 | 846,384 |
| Chicago, Series A, G.O. Bond, AMBAC | 5.000% | 1/1/2018 | Aaa | 2,255,000 | 2,384,324 |
| Chicago, Series A, G.O. Bond, FSA | 4.750% | 1/1/2038 | Aaa | 1,500,000 | 1,485,675 |
| Cook County, Series A, G.O. Bond, FGIC | 5.000% | 11/15/2022 | Aaa | 750,000 | 764,858 |
| Illinois State, G.O. Bond | 5.000% | 12/1/2027 | Aa3 | 600,000 | 613,692 |
| Illinois State, Series 1995 A, Certificate of Participation, MBIA | 5.600% | 7/1/2010 | Aaa | 100,000 | 101,135 |
| Madison & St. Clair Counties School District No. 010 Collinsville, School Building, Prerefunded Balance, G.O. Bond, FGIC | 5.125% | 2/1/2019 | Aaa | 500,000 | 519,290 |
| Rock Island County School District No. 041 Rock Island, G.O. Bond, FSA | 5.125% | 12/1/2015 | Aaa | 200,000 | 203,490 |
| Springfield Electric, Revenue Bond, MBIA | 5.000% | 3/1/2035 | Aaa | 1,000,000 | 1,026,840 |
| | | | | | 8,725,413 |
| | | | | | |
Indiana - 1.3% | | | | | |
| Frankfort High School Elementary School Building Corp., Revenue Bond, FSA | 4.750% | 7/15/2025 | AAA2 | 1,500,000 | 1,513,140 |
| La Porte County, G.O. Bond, FGIC | 5.200% | 1/15/2018 | Aaa | 300,000 | 314,091 |
| Noblesville Sewage Works, Revenue Bond, AMBAC | 5.000% | 1/1/2024 | Aaa | 550,000 | 565,785 |
| North Lawrence Indiana Community Schools Building Corp., Revenue Bond, FSA | 5.000% | 7/15/2020 | Aaa | 450,000 | 465,201 |
| | | | | | 2,858,217 |
| | | | | | |
Iowa - 1.9% | | | | | |
| Indianola Community School District, G.O. Bond, FGIC | 5.200% | 6/1/2021 | Aaa | 425,000 | 446,428 |
| Iowa City Community School District, G.O. Bond, FSA | 4.000% | 6/1/2018 | Aaa | 425,000 | 414,184 |
| Iowa City, Sewer, Revenue Bond, MBIA | 5.750% | 7/1/2021 | Aaa | 250,000 | 250,373 |
| Polk County, Series C, G.O. Bond | 4.000% | 6/1/2017 | Aa1 | 995,000 | 972,016 |
| Polk County, Series C, G.O. Bond | 4.125% | 6/1/2025 | Aa1 | 2,075,000 | 1,926,721 |
| | | | | | 4,009,722 |
| | | | | | |
Kansas - 3.1% | | | | | |
| Johnson & Miami Counties Unified School District No. 230, G.O. Bond, FGIC | 4.000% | 9/1/2022 | Aaa | 1,000,000 | 940,050 |
| Johnson County Unified School District No. 229, Prerefunded Balance, Series A, G.O. Bond | 5.000% | 10/1/2014 | Aa1 | 220,000 | 220,664 |
| Johnson County Unified School District No. 231, Prerefunded Balance, Series A, G.O. Bond, FGIC | 5.750% | 10/1/2016 | Aaa | 500,000 | 520,195 |
| Miami County Unified School District No. 416 Louisburg, G.O. Bond, MBIA | 5.000% | 9/1/2018 | Aaa | 2,000,000 | 2,116,420 |
The accompanying notes are an integral part of the financial statements.
5
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
| | | | | | |
Kansas (continued) | | | | | |
| Sedgwick County Unified School District No. 265, G.O. Bond, FSA | 5.000% | 10/1/2025 | Aaa | $1,090,000 | $1,133,262 |
| Shawnee County Unified School District No. 450, Shawnee Heights, G.O. Bond, FSA | 4.200% | 9/1/2020 | Aaa | 700,000 | 683,956 |
| Shawnee County Unified School District No. 450, Shawnee Heights, G.O. Bond, FSA | 4.250% | 9/1/2021 | Aaa | 580,000 | 565,488 |
| Wyandotte County School District No. 204 Bonner Springs, Prerefunded Balance, Series A, G.O. Bond, FSA | 5.375% | 9/1/2015 | Aaa | 290,000 | 302,279 |
| Wyandotte County School District No. 204 Bonner Springs, Unrefunded Balance, Series A, G.O. Bond, FSA | 5.375% | 9/1/2015 | Aaa | 110,000 | 114,534 |
| | | | | | 6,596,848 |
| | | | | | |
Kentucky - 0.9% | | | | | |
| Kentucky State Turnpike Authority, Economic Development, Revenue Bond, AMBAC | 6.500% | 7/1/2008 | Aaa | 250,000 | 256,672 |
| Lexington-Fayette Urban County Government, Public Facilities Corp., Revenue Bond, MBIA | 4.000% | 10/1/2018 | Aaa | 1,655,000 | 1,611,407 |
| | | | | | 1,868,079 |
| | | | | | |
Louisiana - 1.5% | | | | | |
| Caddo Parish Parishwide School District, G.O. Bond, MBIA | 4.350% | 3/1/2026 | Aaa | 660,000 | 629,323 |
| Caddo Parish Parishwide School District, G.O. Bond, MBIA | 4.375% | 3/1/2027 | Aaa | 1,090,000 | 1,037,658 |
| Lafayette Public Power Authority, Series A, Revenue Bond, AMBAC | 5.000% | 11/1/2012 | Aaa | 730,000 | 760,361 |
| New Orleans Sewage Service, Revenue Bond, FGIC | 5.250% | 6/1/2012 | Aaa | 300,000 | 303,240 |
| Orleans Parish Parishwide School District, Series A, G.O. Bond, FGIC | 5.125% | 9/1/2016 | Aaa | 400,000 | 402,104 |
