UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04087
Manning & Napier Fund, Inc.
(Exact name of registrant as specified in charter)
290 Woodcliff Drive, Fairport, NY | 14450 | |||
| (Address of principal executive offices) | (Zip Code) | |||
B. Reuben Auspitz 290 Woodcliff Drive, Fairport, NY 14450 | ||||
| (Name and address of agent for service) | ||||
Registrant’s telephone number, including area code: 585-325-6880
Date of fiscal year end: October 31, 2008
Date of reporting period: November 1, 2007 through October 31, 2008
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.
| ITEM 1: | REPORTS TO STOCKHOLDERS |
Manning & Napier Fund, Inc.
| TAX MANAGED SERIES | | | Annual Report - October 31, 2008 |
Management Discussion and Analysis (unaudited)
Dear Shareholders:
Although its returns were negative, the Tax Managed Series outperformed the Russell 3000® Index for the twelve months ended October 31, 2008. The Series continues to outperform the index over the current market cycle time period (beginning April 1, 2000).
For global investors, the past year has been challenging to say the least. From October 2007 highs, U.S. equity markets were down more than 35% through October 31, 2008. Economic news is not much better, with slowing global growth, and continued fallout from the credit crisis hanging over the economy. While this has resulted in negative returns over the course of the year, it has also resulted in historically low valuations for many U.S. stocks.
Late in 2007, we selectively trimmed positions in the Information Technology and Consumer Staples sectors, where investment themes were playing out and valuations reflected higher expectations going forward. Many of our holdings with themes linked to global growth began to hit fair value, which allowed us to take gains. As a result, we also lightened our allocation to Energy stocks late in the year, and have remained underweight compared to the benchmark since then.
We took advantage of the increased volatility and short-term weakness in the first quarter of 2008 to reinitiate positions in several Information Technology stocks that we had reduced in 2007, as well as to add to areas in the Health Care sector. Given reasonable valuations in many areas of the market prior to this year, we used the market volatility in 2008 both to opportunistically buy more of existing holdings that were trading at more attractive levels and to upgrade into new holdings with stronger competitive positioning that now met our pricing disciplines.
Currently, our largest sector weightings remain Information Technology and Health Care, specifically focused on areas that are less sensitive to slowing U.S. consumer spending. We continue to have comparatively small positions in both Energy and Financials relative to the benchmark. Our small position in Financials has helped relative performance over the course of the year in light of the credit crisis. While the small position in Energy detracted from returns in the first half of 2008, it has added value relative to the benchmark so far in the second half of the year.
Through the first half of 2008, we increased the Series’ holdings in industry leaders in the Industrials and transportation sectors that were gaining market share in the face of higher energy costs, primarily at the expense of their weaker competitors. The declines in energy and commodity prices benefited these holdings to a greater extent than the overall market, and drove significant relative outperformance during the third quarter of 2008.
As always, we appreciate your business.
Sincerely,
Manning & Napier Advisors, Inc.
| 1 |
Performance Update as of October 31, 2008 (unaudited)
| Average Annual Total Returns As of October 31, 2008 | ||||||||||
| One Year | Five Year | Ten Year | Since Inception1 | |||||||
Manning & Napier Fund, Inc. - Tax Managed Series | ||||||||||
Returns Before Taxes2,4 | -33.62% | 4.01% | 5.76% | 7.63% | ||||||
Returns After Taxes on Distributions3,4 | -33.94% | 3.13% | 5.19% | 7.14% | ||||||
Returns After Taxes on Distributions and Sale of Series Shares3,4 | -21.14% | 3.65% | 5.05% | 6.80% | ||||||
Russell 3000® Index5 | -36.60% | 0.46% | 1.05% | 5.80% | ||||||
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Tax Managed Series (returns before taxes) for the ten years ended October 31, 2008 to the Russell 3000® Index.
1Performance numbers for the Series and Index are calculated from November 1, 1995, the Series’ inception date.
2Returns before taxes do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended October 31, 2008, this net expense ratio was 1.20%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.40% for the year ended October 31, 2008.
3Returns after taxes on distributions assume that an investor owned the Series during the entire period and paid taxes on the Series’ distributions. Returns after taxes on distributions and sale of series shares assume that an investor paid taxes on the Series’ distributions and sold all shares at the end of each period. After-tax returns reflect the historical highest individual federal marginal income tax rates and do not reflect state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. After-tax returns reflect past tax effects and are not indicative of future tax effects. After-tax returns are not relevant to those investing through 401(k) plans, IRAs or other tax-deferred arrangements.
4The Series’ performance is historical and may not be indicative of future results.
5The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. The Index returns, unlike Series returns, do not reflect any fees or expenses.
| 2 |
Shareholder Expense Example (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2008 to October 31, 2008).
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 Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period* 5/1/08-10/31/08 | |||||||
Actual | $ | 1,000.00 | $ | 725.80 | $ | 5.21 | |||
Hypothetical | $ | 1,000.00 | $ | 1,019.10 | $ | 6.09 | |||
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.20%, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.
| 3 |
Portfolio Composition as of October 31, 2008 (unaudited)
Sector Allocation1
1As a percentage of net assets.
| 4 |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS - 98.3% | |||||
Consumer Discretionary - 13.2% | |||||
Hotels, Restaurants & Leisure - 2.6% | |||||
Carnival Corp. | 15,810 | $ | 401,574 | ||
Household Durables - 1.0% | |||||
Fortune Brands, Inc. | 4,300 | 164,002 | |||
Media - 6.1% | |||||
Charter Communications, Inc. - Class A* | 96,410 | 42,420 | |||
Comcast Corp. - Class A | 29,010 | 457,198 | |||
Scripps Networks Interactive - Class A | 8,380 | 237,992 | |||
The Walt Disney Co. | 8,270 | 214,193 | |||
| 951,803 | |||||
Specialty Retail - 3.5% | |||||
The Home Depot, Inc. | 11,380 | 268,454 | |||
Lowe’s Companies, Inc. | 12,460 | 270,382 | |||
| 538,836 | |||||
Total Consumer Discretionary | 2,056,215 | ||||
Consumer Staples - 8.0% | |||||
Food Products - 6.7% | |||||
Dean Foods Co.* | 8,810 | 192,587 | |||
Nestle S.A. (Switzerland) (Note 7) | 6,440 | 249,978 | |||
Unilever plc - ADR (United Kingdom) (Note 7) | 26,660 | 601,450 | |||
| 1,044,015 | |||||
Personal Products - 1.3% | |||||
L’Oreal S.A. (France) (Note 7) | 2,620 | 197,048 | |||
Total Consumer Staples | 1,241,063 | ||||
Energy - 3.5% | |||||
Energy Equipment & Services - 3.5% | |||||
Baker Hughes, Inc. | 6,660 | 232,767 | |||
National-Oilwell Varco, Inc.* | 2,752 | 82,257 | |||
Weatherford International Ltd.* | 13,140 | 221,803 | |||
Total Energy | 536,827 | ||||
Financials - 7.4% | |||||
Capital Markets - 1.6% | |||||
SEI Investments Co. | 14,080 | 248,934 | |||
Commercial Banks - 4.3% | |||||
PNC Financial Services Group, Inc. | 4,900 | 326,683 | |||
U.S. Bancorp | 11,410 | 340,132 | |||
| 666,815 | |||||
| 5 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS (continued) | |||||
Financials (continued) | |||||
Consumer Finance - 1.5% | |||||
American Express Co. | 8,320 | $ | 228,800 | ||
Total Financials | 1,144,549 | ||||
Health Care - 19.5% | |||||
Biotechnology - 1.7% | |||||
Amgen, Inc.* | 2,290 | 137,148 | |||
Genzyme Corp.* | 1,680 | 122,438 | |||
| 259,586 | |||||
Health Care Equipment & Supplies - 5.7% | |||||
Becton, Dickinson and Co. | 3,260 | 226,244 | |||
Inverness Medical Innovations, Inc.* | 7,940 | 152,051 | |||
Medtronic, Inc. | 12,370 | 498,882 | |||
| 877,177 | |||||
Health Care Providers & Services - 2.4% | |||||
Quest Diagnostics, Inc. | 8,090 | 378,612 | |||
Health Care Technology - 1.4% | |||||
Cerner Corp.* | 5,790 | 215,562 | |||
Life Sciences Tools & Services - 3.1% | |||||
Lonza Group AG (Switzerland) (Note 7) | 1,050 | 86,949 | |||
Millipore Corp.* | 2,920 | 151,519 | |||
PerkinElmer, Inc. | 13,530 | 242,728 | |||
| 481,196 | |||||
Pharmaceuticals - 5.2% | |||||
Johnson & Johnson | 7,750 | 475,385 | |||
Novartis AG - ADR (Switzerland) (Note 7) | 6,530 | 332,965 | |||
| 808,350 | |||||
Total Health Care | 3,020,483 | ||||
Industrials - 13.7% | |||||
Air Freight & Logistics - 5.9% | |||||
FedEx Corp. | 6,880 | 449,746 | |||
United Parcel Service, Inc. - Class B | 8,920 | 470,798 | |||
| 920,544 | |||||
Airlines - 3.7% | |||||
JetBlue Airways Corp.* | 22,590 | 125,375 | |||
Southwest Airlines Co. | 37,840 | 445,755 | |||
| 571,130 | |||||
| The accompanying notes are an integral part of the financial statements. | 6 |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS (continued) | |||||
Industrials (continued) | |||||
Industrial Conglomerates - 2.5% | |||||
3M Co. | 6,010 | $ | 386,443 | ||
Road & Rail - 1.6% | |||||
Heartland Express, Inc. | 4,470 | 68,570 | |||
J.B. Hunt Transport Services, Inc. | 3,830 | 108,887 | |||
Knight Transportation, Inc. | 4,380 | 69,642 | |||
| 247,099 | |||||
Total Industrials | 2,125,216 | ||||
Information Technology - 28.4% | |||||
Communications Equipment - 5.8% | |||||
Cisco Systems, Inc.* | 26,390 | 468,950 | |||
Juniper Networks, Inc.* | 12,990 | 243,433 | |||
Nokia (Finland) (Note 7) | 12,830 | 194,759 | |||
| 907,142 | |||||
Computers & Peripherals - 4.3% | |||||
EMC Corp.* | 57,380 | 675,936 | |||
Internet Software & Services - 6.2% | |||||
Google, Inc. - Class A* | 2,660 | 955,898 | |||
IT Services - 1.5% | |||||
Automatic Data Processing, Inc. | 6,480 | 226,476 | |||
Semiconductors & Semiconductor Equipment - 2.4% | |||||
ASML Holdings N.V. (Netherlands) (Note 7) | 6,580 | 114,044 | |||
KLA-Tencor Corp. | 4,120 | 95,790 | |||
Lam Research Corp.* | 4,140 | 92,570 | |||
Tokyo Electron Limited (Japan) (Note 7) | 2,400 | 78,221 | |||
| 380,625 | |||||
Software - 8.2% | |||||
Autodesk, Inc.* | 9,560 | 203,724 | |||
Electronic Arts, Inc.* | 12,740 | 290,217 | |||
Microsoft Corp. | 20,050 | 447,716 | |||
SAP AG - ADR (Germany) (Note 7) | 9,310 | 328,922 | |||
| 1,270,579 | |||||
Total Information Technology | 4,416,656 | ||||
Materials - 3.3% | |||||
Chemicals - 0.8% | |||||
Monsanto Co. | 1,400 | 124,572 | |||
| 7 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | |||||
COMMON STOCKS (continued) | ||||||
Materials (continued) | ||||||
Paper & Forest Products - 2.5% | ||||||
Louisiana-Pacific Corp. | 19,340 | $ | 92,832 | |||
Weyerhaeuser Co. | 7,890 | 301,556 | ||||
| 394,388 | ||||||
Total Materials | 518,960 | |||||
Utilities - 1.3% | ||||||
Independent Power Producers & Energy Traders - 1.3% | ||||||
Mirant Corp*. | 11,330 | 198,502 | ||||
TOTAL COMMON STOCKS | 15,258,471 | |||||
SHORT-TERM INVESTMENTS - 2.4% | ||||||
Dreyfus Treasury and Agency Cash Management - Institutional Shares (Identified Cost $380,194) | 380,194 | 380,194 | ||||
TOTAL INVESTMENTS - 100.7% | 15,638,665 | |||||
LIABILITIES, LESS OTHER ASSETS - (0.7%) | (108,792 | ) | ||||
NET ASSETS - 100% | $ | 15,529,873 | ||||
*Non-income producing security
ADR - American Depository Receipt
| The accompanying notes are an integral part of the financial statements. | 8 |
Statement of Assets and Liabilities
October 31, 2008
ASSETS: | ||||
Investments, at value (identified cost $19,109,246) (Note 2) | $ | 15,638,665 | ||
Foreign currency, at value (cost $4) | 3 | |||
Receivable for fund shares sold | 11,325 | |||
Foreign tax reclaims receivable | 7,205 | |||
Dividends receivable | 3,882 | |||
TOTAL ASSETS | 15,661,080 | |||
| LIABILITIES: | ||||
Accrued management fees (Note 3) | 7,910 | |||
Accrued directors’ fees (Note 3) | 1,998 | |||
Accrued fund accounting and transfer agent fees (Note 3) | 1,673 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 565 | |||
Payable for securities purchased | 44,741 | |||
Payable for fund shares repurchased | 42,043 | |||
Audit fees payable | 29,653 | |||
Other payables and accrued expenses | 2,624 | |||
TOTAL LIABILITIES | 131,207 | |||
TOTAL NET ASSETS | $ | 15,529,873 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 8,506 | ||
Additional paid-in-capital | 21,754,370 | |||
Undistributed net investment income | 78,685 | |||
Accumulated net realized loss on investments, foreign currency and other assets and liabilities | (2,840,724 | ) | ||
Net unrealized depreciation on investments, foreign currency and other assets and liabilities | (3,470,964 | ) | ||
TOTAL NET ASSETS | $ | 15,529,873 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION | $ | 18.26 | ||
| 9 | The accompanying notes are an integral part of the financial statements. |
Statement of Operations
For the Year Ended October 31, 2008
INVESTMENT INCOME: | ||||
Dividends (net of foreign tax withheld, $5,026) | $ | 372,863 | ||
Interest | 12,065 | |||
Total Investment Income | 384,928 | |||
| EXPENSES: | ||||
Management fees (Note 3) | 234,707 | |||
Fund accounting and transfer agent fees (Note 3) | 19,412 | |||
Directors’ fees (Note 3) | 12,080 | |||
Chief Compliance Officer service fees (Note 3) | 4,681 | |||
Audit fees | 29,650 | |||
Custodian fees | 3,699 | |||
Miscellaneous | 24,394 | |||
Total Expenses | 328,623 | |||
Less reduction of expenses (Note 3) | (47,451 | ) | ||
Net Expenses | 281,172 | |||
NET INVESTMENT INCOME | 103,756 | |||
| REALIZED AND UNREALIZED LOSS ON INVESTMENTS: | ||||
Net realized loss on - | ||||
Investments | (2,719,504 | ) | ||
Foreign currency and other assets and liabilities | (446 | ) | ||
| (2,719,950 | ) | |||
Net change in unrealized appreciation (depreciation) on - | ||||
Investments | (6,477,826 | ) | ||
Foreign currency and other assets and liabilities | (582 | ) | ||
| (6,478,408 | ) | |||
NET REALIZED AND UNREALIZED LOSS ON | (9,198,358 | ) | ||
NET DECREASE IN NET ASSETS RESULTING | $ | (9,094,602 | ) | |
| The accompanying notes are an integral part of the financial statements. | 10 |
Statements of Changes in Net Assets
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||
| INCREASE (DECREASE) IN NET ASSETS: | ||||||||
| OPERATIONS: | ||||||||
Net investment income | $ | 103,756 | $ | 63,688 | ||||
Net realized gain (loss) on investments and foreign currency | (2,719,950 | ) | 608,052 | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (6,478,408 | ) | 1,436,705 | |||||
Net increase (decrease) from operations | (9,094,602 | ) | 2,108,445 | |||||
| DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
From net investment income | (85,055 | ) | (38,908 | ) | ||||
From net realized gain on investments | (721,319 | ) | (554,278 | ) | ||||
Total distributions to shareholders | (806,374 | ) | (593,186 | ) | ||||
| CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | (264,421 | ) | 16,595,390 | |||||
Net increase (decrease) in net assets | (10,165,397 | ) | 18,110,649 | |||||
| NET ASSETS: | ||||||||
Beginning of year | 25,695,270 | 7,584,621 | ||||||
End of year (including undistributed net investment income of $78,685 and $60,543, respectively) | $ | 15,529,873 | $ | 25,695,270 | ||||
| 11 | The accompanying notes are an integral part of the financial statements. |
Financial Highlights
| For the Years Ended | ||||||||||
| 10/31/08 | 10/31/07 | 10/31/06 | 10/31/05 | 10/31/04 | ||||||
| Per share data (for a share outstanding throughout each year): | ||||||||||
Net asset value - Beginning of year | $28.44 | $27.01 | $25.60 | $23.51 | $20.15 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income | 0.12 | 0.08 | 0.13 | 0.06 | 0.03 | |||||
Net realized and unrealized gain (loss) on investments | (9.42) | 3.44 | 4.41 | 3.36 | 3.38 | |||||
Total from investment operations | (9.30) | 3.52 | 4.54 | 3.42 | 3.41 | |||||
Less distributions to shareholders: | ||||||||||
From net investment income | (0.09) | (0.14) | (0.06) | (0.02) | (0.05) | |||||
From net realized gain on investments | (0.79) | (1.95) | (3.07) | (1.31) | — | |||||
Total distributions to shareholders | (0.88) | (2.09) | (3.13) | (1.33) | (0.05) | |||||
Net asset value - End of year | $18.26 | $28.44 | $27.01 | $25.60 | $23.51 | |||||
Net assets - End of year (000’s omitted) | $15,530 | $25,695 | $7,585 | $6,886 | $6,205 | |||||
Total return1 | (33.62%) | 13.65% | 20.01% | 14.96% | 16.96% | |||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||||
Expenses* | 1.20% | 1.20% | 1.20% | 1.20% | 1.20% | |||||
Net investment income | 0.44% | 0.38% | 0.54% | 0.23% | 0.10% | |||||
Portfolio turnover | 96% | 65% | 61% | 68% | 64% | |||||
*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 by the following amount: | ||||||||||
| 0.20% | 0.25% | 0.78% | 0.82% | 0.83% | ||||||
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during the year.
| The accompanying notes are an integral part of the financial statements. | 12 |
Notes to Financial Statements
| 1. | ORGANIZATION |
Tax Managed Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series’ investment objective is to maximize long-term growth while attempting to minimize the impact of taxes on the total return earned by shareholders.
The Series is authorized to issue five classes of shares (Class A, B, D, E and Z). 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 and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 5.0 billion shares of common stock each having a par value of $0.01. As of October 31, 2008, 3.4 billion shares have been designated in total among 27 series, of which 87.5 million have been designated as Tax Managed Series Class A common stock.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Security Valuation
Portfolio securities, including domestic equities, foreign equities, 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.
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.
| 13 |
Notes to Financial Statements
| 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 tax 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.
On April 30, 2008, the Series adopted Financial Accounting Standards Board Interpretation No. 48 - Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being measured and recognized in the financial statements. Management has determined that the adoption of FIN 48 did not have a material impact on the Series’ financial statements. The Series files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions, as required. No income tax returns are currently under investigation. The statute of limitations on the Series’ tax returns remains open for the years ended October 31, 2005 through October 31, 2008.
Additionally, based on the Fund’s understanding of the tax rules and rates related to income, gains and transactions for foreign jurisdictions in which it invests, the Series will provide for foreign taxes, and where appropriate, deferred foreign tax.
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.
| 14 |
Notes to Financial Statements
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
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.
The Advisor has contractually agreed, until at least February 28, 2010, 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 Class A Series at no more than 1.20% of average daily net assets each year. Accordingly, the Advisor waived fees of $47,451 for the year ended October 31, 2008, which is reflected as a reduction of expenses on the Statement of Operations. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
For fund accounting and transfer agent services, through October 31, 2008, the Fund paid 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. Effective November 1, 2008, the fee rates are as follows: 0.055% of the Fund’s average daily net assets up to $4.5 billion, 0.03% of the
| 15 |
Notes to Financial Statements
| 3. | TRANSACTIONS WITH AFFILIATES (continued) |
Fund’s average daily net assets between $4.5 billion and $7.5 billion, and 0.02% of the Fund’s average daily net assets over $7.5 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 Citi Fund Services Ohio, Inc. (“Citi”) under which Citi serves as sub-accountant and sub-transfer agent.
| 4. | PURCHASES AND SALES OF SECURITIES |
For the year ended October 31, 2008, purchases and sales of securities, other than United States Government securities and short-term securities, were $21,401,820 and $21,250,354, respectively. There were no purchases or sales of United States Government securities.
| 5. | CAPITAL STOCK TRANSACTIONS |
Transactions in Class A shares of Tax Managed Series were:
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Sold | 210,131 | $ | 5,069,586 | 658,728 | $ | 17,609,407 | ||||||||
Reinvested | 28,353 | 735,759 | 22,122 | 582,684 | ||||||||||
Repurchased | (291,328 | ) | (6,069,766 | ) | (58,254 | ) | (1,596,701 | ) | ||||||
Total | (52,844 | ) | $ | (264,421 | ) | 622,596 | $ | 16,595,390 | ||||||
At October 31, 2008 one omnibus account owned 444,658 shares of the Series (52.3% of shares outstanding) valued at $8,119,455. Investment activities of this shareholder may have a material effect on the Series.
| 6. | FINANCIAL INSTRUMENTS |
The Series may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on October 31, 2008.
| 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.
| 16 |
Notes to Financial Statements
| 8. | FEDERAL INCOME TAX INFORMATION |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including losses deferred due to wash sales and foreign currency gains and losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||
Ordinary income | $ | 85,168 | $ | 38,908 | ||
Long-term capital gains | 721,206 | 554,278 | ||||
At October 31, 2008, the tax basis components of distributable earnings and the net unrealized depreciation based on identified cost for federal income tax purposes were as follows:
Cost for federal income tax purposes | $ | 19,369,600 | ||
Unrealized appreciation | $ | 213,095 | ||
Unrealized depreciation | (3,944,030 | ) | ||
Net unrealized depreciation | $ | (3,730,935 | ) | |
Undistributed ordinary income | 78,685 | |||
Capital loss carryover | 2,580,370 |
The capital loss carryover, disclosed above, available to the extent allowed by tax law to offset future net capital gain, if any, will expire on October 31, 2016.
| 9. | RECENT ACCOUNTING PRONOUNCEMENTS |
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.
In September 2008, FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45” (the “Position”) was issued. The Position amends FASB Statement No. 133 (“FAS 133”), Accounting for Derivative Instruments and Hedging Activities, and also amends FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The amendments to FAS 133 include required disclosure for (i) the nature and terms of the credit derivative, reasons for entering into the credit derivative, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment
| 17 |
Notes to Financial Statements
| 9. | RECENT ACCOUNTING PRONOUNCEMENTS (continued) |
performance risk of the credit derivative, (ii) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative, (iii) the fair value of the credit derivative, and (iv) the nature of any recourse provisions and assets held either as collateral or by third parties. The amendments to FIN 45 require additional disclosures about the current status of the payment/performance risk of a guarantee. At this time, Management is evaluating the implications of FAS 133-1 and FIN 45-4, but it is not expected to materially impact the Series’ financial statements.
In March 2008, FASB Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”) was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about the Series’ derivative and hedging activities, including how such activities are accounted for and their effect on the Series’ financial position and performance. Management is currently evaluating the impact of the adoption of FAS 161, but it is not expected to materially impact the Series’ financial statements.
| 18 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Tax Managed Series:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Tax Managed Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at October 31, 2008, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
Columbus, Ohio
December 12, 2008
| 19 |
Supplemental Tax Information (unaudited)
For federal income tax purposes, the Series designates for the current fiscal year $85,168 or, if different, the maximum amount allowable under the tax law as qualified dividend income.
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Series hereby designates $721,206 as capital gains for its taxable year ended October 31, 2008.
For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal year is 100%.
| 20 |
Directors’ and Officers’ Information (unaudited)
The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http://www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.
INTERESTED DIRECTOR/OFFICER
| Name: | B. Reuben Auspitz* | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 61 | |
| Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director | |
| Term of Office1 & Length of Time Served: | Indefinite - Director since 1984; Vice President 1984 - 2003; President since 2004; Principal Executive Officer since 2002 | |
| Principal Occupation(s) During Past 5 Years: | Executive Vice President; Co-Executive Director; Executive Group Member**; Chief Compliance Officer since 2004 - Manning & Napier Advisors, Inc. President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| INDEPENDENT DIRECTORS | ||
| Name: | Stephen B. Ashley | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 68 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1996 | |
| Principal Occupation(s) During Past 5 Years: | Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Chairman (non-executive) 2004 - 2008; Director 1995 - 2008 - Fannie Mae (mortgage) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | The Ashley Group | |
| Name: | Peter L. Faber | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 70 | |
| Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1987 | |
| Principal Occupation(s) During Past 5 Years: | Senior Counsel, McDermott, Will & Emery LLP (law firm) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Partnership for New York City, Inc. New York Collegium Boston Early Music Festival | |
| Name: | Harris H. Rusitzky | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 73 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1985 | |
| Principal Occupation(s) During Past 5 Years: | President, The Greening Group (business consultants); Partner, The Restaurant Group (restaurants) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| 21 |
Directors’ and Officers’ Information (unaudited)
INDEPENDENT DIRECTORS (continued)
| Name: | Paul A. Brooke | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 63 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 2007 | |
| Principal Occupation(s) During Past 5 Years: | Chairman & CEO, Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Incyte Corp. ViroPharma, Inc. HLTH Corp. Cheyne Captial International MPM Bio-equities GMP Companies HoustonPharma | |
| OFFICERS | ||
| Name: | Jeffrey S. Coons, Ph.D., CFA | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 45 | |
| Current Position(s) Held with Fund: | Vice President | |
| Term of Office1 & Length of Time Served: | Since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Co-Director of Research since 2002 & Executive Group Member**, Manning & Napier Advisors, Inc. Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Christine Glavin | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 42 | |
| Current Position(s) Held with Fund: | Principal Financial Officer, Chief Financial Officer | |
| Term of Office1 & Length of Time Served: | Principal Financial Officer since 2002; Chief Financial Officer since 2001 | |
| Principal Occupation(s) During Past 5 Years: | Fund Reporting Manager, Manning & Napier Advisors, Inc. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Jodi L. Hedberg | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 40 | |
| Current Position(s) Held with Fund: | Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer | |
| Term of Office1 & Length of Time Served: | Corporate Secretary since 1997; Chief Compliance Officer since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Director of Compliance, Manning & Napier Advisors, Inc. and affiliates; Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006 | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, Inc. and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.
**The Executive Group performs the duties of the Office of the Chief Executive of Manning & Napier Advisors, Inc.
1The term of office for President, Vice President, Chief Financial Officer, and Corporate Secretary is one year and until their respective successors are chosen and qualified. All other officers’ terms are indefinite.
| 22 |
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
| 23 |
Manning & Napier Fund, Inc.
| OVERSEAS SERIES | | | Annual Report - October 31, 2008 |
Management Discussion and Analysis (unaudited)
Dear Shareholders:
The Overseas Series produced negative absolute returns for the 12-month period ended October 31, 2008, it substantially outperformed its benchmark, the Morgan Stanley Capital International (MSCI) All Country World Index ex U.S. for that time period. Over the current foreign stock market cycle (which includes both rising and falling markets and began on January 1, 2000), the Overseas Series has also meaningfully outperformed the benchmark.
Our team of analysts uses time-tested strategies to choose stocks for the portfolio. These strategies include the Strategic Profile Strategy, Hurdle Rate Strategy, and the Bankable Deal Strategy. Our investment process also follows strict pricing disciplines in order to avoid buying stocks that are not attractively valued.
The Series currently has relatively large positions compared to the benchmark in the Health Care and Consumer Staples sectors. Within the Health Care sector, the majority of the stocks we bought fall under our Strategic Profile Strategy. In this strategy, our analysts seek to identify companies that we believe can grow their earnings faster than overall global economic growth. Typically this is accomplished by some sustainable competitive advantage that keeps competitors from entering their markets. Our holdings in the Health Care sector are spread among pharmaceutical companies, diagnostic testing companies, and firms that supply products to the drug discovery market. Within the Consumer Staples sector, the Series’ holdings are concentrated in large, well-diversified companies with strong brand names that derive a meaningful portion of their earnings and revenue from both developed and emerging economies. Given the defensive nature of the Health Care and Consumer Staples sectors, the Series’ overweight positions to these areas helped performance relative to the benchmark in light of the credit crisis and weakening economic environment.
The Series has also maintained a larger position than the benchmark in the Information Technology sector. Many of the companies in the Information Technology sector are owned under either the Strategic Profile Strategy or the Hurdle Rate Strategy. Under the Hurdle Rate Strategy, we seek to identify industries in a downturn where profits are temporarily depressed and future expectations are low. When capacity has been taken out of the industry and the supply/demand situation is more in balance, we want to own those companies that are in the strongest competitive position to increase profits and market share. We currently own companies that develop software titles for the video game console market under the Hurdle Rate Strategy. Under the Profile Strategy, we own an enterprise application software company and a company that provides billing and customer relationship management software to the telecommunications industry. Stocks selection in this sector benefited performance relative to the benchmark for the year.
The Series currently has a relatively small position in the Financials sector as compared to the benchmark, and this benefited performance as the sector was one of the worst performers over the past 12 months. We have largely shied away from companies with direct exposure to the subprime mortgage market and positioned the portfolio in companies that earn most of their revenues from fee-based business. These include large diversified banks, insurance brokerage, and ratings agency businesses in developed European countries. We hold a few stocks in the Bankable Deal Strategy within the Financials sector. Under this strategy, we look for companies that are trading for a fraction of the underlying asset values or cash flows they can generate.
The Series maintained a relatively small position in emerging markets, which benefited relative performance. Stock markets in these regions are highly sensitive to global growth and retreated markedly after the speculative boom in energy and commodity prices ended during the third quarter of 2008. The Series maintained its exposure to economies in Europe, specifically France, Switzerland, and Germany. Continued structural reform and compelling valuations have offered unique opportunities in these markets. Relative to the benchmark, the Series has a small position in Japanese stocks. As always, we adhere to our stock selection strategies, unique investment process, and our strict pricing disciplines in positioning the portfolio.
As always, we appreciate your business.
Sincerely,
Manning & Napier Advisors, Inc.
| 1 |
Performance Update as of October 31, 2008 (unaudited)
| Average Annual Total Returns As of October 31, 2008 | ||||||||||
| One Year | Five Year | Ten Year | Since Inception1 | |||||||
Manning & Napier Fund, Inc. - Overseas Series2,3 | -41.58% | 7.32% | 8.12% | 8.25% | ||||||
Morgan Stanley Capital International (MSCI) All Country World Index ex U.S.4 | -48.53% | 4.61% | 2.82% | 3.82% | ||||||
The following graph compares the value of a $1,000,000 investment in the Manning & Napier Fund, Inc. - Overseas Series from its for the ten years ended October 31, 2008 to the MSCI All Country World Index ex U.S.
1 Performance numbers for the Series are calculated from September 23, 1998, the Collective’s inception date (see Note 3 below). Prior to 2001, the MSCI All Country World Index ex U.S. only published month-end numbers; therefore, performance numbers for the Index are calculated from September 30, 1998.
2 The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended October 31, 2008, this net expense ratio was 0.80%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.83% for the year ended October 31, 2008.
3 For periods prior to the inception of the Series on July 10, 2002, the performance figures reflect the performance of the Exeter Trust Company Group Trust for Employee Benefit Plans - International Equity Collective Investment Trust (the “Collective”), which was managed by the Advisor and reorganized into the Series. The Collective was not open to the public generally, or registered under the Investment Company Act of 1940 (the “1940 Act”), or subject to certain restrictions that are imposed by the 1940 Act. If the Collective had been registered under the 1940 Act, performance may have been adversely affected. Because the fees of the Collective were lower than the Series’ fees, historical performance would have been lower if the Collective had been subject to the same fees.
4 The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S. Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Collective (see note 1 above) through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). Unlike Series returns, the Index returns do not reflect any fees or expenses.
| 2 |
Shareholder Expense Example (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2008 to October 31, 2008).
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 Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period* 5/1/08-10/31/08 | |||||||
Actual | $ | 1,000.00 | $ | 623.60 | $ | 3.22 | |||
Hypothetical | $ | 1,000.00 | $ | 1,021.17 | $ | 4.01 | |||
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.79%, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.
| 3 |
Portfolio Composition as of October 31, 2008 (unaudited)
Country Allocation1
1As a percentage of net assets.
2Miscellaneous
Denmark 1.3%
Finland 1.5%
Hong Kong 1.0%
Israel 0.4%
Thailand 0.9%
United States 1.7%
Sector Allocation3
3As a percentage of net assets.
| 4 |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS - 94.3% | |||||
Consumer Discretionary - 10.0% | |||||
Automobiles - 1.7% | |||||
Suzuki Motor Corp. (Japan) | 205,600 | $ | 2,930,880 | ||
Hotels, Restaurants & Leisure - 1.2% | |||||
Club Mediterranee S.A.* (France) | 104,168 | 2,070,934 | |||
Leisure Equipment & Products - 1.5% | |||||
Sankyo Co. Ltd. (Japan) | 58,000 | 2,544,015 | |||
Media - 4.7% | |||||
Grupo Televisa S.A. - ADR (Mexico) | 232,130 | 4,099,416 | |||
Societe Television Francaise 1 (France) | 321,000 | 4,086,749 | |||
| 8,186,165 | |||||
Textiles, Apparel & Luxury Goods - 0.9% | |||||
Adidas AG (Germany) | 48,200 | 1,667,110 | |||
Total Consumer Discretionary | 17,399,104 | ||||
Consumer Staples - 18.4% | |||||
Beverages - 3.5% | |||||
Carlsberg A/S - Class B (Denmark) | 55,850 | 2,199,158 | |||
Heineken N.V. (Netherlands) | 115,400 | 3,872,256 | |||
| 6,071,414 | |||||
Food & Staples Retailing - 2.5% | |||||
Carrefour S.A. (France) | 101,970 | 4,277,989 | |||
Food Products - 9.3% | |||||
Cadbury plc (United Kingdom) | 272,236 | 2,488,014 | |||
Nestle S.A. (Switzerland) | 125,950 | 4,888,942 | |||
Unilever plc - ADR (United Kingdom) | 390,250 | 8,804,040 | |||
| 16,180,996 | |||||
Personal Products - 3.1% | |||||
L’Oreal S.A. (France) | 47,650 | 3,583,709 | |||
Natura Cosmeticos S.A. (Brazil) | 226,950 | 1,907,848 | |||
| 5,491,557 | |||||
Total Consumer Staples | 32,021,956 | ||||
Energy - 4.1% | |||||
Energy Equipment & Services - 4.1% | |||||
Calfrac Well Services Ltd. (Canada) | 248,610 | 3,140,641 | |||
Compagnie Generale de Geophysique - Veritas (CGG - Veritas)* (France) | 148,300 | 2,364,318 | |||
Trican Well Service Ltd. (Canada) | 170,790 | 1,601,865 | |||
Total Energy | 7,106,824 | ||||
| 5 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS (continued) | |||||
Financials - 8.4% | |||||
Commercial Banks - 3.0% | |||||
HSBC Holdings plc (United Kingdom) | 317,170 | $ | 3,888,713 | ||
Societe Generale (France) | 25,002 | 1,343,808 | |||
| 5,232,521 | |||||
Diversified Financial Services - 2.4% | |||||
Financiere Marc de Lacharriere S.A. (Fimalac) (France) | 94,550 | 4,093,214 | |||
Insurance - 2.5% | |||||
Allianz SE (Germany) | 26,940 | 2,042,438 | |||
Willis Group Holdings Ltd. (United Kingdom) | 88,300 | 2,316,992 | |||
| 4,359,430 | |||||
Thrifts & Mortgage Finance - 0.5% | |||||
Aareal Bank AG (Germany) | 116,050 | 946,526 | |||
Total Financials | 14,631,691 | ||||
Health Care - 19.2% | |||||
Health Care Equipment & Supplies - 4.5% | |||||
Covidien Ltd. (Bermuda) | 44,140 | 1,954,961 | |||
Nobel Biocare Holding AG (Switzerland) | 83,690 | 1,430,086 | |||
Straumann Holding AG (Switzerland) | 8,580 | 1,450,600 | |||
Synthes, Inc. (United States) | 23,240 | 2,992,954 | |||
| 7,828,601 | |||||
Health Care Providers & Services - 5.1% | |||||
BML, Inc. (Japan) | 77,100 | 1,514,758 | |||
Bumrungrad Hospital Public Co. Ltd. - NVDR (Thailand) | 2,362,700 | 1,483,854 | |||
Diagnosticos da America S.A. (Brazil) | 102,950 | 1,198,309 | |||
Sonic Healthcare Ltd. (Australia) | 514,430 | 4,685,211 | |||
| 8,882,132 | |||||
Life Sciences Tools & Services - 4.5% | |||||
Lonza Group AG (Switzerland) | 49,950 | 4,136,289 | |||
QIAGEN N.V.* (Netherlands) | 254,800 | 3,633,448 | |||
| 7,769,737 | |||||
Pharmaceuticals - 5.1% | |||||
Novartis AG - ADR (Switzerland) | 124,630 | 6,354,884 | |||
Santen Pharmaceutical Co. Ltd. (Japan) | 104,400 | 2,628,815 | |||
| 8,983,699 | |||||
Total Health Care | 33,464,169 | ||||
| The accompanying notes are an integral part of the financial statements. | 6 |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS (continued) | |||||
Industrials - 14.7% | |||||
Aerospace & Defense - 3.8% | |||||
Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) | 313,260 | $ | 6,553,399 | ||
Air Freight & Logistics - 3.4% | |||||
Deutsche Post AG (Germany) | 110,605 | 1,217,856 | |||
TNT N.V. (Netherlands) | 227,970 | 4,735,575 | |||
| 5,953,431 | |||||
Electrical Equipment - 3.1% | |||||
ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) | 234,620 | 3,085,253 | |||
Nexans S.A. (France) | 41,120 | 2,327,765 | |||
| 5,413,018 | |||||
Industrial Conglomerates - 3.4% | |||||
Siemens AG (Germany) | 72,060 | 4,358,423 | |||
Tyco International Ltd. (Bermuda) | 63,640 | 1,608,819 | |||
| 5,967,242 | |||||
Machinery - 1.0% | |||||
Schindler Holding AG (Switzerland) | 39,770 | 1,715,259 | |||
Total Industrials | 25,602,349 | ||||
Information Technology - 15.5% | |||||
Communications Equipment - 2.8% | |||||
Alcatel-Lucent - ADR* (France) | 879,960 | 2,261,497 | |||
Nokia (Finland) | 172,710 | 2,621,738 | |||
| 4,883,235 | |||||
Semiconductors & Semiconductor Equipment - 2.1% | |||||
ASML Holding N.V. (Netherlands) | 123,440 | 2,139,451 | |||
Tokyo Electron Limited (Japan) | 49,600 | 1,616,570 | |||
| 3,756,021 | |||||
Software - 10.6% | |||||
Aladdin Knowledge Systems Ltd.* (Israel) | 55,220 | 612,390 | |||
Amdocs Ltd.* (Guernsey) | 254,820 | 5,748,739 | |||
Misys plc (United Kingdom) | 869,545 | 1,542,516 | |||
SAP AG - ADR (Germany) | 137,440 | 4,855,755 | |||
Square Enix Holdings Co. Ltd. (Japan) | 81,300 | 2,022,388 | |||
UbiSoft Entertainment S.A.* (France) | 70,130 | 3,679,528 | |||
| 18,461,316 | |||||
Total Information Technology | 27,100,572 | ||||
| 7 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS (continued) | |||||
Materials - 1.0% | |||||
Paper & Forest Products - 1.0% | |||||
Norbord, Inc. (Canada) | 1,117,820 | $ | 1,753,552 | ||
Telecommunication Services - 3.0% | |||||
Wireless Telecommunication Services - 3.0% | |||||
Hutchison Telecommunications International Ltd.* (Hong Kong) | 1,677,000 | 1,813,371 | |||
SK Telecom Co. Ltd. - ADR (South Korea) | 203,620 | 3,504,300 | |||
Total Telecommunication Services | 5,317,671 | ||||
TOTAL COMMON STOCKS | 164,397,888 | ||||
PREFERRED STOCKS - 1.1% | |||||
Consumer Staples - 1.1% | |||||
Household Products - 1.1% | |||||
Henkel AG & Co. KGaA (Germany) | 65,150 | 1,869,778 | |||
SHORT-TERM INVESTMENTS - 4.5% | |||||
Dreyfus Treasury and Agency Cash Management - Institutional Shares | 7,930,118 | 7,930,118 | |||
TOTAL INVESTMENTS - 99.9% | 174,197,784 | ||||
OTHER ASSETS, LESS LIABILITIES - 0.1% | 173,398 | ||||
NET ASSETS - 100% | $ | 174,371,182 | |||
*Non-income producing security
ADR - American Depository Receipt
NVDR - Non-Voting Depository Receipt
The Series’ portfolio holds, as a percentage of net assets, greater than 10% in the following countries:
France - 17.3%; Switzerland - 13.2%; United Kingdom - 10.9%.
| The accompanying notes are an integral part of the financial statements. | 8 |
Statement of Assets & Liabilities
October 31, 2008
ASSETS: | ||||
Investments, at value (identified cost $273,281,230) (Note 2) | $ | 174,197,784 | ||
Foreign currency, at value (cost $751) | 698 | |||
Dividends receivable | 259,697 | |||
Foreign tax reclaims receivable | 114,473 | |||
Receivable for fund shares sold | 470 | |||
TOTAL ASSETS | 174,573,122 | |||
| LIABILITIES: | ||||
Accrued management fees (Note 3) | 86,339 | |||
Accrued fund accounting and transfer agent fees (Note 3) | 9,296 | |||
Accrued directors’ fees (Note 3) | 1,998 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 565 | |||
Payable for fund shares repurchased | 55,325 | |||
Audit fees payable | 34,103 | |||
Custodian fees payable | 9,308 | |||
Other payables and accrued expenses | 5,006 | |||
TOTAL LIABILITIES | 201,940 | |||
TOTAL NET ASSETS | $ | 174,371,182 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 98,076 | ||
Additional paid-in-capital | 265,647,493 | |||
Undistributed net investment income | 3,246,815 | |||
Accumulated net realized gain on investments, foreign currency, forward foreign currency exchange contracts and other assets and liabilities | 4,463,387 | |||
Net unrealized depreciation on investments, foreign currency and other assets and liabilities | (99,084,589 | ) | ||
TOTAL NET ASSETS | $ | 174,371,182 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($174,371,182/9,807,613 shares) | $ | 17.78 | ||
| 9 | The accompanying notes are an integral part of the financial statements. |
Statement of Operations
For the Year Ended October 31, 2008
INVESTMENT INCOME: | ||||
Dividends (net of foreign tax withheld, $432,716) | $ | 5,063,347 | ||
Interest | 279,777 | |||
Total Investment Income | 5,343,124 | |||
| EXPENSES: | ||||
Management fees (Note 3) | 1,643,836 | |||
Fund accounting and transfer agent fees (Note 3) | 137,702 | |||
Directors’ fees (Note 3) | 12,099 | |||
Chief Compliance Officer service fees (Note 3) | 4,681 | |||
Custodian fees | 52,951 | |||
Miscellaneous | 88,020 | |||
Total Expenses | 1,939,289 | |||
Less reduction of expenses (Note 3) | (61,988 | ) | ||
Net Expenses | 1,877,301 | |||
NET INVESTMENT INCOME | 3,465,823 | |||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain on - | ||||
Investments | 783,870 | |||
Foreign currency, forward foreign currency exchange contracts and other assets and liabilities | 3,509,147 | |||
| 4,293,017 | ||||
Net change in unrealized appreciation (depreciation) on - | ||||
Investments | (125,382,231 | ) | ||
Foreign currency and other assets and liabilities | (6,062 | ) | ||
| (125,388,293 | ) | |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | (121,095,276 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (117,629,453 | ) | |
| The accompanying notes are an integral part of the financial statements. | 10 |
Statements of Changes in Net Assets
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||
| INCREASE (DECREASE) IN NET ASSETS: | ||||||||
| OPERATIONS: | ||||||||
Net investment income | $ | 3,465,823 | $ | 2,066,404 | ||||
Net realized gain on investments and foreign currency | 4,293,017 | 17,685,628 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (125,388,293 | ) | 20,100,911 | |||||
Net increase (decrease) from operations | (117,629,453 | ) | 39,852,943 | |||||
| DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
From net investment income | (1,913,152 | ) | (729,409 | ) | ||||
From net realized gain on investments | (17,685,972 | ) | (2,259,452 | ) | ||||
Total distributions to shareholders | (19,599,124 | ) | (2,988,861 | ) | ||||
| CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase from capital share transactions (Note 5) | 94,962,306 | 92,355,489 | ||||||
Net increase (decrease) in net assets | (42,266,271 | ) | 129,219,571 | |||||
| NET ASSETS: | ||||||||
Beginning of year | 216,637,453 | 87,417,882 | ||||||
End of year (including undistributed net | $ | 174,371,182 | $ | 216,637,453 | ||||
| 11 | The accompanying notes are an integral part of the financial statements. |
Financial Highlights
| For the Years Ended | ||||||||||
| 10/31/08 | 10/31/07 | 10/31/06 | 10/31/05 | 10/31/04 | ||||||
| Per share data (for a share outstanding throughout each year): | ||||||||||
Net asset value - Beginning of year | $33.55 | $26.69 | $21.56 | $18.84 | $15.66 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income | 0.34 | 0.402 | 0.422 | 0.21 | 0.17 | |||||
Net realized and unrealized gain (loss) on investments | (13.17) | 7.16 | 6.42 | 2.85 | 3.18 | |||||
Total from investment operations | (12.83) | 7.56 | 6.84 | 3.06 | 3.35 | |||||
Less distributions to shareholders: | ||||||||||
From net investment income | (0.29) | (0.17) | (0.21) | (0.15) | (0.17) | |||||
From net realized gain on investments | (2.65) | (0.53) | (1.50) | (0.19) | — | |||||
Total distributions to shareholders | (2.94) | (0.70) | (1.71) | (0.34) | (0.17) | |||||
Net asset value - End of year | $17.78 | $33.55 | $26.69 | $21.56 | $18.84 | |||||
Net assets - End of year | $174,371 | $216,637 | $87,418 | $1,617 | $1,044 | |||||
Total return1 | (41.58%) | 28.88% | 33.68% | 16.34% | 21.58% | |||||
| Ratios (to average net assets)/ Supplemental Data: | ||||||||||
Expenses* | 0.80% | 0.84% | 0.95% | 1.05% | 1.05% | |||||
Net investment income | 1.48% | 1.34% | 1.69% | 1.15% | 1.08% | |||||
Portfolio turnover | 43% | 54% | 54% | 40% | 35% | |||||
*The investment advisor did not impose all or a portion of its management fee in some years and in some years paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased by the following amount: | ||||||||||
| 0.03% | N/A | 0.09% | 4.16% | 5.63% | ||||||
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain years.
2Calculated based on average shares outstanding during the year.
| The accompanying notes are an integral part of the financial statements. | 12 |
Notes to Financial Statements
| 1. | ORGANIZATION |
Overseas 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 capital growth by investing primarily in common stocks of issuers from outside the United States.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 5.0 billion shares of common stock each having a par value of $0.01. As of October 31, 2008, 3.4 billion shares have been designated in total among 27 series, of which 100 million have been designated as Overseas Series Class A common stock.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Security Valuation
Portfolio securities, including domestic equities, foreign equities, 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.
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.
| 13 |
Notes to Financial Statements
| 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.
Forward Foreign Currency Exchange Contracts
The Series may purchase or sell forward foreign currency exchange contracts in order to hedge a portfolio position or specific transaction. Risks may arise if the counterparties to a contract are unable to meet the terms of the contract or if the value of the foreign currency moves unfavorably.
All forward foreign currency exchange contracts are adjusted daily by the exchange rate of the underlying currency and, for financial statement purposes, any gain or loss is recorded as unrealized gain or loss until a contract has been closed. Realized and unrealized gain or loss arising from a transaction is included in net realized and unrealized gain (loss) on investments.
The Series may regularly trade forward foreign currency exchange contracts with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to changes in foreign currency exchange rates.
The notional or contractual amount of these instruments represents the investment the Series has in forward foreign currency exchange contracts and does not necessarily represent the amounts potentially at risk. The measurement of the risks associated with forward foreign currency exchange contracts is meaningful only when all related and offsetting transactions are considered. No such investments were held by the Series on October 31, 2008.
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 tax 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.
On April 30, 2008, the Series adopted Financial Accounting Standards Board Interpretation No. 48 - Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being
| 14 |
Notes to Financial Statements
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Federal Taxes (continued)
measured and recognized in the financial statements. Management has determined that the adoption of FIN 48 did not have a material impact on the Series’ financial statements. The Series files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions, as required. No income tax returns are currently under investigation. The statute of limitations on the Series’ tax returns remains open for the years ended October 31, 2005 through October 31, 2008.
Additionally, based on the Fund’s understanding of the tax rules and rates related to income, gains and transactions for foreign jurisdictions in which it invests, the Series will provide for foreign taxes, and where appropriate, deferred foreign tax. The Series had no deferred foreign tax as of October 31, 2008.
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.
| 15 |
Notes to Financial Statements
| 3. | TRANSACTIONS WITH AFFILIATES (continued) |
The Advisor has contractually agreed, until at least February 28, 2010, 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 0.75% of average daily net assets each year. Prior to August 8, 2008, the Advisor had contractually agreed 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 $61,988 for the year ended October 31, 2008, which is reflected as a reduction of expenses on the Statement of Operations. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
For fund accounting and transfer agent services, through October 31, 2008, the Fund paid 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. Effective November 1, 2008, the fee rates are as follows: 0.055% of the Fund’s average daily net assets up to $4.5 billion, 0.03% of the Fund’s average daily net assets between $4.5 billion and $7.5 billion, and 0.02% of the Fund’s average daily net assets over $7.5 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 Citi Fund Services Ohio, Inc. (“Citi”) under which Citi serves as sub-accountant and sub-transfer agent.
| 4. | PURCHASES AND SALES OF SECURITIES |
For the year ended October 31, 2008, purchases and sales of securities, other than United States Government securities and short-term securities, were $180,690,419 and $93,622,076, respectively. There were no purchases or sales of United States Government securities.
| 5. | CAPITAL STOCK TRANSACTIONS |
Transactions in shares of Overseas Series were:
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Sold | 2,953,611 | $ | 82,422,779 | 3,148,195 | $ | 91,618,159 | ||||||||
Reinvested | 630,236 | 18,062,553 | 89,581 | 2,471,536 | ||||||||||
Repurchased | (232,654 | ) | (5,523,026 | ) | (57,233 | ) | (1,734,206 | ) | ||||||
Total | 3,351,193 | $ | 94,962,306 | 3,180,543 | $ | 92,355,489 | ||||||||
At October 31, 2008, the retirement plan of the Advisor and its affiliates owned 137,797 shares of the Series (1.4% of shares outstanding) valued at $2,450,031. In addition, four shareholders owned 6,404,999 shares of the Series (65.3% of shares outstanding) valued at $113,880,882. Investment activities of these shareholders may have a material effect on the Series.
| 16 |
Notes to Financial Statements
| 6. | FINANCIAL INSTRUMENTS |
The Series may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on October 31, 2008.
| 7. | FOREIGN SECURITIES |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the United States Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the United States Government.
| 8. | FEDERAL INCOME TAX INFORMATION |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including differences in the cost basis of securities contributed in-kind, losses deferred due to wash sales and foreign currency gains and losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||
Ordinary income | $ | 15,153,583 | $ | 2,667,063 | ||
Long-term capital gains | 4,445,541 | 321,798 | ||||
At October 31, 2008, the tax basis components of distributable earnings and the net unrealized depreciation based on identified cost for federal income tax purposes were as follows:
Cost for federal income tax purposes | $ | 273,308,800 | ||
Unrealized appreciation | $ | 426,077 | ||
Unrealized depreciation | (99,537,093 | ) | ||
Net unrealized depreciation | $ | (99,111,016 | ) | |
Undistributed ordinary income | 3,652,937 | |||
Undistributed long-term capital gains | 4,075,394 |
| 9. | RECENT ACCOUNTING PRONOUNCEMENTS |
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
| 17 |
Notes to Financial Statements
| 9. | RECENT ACCOUNTING PRONOUNCEMENTS (continued) |
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.