| | | | | | 3,132,686 |
| | | | | | |
Maine - 0.4% | | | | | |
| Kennebec Water District, Revenue Bond, FSA | 5.125% | 12/1/2021 | Aaa | 750,000 | 761,850 |
| | | | | | |
Maryland - 1.9% | | | | | |
| Anne Arundel County, Water & Sewer, G.O. Bond | 4.200% | 3/1/2025 | Aa1 | 1,770,000 | 1,685,305 |
| Anne Arundel County, Water & Sewer, G.O. Bond | 4.125% | 3/1/2024 | Aa1 | 345,000 | 327,205 |
| Baltimore County, Metropolitan District, G.O. Bond | 4.250% | 9/1/2029 | Aaa | 1,000,000 | 946,420 |
| Baltimore, Water Project, Series A, Revenue Bond, FGIC | 5.550% | 7/1/2009 | Aaa | 260,000 | 268,655 |
| Maryland State, State & Local Facilities, G.O. Bond | 4.250% | 8/1/2021 | Aaa | 750,000 | 737,483 |
| | | | | | 3,965,068 |
| | | | | | |
Massachusetts - 2.6% | | | | | |
| Boston, Series A, G.O. Bond, MBIA | 4.125% | 1/1/2021 | Aaa | 1,000,000 | 968,260 |
| Boston, Series A, G.O. Bond, MBIA | 4.125% | 1/1/2022 | Aaa | 410,000 | 394,174 |
| Cambridge, Series A, G.O. Bond | 4.000% | 2/1/2026 | Aaa | 850,000 | 788,316 |
| Cambridge, Series A, G.O. Bond | 4.000% | 2/1/2027 | Aaa | 850,000 | 781,906 |
| Lowell, State Qualified, G.O. Bond, AMBAC | 5.000% | 2/1/2020 | Aaa | 500,000 | 517,455 |
| Massachusetts State, Series C, G.O. Bond, AMBAC | 5.750% | 8/1/2010 | Aaa | 400,000 | 421,324 |
The accompanying notes are an integral part of the financial statements.
6
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
| | | | | | |
Massachusetts (continued) | | | | | |
| Massachusetts State, Series D, G.O. Bond | 5.250% | 10/1/2014 | Aa2 | $1,000,000 | $1,071,800 |
| Plymouth, G.O. Bond, MBIA | 5.250% | 10/15/2020 | Aaa | 100,000 | 104,536 |
| Richmond, G.O. Bond, MBIA | 5.000% | 4/15/2021 | Aaa | 400,000 | 414,796 |
| | | | | | 5,462,567 |
| | | | | | |
Michigan - 4.2% | | | | | |
| Bendle Public School District, School Building & Site, G.O. Bond, FGIC | 4.500% | 5/1/2028 | Aaa | 640,000 | 621,664 |
| Detroit City School District, School Building & Site Impt., Series B, G.O. Bond, FGIC | 5.000% | 5/1/2033 | Aaa | 750,000 | 765,930 |
| Detroit Sewer Disposal System, Series B, Revenue Bond, FGIC | 4.625% | 7/1/2034 | Aaa | 1,500,000 | 1,458,285 |
| Grand Rapids Public Schools, G.O. Bond, MBIA | 4.125% | 5/1/2023 | Aaa | 1,200,000 | 1,135,032 |
| Holly Area School District, G.O. Bond, FGIC | 5.000% | 5/1/2022 | Aaa | 500,000 | 507,245 |
| Hudsonville Public Schools, Prerefunded Balance, G.O. Bond, FGIC | 5.150% | 5/1/2027 | Aaa | 185,000 | 187,126 |
| Hudsonville Public Schools, Unrefunded Balance, G.O. Bond, FGIC | 5.150% | 5/1/2027 | Aaa | 40,000 | 40,320 |
| Lincoln Park School District, Prerefunded Balance, G.O. Bond, FGIC | 5.000% | 5/1/2026 | Aaa | 125,000 | 126,282 |
| Lincoln Park School District, Unrefunded Balance, G.O. Bond, FGIC | 5.000% | 5/1/2026 | Aaa | 355,000 | 357,240 |
| Muskegon Water, Revenue Bond, FSA | 4.750% | 5/1/2019 | Aaa | 565,000 | 572,311 |
| Oakland County, George W. Kuhn Drain District, Prerefunded Balance, Series B, G.O. Bond | 5.375% | 4/1/2021 | Aaa | 475,000 | 485,935 |
| Saginaw City School District, School Building & Site, G.O. Bond, FSA | 4.500% | 5/1/2031 | Aaa | 1,695,000 | 1,639,523 |
| St. Joseph County, Sewer Disposal Systems - Constantine, G.O. Bond, FSA | 5.000% | 4/1/2012 | Aaa | 100,000 | 100,774 |
| Warren Woods Public Schools, School Building & Site, G.O. Bond, FSA | 4.500% | 5/1/2026 | Aaa | 1,015,000 | 990,995 |
| | | | | | 8,988,662 |
| | | | | | |
Minnesota - 1.5% | | | | | |
| Brooklyn Center Independent School District No. 286, School Building, Series A, G.O. Bond, MBIA | 4.375% | 2/1/2026 | Aaa | 1,105,000 | 1,062,093 |
| Hennepin County, Series A, G.O. Bond | 4.500% | 12/1/2025 | Aaa | 1,500,000 | 1,488,810 |
| Pine County, Series A, G.O. Bond, FGIC | 4.400% | 2/1/2028 | Aaa | 555,000 | 531,329 |
| Western Minnesota Municipal Power Agency, Revenue Bond | 6.625% | 1/1/2016 | Aaa | 175,000 | 197,829 |
| | | | | | 3,280,061 |
| | | | | | |
Mississippi - 0.7% | | | | | |
| Biloxi Public School District, Revenue Bond, MBIA | 5.000% | 4/1/2017 | Aaa | 500,000 | 512,075 |
| De Soto County School District, G.O. Bond, FSA | 5.000% | 2/1/2013 | Aaa | 1,000,000 | 1,040,660 |
| | | | | | 1,552,735 |
The accompanying notes are an integral part of the financial statements.