In September 2008, FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45” (the “Position”) was issued. The Position amends FASB Statement No. 133 (“FAS 133”), Accounting for Derivative Instruments and Hedging Activities, and also amends FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The amendments to FAS 133 include required disclosure for (i) the nature and terms of the credit derivative, reasons for entering into the credit derivative, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment performance risk of the credit derivative, (ii) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative, (iii) the fair value of the credit derivative, and (iv) the nature of any recourse provisions and assets held either as collateral or by third parties. The amendments to FIN 45 require additional disclosures about the current status of the payment/performance risk of a guarantee. At this time, Management is evaluating the implications of FAS 133-1 and FIN 45-4, but it is not expected to materially impact the Series’ financial statements.
In March 2008, FASB Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”) was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about the Series’ derivative and hedging activities, including how such activities are accounted for and their effect on the Series’ financial position and performance. Management is currently evaluating the impact of the adoption of FAS 161, but it is not expected to materially impact the Series’ financial statements.
| 18 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Overseas Series:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Overseas Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at October 31, 2008, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian, provide a reasonable basis for our opinion.
Columbus, Ohio
December 12, 2008
| 19 |
Supplemental Tax Information (unaudited)
For federal income tax purposes, the Series designates for the current fiscal year $2,619,412 or, if different, the maximum amount allowable under the tax law as qualified dividend income.
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Series hereby designates $4,445,541 as capital gains for its taxable year ended October 31, 2008.
| 20 |
Directors’ and Officers’ Information (unaudited)
The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http://www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.
INTERESTED DIRECTOR/OFFICER
| Name: | B. Reuben Auspitz* | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 61 | |
| Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director | |
| Term of Office1 & Length of Time Served: | Indefinite - Director since 1984; Vice President 1984 - 2003; President since 2004; Principal Executive Officer since 2002 | |
| Principal Occupation(s) During Past 5 Years: | Executive Vice President; Co-Executive Director; Executive Group Member**; Chief Compliance Officer since 2004 - Manning & Napier Advisors, Inc. President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| INDEPENDENT DIRECTORS | ||
| Name: | Stephen B. Ashley | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 68 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1996 | |
| Principal Occupation(s) During Past 5 Years: | Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Chairman (non-executive) 2004 - 2008; Director 1995 - 2008 - Fannie Mae (mortgage) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | The Ashley Group | |
| Name: | Peter L. Faber | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 70 | |
| Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1987 | |
| Principal Occupation(s) During Past 5 Years: | Senior Counsel, McDermott, Will & Emery LLP (law firm) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Partnership for New York City, Inc. New York Collegium Boston Early Music Festival | |
| Name: | Harris H. Rusitzky | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 73 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1985 | |
| Principal Occupation(s) During Past 5 Years: | President, The Greening Group (business consultants); Partner, The Restaurant Group (restaurants) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| 21 |
Directors’ and Officers’ Information (unaudited)
INDEPENDENT DIRECTORS (continued)
| Name: | Paul A. Brooke | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 63 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 2007 | |
| Principal Occupation(s) During Past 5 Years: | Chairman & CEO, Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Incyte Corp. ViroPharma, Inc. HLTH Corp. Cheyne Captial International MPM Bio-equities GMP Companies HoustonPharma |
OFFICERS
| Name: | Jeffrey S. Coons, Ph.D., CFA | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 45 | |
| Current Position(s) Held with Fund: | Vice President | |
| Term of Office1 & Length of Time Served: | Since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Co-Director of Research since 2002 & Executive Group Member**, | |
| Manning & Napier Advisors, Inc. Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer. | ||
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Christine Glavin | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 42 | |
| Current Position(s) Held with Fund: | Principal Financial Officer, Chief Financial Officer | |
| Term of Office1 & Length of Time Served: | Principal Financial Officer since 2002; Chief Financial Officer since 2001 | |
| Principal Occupation(s) During Past 5 Years: | Fund Reporting Manager, Manning & Napier Advisors, Inc. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Jodi L. Hedberg | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 40 | |
| Current Position(s) Held with Fund: | Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer | |
| Term of Office1 & Length of Time Served: | Corporate Secretary since 1997; Chief Compliance Officer since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Director of Compliance, Manning & Napier Advisors, Inc. and affiliates; Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006 | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, Inc. and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.
**The Executive Group performs the duties of the Office of the Chief Executive of Manning & Napier Advisors, Inc.
1The term of office for President, Vice President, Chief Financial Officer, and Corporate Secretary is one year and until their respective successors are chosen and qualified. All other officers’ terms are indefinite.
| 22 |
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
| 23 |
Manning & Napier Fund, Inc.
| TARGET INCOME SERIES | | | Annual Report - October 31, 2008 |
TARGET 2010 SERIES
TARGET 2020 SERIES
TARGET 2030 SERIES
TARGET 2040 SERIES
TARGET 2050 SERIES
Management Discussion and Analysis (unaudited)
Dear Shareholders:
The Target Series’ were launched on March 28, 2008. For the period from inception to October 31, 2008, performance results have generally held up better than the benchmarks. Each of the Target Series invests in one or two of the Manning & Napier Fund Pro-Blend® Series, with the underlying investments becoming more conservative over time. In the discussion below, we will “look through” the Target Series’ portfolios and discuss the holdings and performance of the corresponding Pro-Blend® Series.
Uncertainty in both equity and fixed income markets dominated this year. Volatility, which was slightly bolstered at the end of 2007, soared to unimagined heights through the 3rd quarter of 2008. This environment was due to a confluence of decelerating global growth, energy and commodity price inflation and ongoing credit turmoil. While energy and commodity prices have retracted from speculative levels, credit problems and recessionary pressures persist. Despite this backdrop, our investment process of searching for solid investment opportunities at attractive prices remains intact. As such, the market’s decline has been an opportunity to upgrade the Series’ portfolios with stocks and bonds with high quality fundamental characteristics.
Major U.S. equity indices declined more than 35% for the twelve months ended October 31, 2008. The S&P 500 Total Return Index was down -36.09%, the Russell 3000® Index down -36.60%, the NASDAQ Composite down -39.81%, and international markets fared worse, with the Morgan Stanley Capital International (MSCI) All Country World Index ex U.S. returning -48.53%. By contrast, bond indices were barely positive, with the 12-month return of the Barclays Capital Aggregate Bond Index at +0.30% and the Merrill Lynch U.S. Corporate, Government and Mortgage Index up 0.70%.
The Series’ relatively large positions in stocks relative to their benchmarks had the greatest negative impact on their performance. The comparatively small allocation to Energy stocks relative to the benchmark also held back performance for the first eight months of this period, most notably in the Target Series 2040 and 2050 Series portfolios. On a bottom-up basis, our investment process is designed to identify good businesses at attractive valuations and to avoid speculatively priced segments. This discipline kept holdings in the Energy sector limited throughout the twelve month period through October 31, 2008, which helped performance over the last four months of the period. Broadly, relatively large allocations to Health Care and relatively small positions in the Financials sector both contributed positively to performance compared to the benchmarks. Also, our stock selection strategies identified specific positive performers, particularly in the Industrials sector.
As mentioned briefly above, given the protracted credit crisis, spawned by over-extension of consumer and mortgage credit, the Target Series benefited from relatively small positions in the Financials sector as compared to their benchmarks. The crisis resulted in a succession of failed financial institutions and ultimately governmental intervention. Several major institutions ceased to exist while others expanded by acquisition of their former competitors. Fortunately, our direct exposure to distressed financials was limited. Our investments in the financial services sector focused predominantly on companies with diversified business lines which produce recurring revenue in various market environments. These selections reflected our preference for banks with low mortgage exposure and high fee-based income relative to industry peers.
Fixed income market returns reflected sharp differences between returns of various sectors and credit quality segments. Our fixed income returns performed better than the fixed income portions of the benchmarks, particularly for the Target Income Series, which has close to 60% of the holdings allocated to fixed income. Our positive fixed income performance was aided specifically by our decision to avoid most financial corporate bonds in favor of Treasury bonds, as well as high quality industrial bonds and government-sponsored FNMA (Fannie Mae) and FHLMC (Freddie Mac) securities. In addition, we took advantage of a sharp interest rate decline in September, paring back long-term bond holdings which had been established during the second quarter when rates had spiked.
| 1 |
Management Discussion and Analysis (unaudited)
All of the Target Series had foreign stock allocations that were less than that of their blended benchmarks. Since the downturn in the foreign equity markets generally dwarfed the decline in the U.S. equity markets through the one-year period ended October 31, 2008, our comparatively small positions in international holdings, including emerging markets, benefited performance.
While downside risks to stock and fixed income performance remain, and the short term direction is difficult to predict, we recognize select segments of the stock and bond markets are currently trading at attractive valuations, and we have been positioning the portfolios accordingly.
As always, we appreciate your business.
Sincerely,
Manning & Napier Advisors, Inc.
| 2 |
Performance Update - Target Income Series (unaudited)
| Total Returns Since Inception1 As of October 31, 2008 | ||||
Manning & Napier Fund, Inc. - Target Income Series - Class K2 | -7.00% | |||
Manning & Napier Fund, Inc. - Target Income Series - Class R2 | -7.10% | |||
Manning & Napier Fund, Inc. - Target Income Series - Class C2 | -7.40% | |||
Manning & Napier Fund, Inc. - Target Income Series - Class I2 | -6.80% | |||
Barclays Capital (formerly Lehman Brothers) Intermediate U.S. Aggregate Bond Index3,5 | -2.85% | |||
Target Income Blended Index3,4,5 | -8.55% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Target Income Series - Class K from its inception1 (3/28/08) to present (10/31/08) to the Barclays Capital Intermediate U.S. Aggregate Bond Index and the Target Income Blended Index.
1Performance numbers for the Series are calculated from March 28, 2008, the Series’ inception date. The Barclays Capital Intermediate U.S. Aggregate Bond Index, only publishes month-end numbers; therefore, performance numbers for the Index are calculated from March 31, 2008.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 0.30% for Class K, 0.55% for Class R, 1.05% for Class C and 0.05% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1,571% for Class K, 43,128% for Class R, 43,148% for Class C and 43,107% for Class I for the period ended October 31, 2008.
3The Barclays Capital (formerly Lehman Brothers) Intermediate U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities greater than one year but less than ten years. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
4The Target Income Blended Index is a 5%/15%/80% Blended Index which is made up of 5% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 15% Russell 3000® Index, and 80% Barclays Capital Intermediate U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of net dividends (which do account for foreign dividend taxation). The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. Both Indices�� returns, unlike Series returns, do not reflect any fees or expenses.
5Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Index portfolios.
| 3 |
Performance Update - Target 2010 Series (unaudited)
| Total Returns Since Inception1 As of October 31, 2008 | ||||
Manning & Napier Fund, Inc. - Target 2010 - Class K2 | -13.90% | |||
Manning & Napier Fund, Inc. - Target 2010 - Class R2 | -13.90% | |||
Manning & Napier Fund, Inc. - Target 2010 - Class C2 | -14.20% | |||
Manning & Napier Fund, Inc. - Target 2010 - Class I2 | -13.70% | |||
Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index3,5 | -3.83% | |||
Target 2010 Blended Index3,4,5 | -14.64% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Target 2010 Series - Class K from its inception1 (3/28/08) to present (10/31/08) to the Barclays Capital U.S. Aggregate Bond Index and the Target 2010 Blended Index.
1Performance numbers for the Series are calculated from March 28, 2008, the Series’ inception date. The Barclays Capital Aggregate Bond Index, only publishes month-end numbers; therefore, performance numbers for the Index are calculated from March 31, 2008.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 0.30% for Class K, 0.55% for Class R, 1.05% for Class C and 0.05% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1,071% for Class K, 42,883% for Class R, 920% for Class C and 42,439% for Class I for the period ended October 31, 2008.
3The Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
4The Target 2010 Blended Index is a 10%/30%/60% Blended Index which is made up of 10% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 30% Russell 3000® Index, and 60% Barclays Capital U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market county indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of net dividends (which do account for foreign dividend taxation). The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. Both Indices’ returns, unlike Series returns, do not reflect any fees or expenses.
5Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Index portfolios.
| 4 |
Performance Update - Target 2020 Series (unaudited)
| Total Returns Since Inception1 As of October 31, 2008 | ||||
Manning & Napier Fund, Inc. - Target 2020 Series - Class K2 | -18.60% | |||
Manning & Napier Fund, Inc. - Target 2020 Series - Class R2 | -18.70% | |||
Manning & Napier Fund, Inc. - Target 2020 Series - Class C2 | -19.00% | |||
Manning & Napier Fund, Inc. - Target 2020 Series - Class I2 | -18.50% | |||
Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index3,5 | -3.83% | |||
Target 2020 Blended Index3,4,5 | -18.74% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Target 2020 Series - Class K from its inception1 (3/28/08) to present (10/31/08) to the Barclays Capital U.S. Aggregate Bond Index and the Target 2020 Blended Index.
1Performance numbers for the Series are calculated from March 28, 2008, the Series’ inception date. The Barclays Capital Aggregate Bond Index, only publishes month-end numbers; therefore, performance numbers for the Index are calculated from March 31, 2008.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 0.30% for Class K, 0.55% for Class R, 1.05% for Class C and 0.05% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 34,421% for Class K, 38,137% for Class R, 159% for Class C and 871% for Class I for the period ended October 31, 2008.
3The Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
4The Target 2020 Blended Index is a 15%/40%/45% Blended Index which is made up of 15% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 40% Russell 3000® Index, and 45% Barclays Capital U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S. Dollars. The Index returns assume daily reinvestment of net dividends (which do account for foreign dividend taxation). The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largets U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. Both Indices’ returns, unlike Series returns, do not reflect any fees or expenses.
5Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Index portfolios.
| 5 |
Performance Update - Target 2030 Series (unaudited)
| Total Returns Since Inception1 As of October 31, 2008 | ||||
Manning & Napier Fund, Inc. - Target 2030 Series - Class K2 | -21.90% | |||
Manning & Napier Fund, Inc. - Target 2030 Series - Class R2 | -22.10% | |||
Manning & Napier Fund, Inc. - Target 2030 Series - Class C2 | -22.30% | |||
Manning & Napier Fund, Inc. - Target 2030 Series - Class I2 | -21.80% | |||
Russell 3000® Index3,6 | -26.19% | |||
Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index4,6 | -3.83% | |||
Target 2030 Blended Index3,4,5,6 | -23.09% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Target 2030 Series - Class K from its inception1 (3/28/08) to present (10/31/08) to the Russell 3000® Index and the Target 2030 Blended Index.
1Performance numbers for the Series are calculated from March 28, 2008, the Series’ inception date. The Barclays Capital Aggregate Bond Index, only publishes month-end numbers; therefore, performance numbers for the Index are calculated from March 31, 2008.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 0.30% for Class K, 0.55% for Class R, 1.05% for Class C and 0.05% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 37,175% for Class K, 38,769% for Class R, 38,790% for Class C and 14,979% for Class I for the period ended October 31, 2008.
3The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. The Index returns, unlike Series returns, do not reflect any fees or expenses.
4The Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income. The Index returns, unlike Series returns, do not reflect any fees or expenses.
5The Target 2030 Blended Index is 60% of a 20%/65%/15% Blended Index which is made up of 20% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 65% Russell 3000® Index, and 15% Lehman Brothers U.S. Aggregate Bond Index and 40% of a 15%/40%/45% Blended Index which is 15% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 40% Russell 3000® Index, and 45% Barclays Capital U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market county indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of net dividends (which do account for foreign dividend taxation). The Index returns, unlike Series returns, do not reflect any fees or expenses.
6Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Index portfolios.
| 6 |
Performance Update - Target 2040 Series (unaudited)
| Total Returns Since Inception1 As of October 31, 2008 | ||||
Manning & Napier Fund, Inc. - Target 2040 - Class K2 | -24.20% | |||
Manning & Napier Fund, Inc. - Target 2040 - Class R2 | -24.20% | |||
Manning & Napier Fund, Inc. - Target 2040 - Class C2 | -24.50% | |||
Manning & Napier Fund, Inc. - Target 2040 - Class I2 | -24.00% | |||
Russell 3000® Index3,5 | -26.19% | |||
Target 2040 Blended Index3,4,5 | -25.93% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Target 2040 Series - Class K from its inception1 (3/28/08) to present (10/31/08) to the Russell 3000® Index and the Target 2040 Blended Index.
1Performance numbers for the Series are calculated from March 28, 2008, the Series’ inception date. The Barclays Capital Aggregate Bond Index, a component of the Target 2040 Blended Index, only publishes month-end numbers; therefore, performance numbers for the Index are calculated from March 31, 2008.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 0.30% for Class K, 0.55% for Class R, 1.05% for Class C and 0.05% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 28,865% for Class K, 28,866% for Class R, 28,899% for Class C and 767% for Class I for the period ended October 31, 2008.
3The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. The Index returns, unlike Series returns, do not reflect any fees or expenses.
4The Target 2040 Blended Index is a 20%/65%/15% Blended Index which is made up of 20% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 65% Russell 3000® Index, and 15% Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market county indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of net dividends (which do account for foreign dividend taxation). The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income. Both Indices’ returns, unlike Series returns, do not reflect any fees or expenses.
5Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Index portfolios.
| 7 |
Performance Update - Target 2050 Series (unaudited)
| Total Returns Since Inception1 As of October 31, 2008 | ||||
Manning & Napier Fund, Inc. - Target 2050 Series - Class K2 | -24.20% | |||
Manning & Napier Fund, Inc. - Target 2050 Series - Class R2 | -24.20% | |||
Manning & Napier Fund, Inc. - Target 2050 Series - Class C2 | -24.50% | |||
Manning & Napier Fund, Inc. - Target 2050 Series - Class I2 | -24.00% | |||
Russell 3000® Index3,5 | -26.19% | |||
Target 2050 Blended Index3,4,5 | -25.93% |
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Target 2050 Series - Class K from its inception1 (3/28/08) to present (10/31/08) to the Russell 3000® Index and the Target 2040 Blended Index.
1Performance numbers for the Series are calculated from March 28, 2008, the Series’ inception date. The Barclays Capital Aggregate Bond Index, a component of the Target 2050 Blended Index, only publishes month-end numbers; therefore, performance numbers for the Index are calculated from March 31, 2008.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 0.30% for Class K, 0.55% for Class R, 1.05% for Class C and 0.05% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 35,232% for Class K, 35,244% for Class R, 35,268% for Class C and 1,903% for Class I for the period ended October 31, 2008.
3The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. The Index returns, unlike Series returns, do not reflect any fees or expenses.
4The Target 2050 Blended Index is a 20%/65%/15% Blended Index which is made up of 20% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 65% Russell 3000® Index, and 15% Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market county indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of net dividends (which do account for foreign dividend taxation). The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income. Both Indices’ returns, unlike Series returns, do not reflect any fees or expenses.
5Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Index portfolios.
| 8 |
Shareholder Expense Example (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2008 to October 31, 2008).
Actual Expenses
The Actual lines of the following tables provide information about actual account values and actual expenses. You may use the information in these lines, 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 Actual line for the Series and Class in which you have invested in 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 Hypothetical lines of the following tables provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ 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 for the Series and Class in which you have invested in with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as potential wire charges on redemptions. Therefore, the Hypothetical lines of the tables are 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.
| 9 |
Shareholder Expense Example (unaudited)
Target Income | Beginning Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense Ratio2 | ||||||||
Actual (Class K) | $ | 1,000.00 | $ | 922.60 | $ | 1.45 | 0.30 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,023.63 | $ | 1.53 | 0.30 | % | ||||
Actual (Class R) | $ | 1,000.00 | $ | 921.60 | $ | 2.66 | 0.55 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,022.37 | $ | 2.80 | 0.55 | % | ||||
Actual (Class C) | $ | 1,000.00 | $ | 919.60 | $ | 5.07 | 1.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,019.86 | $ | 5.33 | 1.05 | % | ||||
Actual (Class I) | $ | 1,000.00 | $ | 924.60 | $ | 0.24 | 0.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,024.89 | $ | 0.25 | 0.05 | % | ||||
Target 2010 | Beginning Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense Ratio2 | ||||||||
Actual (Class K) | $ | 1,000.00 | $ | 835.90 | $ | 1.38 | 0.30 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,023.63 | $ | 1.53 | 0.30 | % | ||||
Actual (Class R) | $ | 1,000.00 | $ | 835.90 | $ | 2.54 | 0.55 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,022.37 | $ | 2.80 | 0.55 | % | ||||
Actual (Class C) | $ | 1,000.00 | $ | 833.80 | $ | 4.84 | 1.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,019.86 | $ | 5.33 | 1.05 | % | ||||
Actual (Class I) | $ | 1,000.00 | $ | 837.90 | $ | 0.23 | 0.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,024.89 | $ | 0.25 | 0.05 | % | ||||
Target 2020 | Beginning Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense Ratio2 | ||||||||
Actual (Class K) | $ | 1,000.00 | $ | 785.00 | $ | 1.35 | 0.30 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,023.63 | $ | 1.53 | 0.30 | % | ||||
Actual (Class R) | $ | 1,000.00 | $ | 784.00 | $ | 2.47 | 0.55 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,022.37 | $ | 2.80 | 0.55 | % | ||||
Actual (Class C) | $ | 1,000.00 | $ | 781.90 | $ | 4.70 | 1.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,019.86 | $ | 5.33 | 1.05 | % | ||||
Actual (Class I) | $ | 1,000.00 | $ | 785.90 | $ | 0.22 | 0.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,024.89 | $ | 0.25 | 0.05 | % | ||||
| 10 |
Shareholder Expense Example (unaudited)
Target 2030 | Beginning Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense Ratio2 | ||||||||
Actual (Class K) | $ | 1,000.00 | $ | 747.40 | $ | 1.32 | 0.30 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,023.63 | $ | 1.53 | 0.30 | % | ||||
Actual (Class R) | $ | 1,000.00 | $ | 745.50 | $ | 2.41 | 0.55 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,022.37 | $ | 2.80 | 0.55 | % | ||||
Actual (Class C) | $ | 1,000.00 | $ | 743.50 | $ | 4.60 | 1.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,019.86 | $ | 5.33 | 1.05 | % | ||||
Actual (Class I) | $ | 1,000.00 | $ | 748.30 | $ | 0.22 | 0.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,024.89 | $ | 0.25 | 0.05 | % | ||||
Target 2040 | Beginning Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense Ratio2 | ||||||||
Actual (Class K) | $ | 1,000.00 | $ | 721.20 | $ | 1.30 | 0.30 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,023.63 | $ | 1.53 | 0.30 | % | ||||
Actual (Class R) | $ | 1,000.00 | $ | 721.20 | $ | 2.38 | 0.55 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,022.37 | $ | 2.80 | 0.55 | % | ||||
Actual (Class C) | $ | 1,000.00 | $ | 719.00 | $ | 4.54 | 1.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,019.86 | $ | 5.33 | 1.05 | % | ||||
Actual (Class I) | $ | 1,000.00 | $ | 723.10 | $ | 0.22 | 0.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,024.89 | $ | 0.25 | 0.05 | % | ||||
Target 2050 | Beginning Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense Ratio2 | ||||||||
Actual (Class K) | $ | 1,000.00 | $ | 721.20 | $ | 1.30 | 0.30 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,023.63 | $ | 1.53 | 0.30 | % | ||||
Actual (Class R) | $ | 1,000.00 | $ | 721.20 | $ | 2.38 | 0.55 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,022.37 | $ | 2.80 | 0.55 | % | ||||
Actual (Class C) | $ | 1,000.00 | $ | 719.00 | $ | 4.54 | 1.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,019.86 | $ | 5.33 | 1.05 | % | ||||
Actual (Class I) | $ | 1,000.00 | $ | 723.10 | $ | 0.22 | 0.05 | % | ||||
Hypothetical3 | $ | 1,000.00 | $ | 1,024.89 | $ | 0.25 | 0.05 | % | ||||
1Expenses are equal to the Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratios stated in the financial highlights, which are based on data for the period March 28, 2008, (commencement of operations) to October 31, 2008. The Class’ total returns would have been lower had certain expenses not been reimbursed during the period.
2Expense ratios of the Class do not include fees and expenses indirectly incurred by the underlying funds. If these expenses were included, the expense ratios would be higher.
3Assumes 5% annual return before expenses.
| 11 |
Portfolio Composition - Asset Allocation1 (unaudited)
1As a percentage of net assets of the underlying investment(s) for each Series.
2A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years.
3A U.S. Treasury Note is an intermediate-term obligation of the U.S. Treasury issued with a maturity period between one and ten years.
| 12 |
Statements of Assets and Liabilities
October 31, 2008
| Target Income | Target 2010 | Target 2020 | Target 2030 | Target 2040 | Target 2050 | ||||||||||||||||
ASSETS: | |||||||||||||||||||||
Manning & Napier Pro-Blend® Maximum Term Series - Class I (1,021 shares, 3,801 shares, and 2,390 shares, respectively) | $ — | $ — | $ — | $ | 7,732 | $ | 28,771 | $ | 18,092 | ||||||||||||
Manning & Napier Pro-Blend® Extended Term Series - Class I (34,579 shares and 634 shares, respectively) | — | — | 280,090 | 5,133 | — | — | |||||||||||||||
Manning & Napier Pro-Blend® Moderate Term Series - Class I (23,251 shares) | — | 199,723 | — | — | — | — | |||||||||||||||
Manning & Napier Pro-Blend® Conservative Term Series - Class I (7,649 shares) | 70,905 | — | — | — | — | — | |||||||||||||||
Total investments in securities: | |||||||||||||||||||||
At value* | 70,905 | 199,723 | 280,090 | 12,865 | 28,771 | 18,092 | |||||||||||||||
Receivable for fund shares sold | — | — | — | 41 | 815 | 1,760 | |||||||||||||||
Receivable from Investment Advisor (Note 3) | 37,495 | 37,486 | 37,474 | 37,480 | 37,489 | 37,489 | |||||||||||||||
TOTAL ASSETS | 108,400 | 237,209 | 317,564 | 50,386 | 67,075 | 57,341 | |||||||||||||||
LIABILITIES: | |||||||||||||||||||||
Accrued fund accounting fees (Note 3) | 3,579 | 3,579 | 3,578 | 3,578 | 3,579 | 3,579 | |||||||||||||||
Accrued transfer agent fees (Class K) (Note 3) | 3,109 | 3,109 | 3,109 | 3,109 | 3,109 | 3,109 | |||||||||||||||
Accrued transfer agent fees (Class R) (Note 3) | 3,113 | 3,111 | 3,111 | 3,111 | 3,111 | 3,111 | |||||||||||||||
Accrued transfer agent fees (Class C) (Note 3) | 3,113 | 3,113 | 3,113 | 3,113 | 3,113 | 3,112 | |||||||||||||||
Accrued transfer agent fees (Class I) (Note 3) | 3,113 | 3,111 | 3,111 | 3,111 | 3,111 | 3,110 | |||||||||||||||
Accrued directors’ fees (Note 3) | 2,006 | 2,006 | 2,006 | 2,006 | 2,006 | 2,006 | |||||||||||||||
Accrued Chief Compliance Officer service fees (Note 3) | 570 | 570 | 570 | 570 | 570 | 570 | |||||||||||||||
Accrued distribution and service (Rule 12b-1) fees (Class K) (Note 3) | 4 | 5 | — | — | — | — | |||||||||||||||
Accrued distribution and service (Rule 12b-1) fees (Class C) (Note 3) | — | 26 | 195 | — | — | — | |||||||||||||||
Accrued distribution and service (Rule 12b-1) fees (Class R) (Note 3) | —2 | —2 | —2 | —2 | —2 | —2 | |||||||||||||||
Audit fees payable | 18,075 | 18,075 | 18,075 | 18,075 | 18,075 | 18,075 | |||||||||||||||
Payable for securities purchased | — | — | — | 40 | 815 | 1,760 | |||||||||||||||
Other payables and accrued expenses | 819 | 820 | 820 | 808 | 820 | 819 | |||||||||||||||
TOTAL LIABILITIES | 37,501 | 37,525 | 37,688 | 37,521 | 38,309 | 39,251 | |||||||||||||||
TOTAL NET ASSETS | $ | 70,899 | $ | 199,684 | $ | 279,876 | $ | 12,865 | $ | 28,766 | $ | 18,090 | |||||||||
NET ASSETS CONSIST OF: | |||||||||||||||||||||
Capital stock | 76 | 232 | 345 | 16 | 38 | 24 | |||||||||||||||
Additional paid-in-capital | 70,320 | 198,981 | 319,164 | 12,790 | 35,871 | 22,302 | |||||||||||||||
Undistributed net investment income (loss) | — | — | — | 1 | — | — | |||||||||||||||
Accumulated net realized gain (loss) on underlying series | — | — | (3,683 | ) | — | (4 | ) | (3 | ) | ||||||||||||
Net unrealized appreciation (depreciation) on underlying series | 503 | 471 | (35,950 | ) | 58 | (7,139 | ) | (4,233 | ) | ||||||||||||
TOTAL NET ASSETS | $ | 70,899 | $ | 199,684 | $ | 279,876 | $ | 12,865 | $ | 28,766 | $ | 18,090 | |||||||||
Class K | |||||||||||||||||||||
Net Assets | $ | 70,620 | $ | 101,213 | $ | 157 | $ | 118 | $ | 76 | $ | 76 | |||||||||
Shares Outstanding | 7,594 | 11,755 | 20 | 15 | 10 | 10 | |||||||||||||||
Net Asset Value, Offering Price, and Redemption Price per share1 | $ | 9.30 | $ | 8.61 | $ | 8.14 | $ | 7.81 | $ | 7.58 | $ | 7.58 | |||||||||
Class R | |||||||||||||||||||||
Net Assets | $ | 93 | $ | 86 | $ | 81 | $ | 78 | $ | 76 | $ | 76 | |||||||||
Shares Outstanding | 10 | 10 | 10 | 10 | 10 | 10 | |||||||||||||||
Net Asset Value, Offering Price, and Redemption Price per share1 | $ | 9.29 | $ | 8.61 | $ | 8.13 | $ | 7.79 | $ | 7.58 | $ | 7.58 | |||||||||
Class C | |||||||||||||||||||||
Net Assets | $ | 93 | $ | 98,226 | $ | 228,171 | $ | 78 | $ | 75 | $ | 75 | |||||||||
Shares Outstanding | 10 | 11,452 | 28,169 | 10 | 10 | 10 | |||||||||||||||
Net Asset Value, Offering Price, and Redemption Price per share1 | $ | 9.26 | $ | 8.58 | $ | 8.10 | $ | 7.77 | $ | 7.55 | $ | 7.55 | |||||||||
Class I | |||||||||||||||||||||
Net Assets | $ | 93 | $ | 159 | $ | 51,467 | $ | 12,591 | $ | 28,539 | $ | 17,863 | |||||||||
Shares Outstanding | 10 | 18 | 6,314 | 1,609 | 3,755 | 2,351 | |||||||||||||||
Net Asset Value, Offering Price, and Redemption Price per share1 | $ | 9.32 | $ | 8.63 | $ | 8.15 | $ | 7.82 | $ | 7.60 | $ | 7.60 | |||||||||
*At identified cost | $ | 70,402 | $ | 199,252 | $ | 316,040 | $ | 12,807 | $ | 35,910 | $ | 22,325 | |||||||||
1Calculated NAV may not equal actual NAV shown due to rounding of the small net assets.
2These fees were less than $1 for the period due to small net assets.
| 13 | The accompanying notes are an integral part of the financial statements. |
Statements of Operations
For the Period March 28, 20081 to October 31, 2008
| Target Income | Target 2010 | Target 2020 | Target 2030 | Target 2040 | Target 2050 | |||||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||||||
Income distributions from underlying series | $ | 2 | $ | 2 | $ | 3 | $ | 2 | $ | 1 | $ | 2 | ||||||||||||
EXPENSES: | ||||||||||||||||||||||||
Distribution and service (Rule 12b-1) fees (Class K) (Note 3) | 4 | 5 | —2 | —2 | —2 | —2 | ||||||||||||||||||
Distribution and service (Rule 12b-1) fees (Class C) (Note 3) | —2 | 26 | 222 | —2 | —2 | —2 | ||||||||||||||||||
Distribution and service (Rule 12b-1) fees (Class R) (Note 3) | —2 | —2 | —2 | —2 | —2 | —2 | ||||||||||||||||||
Fund accounting fees (Note 3) | 17,499 | 17,499 | 17,499 | 17,499 | 17,499 | 17,499 | ||||||||||||||||||
Transfer agent fees (Class K) (Note 3) | 7,250 | 7,250 | 7,250 | 7,250 | 7,250 | 7,250 | ||||||||||||||||||
Transfer agent fees (Class R) (Note 3) | 7,250 | 7,250 | 7,250 | 7,250 | 7,250 | 7,250 | ||||||||||||||||||
Transfer agent fees (Class C) (Note 3) | 7,250 | 7,250 | 7,250 | 7,250 | 7,250 | 7,250 | ||||||||||||||||||
Transfer agent fees (Class I) (Note 3) | 7,250 | 7,250 | 7,250 | 7,250 | 7,250 | 7,250 | ||||||||||||||||||
Directors’ fees (Note 3) | 4,610 | 4,610 | 4,610 | 4,610 | 4,610 | 4,610 | ||||||||||||||||||
Chief Compliance Officer service fees (Note 3) | 2,331 | 2,331 | 2,331 | 2,331 | 2,331 | 2,331 | ||||||||||||||||||
Registration and filing fees | 30,640 | 30,640 | 30,640 | 30,640 | 30,640 | 30,640 | ||||||||||||||||||
Audit fees | 18,075 | 18,075 | 18,075 | 18,075 | 18,075 | 18,075 | ||||||||||||||||||
Custodian fees | 49 | 49 | 49 | 49 | 49 | 49 | ||||||||||||||||||
Miscellaneous | 1,742 | 1,743 | 1,742 | 1,742 | 1,742 | 1,743 | ||||||||||||||||||
Total Expenses | 103,950 | 103,978 | 104,168 | 103,946 | 103,946 | 103,947 | ||||||||||||||||||
Less reduction of expenses (Note 3) | (103,944 | ) | (103,939 | ) | (103,926 | ) | (103,945 | ) | (103,942 | ) | (103,944 | ) | ||||||||||||
Net Expenses | 6 | 39 | 242 | 1 | 4 | 3 | ||||||||||||||||||
NET INVESTMENT INCOME (LOSS) | (4 | ) | (37 | ) | (239 | ) | 1 | (3 | ) | (1 | ) | |||||||||||||
| REALIZED AND UNREALIZED GAIN (LOSS) ON UNDERLYING SERIES: | ||||||||||||||||||||||||
Net realized loss on underlying series | — | — | (3,683 | ) | — | (4 | ) | (3 | ) | |||||||||||||||
Net change in unrealized appreciation (depreciation) on underlying series | 503 | 471 | (35,950 | ) | 58 | (7,139 | ) | (4,233 | ) | |||||||||||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON UNDERLYING SERIES | 503 | 471 | (39,633 | ) | 58 | (7,143 | ) | (4,236 | ) | |||||||||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 499 | $ | 434 | $ | (39,872 | ) | $ | 59 | $ | (7,146 | ) | $ | (4,237 | ) | |||||||||
1Commencement of operations.
2These fees were less than $1 for the period due to the small net assets.
| The accompanying notes are an integral part of the financial statements. | 14 |
Statements of Changes in Net Assets
For the Period March 28, 20081 to October 31, 2008
| Target Income | Target 2010 | Target 2020 | Target 2030 | Target 2040 | Target 2050 | ||||||||||||||||||
INCREASE (DECREASE) IN NET ASSETS: | |||||||||||||||||||||||
| OPERATIONS: | |||||||||||||||||||||||
Net investment income (loss) | $ | (4 | ) | $ | (37 | ) | $ | (239 | ) | $ | 1 | $ | (3 | ) | $ | (1 | ) | ||||||
Net realized loss on underlying series | — | — | (3,683 | ) | — | (4 | ) | (3 | ) | ||||||||||||||
Net change in unrealized appreciation (depreciation) on underlying series | 503 | 471 | (35,950 | ) | 58 | (7,139 | ) | (4,233 | ) | ||||||||||||||
Net increase (decrease) from operations | 499 | 434 | (39,872 | ) | 59 | (7,146 | ) | (4,237 | ) | ||||||||||||||
| CAPITAL STOCK ISSUED AND REPURCHASED: | |||||||||||||||||||||||
Net increase from capital share transactions (Note 5) | 70,400 | 199,250 | 319,748 | 12,806 | 35,912 | 22,327 | |||||||||||||||||
Net increase in net assets | 70,899 | 199,684 | 279,876 | 12,865 | 28,766 | 18,090 | |||||||||||||||||
| NET ASSETS: | |||||||||||||||||||||||
Beginning of period | — | — | — | — | — | — | |||||||||||||||||
End of period2 | $ | 70,899 | $ | 199,684 | $ | 279,876 | $ | 12,865 | $ | 28,766 | $ | 18,090 | |||||||||||
1Commencement of operations. 2Including undistributed net investment income (loss) of: |
| ||||||||||||||||||||||
| — | — | — | 1 | — | — | ||||||||||||||||||
| 15 | The accompanying notes are an integral part of the financial statements. |
Financial Highlights - Target Income Series
For the Period March 28, 20081 to October 31, 2008
| Class K | Class R | Class C | Class I | |||||
| Per share data (for a share outstanding throughout the period): | ||||||||
Net asset value - Beginning of period | $10.00 | $10.00 | $10.00 | $10.00 | ||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss)6 | (0.01) | 0.02 | (0.01) | 0.05 | ||||
Net realized and unrealized loss on underlying series | (0.69) | (0.73) | (0.73) | (0.73) | ||||
Total from investment operations | (0.70) | (0.71) | (0.74) | (0.68) | ||||
Net asset value - End of period | $9.30 | $9.29 | $9.26 | $9.32 | ||||
Net assets - End of period | $70,620 | $93 | $93 | $93 | ||||
Total return2 | (7.00%) | (7.10%) | (7.40%) | (6.80%) | ||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses*3,5 | 0.30% | 0.55% | 1.05% | 0.05% | ||||
Net investment income (loss)5 | (0.27%) | 0.34% | (0.15%) | 0.85% | ||||
The Series had no portfolio turnover for the period7. | ||||||||
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratios (to average net assets) would have been increased by the following amount3,4,5: | ||||||||
| 1,571% | 43,127% | 43,147% | 43,107% | |||||
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 reimbursed during the period. Periods less than one year are not annualized.
3Expense ratios do not include expenses of the underlying series in which the Series invests. The expense ratio of the underlying series was 0.70%.
4The increase to the expense ratios (to average net assets) is largely due to the small net assets in each class. It is anticipated that this ratio will decease as net assets increase.
5Annualized.
6Calculated based on average shares outstanding during the year.
7Reflects activity of the Series and does not include the activity of the underlying series.
| The accompanying notes are an integral part of the financial statements. | 16 |
Financial Highlights - Target 2010 Series
For the Period March 28, 20081 to October 31, 2008
| Class K | Class R | Class C | Class I | |||||
| Per share data (for a share outstanding throughout the period): | ||||||||
Net asset value - Beginning of period | $10.00 | $10.00 | $10.00 | $10.00 | ||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss)6 | (0.01) | 0.02 | (0.05) | 0.05 | ||||
Net realized and unrealized loss on underlying series | (1.38) | (1.41) | (1.37) | (1.42) | ||||
Total from investment operations | (1.39) | (1.39) | (1.42) | (1.37) | ||||
Net asset value - End of period | $8.61 | $8.61 | $8.58 | $8.63 | ||||
Net assets - End of period | $101,213 | $86 | $98,226 | $159 | ||||
Total return2 | (13.90%) | (13.90%) | (14.20%) | (13.70%) | ||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses*3,5 | 0.30% | 0.55% | 1.05% | 0.05% | ||||
Net investment income (loss)5 | (0.28%) | 0.36% | (1.03%) | 0.86% | ||||
The Series had no portfolio turnover for the period7. | ||||||||
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratios (to average net assets) would have been increased by the following amount3,4,5: | ||||||||
| 1,071% | 42,882% | 919% | 42,439% | |||||
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 reimbursed during the period. Periods less than one year are not annualized.
3Expense ratios do not include expenses of the underlying series in which the Series invests. The expense ratio of the underlying series was 0.85%.
4The increase to the expense ratios (to average net assets) is largely due to the small net assets in each class. It is anticipated that this ratio will decease as net assets increase.
5Annualized.
6Calculated based on average shares outstanding during the year.
7Reflects activity of the Series and does not include the activity of the underlying series.
| 17 | The accompanying notes are an integral part of the financial statements. |
Financial Highlights - Target 2020 Series
For the Period March 28, 20081 to October 31, 2008
| Class K | Class R | Class C | Class I | |||||
| Per share data (for a share outstanding throughout the period): | ||||||||
Net asset value - Beginning of period | $10.00 | $10.00 | $10.00 | $10.00 | ||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss)8 | 0.04 | 0.04 | (0.05) | —6 | ||||
Net realized and unrealized loss on underlying series | (1.90) | (1.91) | (1.85) | (1.85) | ||||
Total from investment operations | (1.86) | (1.87) | (1.90) | (1.85) | ||||
Net asset value - End of period | $8.14 | $8.13 | $8.10 | $8.15 | ||||
Net assets - End of period | $157 | $81 | $228,171 | $51,467 | ||||
Total return2 | (18.60%) | (18.70%) | (19.00%) | (18.50%) | ||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses*3,5 | 0.30% | 0.55% | 1.05% | 0.05% | ||||
Net investment income (loss)5 | 0.74% | 0.62% | (1.05%) | (0.02%) | ||||
The Series’ portfolio turnover rate for the period was 31%7. | ||||||||
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratios (to average net assets) would have been increased by the following amount3,4,5: | ||||||||
| 34,421% | 38,136% | 158% | 871% | |||||
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 reimbursed during the period. Periods less than one year are not annualized.
3Expense ratios do not include expenses of the underlying series in which the Series invests. The expense ratio of the underlying series was 0.85%.
4The increase to the expense ratios (to average net assets) is largely due to the small net assets in each class. It is anticipated that this ratio will decease as net assets increase.
5Annualized.
6Less than $0.01.
7Reflects activity of the Series and does not include the activity of the underlying series.
8Calculated based on average shares outstanding during the year.
| The accompanying notes are an integral part of the financial statements. | 18 |
Financial Highlights - Target 2030 Series
For the Period March 28, 20081 to October 31, 2008
| Class K | Class R | Class C | Class I | |||||
| Per share data (for a share outstanding throughout the period): | ||||||||
Net asset value - Beginning of period | $10.00 | $10.00 | $10.00 | $10.00 | ||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss)6 | 0.03 | 0.02 | (0.01) | 0.01 | ||||
Net realized and unrealized loss on underlying series | (2.22) | (2.23) | (2.22) | (2.19) | ||||
Total from investment operations | (2.19) | (2.21) | (2.23) | (2.18) | ||||
Net asset value - End of period | $7.81 | $7.79 | $7.77 | $7.82 | ||||
Net assets - End of period | $118 | $78 | $78 | $12,591 | ||||
Total return2 | (21.90%) | (22.10%) | (22.30%) | (21.80%) | ||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses*3,5 | 0.30% | 0.55% | 1.05% | 0.05% | ||||
Net investment income (loss)5 | 0.54% | 0.31% | (0.17%) | 0.16% | ||||
The Series’ portfolio turnover rate was less than 1% for the period7. | ||||||||
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratios (to average net assets) would have been increased by the following amount3,4,5: | ||||||||
| 37,175% | 38,768% | 38,789% | 14,979% | |||||
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 reimbursed during the period. Periods less than one year are not annualized.
3Expense ratios do not include expenses of the underlying series in which the Series invests. The expense ratio of the underlying series were 0.85%.
4The increase to the expense ratios (to average net assets) is largely due to the small net assets in each class. It is anticipated that this ratio will decease as net assets increase.
5Annualized.
6Calculated based on average shares outstanding during the year.
7Reflects activity of the Series and does not include the activity of the underlying series.
| 19 | The accompanying notes are an integral part of the financial statements. |
Financial Highlights - Target 2040 Series
For the Period March 28, 20081 to October 31, 2008
| Class K | Class R | Class C | Class I | |||||
| Per share data (for a share outstanding throughout the period): | ||||||||
Net asset value - Beginning of period | $10.00 | $10.00 | $10.00 | $10.00 | ||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss)8 | 0.02 | 0.01 | (0.02) | —6 | ||||
Net realized and unrealized loss on underlying series | (2.44) | (2.43) | (2.43) | (2.40) | ||||
Total from investment operations | (2.42) | (2.42) | (2.45) | (2.40) | ||||
Net asset value - End of period | $7.58 | $7.58 | $7.55 | $7.60 | ||||
Net assets - End of period | $76 | $76 | $75 | $28,539 | ||||
Total return2 | (24.20%) | (24.20%) | (24.50%) | (24.00%) | ||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses*3,5 | 0.30% | 0.55% | 1.05% | 0.05% | ||||
Net investment income (loss)5 | 0.40% | 0.14% | (0.36%) | (0.04%) | ||||
The Series’ portfolio turnover rate was less than 1% for the, period7 . | ||||||||
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratios (to average net assets) would have been increased by the following amount3,4,5: | ||||||||
| 28,865% | 28,865% | 28,898% | 767% | |||||
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 reimbursed during the period. Periods less than one year are not annualized.
3Expense ratios do not include expenses of the underlying series in which the Series invests. The expense ratio of the underlying series was 0.85%.
4The increase to the expense ratios (to average net assets) is largely due to the small net assets in each class. It is anticipated that this ratio will decease as net assets increase.
5Annualized.
6Less than $0.01.
7Reflects activity of the Series and does not include the activity of the underlying series.
8Calculated based on average shares outstanding during the year.
| The accompanying notes are an integral part of the financial statements. | 20 |
Financial Highlights - Target 2050 Series
For the Period March 28, 20081 to October 31, 2008
| Class K | Class R | Class C | Class I | |||||
| Per share data (for a share outstanding throughout the period): | ||||||||
Net asset value - Beginning of period | $10.00 | $10.00 | $10.00 | $10.00 | ||||
Income (loss) from investment operations: | ||||||||
Net investment income (loss)8 | 0.02 | 0.01 | (0.02) | —6 | ||||
Net realized and unrealized loss on underlying series | (2.44) | (2.43) | (2.43) | (2.40) | ||||
Total from investment operations | (2.42) | (2.42) | (2.45) | (2.40) | ||||
Net asset value - End of period | $7.58 | $7.58 | $7.55 | $7.60 | ||||
Net assets - End of period | $76 | $76 | $75 | $17,863 | ||||
Total return2 | (24.20%) | (24.20%) | (24.50%) | (24.00%) | ||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses*3,5 | 0.30% | 0.55% | 1.05% | 0.05% | ||||
Net investment income (loss)5 | 0.40% | 0.14% | (0.36%) | (0.03%) | ||||
The Series’ portfolio turnover rate was 1% for the period7. | ||||||||
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratios (to average net assets) would have been increased by the following amount3,4,5: | ||||||||
| 35,232% | 35,243% | 35,267% | 1,903% | |||||
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 reimbursed during the period. Periods less than one year are not annualized.
3Expense ratios do not include expenses of the underlying series in which the Series invests. The expense ratio of the underlying series was 0.85%.
4The increase to the expense ratios (to average net assets) is largely due to the small net assets in each class. It is anticipated that this ratio will decease as net assets increase.
5Annualized.
6Less than $0.01.
7Reflects activity of the Series and does not include the activity of the underlying series.
8Calculated based on average shares outstanding during the year.
| 21 | The accompanying notes are an integral part of the financial statements. |
Notes to Financial Statements
| 1. | ORGANIZATION |
Target Income Series, Target 2010 Series, Target 2020 Series, Target 2030 Series, Target 2040 Series and Target 2050 Series (each the “Series”) are 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.
Each Series seeks to achieve its investment objectives by investing in a combination of other Manning & Napier mutual funds (the “underlying series”) in order to meet its target asset allocations and investment style. Each Series has its own distinct target portfolio allocation and is designed to accommodate different investment goals and risk tolerances. The financial statements of the underlying funds should be read in conjunction with the Funds’ financial statements.
Each Series is authorized to issue four classes of shares (Class K, R, C and I). Each class of shares is substantially the same, except that class-specific transfer agency 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 each Series are offered to investors and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 5.0 billion shares of common stock each having a par value of $0.01. As of October 31, 2008, 3.4 billion shares have been designated in total among 27 series, of which 10 million have been designated in each of the Series for Class C and I common stock and 40 million have been designated in each of the Series for Class K and R common stock.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Security Valuation
Investments in the underlying series are valued at their net asset value per share on valuation date.
Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividends, if any, are recorded at the fair market value of the securities received.
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. Expenses included in the accompanying statements of operations do not include any expense of the underlying series.
Income, expenses (other than class specific expenses), and realized and unrealized gains and losses are prorated among the classes based on the relative net assets of each class. Class specific expenses are directly charged to that Class.
The Series use the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
| 22 |
Notes to Financial Statements
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Federal Taxes
Each Series’ policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series are not subject to federal income tax or excise tax to the extent that each Series distributes to shareholders each year its taxable income, including any net realized gains on investments, in accordance with requirements of the Internal Revenue Code. Accordingly, no provision for federal income tax or excise tax has been made in the financial statements.
On April 30, 2008, the Series adopted Financial Accounting Standards Board Interpretation No. 48 – Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being measured and recognized in the financial statements. Management has determined that the adoption of FIN 48 did not have a material impact on the Series’ financial statements. Each Series will file income tax returns in the U.S. federal jurisdiction and various states, as required. No income tax returns are currently under investigation, as this is the inception year for the Series, and they have not yet filed any tax returns.
Distributions of Income and Gains
Distributions to shareholders of net investment income are made semi-annually. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of a Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
| 3. | TRANSACTIONS WITH AFFILIATES |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Advisor does not receive an advisory fee for the services it performs for the Series. However, the Advisor is entitled to receive an advisory fee from its investment in each of the underlying series.
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
| 23 |
Notes to Financial Statements
| 3. | TRANSACTIONS WITH AFFILIATES (continued) |
all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended for each active series of the Fund plus a fee for each committee meeting attended.