7
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
| | | | | | |
Missouri - 0.3% | | | | | |
| Metropolitan St. Louis Sewer District Wastewater System, Series A, Revenue Bond, MBIA | 3.600% | 5/1/2013 | Aaa | $600,000 | $585,696 |
| | | | | | |
| | | | | | |
Nebraska - 1.2% | | | | | |
| Omaha Metropolitan Utilities District Water, Series A, Revenue Bond, FSA | 4.375% | 12/1/2031 | Aaa | 2,640,000 | 2,499,895 |
| | | | | | |
Nevada - 2.6% | | | | | |
| Clark County Transportation, Series A, G.O. Bond, FGIC | 4.500% | 12/1/2019 | Aaa | 500,000 | 501,130 |
| Clark County Public Facilities, Series C, G.O. Bond, FGIC | 5.000% | 6/1/2024 | Aaa | 425,000 | 431,439 |
| Las Vegas Valley Water District, Water Impt., Series A, G.O. Bond, FSA | 4.750% | 6/1/2033 | Aaa | 1,500,000 | 1,504,275 |
| Nevada State, Project Nos. 66 & 67, Prerefunded Balance, Series A, G.O. Bond, FGIC | 5.000% | 5/15/2028 | Aaa | 625,000 | 631,712 |
| Nevada State, Project Nos. 66 & 67, Unrefunded Balance, Series A, G.O. Bond, FGIC | 5.000% | 5/15/2028 | Aaa | 125,000 | 125,825 |
| North Las Vegas, G.O. Bond, MBIA | 5.000% | 5/1/2024 | Aaa | 1,500,000 | 1,560,765 |
| Truckee Meadows, Water Authority, Prerefunded Balance, Series A, Revenue Bond, FSA | 5.000% | 7/1/2025 | Aaa | 750,000 | 778,628 |
| | | | | | 5,533,774 |
| | | | | | |
New Jersey - 3.5% | | | | | |
| East Brunswick Township Board of Education, G.O. Bond, FSA | 4.500% | 11/1/2028 | Aaa | 835,000 | 818,116 |
| East Brunswick Township Board of Education, G.O. Bond, FSA | 4.500% | 11/1/2029 | Aaa | 1,000,000 | 979,240 |
| Essex County, Prerefunded Balance, Series A, G.O. Bond, MBIA | 4.500% | 5/1/2031 | Aaa | 500,000 | 514,280 |
| Hudson County, G.O. Bond, CIFG | 4.250% | 9/1/2021 | Aaa | 930,000 | 906,731 |
| Morris County Impt. Authority, School District, Morris Hills Regional District, Revenue Bond | 3.700% | 10/1/2018 | Aaa | 540,000 | 509,825 |
| New Jersey Transportation Trust Fund Authority, Transportation System, Unrefunded Balance, Series C, Revenue Bond, FSA | 5.500% | 12/15/2013 | Aaa | 1,400,000 | 1,511,972 |
| South Brunswick Township Board of Education, G.O. Bond, MBIA | 4.125% | 8/1/2012 | Aaa | 1,200,000 | 1,210,668 |
| Sparta Township School District, G.O. Bond, FSA | 4.300% | 2/15/2030 | Aaa | 1,000,000 | 960,490 |
| | | | | | 7,411,322 |
| | | | | | |
New Mexico - 0.4% | | | | | |
| New Mexico Finance Authority, Public Project Revolving Fund, Series A, Revenue Bond, MBIA | 3.250% | 6/1/2013 | Aaa | 800,000 | 759,368 |
| | | | | | |
| | | | | | |
New York - 4.0% | | | | | |
| Erie County, Public Impt., Series A, G.O. Bond, FGIC | 5.000% | 9/1/2014 | Aaa | 380,000 | 397,993 |
| Hampton Bays Union Free School District, G.O. Bond, FSA | 4.375% | 9/15/2029 | Aaa | 2,225,000 | 2,152,665 |
| Mount Morris Central School District, G.O. Bond, FGIC | 4.125% | 6/15/2014 | Aaa | 1,290,000 | 1,305,648 |
| New York City Municipal Water Finance Authority, Series E, Revenue Bond, FGIC | 5.000% | 6/15/2026 | Aaa | 750,000 | 768,645 |
| New York State Urban Development Corp., Series B, Revenue Bond, MBIA | 5.000% | 1/1/2019 | AAA2 | 1,000,000 | 1,053,790 |
The accompanying notes are an integral part of the financial statements.