The Advisor has contractually agreed, until at least February 28, 2010, to limit each class’ total direct annual fund operating expenses for the Series at no more than 0.30% for Class K, 0.55% for Class R, 1.05% for Class C and 0.05% for Class I, of average daily net assets each year. The Advisor’s agreement to limit each class’ operating expense is limited to direct operating expenses and, therefore, does not apply to the indirect expenses incurred by the Series through their investments in the underlying series. For the period March 28, 2008 (commencement of operations) through October 31, 2008, the Advisor reimbursed expenses of $103,944 for Target Income Series, $103,939 for Target 2010 Series, $103,926 for Target 2020 Series, $103,945 for Target 2030 Series, $103,942 for Target 2040 Series and $103,944 for Target 2050 Series, 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 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 Series compensates the distributor for distributing and servicing the Series’ Class K, Class R and Class C shares pursuant to a distribution plan adopted under Rule 12b-1 of the 40 Act, regardless of expenses actually incurred. Under the agreement, each Series pays distribution and servicing fees to the distributor at an annual rate of 0.25% of average daily net assets attributable to Class K shares, 0.50% of average daily net assets attributable to Class R shares, and 1.00% of average daily net assets attributable to Class C shares. There are no distribution and servicing fees on the Class I shares of each Series. The fees are accrued daily and paid monthly.
For fund accounting services, the Fund pays the Advisor an annual fee of $19,000 for each Target Series. For transfer agency services, the Fund pays the Advisor an annual fee of $12,000 per class for each Target Series. 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 Citi Fund Services Ohio, Inc. (“Citi”) under which Citi serves as sub-accountant and sub-transfer agent.
| 4. | PURCHASES AND SALES OF SECURITIES |
For the period March 28, 2008 (commencement of operations) through October 31, 2008, purchases and sales of underlying series were as follows:
Series | Purchases | Sales | ||||
Target Income | $ | 70,402 | — | |||
Target 2010 | $ | 199,252 | — | |||
Target 2020 | $ | 336,067 | $ | 16,334 | ||
Target 2030 | $ | 12,809 | $ | 2 | ||
Target 2040 | $ | 35,953 | $ | 39 | ||
Target 2050 | $ | 22,355 | $ | 27 | ||
| 24 |
Notes to Financial Statements
| 5. | CAPITAL STOCK TRANSACTIONS |
Transactions in shares for the period March 28, 2008 (commencement of operations) through October 31, 2008 were as follows:
| Class K | Class R | Class C | Class I | |||||||||||||||||||||
| Target Income: | ||||||||||||||||||||||||
Sold | 7,594 | $ | 70,100 | 10 | $ | 100 | 10 | $ | 100 | 10 | $ | 100 | ||||||||||||
Reinvested | — | — | — | — | — | — | — | — | ||||||||||||||||
Repurchased | — | — | — | — | — | — | — | — | ||||||||||||||||
Total | 7,594 | $ | 70,100 | 10 | $ | 100 | 10 | $ | 100 | 10 | $ | 100 | ||||||||||||
| Target 2010: | ||||||||||||||||||||||||
Sold | 11,755 | $ | 98,879 | 10 | $ | 100 | 11,452 | $ | 100,100 | 18 | $ | 171 | ||||||||||||
Reinvested | — | — | — | — | — | — | — | — | ||||||||||||||||
Repurchased | — | — | — | — | — | — | — | — | ||||||||||||||||
Total | 11,755 | $ | 98,879 | 10 | $ | 100 | 11,452 | $ | 100,100 | 18 | $ | 171 | ||||||||||||
| Target 2020: | ||||||||||||||||||||||||
Sold | 20 | $ | 189 | 10 | $ | 100 | 30,244 | $ | 285,432 | 6,314 | $ | 50,343 | ||||||||||||
Reinvested | — | — | — | — | — | — | — | — | ||||||||||||||||
Repurchased | — | — | — | — | (2,075 | ) | (16,316 | ) | — | — | ||||||||||||||
Total | 20 | $ | 189 | 10 | $ | 100 | 28,169 | $ | 269,116 | 6,314 | $ | 50,343 | ||||||||||||
| Target 2030: | ||||||||||||||||||||||||
Sold | 15 | $ | 148 | 10 | $ | 100 | 10 | $ | 100 | 1,609 | $ | 12,459 | ||||||||||||
Reinvested | — | — | — | — | — | — | — | — | ||||||||||||||||
Repurchased | — | — | — | — | — | — | — | * | (1 | ) | ||||||||||||||
Total | 15 | $ | 148 | 10 | $ | 100 | 10 | $ | 100 | 1,609 | $ | 12,458 | ||||||||||||
* Less than 1 share | ||||||||||||||||||||||||
| Target 2040: | ||||||||||||||||||||||||
Sold | 10 | $ | 100 | 10 | $ | 100 | 10 | $ | 100 | 3,761 | $ | 35,664 | ||||||||||||
Reinvested | — | — | — | — | — | — | — | — | ||||||||||||||||
Repurchased | — | — | — | — | — | — | (6 | ) | (52 | ) | ||||||||||||||
Total | 10 | $ | 100 | 10 | $ | 100 | 10 | $ | 100 | 3,755 | $ | 35,612 | ||||||||||||
| Target 2050: | ||||||||||||||||||||||||
Sold | 10 | $ | 100 | 10 | $ | 100 | 10 | $ | 100 | 2,354 | $ | 22,054 | ||||||||||||
Reinvested | — | — | — | — | — | — | — | — | ||||||||||||||||
Repurchased | — | — | — | — | — | — | (3 | ) | (27 | ) | ||||||||||||||
Total | 10 | $ | 100 | 10 | $ | 100 | 10 | $ | 100 | 2,351 | $ | 22,027 | ||||||||||||
| 25 |
Notes to Financial Statements
| 6. | FINANCIAL INSTRUMENTS |
The Underlying Series may trade in financial instruments with off-balance sheet risk in the normal course of their investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on October 31, 2008.
| 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. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including losses deferred due to wash sales. Each Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
At October 31, 2008, the tax basis components of distributable earnings and the net unrealized appreciation (depreciation) based on identified cost for federal income tax purposes were as follows:
| Target Income | Target 2010 | Target 2020 | Target 2030 | Target 2040 | Target 2050 | ||||||||||||||||
Cost for federal income tax purposes | $ | 70,402 | $ | 199,252 | $ | 319,637 | $ | 12,807 | $ | 35,914 | $ | 22,328 | |||||||||
Unrealized appreciation | $ | 503 | $ | 471 | $ | — | $ | 58 | $ | — | $ | — | |||||||||
Unrealized depreciation | — | — | (39,547 | ) | — | (7,143 | ) | (4,236 | ) | ||||||||||||
Net unrealized appreciation (depreciation) | $ | 503 | $ | 471 | $ | (39,547 | ) | $ | 58 | $ | (7,143 | ) | $ | (4,236 | ) | ||||||
Undistributed ordinary income | — | — | — | 1 | — | — | |||||||||||||||
Undistributed long-term capital gains | — | — | — | — | — | — | |||||||||||||||
Capital loss carryover | — | — | 86 | — | — | — | |||||||||||||||
The capital loss carryover, disclosed above, available to the extent allowed by tax law to offset future net capital gain; if any, will expire on October 31, 2016.
| 8. | RECENT ACCOUNTING PRONOUNCEMENTS |
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.
| 26 |
Notes to Financial Statements
| 8. | RECENT ACCOUNTING PRONOUNCEMENTS (continued) |
In September 2008, FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45” (the “Position”) was issued. The Position amends FASB Statement No. 133 (“FAS 133”), Accounting for Derivative Instruments and Hedging Activities, and also amends FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The amendments to FAS 133 include required disclosure for (i) the nature and terms of the credit derivative, reasons for entering into the credit derivative, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment performance risk of the credit derivative, (ii) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative, (iii) the fair value of the credit derivative, and (iv) the nature of any recourse provisions and assets held either as collateral or by third parties. The amendments to FIN 45 require additional disclosures about the current status of the payment/performance risk of a guarantee. At this time, Management is evaluating the implications of FAS 133-1 and FIN 45-4, but it is not expected to materially impact the Series’ financial statements.
In March 2008, FASB Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”) was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about the Series’ derivative and hedging activities, including how such activities are accounted for and their effect on the Series’ financial position and performance. Management is currently evaluating the impact of the adoption of FAS 161, but it is not expected to materially impact the Series’ financial statements.
| 27 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of – Target Income Series, Target 2010 Series, Target 2020 Series, Target 2030 Series, Target 2040 Series and Target 2050 Series:
In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Target Income Series, Target 2010 Series, Target 2020 Series, Target 2030 Series, Target 2040 Series and Target 2050 Series (each a series of Manning & Napier Fund, Inc., hereafter collectively referred to as the “Series”) at October 31, 2008, and the results of each of their operations, the changes in each of their net assets and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at October 31, 2008 by correspondence with the custodian, provides a reasonable basis for our opinion.
Columbus, Ohio
December 12, 2008
| 28 |
Directors’ and Officers’ Information (unaudited)
The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http://www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.
INTERESTED DIRECTOR/OFFICER
| Name: | B. Reuben Auspitz* | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 61 | |
| Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director | |
| Term of Office1 & Length of Time Served: | Indefinite - Director since 1984; Vice President 1984 - 2003; President since 2004; Principal Executive Officer since 2002 | |
| Principal Occupation(s) During Past 5 Years: | Executive Vice President; Co-Executive Director; Executive Group Member**; Chief Compliance Officer since 2004 - Manning & Napier Advisors, Inc. President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| INDEPENDENT DIRECTORS | ||
| Name: | Stephen B. Ashley | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 68 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1996 | |
| Principal Occupation(s) During Past 5 Years: | Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Chairman (non-executive) 2004-2008; Director 1995-2008 – Fannie Mae (Mortgage) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | The Ashley Group | |
| Name: | Peter L. Faber | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 70 | |
| Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1987 | |
| Principal Occupation(s) During Past 5 Years: | Senior Counsel, McDermott, Will & Emery LLP (law firm) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Partnership for New York City, Inc. New York Collegium Boston Early Music Festival | |
| Name: | Harris H. Rusitzky | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 73 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1985 | |
| Principal Occupation(s) During Past 5 Years: | President, The Greening Group (business consultants); Partner, The Restaurant Group (restaurants) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| 29 |
Directors’ and Officers’ Information (unaudited)
| INDEPENDENT DIRECTORS (continued) | ||
| Name: | Paul A. Brooke | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 63 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 2007 | |
| Principal Occupation(s) During Past 5 Years: | Chairman & CEO, Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Incyte Corp. ViroPharma, Inc. HLTH Corp. Cheyne Captial International MPM Bio-equities GMP Companies HoustonPharma | |
| OFFICERS | ||
| Name: | Jeffrey S. Coons, Ph.D., CFA | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 45 | |
| Current Position(s) Held with Fund: | Vice President | |
| Term of Office1 & Length of Time Served: | Since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Co-Director of Research since 2002 & Executive Group Member**, Manning & Napier Advisors, Inc. Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Christine Glavin | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 42 | |
| Current Position(s) Held with Fund: | Principal Financial Officer, Chief Financial Officer | |
| Term of Office1 & Length of Time Served: | Principal Financial Officer since 2002; Chief Financial Officer since 2001 | |
| Principal Occupation(s) During Past 5 Years: | Fund Reporting Manager, Manning & Napier Advisors, Inc. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Jodi L. Hedberg | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 40 | |
| Current Position(s) Held with Fund: | Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer | |
| Term of Office1 & Length of Time Served: | Corporate Secretary since 1997; Chief Compliance Officer since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Director of Compliance, Manning & Napier Advisors, Inc. and affiliates; Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006 | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A |
*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, Inc. and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.
**The Executive Group performs the duties of the Office of the Chief Executive of Manning & Napier Advisors, Inc.
1The term of office for President, Vice President, Chief Financial Officer, and Corporate Secretary is one year and until their respective successors are chosen and qualified. All other officers’ terms are indefinite.
| 30 |
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
| 31 |
Manning & Napier Fund, Inc.
| EQUITY SERIES | | | Annual Report - October 31, 2008 |
Management Discussion and Analysis (unaudited)
Dear Shareholders:
Although its returns were negative, the Equity Series outperformed the Russell 3000® Index for the twelve months ended October 31, 2008. The Series continues to outperform the index over the current market cycle time period (beginning April 1, 2000) with an annualized return of 3.18% compared to -2.89% for the index.
For global investors, the past year has been challenging to say the least. From October 2007 highs, U.S. equity markets were down more than 35% through October 31, 2008. Economic news is not much better, with slowing global growth, and continued fallout from the credit crisis hanging over the economy. While this has resulted in negative returns over the course of the year, it has also resulted in historically low valuations for many U.S. stocks.
Late in 2007, we selectively trimmed positions in the Information Technology and Consumer Staples sectors, where investment themes were playing out and valuations reflected higher expectations going forward. Many of our holdings with themes linked to global growth began to reach fair value, which allowed us to take gains. As a result, we also lightened our allocation to Energy stocks late in the year, and have remained underweight compared to the benchmark since then.
We took advantage of the increased volatility and short-term weakness in the first quarter of 2008 to reinitiate positions in several Information Technology stocks that we had reduced in 2007, as well as to add to areas in the Health Care sector. Given reasonable valuations in many areas of the market prior to this year, we used the market volatility in 2008 both to opportunistically buy more of existing holdings that were trading at more attractive levels and to upgrade into new holdings with stronger competitive positioning that now met our pricing disciplines.
Currently, our largest sector weightings remain Information Technology and Health Care, specifically focused on areas that are less sensitive to slowing U.S. consumer spending. We continue to have comparatively small positions in both Energy and Financials relative to the benchmark. Our small position in Financials has helped relative performance over the course of the year in light of the credit crisis. While the small position in Energy detracted from returns in the first half of 2008, it has added value relative to the benchmark so far in the second half of the year.
Through the first half of 2008, we increased the Series’ holdings in industry leaders in the Industrials and transportation sectors that were gaining market share in the face of higher energy costs, primarily at the expense of their weaker competitors. The declines in energy and commodity prices benefited these holdings to a greater extent than the overall market, and drove significant relative outperformance during the third quarter of 2008.
As always, we appreciate your business.
Sincerely,
Manning & Napier Advisors, Inc.
| 1 |
Performance Update as of October 31, 2008 (unaudited)
| Average Annual Total Returns As of October 31, 2008 | ||||||||||
| One Year | Five Year | Ten Year | Since Inception1 | |||||||
Manning & Napier Fund, Inc. - Equity Series2,3 | -35.09% | 3.86% | 7.69% | 4.73% | ||||||
Russell 3000® Index4 | -36.60% | 0.46% | 1.05% | 0.64% | ||||||
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Equity Series for the ten years ended October 31, 2008 to the Russell 3000® Index.
1Performance numbers for the Series and Index are calculated from May 1, 1998, the Collective’s inception date (see Note 3 below).
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended October 31, 2008, this net expense ratio was 1.05%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.11% for the year ended October 31, 2008.
3For periods prior to the inception of the Series on July 10, 2002, the performance figures reflect the performance of the Exeter Trust Company Group Trust for Employee Benefit Plans - All-Equity Collective Investment Trust (the “Collective”), which was managed by the Advisor and reorganized into the Series. The Collective was not open to the public generally, or registered under the Investment Company Act of 1940 (the “1940 Act”), or subject to certain restrictions that are imposed by the 1940 Act. If the Collective had been registered under the 1940 Act, performance may have been adversely affected. Because the fees of the Collective were lower than the Series’ fees, historical performance would have been lower if the Collective had been subject to the same fees.
4The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. The Index returns, unlike Series returns, do not reflect any fees or expenses.
| 2 |
Shareholder Expense Example (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2008 to October 31, 2008).
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 Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period* 5/1/08-10/31/08 | |||||||
Actual | $ | 1,000.00 | $ | 725.80 | $ | 4.55 | |||
Hypothetical | $ | 1,000.00 | $ | 1,019.86 | $ | 5.33 | |||
*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.05%, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.
| 3 |
Portfolio Composition as of October 31, 2008 (unaudited)
Sector Allocation1
1As a percentage of net assets.
| 4 |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS - 92.5% | |||||
Consumer Discretionary - 14.4% | |||||
Hotels, Restaurants & Leisure - 4.9% | |||||
Carnival Corp. | 645,600 | $ | 16,398,240 | ||
International Game Technology | 586,590 | 8,212,260 | |||
| 24,610,500 | |||||
Household Durables - 1.2% | |||||
Fortune Brands, Inc. | 162,410 | 6,194,317 | |||
Media - 4.7% | |||||
Charter Communications, Inc. - Class A* | 2,536,470 | 1,116,047 | |||
Comcast Corp. - Class A | 927,130 | 14,611,569 | |||
The Walt Disney Co. | 308,250 | 7,983,675 | |||
| 23,711,291 | |||||
Specialty Retail - 3.6% | |||||
The Home Depot, Inc. | 377,080 | 8,895,317 | |||
Lowe’s Companies, Inc. | 415,730 | 9,021,341 | |||
| 17,916,658 | |||||
Total Consumer Discretionary | 72,432,766 | ||||
Consumer Staples - 1.4% | |||||
Food Products - 1.4% | |||||
Dean Foods Co.* | 330,290 | 7,220,139 | |||
Energy - 3.4% | |||||
Energy Equipment & Services - 3.4% | |||||
Baker Hughes, Inc. | 264,790 | 9,254,410 | |||
Weatherford International Ltd.* | 458,550 | 7,740,324 | |||
Total Energy | 16,994,734 | ||||
Financials - 8.2% | |||||
Capital Markets - 1.7% | |||||
SEI Investments Co. | 487,800 | 8,624,304 | |||
Commercial Banks - 4.8% | |||||
PNC Financial Services Group, Inc. | 178,060 | 11,871,260 | |||
U.S. Bancorp | 410,770 | 12,245,054 | |||
| 24,116,314 | |||||
Consumer Finance - 1.7% | |||||
American Express Co. | 309,760 | 8,518,400 | |||
Total Financials | 41,259,018 | ||||
Health Care - 18.9% | |||||
Biotechnology - 1.6% | |||||
Amgen, Inc.* | 67,910 | 4,067,130 | |||
Genzyme Corp.* | 57,730 | 4,207,362 | |||
| 8,274,492 | |||||
| The accompanying notes are an integral part of the financial statements. | 5 |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS (continued) | |||||
Health Care (continued) | |||||
Health Care Equipment & Supplies - 6.3% | |||||
Becton, Dickinson and Co. | 102,970 | $ | 7,146,118 | ||
Inverness Medical Innovations, Inc.* | 347,210 | 6,649,071 | |||
Medtronic, Inc. | 435,360 | 17,558,069 | |||
| 31,353,258 | |||||
Health Care Providers & Services - 2.4% | |||||
Quest Diagnostics, Inc. | 254,070 | 11,890,476 | |||
Health Care Technology - 2.6% | |||||
Cerner Corp.* | 173,000 | 6,440,790 | |||
Eclipsys Corp.* | 443,330 | 6,583,450 | |||
| 13,024,240 | |||||
Life Sciences Tools & Services - 3.2% | |||||
Millipore Corp.* | 114,440 | 5,938,292 | |||
PerkinElmer, Inc. | 550,000 | 9,867,000 | |||
| 15,805,292 | |||||
Pharmaceuticals - 2.8% | |||||
Johnson & Johnson | 231,880 | 14,223,519 | |||
Total Health Care | 94,571,277 | ||||
Industrials - 15.3% | |||||
Air Freight & Logistics - 6.6% | |||||
FedEx Corp. | 266,480 | 17,419,798 | |||
United Parcel Service, Inc. - Class B | 302,370 | 15,959,089 | |||
| 33,378,887 | |||||
Airlines - 3.9% | |||||
JetBlue Airways Corp.* | 689,470 | 3,826,558 | |||
Southwest Airlines Co. | 1,332,240 | 15,693,787 | |||
| 19,520,345 | |||||
Industrial Conglomerates - 2.9% | |||||
3M Co. | 225,940 | 14,527,942 | |||
Road & Rail - 1.9% | |||||
Heartland Express, Inc. | 172,670 | 2,648,758 | |||
J.B. Hunt Transport Services, Inc. | 146,130 | 4,154,476 | |||
Knight Transportation, Inc. | 168,970 | 2,686,623 | |||
| 9,489,857 | |||||
Total Industrials | 76,917,031 | ||||
| 6 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Shares | Value (Note 2) | ||||
COMMON STOCKS (continued) | |||||
Information Technology - 24.9% | |||||
Communications Equipment - 4.5% | |||||
Cisco Systems, Inc.* | 844,100 | $ | 14,999,657 | ||
Juniper Networks, Inc.* | 397,020 | 7,440,155 | |||
| 22,439,812 | |||||
Computers & Peripherals - 4.4% | |||||
EMC Corp.* | 1,869,920 | 22,027,658 | |||
Internet Software & Services - 4.8% | |||||
Google, Inc. - Class A* | 67,260 | 24,170,554 | |||
IT Services - 3.2% | |||||
Automatic Data Processing, Inc. | 455,260 | 15,911,337 | |||
Semiconductors & Semiconductor Equipment - 1.2% | |||||
KLA-Tencor Corp. | 147,600 | 3,431,700 | |||
Lam Research Corp.* | 119,310 | 2,667,772 | |||
| 6,099,472 | |||||
Software - 6.8% | |||||
Autodesk, Inc.* | 359,350 | 7,657,748 | |||
Electronic Arts, Inc.* | 488,100 | 11,118,918 | |||
Microsoft Corp. | 687,020 | 15,341,157 | |||
| 34,117,823 | |||||
Total Information Technology | 124,766,656 | ||||
Materials - 4.5% | |||||
Chemicals - 0.8% | |||||
Monsanto Co. | 45,160 | 4,018,337 | |||
Paper & Forest Products - 3.7% | |||||
Louisiana-Pacific Corp. | 551,780 | 2,648,544 | |||
Weyerhaeuser Co. | 415,110 | 15,865,504 | |||
| 18,514,048 | |||||
Total Materials | 22,532,385 | ||||
Utilities - 1.5% | |||||
Independent Power Producers & Energy Traders - 1.5% | |||||
Mirant Corp.* | 413,160 | 7,238,563 | |||
TOTAL COMMON STOCKS | 463,932,569 | ||||
| The accompanying notes are an integral part of the financial statements. | 7 |
Investment Portfolio - October 31, 2008
Shares/ Principal Amount | Value (Note 2) | ||||||
SHORT-TERM INVESTMENTS - 8.5% | |||||||
Dreyfus Treasury and Agency Cash Management - Institutional Shares | 27,649,156 | $ | 27,649,156 | ||||
Fannie Mae Discount Note, 1/5/2009 | $ | 15,000,000 | 14,972,175 | ||||
TOTAL SHORT-TERM INVESTMENTS | 42,621,331 | ||||||
TOTAL INVESTMENTS - 101.0% | 506,553,900 | ||||||
LIABILITIES, LESS OTHER ASSETS - (1.0%) | (4,970,888 | ) | |||||
NET ASSETS - 100% | $ | 501,583,012 | |||||
*Non-income producing security
| 8 | The accompanying notes are an integral part of the financial statements. |
Statement of Assets and Liabilities
October 31, 2008
ASSETS: | ||||
Investments, at value (identified cost $637,666,892) (Note 2) | $ | 506,553,900 | ||
Receivable for securities sold | 8,335,163 | |||
Receivable for fund shares sold | 8,221,640 | |||
Dividends receivable | 112,543 | |||
TOTAL ASSETS | 523,223,246 | |||
| LIABILITIES: | ||||
Accrued management fees (Note 3) | 332,150 | |||
Accrued fund accounting and transfer agent fees (Note 3) | 27,256 | |||
Accrued directors’ fees (Note 3) | 1,998 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 565 | |||
Payable for securities purchased | 20,605,046 | |||
Payable for fund shares repurchased | 616,244 | |||
Audit fees payable | 29,982 | |||
Other payables and accrued expenses | 26,993 | |||
TOTAL LIABILITIES | 21,640,234 | |||
TOTAL NET ASSETS | $ | 501,583,012 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 376,132 | ||
Additional paid-in-capital | 668,885,589 | |||
Undistributed net investment income | 1,596,227 | |||
Accumulated net realized loss on investments | (38,161,944 | ) | ||
Net unrealized depreciation on investments | (131,112,992 | ) | ||
TOTAL NET ASSETS | $ | 501,583,012 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($501,583,012/37,613,205 shares) | $ | 13.34 | ||
| The accompanying notes are an integral part of the financial statements. | 9 |
Statement of Operations
For the Year Ended October 31, 2008
INVESTMENT INCOME: | ||||
Dividends | $ | 5,371,156 | ||
Interest | 227,824 | |||
Total Investment Income | 5,598,980 | |||
| EXPENSES: | ||||
Management fees (Note 3) | 3,476,559 | |||
Fund accounting and transfer agent fees (Note 3) | 237,037 | |||
Directors’ fees (Note 3) | 12,100 | |||
Chief Compliance Officer service fees (Note 3) | 4,681 | |||
Custodian fees | 22,400 | |||
Miscellaneous | 114,358 | |||
Total Expenses | 3,867,135 | |||
Less reduction of expenses (Note 3) | (209,273 | ) | ||
Net Expenses | 3,657,862 | |||
NET INVESTMENT INCOME | 1,941,118 | |||
| REALIZED AND UNREALIZED LOSS ON INVESTMENTS: | ||||
Net realized loss on investments | (38,140,400 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (134,982,408 | ) | ||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (173,122,808 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (171,181,690 | ) | |
| 10 | The accompanying notes are an integral part of the financial statements. |
Statements of Changes in Net Assets
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||
| INCREASE (DECREASE) IN NET ASSETS: | ||||||||
| OPERATIONS: | ||||||||
Net investment income | $ | 1,941,118 | $ | 423,396 | ||||
Net realized gain (loss) on investments | (38,140,400 | ) | 7,608,792 | |||||
Net change in unrealized appreciation (depreciation) on investments | (134,982,408 | ) | 3,014,467 | |||||
Net increase (decrease) from operations | (171,181,690 | ) | 11,046,655 | |||||
| DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
From net investment income | (750,464 | ) | (32,650 | ) | ||||
From net realized gain on investments | (7,613,462 | ) | (277,398 | ) | ||||
Total distributions to shareholders | (8,363,926 | ) | (310,048 | ) | ||||
| CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase from capital share transactions (Note 5) | 490,102,429 | 171,979,405 | ||||||
Net increase in net assets | 310,556,813 | 182,716,012 | ||||||
| NET ASSETS: | ||||||||
Beginning of year | 191,026,199 | 8,310,187 | ||||||
End of year (including undistributed net investment income of $1,596,227 and $406,524, respectively) | $ | 501,583,012 | $ | 191,026,199 | ||||
| The accompanying notes are an integral part of the financial statements. | 11 |
Financial Highlights
| For the Years Ended | ||||||||||
| 10/31/08 | 10/31/07 | 10/31/06 | 10/31/05 | 10/31/04 | ||||||
| Per share data (for a share outstanding throughout each year): | ||||||||||
Net asset value - Beginning of year | $21.43 | $19.19 | $17.24 | $15.63 | $13.42 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income (loss) | 0.07 | 0.06 | 0.04 | (0.01) | (0.01) | |||||
Net realized and unrealized gain (loss) on investments | (7.35) | 2.65 | 3.25 | 2.45 | 2.23 | |||||
Total from investment operations | (7.28) | 2.71 | 3.29 | 2.44 | 2.22 | |||||
Less distributions to shareholders: | ||||||||||
From net investment income | (0.07) | (0.05) | — | — | (0.01) | |||||
From net realized gain on investments | (0.74) | (0.42) | (1.34) | (0.83) | — | |||||
Total distributions to shareholders | (0.81) | (0.47) | (1.34) | (0.83) | (0.01) | |||||
Net asset value - End of year | $13.34 | $21.43 | $19.19 | $17.24 | $15.63 | |||||
Net assets - End of year (000’s omitted) | $501,583 | $191,026 | $8,310 | $2,714 | $1,769 | |||||
Total return1 | (35.09%) | 14.37% | 20.36% | 16.05% | 16.52% | |||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||||
Expenses* | 1.05% | 1.05% | 1.05% | 1.05% | 1.05% | |||||
Net investment income (loss) | 0.56% | 0.45% | 0.35% | (0.04%) | (0.06%) | |||||
Portfolio turnover | 63% | 44% | 55% | 57% | 60% | |||||
*The investment advisor did not impose all or a portion of its management fee and in some years paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would | ||||||||||
have been increased by the following amount: | 0.06% | 0.11% | 1.24% | 2.33% | 2.85% | |||||
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the year.
| 12 | The accompanying notes are an integral part of the financial statements. |
Notes to Financial Statements
| 1. | ORGANIZATION |
Equity 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 of capital, primarily through investments in U.S. common stocks.
The Fund’s Advisor is Manning & Napier Advisors, Inc. (the “Advisor”). Shares of the Series are offered to investors and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 5.0 billion shares of common stock each having a par value of $0.01. As of October 31, 2008, 3.4 billion shares have been designated in total among 27 series, of which 125 million have been designated as Equity Series Class A common stock.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Security Valuation
Portfolio securities, including domestic equities, foreign equities, 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.
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.
| 13 |
Notes to Financial Statements
| 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.
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 tax 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.
On April 30, 2008, the Series adopted Financial Accounting Standards Board Interpretation No. 48 - Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being measured and recognized in the financial statements. Management has determined that the adoption of FIN 48 did not have a material impact on the Series’ financial statements. The Series files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions, as required. No income tax returns are currently under investigation. The statute of limitations on the Series’ tax returns remains open for the years ended October 31, 2005 through October 31, 2008.
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
| 14 |
Notes to Financial Statements
| 3. | TRANSACTIONS WITH AFFILIATES (continued) |
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 February 28, 2010, 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 1.05% of average daily net assets each year. Accordingly, the Advisor waived fees of $209,273 for the year ended October 31, 2008, which is reflected as a reduction of expenses on the Statement of Operations. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
For fund accounting and transfer agent services, through October 31, 2008, the Fund paid 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. Effective November 1, 2008, the fee rates are as follows: 0.055% of the Fund’s average daily net assets up to $4.5 billion, 0.03% of the Fund’s average daily net assets between $4.5 billion and $7.5 billion, and 0.02% of the Fund’s average daily net assets over $7.5 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 Citi Fund Services Ohio, Inc. (“Citi”) under which Citi serves as sub-accountant and sub-transfer agent.
| 4. | PURCHASES AND SALES OF SECURITIES |
For the year ended October 31, 2008, purchases and sales of securities, other than United States Government securities and short-term securities, were $667,014,434 and $207,791,408, respectively. There were no purchases or sales of United States Government securities.
| 5. | CAPITAL STOCK TRANSACTIONS |
Transactions in shares of Equity Series were:
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
Sold | 36,287,140 | $ | 619,884,035 | 9,080,249 | $ | 184,492,831 | ||||||||
Reinvested | 428,960 | 8,180,272 | 15,722 | 309,402 | ||||||||||
Repurchased | (8,016,843 | ) | (137,961,878 | ) | (615,168 | ) | (12,822,828 | ) | ||||||
Total | 28,699,257 | $ | 490,102,429 | 8,480,803 | $ | 171,979,405 | ||||||||
| 15 |
Notes to Financial Statements
| 5. | CAPITAL STOCK TRANSACTIONS (continued) |
At October 31, 2008, the retirement plan of the advisor and its affiliates owned 261,103 shares of the Series (0.7% of shares outstanding) valued at $3,483,114.
| 6. | FINANCIAL INSTRUMENTS |
The Series may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by the Series on October 31, 2008.
| 7. | FOREIGN SECURITIES |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the United States Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the United States Government. No such investments were held by the Series on October 31, 2008.
| 8. | FEDERAL INCOME TAX INFORMATION |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including differences in the cost basis of securities contributed in-kind and losses deferred due to wash sales. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||
Ordinary income | $ | 7,621,863 | $ | 96,775 | ||
Long-term capital gains | 742,063 | 213,273 | ||||
At October 31, 2008, the tax basis components of distributable earnings and the net unrealized depreciation based on identified cost for federal income tax purposes were as follows:
Cost for federal income tax purposes | $ | 639,332,380 | ||
Unrealized appreciation | $ | 2,509,232 | ||
Unrealized depreciation | (135,287,712 | ) | ||
Net unrealized depreciation | $ | (132,778,480 | ) | |
Undistributed ordinary income | 1,596,227 | |||
Capital loss carryover | 36,496,456 |
| 16 |
Notes to Financial Statements
| 8. | FEDERAL INCOME TAX INFORMATION (continued) |
The capital loss carryover, disclosed previously, available to the extent allowed by tax law to offset future net capital gain, if any, will expire on October 31, 2016.
| 9. | RECENT ACCOUNTING PRONOUNCEMENTS |
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.
In September 2008, FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45” (the “Position”) was issued. The Position amends FASB Statement No. 133 (“FAS 133”), Accounting for Derivative Instruments and Hedging Activities, and also amends FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The amendments to FAS 133 include required disclosure for (i) the nature and terms of the credit derivative, reasons for entering into the credit derivative, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment performance risk of the credit derivative, (ii) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative, (iii) the fair value of the credit derivative, and (iv) the nature of any recourse provisions and assets held either as collateral or by third parties. The amendments to FIN 45 require additional disclosures about the current status of the payment/performance risk of a guarantee. At this time, Management is evaluating the implications of FAS 133-1 and FIN 45-4, but it is not expected to materially impact the Series’ financial statements.
In March 2008, FASB Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”) was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about the Series’ derivative and hedging activities, including how such activities are accounted for and their effect on the Series’ financial position and performance. Management is currently evaluating the impact of the adoption of FAS 161, but it is not expected to materially impact the Series’ financial statements.
| 17 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Equity Series:
In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Equity Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at October 31, 2008, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
Columbus, Ohio
December 12, 2008
| 18 |
Supplemental Tax Information (unaudited)
For federal income tax purposes, the Series designates for the current fiscal year $1,681,530 or, if different, the maximum amount allowable under the tax law as qualified dividend income.
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Series hereby designates $742,063 as capital gains for its taxable year ended October 31, 2008.
For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal year is 5.5%.
| 19 |
Directors’ and Officers’ Information (unaudited)
The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http://www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.
INTERESTED DIRECTOR/OFFICER
| Name: | B. Reuben Auspitz* | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 61 | |
| Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director | |
| Term of Office1 & Length of Time Served: | Indefinite - Director since 1984; Vice President 1984 - 2003; President since 2004; Principal Executive Officer since 2002 | |
| Principal Occupation(s) During Past 5 Years: | Executive Vice President; Co-Executive Director; Executive Group Member**; Chief Compliance Officer since 2004 - Manning & Napier Advisors, Inc. President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| INDEPENDENT DIRECTORS | ||
| Name: | Stephen B. Ashley | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 68 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1996 | |
| Principal Occupation(s) During Past 5 Years: | Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Chairman (non-executive) 2004 - 2008; Director 1995 - 2008 - Fannie Mae (mortgage) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | The Ashley Group | |
| Name: | Peter L. Faber | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 70 | |
| Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1987 | |
| Principal Occupation(s) During Past 5 Years: | Senior Counsel, McDermott, Will & Emery LLP (law firm) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Partnership for New York City, Inc. New York Collegium Boston Early Music Festival | |
| Name: | Harris H. Rusitzky | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 73 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1985 | |
| Principal Occupation(s) During Past 5 Years: | President, The Greening Group (business consultants); Partner, The Restaurant Group (restaurants) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| 20 |
Directors’ and Officers’ Information (unaudited)
INDEPENDENT DIRECTORS (continued) | ||
| Name: | Paul A. Brooke | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 63 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 2007 | |
| Principal Occupation(s) During Past 5 Years: | Chairman & CEO, Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Incyte Corp. ViroPharma, Inc. HLTH Corp. Cheyne Captial International MPM Bio-equities GMP Companies HoustonPharma | |
OFFICERS
| Name: | Jeffrey S. Coons, Ph.D., CFA | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 45 | |
| Current Position(s) Held with Fund: | Vice President | |
| Term of Office1 & Length of Time Served: | Since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Co-Director of Research since 2002 & Executive Group Member**, Manning & Napier Advisors, Inc. Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Christine Glavin | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 42 | |
| Current Position(s) Held with Fund: | Principal Financial Officer, Chief Financial Officer | |
| Term of Office1 & Length of Time Served: | Principal Financial Officer since 2002; Chief Financial Officer since 2001 | |
| Principal Occupation(s) During Past 5 Years: | Fund Reporting Manager, Manning & Napier Advisors, Inc. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Jodi L. Hedberg | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 40 | |
| Current Position(s) Held with Fund: | Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer | |
| Term of Office1 & Length of Time Served: | Corporate Secretary since 1997; Chief Compliance Officer since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Director of Compliance, Manning & Napier Advisors, Inc. and affiliates; Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006 | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, Inc. and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.
**The Executive Group performs the duties of the Office of the Chief Executive of Manning & Napier Advisors, Inc.
1The term of office for President, Vice President, Chief Financial Officer, and Corporate Secretary is one year and until their respective successors are chosen and qualified. All other officers’ terms are indefinite.
| 21 |
Literature Requests (unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone | 1-800-466-3863 | |
On the Securities and Exchange Commission’s (SEC) web site | http://www.sec.gov |
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone | 1-800-466-3863 | |
On the SEC’s web site | http://www.sec.gov |
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-Q, and are available, without charge, upon request:
By phone | 1-800-466-3863 | |
On the SEC’s web site | http://www.sec.gov |
The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Prospectus and Statement of Additional Information (SAI)
The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:
By phone | 1-800-466-3863 | |
On the SEC’s web site | http://www.sec.gov | |
On the Advisor’s web site | http://www.manningnapieradvisors.com |
Additional information available at www.manningnapieradvisors.com
1. Fund Holdings - Month-End
2. Fund Holdings - Quarter-End
3. Shareholder Report - Annual
4. Shareholder Report - Semi-Annual
| 22 |
Manning & Napier Fund, Inc.
| PRO-BLEND® CONSERVATIVE TERM SERIES | | | Annual Report - October 31, 2008 | ||
| PRO-BLEND® MODERATE TERM SERIES | ||||
| PRO-BLEND® EXTENDED TERM SERIES | ||||
| PRO-BLEND® MAXIMUM TERM SERIES |
Management Discussion and Analysis (unaudited)
Dear Shareholders:
Uncertainty in both equity and fixed income markets dominated this year. Volatility, which was slightly bolstered at the end of 2007, soared to unimagined heights through the 3rd quarter of 2008. This environment was due to a confluence of decelerating global growth, energy and commodity price inflation and ongoing credit turmoil. While energy and commodity prices have retracted from speculative levels, credit problems and recessionary pressures persist. Despite this backdrop, our investment process of searching for solid investment opportunities at attractive prices remains intact. As such, the market’s decline has been an opportunity to upgrade the Pro-Blend® Series’ portfolios with stocks and bonds with high quality fundamental characteristics.
Major U.S. equity indices declined more than 35% for the twelve months ended October 31, 2008. The S&P 500 Total Return Index was down -36.09%, the Russell 3000® Index down -36.60%, the NASDAQ Composite down -39.81%, and international markets fared worse, with the Morgan Stanley Capital International (MSCI) All Country World Index ex U.S. returning -48.53%. By contrast, bond indices were barely positive, with the 12-month return of the Barclays Capital Aggregate Bond Index at +0.30% and the Merrill Lynch U.S. Corporate, Government and Mortgage Index up 0.70%.
All four Pro-Blend® Series continue to outperform over the current stock market cycle with solid absolute returns for long term investors. However, the one-year performance results versus the market and benchmarks were mixed for the year ended October 31, 2008, with the Pro-Blend® Conservative Term Series and the Pro-Blend® Maximum Term Series holding up better than their blended benchmarks and the Pro-Blend® Moderate Term Series and Extended Term Series slightly underperforming.
The Pro-Blend® Series’ relatively large positions in stocks relative to their benchmarks had the greatest negative impact on their performance. The comparatively small allocation to Energy stocks relative to the benchmark also held back performance for the first eight months of this period, most notably in the Pro-Blend® Maximum Term Series. On a bottom-up basis, our investment process is designed to identify good businesses at attractive valuations and to avoid speculatively priced segments. This discipline kept holdings in the Energy sector limited throughout the twelve month period through October 31, 2008, which helped performance over the last four months of the period. Broadly, relatively large allocations to Health Care and relatively small positions in the Financials sector both contributed positively to performance compared to the benchmarks. Also, our stock selection strategies identified specific positive performers, particularly in the Industrials sector.
As mentioned briefly above, given the protracted credit crisis, spawned by over-extension of consumer and mortgage credit, the Pro-Blend® Series benefited from their relatively small positions in the Financials sector as compared to their benchmarks. The crisis resulted in a succession of failed financial institutions and ultimately governmental intervention. Several major institutions ceased to exist, while others expanded by acquisition of their former competitors. Fortunately, our direct exposure to distressed financials was limited. Our investments in the financial services sector focused predominantly on companies with diversified business lines which produce recurring revenue in various market environments. These selections reflected our preference for banks with low mortgage exposure and high fee-based income relative to industry peers.
Fixed income market returns reflected sharp differences between returns of various sectors and credit quality segments. Our fixed income returns performed better than the fixed income portions of the benchmarks, particularly for the Pro-Blend® Conservative Term Series, which has close to 60% of the holdings allocated to fixed income. Our positive fixed income performance was aided specifically by our decision to avoid most financial corporate bonds in favor of Treasury bonds, as well as high quality industrial bonds and government-sponsored FNMA (Fannie Mae) and FHLMC (Freddie Mac) securities. In addition, we took advantage of a sharp interest rate decline in September, paring back long-term bond holdings which had been established during the second quarter when rates had spiked.
| 1 |
Management Discussion and Analysis (unaudited)
All of the Pro-Blend® Series had foreign stock allocations that were less than that of their blended benchmarks. Since the downturn in the foreign equity markets generally dwarfed the decline in the U.S. equity markets through the one-year period ended October 31, 2008, our comparatively small positions in international holdings, including emerging markets, benefited performance.
While downside risks to stock and fixed income performance remain, and the short term direction is difficult to predict, we recognize select segments of the stock and bond markets are currently trading at attractive valuations, and we have been positioning the portfolios accordingly.
As always, we appreciate your business.
Sincerely,
Manning & Napier Advisors, Inc.
| 2 |
Performance Update - Pro-Blend® Conservative Term Series (unaudited)
| Average Annual Total Returns As of October 31, 2008 | ||||||||
| One Year | Five Year | Ten Year | Since Inception1 | |||||
Manning & Napier Fund, Inc. - Pro-Blend® Conservative Term Series - Class S2 | -7.52% | 3.89% | 5.07% | 5.45% | ||||
Manning & Napier Fund, Inc. - Pro-Blend® Conservative Term Series - Class I2,3 | -7.36% | 4.17% | 5.37% | 5.76% | ||||
Barclays Capital (formerly Lehman Brothers) Intermediate U.S. Aggregate Bond Index4,6 | 1.48% | 3.56% | 5.04% | 5.62% | ||||
5%/15%/80% Blended Index4,5,6 | -8.05% | 3.32% | 4.55% | 5.78% | ||||
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Pro-Blend® Conservative Term Series - Class S for the ten years ended October 31, 2008 to the Barclays Capital Intermediate U.S. Aggregate Bond Index and a 5%/15%/80% Blended Index.
1Performance numbers for the Series and Indices are calculated from November 1, 1995, the Class S inception date.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 0.92% for Class S and 0.70% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.97% for Class S and 0.85% for Class I for the period ended October 31, 2008.
3For periods prior to the inception of Class I on March 28, 2008, the performance figures are hypothetical and reflect the performance of the Manning & Napier Fund, Inc. - Pro-Blend® Conservative Term Series - Class S adjusted for expense differences.
4The Barclays Capital (formerly Lehman Brothers) Intermediate U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities greater than one year but less than ten years. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
5The 5%/15%/80% Blended Index is 5% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 15% Russell 3000® Index, and 80% Barclays Capital Intermediate U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. Both Indices’ returns, unlike Series returns, do not reflect any fees or expenses.
6Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Indices’ portfolios.
| 3 |
Shareholder Expense Example - Pro-Blend® Conservative Term Series (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2008 to October 31, 2008).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, 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 Actual line for the Class in which you have invested in 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 Hypothetical lines of the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ 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 for the Class in which you have invested in 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 Hypothetical lines of the table are 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 Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense ratio | |||||||||
Class S | ||||||||||||
Actual | $ | 1,000.00 | $ | 924.30 | $ | 4.35 | 0.90 | % | ||||
Hypothetical | $ | 1,000.00 | $ | 1,020.61 | $ | 4.57 | 0.90 | % | ||||
Class I | ||||||||||||
Actual | $ | 1,000.00 | $ | 924.50 | $ | 3.39 | 0.70 | % | ||||
Hypothetical | $ | 1,000.00 | $ | 1,021.62 | $ | 3.56 | 0.70 | % | ||||
1Expenses are equal to the Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data (or since inception (3/28/08) for Class I). The Class’ total return would have been lower had certain expenses not been waived during the period.
| 4 |
Portfolio Composition - Pro-Blend® Conservative Term Series (unaudited)
As of October 31, 2008
Asset Allocation1
1As a percentage of net assets.
2A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years.
3A U.S. Treasury Note is an intermediate-term obligation of the U.S. Treasury issued with a maturity period between one and ten years.
Sector Allocation4
Information Technology | 8.07% | |
Health Care | 5.67% | |
Industrials | 3.86% | |
Consumer Discretionary | 3.70% | |
Financials | 2.74% | |
Consumer Staples | 2.08% | |
Energy | 1.18% | |
Materials | 0.84% | |
Utilities | 0.12% | |
Telecommunication Services | 0.10% |
4Including common stocks, preferred stocks, warrants, and corporate bonds, as a percentage of total investments.
Top Five Stock Holdings5
Google, Inc. - Class A | 1.75% | |
EMC Corp. | 1.17% | |
Unilever plc - ADR (United Kingdom) | 0.99% | |
Johnson & Johnson | 0.86% | |
Medtronic, Inc. | 0.83% |
5As a percentage of total investments.
Top Five Bond Holdings6
U.S. Treasury Note, 4.00%, 2/15/2015 | 10.72% | |
U.S. Treasury Note, 4.625%, 2/15/2017 | 7.70% | |
U.S. Treasury Note, 4.00%, 11/15/2012 | 7.06% | |
U.S. Treasury Note, 3.875%, 5/15/2010 | 6.09% | |
U.S. Treasury Note, 3.50%, 11/15/2009 | 5.24% |
6As a percentage of total investments.