8
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
| | | | | | |
New York (continued) | | | | | |
| Orange County, G.O. Bond | 5.125% | 9/1/2024 | Aa1 | $500,000 | $506,100 |
| Sachem Central School District of Holbrook, G.O. Bond, FGIC | 4.375% | 10/15/2030 | Aaa | 2,000,000 | 1,922,140 |
| Spencerport Central School District, G.O. Bond, FSA | 5.000% | 11/15/2012 | Aaa | 350,000 | 356,041 |
| Westchester County, Unrefunded Balance, G.O. Bond | 4.750% | 11/15/2016 | Aaa | 120,000 | 121,194 |
| | | | | | 8,584,216 |
| | | | | | |
North Carolina - 1.4% | | | | | |
| Cary, G.O. Bond | 5.000% | 3/1/2018 | Aaa | 700,000 | 732,564 |
| Mecklenburg County, Public Impt., Series A, G.O. Bond | 4.125% | 2/1/2022 | Aaa | 1,455,000 | 1,407,640 |
| Raleigh, G.O. Bond | 4.400% | 6/1/2017 | Aaa | 250,000 | 255,445 |
| Union County, Prerefunded Balance, Series B, G.O. Bond, FGIC | 5.300% | 3/1/2013 | Aaa | 250,000 | 260,547 |
| Wilson, G.O. Bond, AMBAC | 5.100% | 6/1/2019 | Aaa | 400,000 | 417,912 |
| | | | | | 3,074,108 |
| | | | | | |
North Dakota - 0.9% | | | | | |
| Fargo, Series A, G.O. Bond, MBIA | 4.700% | 5/1/2030 | Aaa | 1,840,000 | 1,825,630 |
| | | | | | |
Ohio - 4.7% | | | | | |
| Brookville Local School District, School Impt., G.O. Bond, FSA | 4.125% | 12/1/2026 | Aaa | 660,000 | 608,111 |
| Cleveland, Various Purposes, G.O. Bond, MBIA | 5.000% | 12/1/2012 | Aaa | 1,140,000 | 1,195,723 |
| Columbus, Limited Tax, Series 2, G.O. Bond | 5.000% | 7/1/2017 | Aaa | 1,000,000 | 1,057,130 |
| Columbus City School District, Facilities Construction & Impt., G.O. Bond, FSA | 4.375% | 12/1/2032 | Aaa | 1,000,000 | 944,250 |
| Licking Heights Local School District, School Facilities Construction & Impt., Series A, G.O. Bond, MBIA | 5.000% | 12/1/2022 | Aaa | 1,450,000 | 1,511,553 |
| Newark City School District, School Impt., G.O. Bond, FGIC | 4.250% | 12/1/2027 | Aaa | 500,000 | 467,160 |
| Oak Hills Local School District, Prerefunded Balance, G.O. Bond, MBIA | 5.125% | 12/1/2025 | Aaa | 490,000 | 497,571 |
| Ohio State Conservation Project, Series A, G.O. Bond | 5.000% | 3/1/2015 | Aa1 | 1,000,000 | 1,053,030 |
| Pickerington Local School District, School Facilities Construction & Impt., G.O. Bond, MBIA | 4.250% | 12/1/2034 | Aaa | 2,500,000 | 2,291,475 |
| Springfield City School District, Prerefunded Balance, G.O. Bond, FGIC | 5.200% | 12/1/2023 | Aaa | 325,000 | 346,655 |
| | | | | | 9,972,658 |
| | | | | | |
Oklahoma - 1.3% | | | | | |
| Oklahoma City, G.O. Bond, MBIA | 4.250% | 3/1/2023 | Aaa | 2,000,000 | 1,931,000 |
| Oklahoma State Turnpike Authority, Prerefunded Balance, Series A, Revenue Bond, FGIC | 5.000% | 1/1/2023 | Aaa | 750,000 | 762,608 |
| | | | | | 2,693,608 |
| | | | | | |
Oregon - 3.4% | | | | | |
| Josephine County Unit School District Three Rivers, Prerefunded Balance, G.O. Bond, FSA | 5.250% | 6/15/2017 | Aaa | 825,000 | 863,957 |
| Metro, G.O. Bond | 5.000% | 6/1/2022 | Aaa | 3,000,000 | 3,158,160 |
| Oregon State Board of Higher Education, Prerefunded Balance, Series B, G.O. Bond | 5.000% | 8/1/2033 | Aa3 | 1,500,000 | 1,534,260 |
| Salem Water & Sewer , Revenue Bond, FSA | 5.000% | 5/1/2014 | Aaa | 1,120,000 | 1,183,840 |
The accompanying notes are an integral part of the financial statements.
9
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
| | | | | | |
Oregon (continued) | | | | | |
| Washington County School District No. 015 Forest Grove, Prerefunded Balance, G.O. Bond, FSA | 5.500% | 6/15/2017 | Aaa | $500,000 | $528,150 |
| | | | | | 7,268,367 |
| | | | | | |
Pennsylvania - 3.2% | | | | | |
| Beaver County, G.O. Bond, MBIA | 5.150% | 10/1/2017 | Aaa | 300,000 | 300,951 |
| Jenkintown School District, Series A, G.O. Bond, FGIC | 4.500% | 5/15/2032 | Aaa | 1,000,000 | 964,820 |
| Lancaster School District, G.O. Bond, FSA | 5.000% | 6/1/2019 | Aaa | 1,200,000 | 1,270,812 |
| Pennsylvania State, G.O. Bond, MBIA | 5.000% | 1/1/2011 | Aaa | 1,500,000 | 1,553,070 |
| Pennsylvania State Turnpike Commission, Prerefunded Balance, Revenue Bond, AMBAC | 5.375% | 7/15/2019 | Aaa | 530,000 | 562,245 |
| Philadelphia, Water & Wastewater, Revenue Bond, MBIA | 5.600% | 8/1/2018 | Aaa | 20,000 | 21,203 |
| Plum Boro School District, Series A, G.O. Bond, FGIC | 4.500% | 9/15/2030 | AAA2 | 855,000 | 828,589 |
| Uniontown Area School District, G.O. Bond, FSA | 4.350% | 10/1/2034 | Aaa | 1,500,000 | 1,399,605 |
| | | | | | 6,901,295 |
| | | | | | |
Rhode Island - 0.5% | | | | | |
| Rhode Island Clean Water Finance Agency, Series A, Revenue Bond, MBIA | 5.000% | 10/1/2035 | Aaa | 1,000,000 | 1,018,190 |
| | | | | | |
South Carolina - 3.7% | | | | | |
| Beaufort County School District, Prerefunded Balance, Series A, G.O. Bond | 5.000% | 3/1/2020 | Aa1 | 500,000 | 517,585 |
| Beaufort County, G.O. Bond, MBIA | 4.250% | 3/1/2024 | Aaa | 790,000 | 758,005 |
| Charleston County, Transportation Sales Tax, G.O. Bond | 5.000% | 11/1/2017 | Aa1 | 1,000,000 | 1,063,840 |
| Orangeburg County Consolidated School District 5, Prerefunded Balance, G.O. Bond | 5.625% | 3/1/2019 | Aa1 | 800,000 | 833,968 |
| South Carolina, State Institutional - South Carolina State University, Series D, G.O. Bond | 4.250% | 10/1/2026 | Aaa | 1,250,000 | 1,191,362 |
| South Carolina, Transportation Infrastructure Bank, Prerefunded Balance, Series A, Revenue Bond, AMBAC | 5.250% | 10/1/2021 | Aaa | 1,500,000 | 1,558,290 |
| South Carolina, Transportation Infrastructure Bank, Series B, Revenue Bond, AMBAC | 4.250% | 10/1/2027 | Aaa | 2,000,000 | 1,870,200 |
| | | | | | 7,793,250 |
| | | | | | |
South Dakota - 0.3% | | | | | |
| Rapid City Area School District No. 51-4, Capital Outlay Certificates, G.O. Bond, FSA | 4.750% | 1/1/2018 | Aaa | 650,000 | 653,256 |
| | | | | | |
Tennessee - 1.6% | | | | | |
| Cleveland Water & Sewer, Prerefunded Balance, G.O. Bond, FGIC | 5.350% | 9/1/2023 | Aaa | 450,000 | 451,170 |
| Rhea County, Prerefunded Balance, G.O. Bond, MBIA | 5.000% | 4/1/2018 | Aaa | 950,000 | 984,105 |
| Shelby County, Series A, G.O. Bond | 5.500% | 3/1/2010 | Aa2 | 2,000,000 | 2,081,020 |
| | | | | | 3,516,295 |
The accompanying notes are an integral part of the financial statements.
10
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | | |
| | Coupon | Maturity | Rating1 | Principal | Value |
| | Rate | Date | (unaudited) | Amount | (Note 2) |
| | | | | | |
Texas - 6.0% | | | | | |
| Alamo Community College District, Series A, G.O. Bond, MBIA | 5.000% | 8/15/2024 | Aaa | $1,020,000 | $1,057,781 |
| Alvin Independent School District, G.O. Bond | 4.375% | 2/15/2024 | Aaa | 750,000 | 719,962 |
| Brazoria County, G.O. Bond, FGIC | 4.750% | 9/1/2011 | Aaa | 445,000 | 448,560 |
| Brazos River Authority, Series B, Revenue Bond, FGIC | 4.250% | 12/1/2017 | Aaa | 1,125,000 | 1,113,019 |
| Canyon Independent School District, School Building, G.O. Bond | 4.700% | 2/15/2025 | AAA2 | 1,440,000 | 1,440,360 |
| Del Valle Independent School District, School Building, G.O. Bond | 5.000% | 6/15/2019 | AAA2 | 1,845,000 | 1,931,088 |
| Fort Bend County, G.O. Bond, MBIA | 4.750% | 3/1/2031 | Aaa | 1,000,000 | 1,000,710 |
| Huntsville Independent School District, G.O. Bond | 4.500% | 2/15/2029 | Aaa | 1,220,000 | 1,171,981 |
| McKinney Waterworks & Sewer, Revenue Bond, FGIC | 4.750% | 3/15/2024 | Aaa | 1,000,000 | 1,007,420 |
| Richardson Independent School District, Prerefunded Balance, Series B, G.O. Bond | 5.000% | 2/15/2021 | Aaa | 500,000 | 500,735 |
| San Antonio Water, Revenue Bond, FGIC | 4.375% | 5/15/2029 | Aaa | 1,400,000 | 1,315,916 |