| 5 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS - 26.54% | |||||
Consumer Discretionary - 3.36% | |||||
Auto Components - 0.01% | |||||
Hankook Tire Co. Ltd. (South Korea) (Note 7) | 840 | $ | 8,004 | ||
Automobiles - 0.01% | |||||
Suzuki Motor Corp. (Japan) (Note 7) | 1,000 | 14,255 | |||
Diversified Consumer Services - 0.02% | |||||
Jackson Hewitt Tax Service, Inc. | 2,510 | 34,588 | |||
Hotels, Restaurants & Leisure - 0.92% | |||||
Carnival Corp. | 34,950 | 887,730 | |||
Club Mediterranee S.A.* (France) (Note 7) | 305 | 6,064 | |||
International Game Technology | 27,660 | 387,240 | |||
| 1,281,034 | |||||
Household Durables - 0.34% | |||||
Corporacion Geo S.A. de C.V. - Class B* (Mexico) (Note 7) | 2,270 | 3,151 | |||
Fortune Brands, Inc. | 11,980 | 456,917 | |||
LG Electronics, Inc. (South Korea) (Note 7) | 120 | 8,785 | |||
Rodobens Negocios Imobiliarios S.A. (Brazil) (Note 7) | 2,180 | 6,595 | |||
| 475,448 | |||||
Leisure Equipment & Products - 0.01% | |||||
Sankyo Co. Ltd. (Japan) (Note 7) | 300 | 13,159 | |||
Media - 1.20% | |||||
Charter Communications, Inc. - Class A* | 165,480 | 72,811 | |||
Comcast Corp. - Class A | 58,437 | 920,967 | |||
Grupo Televisa S.A. - ADR (Mexico) (Note 7) | 970 | 17,130 | |||
Impresa S.A. (SGPS)* (Portugal) (Note 7) | 820 | 617 | |||
The McGraw-Hill Companies, Inc. | 820 | 22,009 | |||
Mediacom Communications Corp. - Class A* | 4,330 | 19,225 | |||
Mediaset S.p.A. (Italy) (Note 7) | 595 | 3,219 | |||
Reed Elsevier plc - ADR (United Kingdom) (Note 7) | 198 | 7,001 | |||
Societe Television Francaise 1 (France) (Note 7) | 1,650 | 21,007 | |||
The Walt Disney Co. | 22,280 | 577,052 | |||
Wolters Kluwer N.V. (Netherlands) (Note 7) | 290 | 5,108 | |||
| 1,666,146 | |||||
Multiline Retail - 0.00%** | |||||
PPR (France) (Note 7) | 65 | 4,109 | |||
| 6 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Consumer Discretionary (continued) | |||||
Specialty Retail - 0.85% | |||||
The Home Depot, Inc. | 24,670 | $ | 581,965 | ||
KOMERI Co. Ltd. (Japan) (Note 7) | 100 | 2,218 | |||
Lowe’s Companies, Inc. | 27,190 | 590,023 | |||
Tractor Supply Co.* | 140 | 5,818 | |||
| 1,180,024 | |||||
Textiles, Apparel & Luxury Goods - 0.00%** | |||||
Adidas AG (Germany) (Note 7) | 130 | 4,496 | |||
LVMH S.A. (Louis Vuitton Moet Hennessy) (France) (Note 7) | 40 | 2,644 | |||
| 7,140 | |||||
Total Consumer Discretionary | 4,683,907 | ||||
Consumer Staples - 1.88% | |||||
Beverages - 0.03% | |||||
Carlsberg A/S - Class B (Denmark) (Note 7) | 250 | 9,844 | |||
Diageo plc (United Kingdom) (Note 7) | 290 | 4,437 | |||
Heineken N.V. (Netherlands) (Note 7) | 670 | 22,482 | |||
| 36,763 | |||||
Food & Staples Retailing - 0.05% | |||||
BJ’s Wholesale Club, Inc.* | 570 | 20,064 | |||
Carrefour S.A. (France) (Note 7) | 650 | 27,270 | |||
Casino Guichard-Perrachon S.A. (France) (Note 7) | 100 | 6,946 | |||
Tesco plc (United Kingdom) (Note 7) | 2,675 | 14,608 | |||
| 68,888 | |||||
Food Products - 1.54% | |||||
Cadbury plc (United Kingdom) (Note 7) | 2,373 | 21,687 | |||
Dean Foods Co.* | 18,540 | 405,284 | |||
Groupe Danone (France) (Note 7) | 160 | 8,858 | |||
Nestle S.A. (Switzerland) (Note 7) | 8,950 | 347,408 | |||
Sanderson Farms, Inc. | 170 | 5,307 | |||
Suedzucker AG (Germany) (Note 7) | 120 | 1,337 | |||
Unilever plc - ADR (United Kingdom) | 60,020 | 1,354,051 | |||
| 2,143,932 | |||||
Household Products - 0.00%** | |||||
Reckitt Benckiser Group plc (United Kingdom) (Note 7) | 145 | 6,089 | |||
| The accompanying notes are an integral part of the financial statements. | 7 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Consumer Staples (continued) | |||||
Personal Products - 0.26% | |||||
L’Oreal S.A. (France) (Note 7) | 4,730 | $ | 355,739 | ||
Natura Cosmeticos S.A. (Brazil) (Note 7) | 960 | 8,070 | |||
| 363,809 | |||||
Total Consumer Staples | 2,619,481 | ||||
Energy - 1.08% | |||||
Energy Equipment & Services - 1.06% | |||||
Baker Hughes, Inc. | 18,235 | 637,313 | |||
Calfrac Well Services Ltd. (Canada) (Note 7) | 1,840 | 23,244 | |||
Compagnie Generale de Geophysique - Veritas (CGG - Veritas)* (France) (Note 7) | 575 | 9,167 | |||
Dril-Quip, Inc.* | 190 | 4,693 | |||
Trican Well Service Ltd. (Canada) (Note 7) | 950 | 8,910 | |||
Weatherford International Ltd.* | 46,634 | 787,182 | |||
| 1,470,509 | |||||
Oil, Gas & Consumable Fuels - 0.02% | |||||
BP plc (United Kingdom) (Note 7) | 450 | 3,673 | |||
Edge Petroleum Corp.* | 1,950 | 1,150 | |||
Eni S.p.A. (Italy) (Note 7) | 475 | 11,217 | |||
Forest Oil Corp.* | 145 | 4,235 | |||
Mariner Energy, Inc.* | 111 | 1,597 | |||
Royal Dutch Shell plc - Class B (Netherlands) (Note 7) | 156 | 4,164 | |||
Total S.A. (France) (Note 7) | 160 | 8,730 | |||
| 34,766 | |||||
Total Energy | 1,505,275 | ||||
Financials - 2.39% | |||||
Capital Markets - 0.37% | |||||
Bank of New York Mellon Corp.1 | 450 | 14,670 | |||
The Charles Schwab Corp. | 540 | 10,325 | |||
Franklin Resources, Inc. | 280 | 19,040 | |||
Janus Capital Group, Inc. | 570 | 6,692 | |||
SEI Investments Co. | 25,860 | 457,205 | |||
T. Rowe Price Group, Inc. | 220 | 8,699 | |||
| 516,631 | |||||
Commercial Banks - 1.46% | |||||
The Bancorp, Inc.* | 1,340 | 5,012 | |||
BNP Paribas (France) (Note 7) | 100 | 7,137 | |||
Commerzbank AG (Germany) (Note 7) | 250 | 2,714 | |||
Credit Agricole S.A. (France) (Note 7) | 160 | 2,291 | |||
| 8 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Financials (continued) | |||||
Commercial Banks (continued) | |||||
The Hachijuni Bank Ltd. (Japan) (Note 7) | 800 | $ | 3,866 | ||
HSBC Holdings plc (United Kingdom) (Note 7) | 1,070 | 13,119 | |||
HSBC Holdings plc - ADR (United Kingdom) (Note 7) | 690 | 40,710 | |||
Huntington Bancshares, Inc. | 680 | 6,426 | |||
KeyCorp | 1,370 | 16,755 | |||
PNC Financial Services Group, Inc. | 13,450 | 896,711 | |||
Societe Generale (France) (Note 7) | 186 | 9,997 | |||
Societe Generale - ADR (France) (Note 7) | 695 | 7,506 | |||
The Sumitomo Trust & Banking Co. Ltd. (Japan) (Note 7) | 800 | 3,558 | |||
SunTrust Banks, Inc. | 120 | 4,817 | |||
TCF Financial Corp. | 1,090 | 19,337 | |||
UniCredito Italiano S.p.A. (Italy) (Note 7) | 1,455 | 3,503 | |||
U.S. Bancorp | 32,305 | 963,012 | |||
Webster Financial Corp. | 320 | 5,933 | |||
Wilmington Trust Corp. | 530 | 15,296 | |||
| 2,027,700 | |||||
Consumer Finance - 0.31% | |||||
American Express Co. | 14,710 | 404,525 | |||
Capital One Financial Corp. | 670 | 26,210 | |||
| 430,735 | |||||
Diversified Financial Services - 0.09% | |||||
Financiere Marc de Lacharriere S.A. (Fimalac) (France) (Note 7) | 665 | 28,789 | |||
ING Groep N.V. (Netherlands) (Note 7) | 185 | 1,706 | |||
JPMorgan Chase & Co. | 1,420 | 58,575 | |||
Moody’s Corp. | 1,620 | 41,472 | |||
| 130,542 | |||||
Insurance - 0.15% | |||||
Allianz SE (Germany) (Note 7) | 490 | 37,149 | |||
Axa (France) (Note 7) | 160 | 3,028 | |||
Brown & Brown, Inc. | 610 | 12,517 | |||
First American Corp. | 890 | 18,165 | |||
LandAmerica Financial Group, Inc. | 1,130 | 11,130 | |||
Muenchener Rueckver AG (Germany) (Note 7) | 165 | 22,079 | |||
The Progressive Corp. | 3,140 | 44,808 | |||
Torchmark Corp. | 360 | 15,037 | |||
| The accompanying notes are an integral part of the financial statements. | 9 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Financials (continued) | |||||
Insurance (continued) | |||||
Willis Group Holdings Ltd. (United Kingdom) (Note 7) | 1,585 | $ | 41,590 | ||
| 205,503 | |||||
Real Estate Investment Trusts (REITS) - 0.00%** | |||||
Alstria Office REIT AG (Germany) (Note 7) | 880 | 5,652 | |||
Thrifts & Mortgage Finance - 0.01% | |||||
Aareal Bank AG (Germany) (Note 7) | 525 | 4,282 | |||
First Niagara Financial Group, Inc. | 460 | 7,254 | |||
| 11,536 | |||||
Total Financials | 3,328,299 | ||||
Health Care - 5.48% | |||||
Biotechnology - 0.52% | |||||
Amgen, Inc.* | 4,940 | 295,857 | |||
Celera Corp.* | 3,890 | 43,996 | |||
Crucell NV - ADR* (Netherlands) (Note 7) | 2,380 | 27,703 | |||
Genomic Health, Inc.* | 2,160 | 39,809 | |||
Genzyme Corp.* | 3,970 | 289,334 | |||
Medarex, Inc.* | 2,210 | 15,536 | |||
QLT, Inc.* (Canada) (Note 7) | 4,850 | 12,561 | |||
Senomyx, Inc.* | 860 | 2,150 | |||
| 726,946 | |||||
Health Care Equipment & Supplies - 1.76% | |||||
Abaxis, Inc.* | 2,120 | 32,584 | |||
Align Technology, Inc.* | 4,630 | 32,086 | |||
Alsius Corp.*2 | 3,536 | 2,475 | |||
AtriCure, Inc.* | 1,040 | 6,729 | |||
Beckman Coulter, Inc. | 920 | 45,926 | |||
Becton, Dickinson and Co. | 7,880 | 546,872 | |||
C.R. Bard, Inc. | 390 | 34,417 | |||
Covidien Ltd. (Bermuda) (Note 7) | 1,240 | 54,920 | |||
DENTSPLY International, Inc. | 1,210 | 36,760 | |||
Dexcom, Inc.* | 8,360 | 37,787 | |||
Gen-Probe, Inc.* | 700 | 32,942 | |||
IDEXX Laboratories, Inc.* | 900 | 31,671 | |||
Inverness Medical Innovations, Inc.* | 3,720 | 71,238 | |||
Medtronic, Inc. | 28,055 | 1,131,458 | |||
Micrus Endovascular Corp.* | 1,775 | 20,945 | |||
Nobel Biocare Holding AG (Switzerland) (Note 7) | 700 | 11,962 | |||
OraSure Technologies, Inc.* | 13,205 | 60,875 | |||
| 10 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Health Care (continued) | |||||
Health Care Equipment & Supplies (continued) | |||||
Sirona Dental Systems, Inc.* | 2,440 | $ | 38,967 | ||
STAAR Surgical Co.* | 7,020 | 17,269 | |||
Straumann Holding AG (Switzerland) (Note 7) | 335 | 56,638 | |||
Synthes, Inc. | 890 | 114,618 | |||
Zimmer Holdings, Inc.* | 660 | 30,644 | |||
| 2,449,783 | |||||
Health Care Providers & Services - 0.59% | |||||
Bumrungrad Hospital Public Co. Ltd. - NVDR (Thailand) (Note 7) | 12,000 | 7,536 | |||
Diagnosticos da America S.A. (Brazil) (Note 7) | 2,980 | 34,686 | |||
Quest Diagnostics, Inc. | 15,380 | 719,784 | |||
Sonic Healthcare Ltd. (Australia) (Note 7) | 6,710 | 61,112 | |||
| 823,118 | |||||
Health Care Technology - 0.39% | |||||
Cerner Corp.* | 12,790 | 476,172 | |||
Eclipsys Corp.* | 5,100 | 75,735 | |||
| 551,907 | |||||
Life Sciences Tools & Services - 0.86% | |||||
Caliper Life Sciences, Inc.* | 8,927 | 12,498 | |||
Exelixis, Inc.* | 8,810 | 30,306 | |||
Lonza Group AG (Switzerland) (Note 7) | 2,870 | 237,661 | |||
Luminex Corp.* | 2,210 | 41,217 | |||
Millipore Corp.* | 5,630 | 292,141 | |||
PerkinElmer, Inc. | 30,523 | 547,583 | |||
QIAGEN N.V.* (Netherlands) (Note 7) | 2,410 | 34,367 | |||
| 1,195,773 | |||||
Pharmaceuticals - 1.36% | |||||
Abbott Laboratories | 700 | 38,605 | |||
AstraZeneca plc (United Kingdom) (Note 7) | 25 | 1,058 | |||
AstraZeneca plc - ADR (United Kingdom) (Note 7) | 120 | 5,095 | |||
Bayer AG (Germany) (Note 7) | 540 | 30,349 | |||
GlaxoSmithKline plc (United Kingdom) (Note 7) | 695 | 13,386 | |||
Johnson & Johnson | 19,210 | 1,178,341 | |||
Mylan, Inc.* | 4,150 | 35,566 | |||
Novartis AG - ADR (Switzerland) (Note 7) | 11,108 | 566,397 | |||
Sanofi-Aventis (France) (Note 7) | 31 | 1,953 | |||
Santen Pharmaceutical Co. Ltd. (Japan) (Note 7) | 400 | 10,072 | |||
| The accompanying notes are an integral part of the financial statements. | 11 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Health Care (continued) | |||||
Pharmaceuticals (continued) | |||||
Shire plc (United Kingdom) (Note 7) | 635 | $ | 8,368 | ||
| 1,889,190 | |||||
Total Health Care | 7,636,717 | ||||
Industrials - 3.57% | |||||
Aerospace & Defense - 0.03% | |||||
Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) (Note 7) | 1,245 | 26,045 | |||
Hexcel Corp.* | 910 | 12,012 | |||
| 38,057 | |||||
Air Freight & Logistics - 1.47% | |||||
Deutsche Post AG (Germany) (Note 7) | 300 | 3,303 | |||
FedEx Corp. | 15,210 | 994,278 | |||
TNT N.V. (Netherlands) (Note 7) | 885 | 18,384 | |||
United Parcel Service, Inc. - Class B | 19,640 | 1,036,599 | |||
| 2,052,564 | |||||
Airlines - 1.03% | |||||
AirTran Holdings, Inc.* | 810 | 3,313 | |||
Deutsche Lufthansa AG (Germany) (Note 7) | 610 | 8,543 | |||
JetBlue Airways Corp.* | 61,184 | 339,571 | |||
Southwest Airlines Co. | 91,855 | 1,082,052 | |||
| 1,433,479 | |||||
Building Products - 0.01% | |||||
Owens Corning, Inc.* | 1,000 | 15,730 | |||
Commercial Services & Supplies - 0.02% | |||||
Tomra Systems ASA (Norway) (Note 7) | 7,190 | 33,328 | |||
Electrical Equipment - 0.02% | |||||
ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) (Note 7) | 1,060 | 13,939 | |||
General Cable Corp.* | 260 | 4,441 | |||
Nexans S.A. (France) (Note 7) | 80 | 4,529 | |||
| 22,909 | |||||
Industrial Conglomerates - 0.74% | |||||
3M Co. | 15,441 | 992,856 | |||
Siemens AG (Germany) (Note 7) | 590 | 35,685 | |||
| 1,028,541 | |||||
Machinery - 0.02% | |||||
FreightCar America, Inc. | 650 | 16,972 | |||
| 12 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Industrials (continued) | |||||
Machinery (continued) | |||||
Schindler Holding AG (Switzerland) (Note 7) | 105 | $ | 4,529 | ||
| 21,501 | |||||
Professional Services - 0.02% | |||||
Equifax, Inc. | 540 | 14,083 | |||
Experian plc (Ireland) (Note 7) | 3,640 | 20,001 | |||
| 34,084 | |||||
Road & Rail - 0.21% | |||||
J.B. Hunt Transport Services, Inc. | 10,060 | 286,006 | |||
Trading Companies & Distributors - 0.00%** | |||||
Rush Enterprises, Inc. - Class A* | 660 | 6,184 | |||
Total Industrials | 4,972,383 | ||||
Information Technology - 7.82% | |||||
Communications Equipment - 1.66% | |||||
Alcatel-Lucent - ADR* (France) (Note 7) | 18,500 | 47,545 | |||
BigBand Networks, Inc.* | 10,130 | 37,481 | |||
Blue Coat Systems, Inc.* | 3,180 | 42,930 | |||
Ceragon Networks Ltd.* (Israel) (Note 7) | 3,490 | 19,719 | |||
Cisco Systems, Inc.* | 61,181 | 1,087,186 | |||
Harris Stratex Networks, Inc. - Class A* | 3,480 | 23,072 | |||
Infinera Corp.* | 5,000 | 38,900 | |||
Juniper Networks, Inc.* | 23,486 | 440,128 | |||
Nokia (Finland) (Note 7) | 33,600 | 510,048 | |||
Riverbed Technology, Inc.* | 5,040 | 63,151 | |||
| 2,310,160 | |||||
Computers & Peripherals - 1.16% | |||||
EMC Corp.* | 135,760 | 1,599,253 | |||
Rackable Systems, Inc.* | 2,830 | 20,178 | |||
| 1,619,431 | |||||
Electronic Equipment, Instruments & Components - 0.03% | |||||
LoJack Corp.* | 7,430 | 32,469 | |||
Planar Systems, Inc.* | 4,960 | 9,920 | |||
| 42,389 | |||||
Internet Software & Services - 1.71% | |||||
Google, Inc. - Class A* | 6,630 | 2,382,557 | |||
IT Services - 0.73% | |||||
Automatic Data Processing, Inc. | 27,068 | 946,027 | |||
Gevity HR, Inc. | 7,490 | 25,541 | |||
Online Resources Corp.* | 6,820 | 23,870 | |||
| The accompanying notes are an integral part of the financial statements. | 13 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Information Technology (continued) | |||||
IT Services (continued) | |||||
Paychex, Inc. | 710 | $ | 20,263 | ||
| 1,015,701 | |||||
Semiconductors & Semiconductor Equipment - 0.13% | |||||
ASML Holding N.V. (Netherlands) (Note 7) | 670 | 11,612 | |||
ASML Holding N.V. - New York Registered Shares (Netherlands) (Note 7) | 1,870 | 32,819 | |||
Hynix Semiconductor, Inc.* (South Korea) (Note 7) | 230 | 1,924 | |||
KLA-Tencor Corp. | 1,340 | 31,155 | |||
Lam Research Corp.* | 1,390 | 31,080 | |||
Netlogic Microsystems, Inc.* | 1,220 | 25,766 | |||
Taiwan Semiconductor Manufacturing Co. | 740 | 6,112 | |||
Tokyo Electron Limited (Japan) (Note 7) | 1,100 | 35,851 | |||
| 176,319 | |||||
Software - 2.40% | |||||
Amdocs Ltd.* (Guernsey) (Note 7) | 2,845 | 64,183 | |||
Autodesk, Inc.* | 16,030 | 341,599 | |||
Electronic Arts, Inc.* | 36,060 | 821,447 | |||
Intuit, Inc.* | 1,420 | 35,585 | |||
Microsoft Corp. | 47,790 | 1,067,151 | |||
Misys plc (United Kingdom) (Note 7) | 1,205 | 2,138 | |||
SAP AG (Germany) (Note 7) | 250 | 8,867 | |||
SAP AG - ADR (Germany) (Note 7) | 26,950 | 952,144 | |||
Sonic Solutions* | 6,440 | 13,138 | |||
Square Enix Holdings Co. Ltd. (Japan) | 200 | 4,975 | |||
THQ, Inc.* | 780 | 5,811 | |||
UbiSoft Entertainment S.A.* (France) (Note 7) | 360 | 18,888 | |||
| 3,335,926 | |||||
Total Information Technology | 10,882,483 | ||||
Materials - 0.83% | |||||
Chemicals - 0.25% | |||||
Arkema (France) (Note 7) | 2 | 45 | |||
Calgon Carbon Corp.* | 1,100 | 14,652 | |||
Monsanto Co. | 3,700 | 329,226 | |||
The Scotts Miracle-Gro Co. - Class A | 270 | 7,052 | |||
| 350,975 | |||||
Containers & Packaging - 0.01% | |||||
Bemis Co., Inc. | 340 | 8,446 | |||
| 14 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Materials (continued) | |||||
Paper & Forest Products - 0.57% | |||||
Louisiana-Pacific Corp. | 30,800 | $ | 147,840 | ||
Norbord, Inc. (Canada) (Note 7) | 5,770 | 9,052 | |||
Weyerhaeuser Co. | 16,590 | 634,070 | |||
| 790,962 | |||||
Total Materials | 1,150,383 | ||||
Telecommunication Services - 0.09% | |||||
Diversified Telecommunication Services - 0.01% | |||||
France Telecom S.A. (France) (Note 7) | 440 | 11,047 | |||
Swisscom AG - ADR (Switzerland) (Note 7) | 290 | 8,729 | |||
| 19,776 | |||||
Wireless Telecommunication Services - 0.08% | |||||
American Tower Corp.* | 380 | 12,278 | |||
Crown Castle International Corp.* | 1,090 | 23,075 | |||
Hutchison Telecommunications International Ltd.* (Hong Kong) (Note 7) | 6,550 | 7,083 | |||
SBA Communications Corp.* | 710 | 14,903 | |||
SK Telecom Co. Ltd. - ADR (South Korea) (Note 7) | 3,090 | 53,179 | |||
| 110,518 | |||||
Total Telecommunication Services | 130,294 | ||||
Utilities - 0.04% | |||||
Electric Utilities - 0.02% | |||||
E.ON AG (Germany) (Note 7) | 665 | 25,670 | |||
Independent Power Producers & Energy Traders - 0.01% | |||||
Mirant Corp.* | 540 | 9,461 | |||
Multi-Utilities - 0.00%** | |||||
National Grid plc (United Kingdom) (Note 7) | 740 | 8,376 | |||
Water Utilities - 0.01% | |||||
Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) (Brazil) (Note 7) | 437 | 5,006 | |||
Companhia de Saneamento de Minas Gerais - Copasa MG (Brazil) (Note 7) | 620 | 3,923 | |||
| 8,929 | |||||
Total Utilities | 52,436 | ||||
TOTAL COMMON STOCKS | 36,961,658 | ||||
| The accompanying notes are an integral part of the financial statements. | 15 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Shares/ Principal Amount | Value (Note 2) | ||||
PREFERRED STOCKS - 0.01% | ||||||
Consumer Staples - 0.01% | ||||||
Household Products - 0.01% | ||||||
Henkel AG & Co. KGaA (Germany) (Note 7) | 330 | $ | 9,471 | |||
WARRANTS - 0.00%** | ||||||
Health Care - 0.00%** | ||||||
Life Sciences Tools & Services - 0.00%** | ||||||
Caliper Life Sciences, Inc., 8/10/2011 | 348 | 90 | ||||
CORPORATE BONDS - 1.24% | ||||||
Convertible Corporate Bonds - 0.11% | ||||||
Consumer Discretionary - 0.02% | ||||||
Hotels, Restaurants & Leisure - 0.01% | ||||||
Carnival Corp., 2.00%, 4/15/2021 | $ | 25,000 | 20,906 | |||
Media - 0.01% | ||||||
Charter Communications, Inc., 6.50%, 10/1/2027 | 52,000 | 9,815 | ||||
Total Consumer Discretionary | 30,721 | |||||
Health Care - 0.04% | ||||||
Biotechnology - 0.04% | ||||||
Amgen, Inc., 0.375%, 2/1/2013 | 60,000 | 52,950 | ||||
Information Technology - 0.05% | ||||||
Computers & Peripherals - 0.02% | ||||||
EMC Corp., 1.75%, 12/1/2013 | 40,000 | 36,150 | ||||
Software - 0.03% | ||||||
Amdocs Ltd., 0.50%, 3/15/2024 (Guernsey) (Note 7) | 40,000 | 38,700 | ||||
Total Information Technology | 74,850 | |||||
Total Convertible Corporate Bonds | 158,521 | |||||
Non-Convertible Corporate Bonds - 1.13% | ||||||
Consumer Discretionary - 0.24% | ||||||
Hotels, Restaurants & Leisure - 0.03% | ||||||
McDonald’s Corp., 5.80%, 10/15/2017 | 50,000 | 45,747 | ||||
Media - 0.08% | ||||||
AOL Time Warner (now known as Time Warner, Inc.), 7.625%, 4/15/2031 | 55,000 | 43,978 | ||||
Comcast Corp., 6.50%, 11/15/2035 | 55,000 | 42,221 | ||||
The Walt Disney Co., 7.00%, 3/1/2032 | 25,000 | 23,473 | ||||
| 109,672 | ||||||
| 16 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Non-Convertible Corporate Bonds (continued) | ||||||
Consumer Discretionary (continued) | ||||||
Multiline Retail - 0.03% | ||||||
Target Corp., 5.875%, 3/1/2012 | $ | 35,000 | $ | 34,653 | ||
Specialty Retail - 0.06% | ||||||
Home Depot, Inc., 5.40%, 3/1/2016 | 65,000 | 49,829 | ||||
Lowe’s Companies, Inc., 8.25%, 6/1/2010 | 30,000 | 30,911 | ||||
| 80,740 | ||||||
Textiles, Apparel & Luxury Goods - 0.04% | ||||||
VF Corp., 5.95%, 11/1/2017 | 75,000 | 60,269 | ||||
Total Consumer Discretionary | 331,081 | |||||
Consumer Staples - 0.15% | ||||||
Beverages - 0.04% | ||||||
Pepsico, Inc., 5.00%, 6/1/2018 | 65,000 | 56,153 | ||||
Food & Staples Retailing - 0.01% | ||||||
The Kroger Co., 6.80%, 4/1/2011 | 20,000 | 19,677 | ||||
Food Products - 0.10% | ||||||
General Mills, 6.00%, 2/15/2012 | 70,000 | 68,665 | ||||
Kraft Foods Inc., 6.125%, 2/1/2018 | 80,000 | 68,543 | ||||
| 137,208 | ||||||
Total Consumer Staples | 213,038 | |||||
Energy - 0.08% | ||||||
Oil, Gas & Consumable Fuels - 0.08% | ||||||
Anadarko Petroleum Corp., 5.95%, 9/15/2016 | 15,000 | 12,512 | ||||
Apache Corp., 6.90%, 9/15/2018 | 55,000 | 52,068 | ||||
Arch Western Finance LLC, 6.75%, 7/1/2013 | 45,000 | 37,800 | ||||
Total Energy | 102,380 | |||||
Financials - 0.30% | ||||||
Capital Markets - 0.07% | ||||||
The Goldman Sachs Group, Inc., 6.345%, 2/15/2034 | 55,000 | 33,944 | ||||
Lehman Brothers Holdings, Inc.3, 2.90688%, 11/16/2009 | 20,000 | 2,350 | ||||
Merrill Lynch & Co., Inc., 6.11%, 1/29/2037 | 20,000 | 13,234 | ||||
Morgan Stanley, 5.55%, 4/27/2017 | 62,000 | 49,377 | ||||
| 98,905 | ||||||
Commercial Banks - 0.18% | ||||||
HSBC Financial Corp., 7.00%, 5/15/2012 | 125,000 | 116,925 | ||||
PNC Bank National Association, 5.25%, 1/15/2017 | 65,000 | 54,019 | ||||
| The accompanying notes are an integral part of the financial statements. | 17 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Non-Convertible Corporate Bonds (continued) | ||||||
Financials (continued) | ||||||
Commercial Banks (continued) | ||||||
U.S. Bank National Association, 6.375%, 8/1/2011 | $ | 30,000 | $ | 29,698 | ||
Wachovia Corp., 5.25%, 8/1/2014 | 55,000 | 45,843 | ||||
| 246,485 | ||||||
Diversified Financial Services - 0.02% | ||||||
Bank of America Corp. Capital Trust VI, 5.625%, 3/8/2035 | 35,000 | 22,618 | ||||
Insurance - 0.03% | ||||||
Ambac Financial Group, Inc., 5.95%, 12/5/2035 | 80,000 | 32,868 | ||||
American International Group, Inc., 4.25%, 5/15/2013 | 30,000 | 11,207 | ||||
| 44,075 | ||||||
Total Financials | 412,083 | |||||
Health Care - 0.03% | ||||||
Pharmaceuticals - 0.03% | ||||||
Abbott Laboratories, 3.50%, 2/17/2009 | 15,000 | 14,982 | ||||
Wyeth, 6.50%, 2/1/2034 | 35,000 | 28,598 | ||||
Total Health Care | 43,580 | |||||
Industrials - 0.21% | ||||||
Aerospace & Defense - 0.01% | ||||||
Boeing Capital Corp., 6.50%, 2/15/2012 | 15,000 | 14,803 | ||||
Airlines - 0.02% | ||||||
Southwest Airlines Co., 5.25%, 10/1/2014 | 35,000 | 28,398 | ||||
Industrial Conglomerates - 0.07% | ||||||
General Electric Capital Corp., 6.75%, 3/15/2032 | 25,000 | 20,286 | ||||
General Electric Co., 5.25%, 12/6/2017 | 90,000 | 75,334 | ||||
| 95,620 | ||||||
Machinery - 0.06% | ||||||