| San Patricio Municipal Water District, Prerefunded Balance, Revenue Bond, FSA | 5.200% | 7/10/2028 | Aaa | 490,000 | 502,701 |
| Waller Consolidated Independent School District, G.O. Bond | 4.750% | 2/15/2023 | Aaa | 500,000 | 502,455 |
| | | | | | 12,712,688 |
| | | | | | |
Utah - 1.6% | | | | | |
| Mountain Regional Water Special Service District, Revenue Bond, MBIA | 5.000% | 12/15/2030 | Aaa | 1,240,000 | 1,274,398 |
| Provo City School District, Series B, G.O. Bond | 4.000% | 6/15/2014 | Aaa | 1,100,000 | 1,096,084 |
| St. George, Parks and Recreation, G.O. Bond, AMBAC | 4.000% | 8/1/2019 | Aaa | 795,000 | 767,867 |
| Utah State Building Ownership Authority, Series C, Revenue Bond, FSA | 5.500% | 5/15/2011 | Aaa | 300,000 | 315,891 |
| | | | | | 3,454,240 |
| | | | | | |
Virginia - 3.2% | | | | | |
| Fairfax County, Public Impt., Series A, G.O. Bond | 4.000% | 4/1/2017 | Aaa | 2,000,000 | 1,983,160 |
| Fairfax County, Public Impt., Series A, G.O. Bond | 4.250% | 4/1/2027 | Aaa | 1,500,000 | 1,430,940 |
| Norfolk, Capital Impt., G.O. Bond, MBIA | 4.375% | 3/1/2024 | Aaa | 685,000 | 667,930 |
| Norfolk, Capital Impt., G.O. Bond, FGIC | 4.250% | 10/1/2024 | Aaa | 2,500,000 | 2,384,950 |
| Richmond, Series B, G.O. Bond, FSA | 4.750% | 7/15/2023 | Aaa | 400,000 | 406,928 |
| | | | | | 6,873,908 |
| | | | | | |
Washington - 4.7% | | | | | |
| Franklin County, G.O. Bond, FGIC | 5.125% | 12/1/2022 | Aaa | 1,000,000 | 1,040,960 |
| King County, Series B, G.O. Bond, MBIA | 5.000% | 1/1/2030 | Aaa | 400,000 | 404,120 |
| King County School District No. 411 Issaquah, Series A, G.O. Bond, FSA | 5.250% | 12/1/2018 | Aaa | 2,420,000 | 2,574,178 |
| King County, Sewer, Series A, Revenue Bond, MBIA | 4.500% | 1/1/2032 | Aaa | 1,070,000 | 1,026,868 |
| King County Sewer, Revenue Bond, FSA | 5.000% | 1/1/2024 | Aaa | 1,460,000 | 1,523,072 |
| Seattle, Drain & Wastewater, Revenue Bond, MBIA | 4.375% | 2/1/2026 | Aaa | 2,000,000 | 1,905,620 |
| Washington State, Prerefunded Balance, Series A, G.O. Bond | 5.000% | 1/1/2023 | Aa1 | 410,000 | 412,562 |
| Washington State, Motor Vehicle Fuel Tax, G.O. Bond, AMBAC | 5.000% | 1/1/2025 | Aaa | 1,000,000 | 1,041,460 |
| | | | | | 9,928,840 |
The accompanying notes are an integral part of the financial statements.
11
Investment Portfolio - June 30, 2007 (unaudited)
| | | | Credit | Principal | |
| | Coupon | Maturity | Rating1 | | Value |
| | Rate | Date | (unaudited) | Shares | (Note 2) |
| | | | | | |
West Virginia - 0.4% | | | | | |
| West Virginia State Water Development Authority, Series A, Revenue Bond, FGIC | 4.250% | 11/1/2026 | Aaa | $820,000 | $773,014 |
| | | | | | |
Wisconsin - 2.9% | | | | | |
| Central Brown County Water Authority, Water Systems, Revenue Bond, AMBAC | 5.000% | 12/1/2035 | Aaa | 1,500,000 | 1,537,245 |
| Eau Claire, Series B, G.O. Bond, MBIA | 4.000% | 4/1/2015 | Aaa | 1,195,000 | 1,185,105 |
| Kenosha, Series B, G.O. Bond, FSA | 5.000% | 9/1/2011 | Aaa | 765,000 | 795,577 |
| Oshkosh, Corporate Purposes, Series A, G.O. Bond, FGIC | 5.050% | 12/1/2021 | Aaa | 450,000 | 465,754 |
| Stoughton Area School District, G.O. Bond, FGIC | 4.875% | 4/1/2016 | Aaa | 500,000 | 514,030 |
| Two Rivers Public School District, Prerefunded Balance, G.O. Bond, FSA | 5.625% | 3/1/2019 | Aaa | 415,000 | 432,621 |
| West De Pere School District, Prerefunded Balance, Series A, G.O. Bond, FSA | 5.250% | 10/1/2017 | Aaa | 500,000 | 519,800 |
| Wisconsin State Transportation, Series A, Revenue Bond, FSA | 5.000% | 7/1/2025 | Aaa | 700,000 | 726,166 |
| | | | | | 6,176,298 |
| | | | | | |
TOTAL MUNICIPAL SECURITIES | | | | | |
| (Identified Cost $206,025,190) | | | | | 204,010,248 |
| | | | | | |
SHORT-TERM INVESTMENTS - 4.8% | | | | | |
| Dreyfus Municipal Reserves - Class R | | | | | |
| (Identified Cost $10,283,690) | | | | 10,283,690 | 10,283,690 |
| | | | | | |
TOTAL INVESTMENTS - 100.6% | | | | | |
| (Identified Cost $216,308,880) | | | | | 214,293,938 |
| | | | | | |
LIABILITIES, LESS OTHER ASSETS - (0.6%) | | | | | (1,354,358) |
| | | | | | |
NET ASSETS - 100% | | | | | $212,939,580 |
KEY:
G.O. Bond - General Obligation Bond
Impt. - Improvement
No. - Number
Scheduled principal and interest payments are guaranteed by:
AMBAC (AMBAC Assurance Corp.)
CIFG (CIFG North America, Inc.)
FGIC (Financial Guaranty Insurance Co.)
FSA (Financial Security Assurance)
MBIA (MBIA, Inc.)
The insurance does not guarantee the market value of the municipal bonds.
1Credit ratings from Moody’s (unaudited).
2Credit ratings from S&P (unaudited).
The Series' portfolio holds, as a percentage of net assets, greater than 10% in bonds insured by the following companies: MBIA - 24.7%; FSA - 21.4%; FGIC - 15.9%.
The accompanying notes are an integral part of the financial statements.
12
Statement of Assets and Liabilities (unaudited)
June 30, 2007
ASSETS: | |
| | |
| Investments, at value (identified cost $216,308,880) (Note 2) | $214,293,938 |
| Interest receivable | 2,647,067 |
| Receivable for fund shares sold | 1,128,835 |
| Dividends receivable | 30,430 |
| Prepaid expenses | 3,066 |
| | |
| TOTAL ASSETS | 218,103,336 |
| | |
LIABILITIES: | |
| | |
| Accrued management fees (Note 3) | 85,022 |
| Accrued fund accounting and transfer agent fees (Note 3) | 12,139 |
| Accrued Chief Compliance Officer service fees (Note 3) | 394 |
| Accrued directors' fees (Note 3) | 260 |
| Payable for securities purchased | 4,374,308 |
| Payable for fund shares repurchased | 673,972 |
| Audit fees payable | 17,661 |
| | |
| TOTAL LIABILITIES | 5,163,756 |
| | |
TOTAL NET ASSETS | $212,939,580 |
| | |
NET ASSETS CONSIST OF: | |
| | |
| Capital stock | $198,996 |
| Additional paid-in-capital | 213,481,611 |
| Undistributed net investment income | 1,246,412 |
| Accumulated net realized gain on investments | 27,503 |
| Net unrealized depreciation on investments | (2,014,942) |
| | |
TOTAL NET ASSETS | $212,939,580 |
| | |
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($212,939,580/19,899,574 shares) | $10.70 |
The accompanying notes are an integral part of the financial statements.
13
Statement of Operations (unaudited)
For the Six Months Ended June 30, 2007
INVESTMENT INCOME: | |
| | |
| Interest | $3,944,422 |
| Dividends | 140,836 |
| | |
| Total Investment Income | 4,085,258 |
| | |
EXPENSES: | |
| | |
| Management fees (Note 3) | 475,237 |
| Fund accounting and transfer agent fees (Note 3) | 75,053 |
| Directors' fees (Note 3) | 3,636 |
| Chief Compliance Officer service fees (Note 3) | 2,835 |
| Custodian fees | 4,606 |
| Miscellaneous | 30,495 |
| | |
| Total Expenses | 591,862 |
| | |
| NET INVESTMENT INCOME | 3,493,396 |
| | |
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | |
| | |
| Net realized gain on investments | 27,503 |
| Net change in unrealized appreciation (depreciation) on investments | (4,857,370) |
| | |
| NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | (4,829,867) |
| | |
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $(1,336,471) |
The accompanying notes are an integral part of the financial statements.
14
Statements of Changes in Net Assets
| | For the Six | |
| | Months Ended | For the |
| | 6/30/07 | Year Ended |
| | (unaudited) | 12/31/06 |
| | | |
INCREASE (DECREASE) IN NET ASSETS: | | |
| | | |
OPERATIONS: | | |
| | | |
| Net investment income | $3,493,396 | $5,054,876 |
| Net realized gain on investments | 27,503 | 162,857 |
| Net change in unrealized appreciation (depreciation) on investments | (4,857,370) | 319,437 |
| | | |
| Net increase (decrease) from operations | (1,336,471) | 5,537,170 |
| | | |
DISTRIBUTIONS TO SHAREHOLDERS (Note 7): | | |
| | | |
| From net investment income | (3,306,606) | (4,612,559) |
| From net realized gain on investments | - | (134,415) |
| | | |
| Total distributions to shareholders | (3,306,606) | (4,746,974) |
| | | |
CAPITAL STOCK ISSUED AND REPURCHASED: | | |
| | | |
| Net increase from capital share transactions (Note 5) | 49,894,045 | 53,933,864 |
| | | |
| Net increase in net assets | 45,250,968 | 54,724,060 |
| | | |
NET ASSETS: | | |
| | | |
| Beginning of period | 167,688,612 | 112,964,552 |
| | | |
End of period (including undistributed net investment income of $1,246,412 and $1,059,622, respectively) | $212,939,580 | $167,688,612 |
The accompanying notes are an integral part of the financial statements.
15
| | For the Six | | | | | |
| | Months Ended | | | | | |
| | | | | For the Years Ended | | |
| | (unaudited) | 12/31/06 | 12/31/05 | 12/31/04 | 12/31/03 | 12/31/02 |
| | | | | | | |
Per share data (for a share outstanding | | | | | | |
throughout each period): | | | | | | |
| | | | | | | |
Net asset value - Beginning of period | $10.95 | $10.90 | $10.99 | $11.04 | $11.00 | $10.54 |
| | | | | | | |
| Income (loss) from investment operations: | | | | | | |
| Net investment income | 0.17 | 0.37 | 0.37 | 0.37 | 0.41 | 0.44 |
| Net realized and unrealized gain (loss) on investments | (0.24) | 0.05 | (0.09) | 0.04 | 0.10 | 0.51 |
| | | | | | | |
| Total from investment operations | (0.07) | 0.42 | 0.28 | 0.41 | 0.51 | 0.95 |
| | | | | | | |
| Less distributions to shareholders: | | | | | | |
| From net investment income | (0.18) | (0.36) | (0.36) | (0.45) | (0.41) | (0.41) |
| From net realized gain on investments | - | (0.01) | (0.01) | (0.01) | (0.06) | (0.08) |
| | | | | | | |
| Total distributions to shareholders | (0.18) | (0.37) | (0.37) | (0.46) | (0.47) | (0.49) |
| | | | | | | |
Net asset value - End of period | $10.70 | $10.95 | $10.90 | $10.99 | $11.04 | $11.00 |
| | | | | | | |
Total return1 | (0.65%) | 3.94% | 2.60% | 3.80% | 4.65% | 9.21% |
| | | | | | | |
Ratios (to average net assets)/Supplemental Data: | | | | | | |
| Expenses | 0.62%2 | 0.66% | 0.71% | 0.77% | 0.78% | 0.82% |
| Net investment income | 3.67%2 | 3.71% | 3.58% | 3.63% | 3.83% | 4.07% |
| | | | | | | |
| Portfolio turnover | 1% | 5% | 2% | 5% | 7% | 11% |
| | | | | | | |
Net assets - End of period (000's omitted) | $212,940 | $167,689 | $112,965 | $86,441 | $63,754 | $55,169 |
1Represents aggregate total return for the period indicated, and assumes reinvestment of all distributions. Periods less than one year are not annualized.
2Annualized.
The accompanying notes are an integral part of the financial statements.
16
Notes to Financial Statements (unaudited)
1. ORGANIZATION
Diversified Tax Exempt Series (the "Series") is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series' investment objective is to provide as high a level of current income exempt from federal income tax as the Advisor believes is consistent with the preservation of capital.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 3.0 billion shares of common stock each having a par value of $0.01. As of June 30, 2007, 2.13 billion shares have been designated in total among 21 series, of which 100 million have been designated as Diversified Tax Exempt Series Class A common stock.
2. SIGNIFICANT ACCOUNTING POLICIES
Security Valuation
Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Securities for which representative valuations or prices are not available from the Fund's pricing service may be valued at fair value. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. 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.
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. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily. Dividend income is recorded on an accrual basis.
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.
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.
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,
17
Notes to Financial Statements (unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Federal Taxes (continued)
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 quarterly. Distributions of 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 pays a fee, computed daily and payable monthly, at an annual rate of 0.50% 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 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 April 30, 2008, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.85% of average daily net assets each year. For the six months ended June 30, 2007, the Advisor did not waive its management fee or reimburse any expenses of the Series. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.
18
Notes to Financial Statements (unaudited)
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, the Fund pays the Advisor an annual fee of 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 Fund Services Ohio, Inc. (“BISYS”) under which BISYS serves as sub-accounting services and sub-transfer agent. On May 2, 2007, The BISYS Group, Inc., the parent company of BISYS Fund Services Ohio, Inc., announced that it had entered into a definitive agreement to be acquired by Citi. The transaction closed effective August 1, 2007, at which time the name changed to Citi Fund Services Ohio, Inc.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other than United States Government securities and short-term securities, were $50,163,382 and $1,922,100, respectively. There were no purchases or sales of United States Government securities.
5. CAPITAL STOCK TRANSACTIONS
Transactions in shares of Diversified Tax Exempt Series were:
| | For the Six Months Ended 6/30/07 | For the Year Ended 12/31/06 |
| | Shares | Amount | Shares | Amount |
| Sold | 5,169,836 | $56,348,215 | 5,535,132 | $60,276,533 |
| Reinvested | 285,573 | 3,081,126 | 414,795 | 4,509,605 |
| Repurchased | (874,101) | (9,535,296) | (1,000,001) | (10,852,274) |
| Total | 4,581,308 | $49,894,045 | 4,949,926 | $53,933,864 |
Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.
6. FINANCIAL INSTRUMENTS
The Series may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on June 30, 2007.
19
Notes to Financial Statements (unaudited)
| 7. | 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. 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 final determination of the tax character of current year distributions will be made at the conclusion of the fiscal year. The tax character of distributions paid for the year ended December 31, 2006 were as follows:
| Ordinary income | $32,274 |
| Tax exempt income | 4,580,724 |
| Long-term capital gains | 133,976 |
At June 30, 2007, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
| Cost for federal income tax purposes | $216,156,457 |
| | |
| Unrealized appreciation | $1,495,685 |
| Unrealized depreciation | (3,358,204) |
| | |
| Net unrealized depreciation | $(1,862,519) |
8. 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 an entity should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the entity 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. Effective June 30, 2007, the Series adopted the provisions of FIN 48. Management has evaluated the impact of FIN 48 and has concluded that it does not have any impact on the Series’ results of operation and financial condition.
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.
20
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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
ITEM 2: CODE OF ETHICS
Not applicable for Semi-Annual Reports.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable for Semi-Annual Reports.
ITEM 4: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable for Semi-Annual Reports.
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) Not applicable for Semi-Annual Reports.
(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.
August 29, 2007
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.
August 29, 2007
/s/ Christine Glavin
Christine Glavin
Chief Financial Officer & Principal Financial Officer of Manning & Napier Fund, Inc.
August 29, 2007