Caterpillar Financial Service Corp., 7.05%, 10/1/2018 | 75,000 | 70,785 | ||||
John Deere Capital Corp., 5.50%, 4/13/2017 | 20,000 | 17,141 | ||||
| 87,926 | ||||||
Road & Rail - 0.05% | ||||||
CSX Corp., 6.00%, 10/1/2036 | 60,000 | 37,645 | ||||
Union Pacific Corp., 5.65%, 5/1/2017 | 35,000 | 29,943 | ||||
| 67,588 | ||||||
Total Industrials | 294,335 | |||||
| 18 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Non-Convertible Corporate Bonds (continued) | ||||||
Information Technology - 0.04% | ||||||
Communications Equipment - 0.04% | ||||||
Cisco Systems, Inc., 5.50%, 2/22/2016 | $ | 20,000 | $ | 18,539 | ||
Corning, Inc., 6.20%, 3/15/2016 | 45,000 | 36,275 | ||||
Total Information Technology | 54,814 | |||||
Utilities - 0.08% | ||||||
Electric Utilities - 0.07% | ||||||
Allegheny Energy Supply Co. LLC4, 8.25%, 4/15/2012 | 20,000 | 18,300 | ||||
American Electric Power Co., Inc., 5.375%, 3/15/2010 | 40,000 | 38,914 | ||||
Exelon Generation Co. LLC, 5.35%, 1/15/2014 | 55,000 | 44,855 | ||||
| 102,069 | ||||||
Multi-Utilities - 0.01% | ||||||
CenterPoint Energy Resources Corp., 7.875%, 4/1/2013 | 15,000 | 14,128 | ||||
Total Utilities | 116,197 | |||||
Total Non-Convertible Corporate Bonds | 1,567,508 | |||||
TOTAL CORPORATE BONDS | 1,726,029 | |||||
U.S. TREASURY SECURITIES - 51.98% | ||||||
U.S. Treasury Bonds - 5.00% | ||||||
U.S. Treasury Bond, 6.875%, 8/15/2025 | 170,000 | 211,743 | ||||
U.S. Treasury Bond, 5.50%, 8/15/2028 | 6,185,000 | 6,754,212 | ||||
Total U.S. Treasury Bonds | 6,965,955 | |||||
U.S. Treasury Notes - 46.98% | ||||||
Interest Stripped - Principal Payment, 2/15/2009 | 17,000 | 16,969 | ||||
U.S. Treasury Note, 3.50%, 11/15/2009 | 7,000,000 | 7,144,921 | ||||
U.S. Treasury Note, 3.875%, 5/15/2010 | 8,000,000 | 8,306,872 | ||||
U.S. Treasury Note, 5.00%, 2/15/2011 | 1,000,000 | 1,081,328 | ||||
U.S. Treasury Note, 4.875%, 4/30/2011 | 5,000,000 | 5,405,470 | ||||
U.S. Treasury Note, 4.00%, 11/15/2012 | 9,000,000 | 9,632,106 | ||||
U.S. Treasury Note, 3.625%, 5/15/2013 | 5,525,000 | 5,762,404 | ||||
U.S. Treasury Note, 4.00%, 2/15/2015 | 14,000,000 | 14,630,000 | ||||
U.S. Treasury Note, 4.625%, 2/15/2017 | 10,000,000 | 10,511,720 | ||||
U.S. Treasury Note, 3.50%, 2/15/2018 | 3,000,000 | 2,918,202 | ||||
Total U.S. Treasury Notes | 65,409,992 | |||||
TOTAL U.S. TREASURY SECURITIES | 72,375,947 | |||||
| The accompanying notes are an integral part of the financial statements. | 19 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Principal Amount | Value (Note 2) | ||||
U.S. GOVERNMENT AGENCIES - 7.58% | ||||||
Mortgage-Backed Securities - 6.74% | ||||||
Fannie Mae, Pool #805347, 5.50%, 1/1/2020 | $ | 19,317 | $ | 19,298 | ||
Fannie Mae, Pool #816064, 4.50%, 4/1/2020 | 147,941 | 141,201 | ||||
Fannie Mae, Pool #863151, 4.50%, 11/1/2020 | 114,478 | 109,262 | ||||
Fannie Mae, Pool #851149, 5.00%, 4/1/2021 | 327,824 | 320,828 | ||||
Fannie Mae, Pool #899023, 4.50%, 1/1/2022 | 106,070 | 101,038 | ||||
Fannie Mae, Pool #899287, 5.00%, 2/1/2022 | 104,664 | 102,392 | ||||
Fannie Mae, Pool #888815, 4.50%, 11/1/2022 | 872,712 | 831,315 | ||||
Fannie Mae, Pool #790393, 6.50%, 9/1/2034 | 4,711 | 4,793 | ||||
Fannie Mae, Pool #745147, 4.50%, 12/1/2035 | 525,819 | 477,959 | ||||
Fannie Mae, Pool #886904, 6.50%, 9/1/2036 | 1,492,614 | 1,513,930 | ||||
Fannie Mae, Pool #901895, 6.50%, 9/1/2036 | 120,954 | 122,682 | ||||
Fannie Mae, Pool #899393, 6.00%, 4/1/2037 | 245,249 | 245,261 | ||||
Fannie Mae, Pool #949709, 6.50%, 9/1/2037 | 2,463 | 2,498 | ||||
Fannie Mae, Pool #950248, 6.00%, 10/1/2037 | 168,061 | 168,069 | ||||
Federal Home Loan Mortgage Corp., Pool #B16835, 5.50%, 10/1/2019 | 13,925 | 13,910 | ||||
Federal Home Loan Mortgage Corp., | 90,974 | 86,630 | ||||
Federal Home Loan Mortgage Corp., | 308,927 | 308,131 | ||||
Federal Home Loan Mortgage Corp., | 67,724 | 66,169 | ||||
Federal Home Loan Mortgage Corp., | 62,523 | 62,290 | ||||
Federal Home Loan Mortgage Corp., | 177,549 | 168,739 | ||||
Federal Home Loan Mortgage Corp., | 195,898 | 191,400 | ||||
Federal Home Loan Mortgage Corp., | 104,667 | 104,277 | ||||
Federal Home Loan Mortgage Corp., | 125,314 | 119,056 | ||||
Federal Home Loan Mortgage Corp., | 10,856 | 11,057 | ||||
Federal Home Loan Mortgage Corp., | 120,195 | 121,911 | ||||
Federal Home Loan Mortgage Corp., | 373,519 | 353,614 | ||||
Federal Home Loan Mortgage Corp., | 228,000 | 222,476 | ||||
GNMA, Pool #365225, 9.00%, 11/15/2024 | 2,052 | 2,235 | ||||
GNMA, Pool #398655, 6.50%, 5/15/2026 | 1,240 | 1,261 | ||||
GNMA, Pool #452826, 9.00%, 1/15/2028 | 2,120 | 2,307 | ||||
GNMA, Pool #460820, 6.00%, 6/15/2028 | 15,375 | 15,450 | ||||
| 20 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Conservative Term Series | Principal Amount/ Shares | Value (Note 2) | ||||
U.S. GOVERNMENT AGENCIES (continued) | ||||||
Mortgage-Backed Securities (continued) | ||||||
GNMA, Pool #458983, 6.00%, 1/15/2029 | $ | 34,985 | $ | 35,134 | ||
GNMA, Pool #530481, 8.00%, 8/15/2030 | 17,074 | 18,252 | ||||
GNMA, Pool #577796, 6.00%, 1/15/2032 | 31,429 | 31,533 | ||||
GNMA, Pool #631703, 6.50%, 9/15/2034 | 7,171 | 7,267 | ||||
GNMA, Pool #003808, 6.00%, 1/20/2036 | 559,830 | 559,069 | ||||
GNMA, Pool #651235, 6.50%, 2/15/2036 | 328,117 | 332,075 | ||||
GNMA, Pool #003830, 5.50%, 3/20/2036 | 1,228,583 | 1,205,519 | ||||
GNMA, Pool #671304, 5.50%, 6/15/2037 | 235,969 | 231,710 | ||||
GNMA, Pool #671531, 5.50%, 9/15/2037 | 262,052 | 257,322 | ||||
GNMA, Pool #671161, 5.50%, 11/15/2037 | 705,112 | 692,387 | ||||
Total Mortgage-Backed Securities | 9,381,707 | |||||
Other Agencies - 0.84% | ||||||
Fannie Mae, 5.25%, 1/15/2009 | 15,000 | 15,078 | ||||
Fannie Mae, 4.875%, 5/18/2012 | 1,135,000 | 1,163,086 | ||||
Total Other Agencies | 1,178,164 | |||||
TOTAL U.S. GOVERNMENT AGENCIES (Identified Cost $10,695,410) | 10,559,871 | |||||
SHORT-TERM INVESTMENTS - 10.66% | ||||||
Dreyfus Treasury and Agency Cash Management - Institutional Shares | 3,988,614 | 3,988,614 | ||||
Federal Home Loan Bank Discount Note, 1/5/2009 | $ | 6,000,000 | 5,988,870 | |||
U.S. Treasury Bill, 8/27/2009 | 4,910,000 | 4,862,687 | ||||
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $14,799,586) | 14,840,171 | |||||
TOTAL INVESTMENTS - 98.01% | 136,473,237 | |||||
OTHER ASSETS, LESS LIABILITIES - 1.99% | 2,778,011 | |||||
NET ASSETS - 100% | $ | 139,251,248 | ||||
*Non-income producing security
**Less than 0.01%
ADR - American Depository Receipt
NVDR - Non-Voting Depository Receipt
1Bank of New York Mellon Corp. is the Fund’s custodian.
2The Chairman and CEO of the company serves as a director of the Fund (see Note 2 to the financial statements).
3The coupon rate is a floating rate and is subject to change quarterly. The coupon rate stated is the rate as of October 31, 2008. The issuer is in default of certain debt covenants, has missed its most recent interest payment and has declared bankruptcy. Income is not being accrued.
4Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. This security has been sold under rule 144A and has been determined to be liquid under guidelines established by the Board of Directors. This security amounts to $18,300, or 0.01%, of the Series’ net assets as of October 31, 2008 (see Note 2 to the financial statements).
| The accompanying notes are an integral part of the financial statements. | 21 |
Statement of Assets and Liabilities - Pro-Blend® Conservative Term Series
October 31, 2008
ASSETS: | ||||
Investments, at value (identified cost $144,141,595) (Note 2) | $ | 136,473,237 | ||
Foreign currency, at value (cost $39,189) | 36,693 | |||
Receivable for fund shares sold | 2,720,176 | |||
Interest receivable | 938,344 | |||
Receivable for securities sold | 184,437 | |||
Dividends receivable | 11,890 | |||
Foreign tax reclaims receivable | 6,404 | |||
TOTAL ASSETS | 140,371,181 | |||
| LIABILITIES: | ||||
Accrued management fees (Note 3) | 5,878 | |||
Accrued shareholder service fees (Class S) (Note 3) | 23,021 | |||
Accrued fund accounting and transfer agent fees (Note 3) | 8,923 | |||
Accrued directors’ fees (Note 3) | 2,000 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 565 | |||
Payable for securities purchased | 925,133 | |||
Payable for fund shares repurchased | 115,022 | |||
Audit fees payable | 31,791 | |||
Other payables and accrued expenses | 7,600 | |||
TOTAL LIABILITIES | 1,119,933 | |||
TOTAL NET ASSETS | $ | 139,251,248 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 125,116 | ||
Additional paid-in-capital | 147,444,326 | |||
Undistributed net investment income | 1,877,915 | |||
Accumulated net realized loss on investments, foreign currency and other assets and liabilities | (2,524,799 | ) | ||
Net unrealized depreciation on investments, foreign currency and other assets and liabilities | (7,671,310 | ) | ||
TOTAL NET ASSETS | $ | 139,251,248 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS S ($139,174,280/12,503,261 shares) | $ | 11.13 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS I ($76,968/8,306 shares) | $ | 9.27 | ||
| 22 | The accompanying notes are an integral part of the financial statements. |
Statement of Operations - Pro-Blend® Conservative Term Series
For the Year Ended October 31, 2008
INVESTMENT INCOME: | ||||
Interest | $ | 3,329,559 | ||
Dividends (net of foreign tax withheld, $12,370) | 613,404 | |||
Total Investment Income | 3,942,963 | |||
| EXPENSES: | ||||
Management fees (Note 3) | 803,962 | |||
Shareholder service fees (Class S) (Note 3) | 164,752 | |||
Fund accounting and transfer agent fees (Note 3) | 89,278 | |||
Directors’ fees (Note 3) | 12,092 | |||
Chief Compliance Officer service fees (Note 3) | 4,681 | |||
Custodian fees | 20,501 | |||
Miscellaneous | 83,019 | |||
Total Expenses | 1,178,285 | |||
Less reduction of expenses (Note 3) | (63,198 | ) | ||
Net Expenses | 1,115,087 | |||
NET INVESTMENT INCOME | 2,827,876 | |||
| REALIZED AND UNREALIZED LOSS ON INVESTMENTS: | ||||
Net realized loss on - | ||||
Investments | (2,430,557 | ) | ||
Foreign currency and other assets and liabilities | (1,570 | ) | ||
| (2,432,127 | ) | |||
Net change in unrealized appreciation (depreciation) on - | ||||
Investments | (11,073,719 | ) | ||
Foreign currency and other assets and liabilities | (3,318 | ) | ||
| (11,077,037 | ) | |||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (13,509,164 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (10,681,288 | ) | |
| The accompanying notes are an integral part of the financial statements. | 23 |
Statements of Changes in Net Assets - Pro-Blend® Conservative Term Series
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||
| INCREASE (DECREASE) IN NET ASSETS: | ||||||||
| OPERATIONS: | ||||||||
Net investment income | $ | 2,827,876 | $ | 2,420,534 | ||||
Net realized gain (loss) on investments and foreign currency | (2,432,127 | ) | 3,892,329 | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (11,077,037 | ) | 505,331 | |||||
Net increase (decrease) from operations | (10,681,288 | ) | 6,818,194 | |||||
| DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
From net investment income (Class S) | (2,505,754 | ) | (1,974,662 | ) | ||||
From net investment income (Class I) | (2 | ) | — | |||||
From net realized gain on investments (Class S) | (3,940,142 | ) | (1,514,456 | ) | ||||
Total distributions to shareholders | (6,445,898 | ) | (3,489,118 | ) | ||||
| CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase from capital share transactions (Note 5) | 45,811,636 | 35,447,246 | ||||||
Net increase in net assets | 28,684,450 | 38,776,322 | ||||||
| NET ASSETS: | ||||||||
Beginning of year | 110,566,798 | 71,790,476 | ||||||
End of year (including undistributed net investment income of $1,877,915 and $1,558,775, respectively) | $ | 139,251,248 | $ | 110,566,798 | ||||
| 24 | The accompanying notes are an integral part of the financial statements. |
Financial Highlights - Pro-Blend® Conservative Term Series - Class S
| For the Years Ended | ||||||||||
| 10/31/08 | 10/31/07 | 10/31/06 | 10/31/05 | 10/31/04 | ||||||
| Per share data (for a share outstanding throughout each year): | ||||||||||
Net asset value - Beginning of year | $12.74 | $12.35 | $11.90 | $11.54 | $11.32 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income | 0.24 | 0.30 | 0.28 | 0.17 | 0.18 | |||||
Net realized and unrealized gain (loss) on investments | (1.15) | 0.65 | 0.69 | 0.46 | 0.48 | |||||
Total from investment operations | (0.91) | 0.95 | 0.97 | 0.63 | 0.66 | |||||
Less distributions to shareholders: | ||||||||||
From net investment income | (0.27) | (0.31) | (0.20) | (0.18) | (0.17) | |||||
From net realized gain on investments | (0.43) | (0.25) | (0.32) | (0.09) | (0.27) | |||||
Total distributions to shareholders | (0.70) | (0.56) | (0.52) | (0.27) | (0.44) | |||||
Net asset value - End of year | $11.13 | $12.74 | $12.35 | $11.90 | $11.54 | |||||
Net assets - End of year (000’s omitted) | $139,174 | $110,567 | $71,790 | $45,899 | $26,844 | |||||
Total return1 | (7.52%) | 7.95% | 8.49% | 5.49% | 5.93% | |||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||||
Expenses* | 0.92% | 0.99% | 1.00% | 1.00% | 1.00% | |||||
Net investment income | 2.33% | 2.73% | 2.65% | 1.81% | 1.77% | |||||
Series portfolio turnover | 45% | 49% | 48% | 60% | 25% | |||||
*The investment advisor did not impose all of its management fee in some years If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have been increased by the following amount: | ||||||||||
| 0.05% | N/A | 0.07% | 0.21% | 0.32% | ||||||
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during certain years.
| The accompanying notes are an integral part of the financial statements. | 25 |
Financial Highlights - Pro-Blend® Conservative Term Series - Class I
| For the Period 3/28/081 to 10/31/08 | ||
| Per share data (for a share outstanding throughout the period): | ||
Net asset value - Beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment income | 0.06 | |
Net realized and unrealized loss on investments | (0.74) | |
Total from investment operations | (0.68) | |
Less distributions to shareholders: | ||
From net investment income | (0.05) | |
Net asset value - End of period | $9.27 | |
Net assets - End of period (000’s omitted) | $77 | |
Total return2 | (6.81%) | |
| Ratios (to average net assets)/Supplemental Data: | ||
Expenses* | 0.70%3 | |
Net investment income | 1.81%3 | |
Series portfolio turnover | 45% | |
*The investment advisor did not impose all of its management fee. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have been increased by 0.15%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. Periods less than one year are not annualized.
3Annualized.
| 26 | The accompanying notes are an integral part of the financial statements. |
Performance Update - Pro-Blend® Moderate Term Series (unaudited)
| Average Annual Total Returns As of October 31, 2008 | ||||||||||
| One Year | Five Year | Ten Year | Since Inception1 | |||||||
Manning & Napier Fund, Inc. - Pro-Blend® Moderate Term Series - Class S2 | -19.28% | 4.05% | 5.17% | 6.37% | ||||||
Manning & Napier Fund, Inc. - Pro-Blend® Moderate Term Series - Class I2,3 | -19.20% | 4.32% | 5.49% | 6.71% | ||||||
Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index4,6 | 0.30% | 3.48% | 5.00% | 5.66% | ||||||
10%/30%/60% Blended Index4,5,6 | -17.52% | 2.95% | 3.94% | 6.20% | ||||||
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Pro-Blend® Moderate Term Series - Class S for the ten years ended October 31, 2008 to the Barclays Capital U.S. Aggregate Bond Index and a 10%/30%/60% Blended Index.
1Performance numbers for the Series are calculated from September 15, 1993, the Class S inception date. The Barclays Capital U.S. Aggregate Bond Index only publishes month-end numbers; therefore, performance numbers for the Indices are calculated from September 30, 1993.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 1.10% for Class S and 0.85% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.12% for Class S and 0.95% for Class I for the period ended October 31, 2008.
3For periods prior to the inception of Class I on March 28, 2008, the performance figures are hypothetical and reflect the performance of the Manning & Napier Fund, Inc. - Pro-Blend® Moderate Term Series - Class S adjusted for expense differences.
4The Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
5The 10%/30%/60% Blended Index is 10% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 30% Russell 3000® Index, and 60% Barclays Capital U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series (see Note 1 above) through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. Both Indices’ returns, unlike Series returns, do not reflect any fees or expenses.
6Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Indices’ portfolios.
| 27 |
Shareholder Expense Example - Pro-Blend® Moderate Term Series (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2008 to October 31, 2008).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, 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 Actual line for the Class in which you have invested in 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 Hypothetical lines of the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ 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 for the Class in which you have invested in 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 Hypothetical lines of the table are 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 Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense ratio | |||||||||
Class S | ||||||||||||
Actual | $ | 1,000.00 | $ | 838.60 | $ | 5.08 | 1.10 | % | ||||
Hypothetical | $ | 1,000.00 | $ | 1,019.61 | $ | 5.58 | 1.10 | % | ||||
Class I | ||||||||||||
Actual | $ | 1,000.00 | $ | 838.40 | $ | 3.93 | 0.85 | % | ||||
Hypothetical | $ | 1,000.00 | $ | 1,020.86 | $ | 4.32 | 0.85 | % | ||||
1Expenses are equal to the Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data (or since inception (3/28/08) for Class I). The Class’ total return would have been lower had certain expenses not been waived during the period.
| 28 |
Portfolio Composition - Pro-Blend® Moderate Term Series (unaudited)
As of October 31, 2008
Asset Allocation1
1As a percentage of net assets.
2A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years.
3A U.S. Treasury Note is an intermediate-term obligation of the U.S. Treasury issued with a maturity period between one and ten years.
Sector Allocation4
Information Technology | 15.31% | |
Health Care | 12.15% | |
Industrials | 7.97% | |
Consumer Discretionary | 7.49% | |
Financials | 5.95% | |
Consumer Staples | 4.23% | |
Energy | 2.25% | |
Materials | 1.81% | |
Utilities | 0.41% | |
Telecommunication Services | 0.24% |
4Including common stocks, preferred stocks, warrants and corporate bonds, as a percentage of total investments.
Top Ten Stock Holdings5
Google, Inc. - Class A | 3.17% | |
EMC Corp. | 2.13% | |
Unilever plc - ADR (United Kingdom) | 1.67% | |
Medtronic, Inc. | 1.59% | |
Johnson & Johnson | 1.58% | |
Southwest Airlines Co. | 1.53% | |
Microsoft Corp. | 1.49% | |
United Parcel Service, Inc. - Class B | 1.48% | |
Cisco Systems, Inc. | 1.42% | |
Automatic Data Processing, Inc. | 1.41% |
5As a percentage of total investments.
| 29 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS - 53.80% | |||||
Consumer Discretionary - 6.78% | |||||
Auto Components - 0.02% | |||||
Hankook Tire Co. Ltd. (South Korea) (Note 7) | 5,000 | $ | 47,645 | ||
Automobiles - 0.02% | |||||
Suzuki Motor Corp. (Japan) (Note 7) | 3,600 | 51,319 | |||
Diversified Consumer Services - 0.07% | |||||
Jackson Hewitt Tax Service, Inc. | 11,040 | 152,131 | |||
Hotels, Restaurants & Leisure - 1.90% | |||||
Carnival Corp. | 109,285 | 2,775,839 | |||
Club Mediterranee S.A.* (France) (Note 7) | 2,590 | 51,491 | |||
International Game Technology | 96,080 | 1,345,120 | |||
| 4,172,450 | |||||
Household Durables - 0.63% | |||||
Corporacion Geo S.A. de C.V. - Class B* (Mexico) (Note 7) | 12,430 | 17,256 | |||
Fortune Brands, Inc. | 33,320 | 1,270,825 | |||
LG Electronics, Inc. (South Korea) (Note 7) | 750 | 54,908 | |||
Rodobens Negocios Imobiliarios S.A. (Brazil) (Note 7) | 11,110 | 33,612 | |||
| 1,376,601 | |||||
Leisure Equipment & Products - 0.02% | |||||
Sankyo Co. Ltd. (Japan) (Note 7) | 1,100 | 48,249 | |||
Media - 2.34% | |||||
Charter Communications, Inc. - Class A* | 474,000 | 208,560 | |||
Comcast Corp. - Class A | 182,963 | 2,883,497 | |||
Grupo Televisa S.A. - ADR (Mexico) (Note 7) | 3,160 | 55,806 | |||
Impresa S.A. (SGPS)* (Portugal) (Note 7) | 8,330 | 6,263 | |||
The McGraw-Hill Companies, Inc. | 3,140 | 84,278 | |||
Mediacom Communications Corp. - Class A* | 23,650 | 105,006 | |||
Mediaset S.p.A. (Italy) (Note 7) | 3,735 | 20,206 | |||
Reed Elsevier plc - ADR (United Kingdom) (Note 7) | 1,384 | 48,938 | |||
Societe Television Francaise 1 (France) (Note 7) | 6,040 | 76,897 | |||
The Walt Disney Co. | 61,670 | 1,597,253 | |||
Wolters Kluwer N.V. (Netherlands) (Note 7) | 1,995 | 35,136 | |||
| 5,121,840 | |||||
Multiline Retail - 0.01% | |||||
PPR (France) (Note 7) | 325 | 20,543 | |||
Specialty Retail - 1.74% | |||||
The Home Depot, Inc. | 78,200 | 1,844,738 | |||
| 30 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Consumer Discretionary (continued) | |||||
Specialty Retail (continued) | |||||
KOMERI Co. Ltd. (Japan) (Note 7) | 1,600 | $ | 35,496 | ||
Lowe’s Companies, Inc. | 86,210 | 1,870,757 | |||
Tractor Supply Co.* | 895 | 37,196 | |||
Valora Holding AG (Switzerland) (Note 7) | 150 | 21,673 | |||
| 3,809,860 | |||||
Textiles, Apparel & Luxury Goods - 0.03% | |||||
Adidas AG (Germany) (Note 7) | 810 | 28,016 | |||
LVMH S.A. (Louis Vuitton Moet Hennessy) (France) (Note 7) | 480 | 31,727 | |||
| 59,743 | |||||
Total Consumer Discretionary | 14,860,381 | ||||
Consumer Staples - 3.85% | |||||
Beverages - 0.09% | |||||
Carlsberg A/S - Class B (Denmark) (Note 7) | 1,050 | 41,345 | |||
Diageo plc (United Kingdom) (Note 7) | 1,980 | 30,297 | |||
Heineken N.V. (Netherlands) (Note 7) | 2,570 | 86,237 | |||
Kirin Holdings Co. Ltd. (Japan) (Note 7) | 3,400 | 36,834 | |||
| 194,713 | |||||
Food & Staples Retailing - 0.12% | |||||
BJ’s Wholesale Club, Inc.* | 1,690 | 59,488 | |||
Carrefour S.A. (France) (Note 7) | 2,500 | 104,884 | |||
Casino Guichard-Perrachon S.A. (France) (Note 7) | 560 | 38,895 | |||
Tesco plc (United Kingdom) (Note 7) | 12,175 | 66,487 | |||
| 269,754 | |||||
Food Products - 2.99% | |||||
Cadbury plc (United Kingdom) (Note 7) | 10,038 | 91,739 | |||
Dean Foods Co.* | 56,590 | 1,237,057 | |||
Groupe Danone (France) (Note 7) | 1,470 | 81,379 | |||
Nestle S.A. (Switzerland) (Note 7) | 37,300 | 1,447,856 | |||
Sanderson Farms, Inc. | 670 | 20,917 | |||
Suedzucker AG (Germany) (Note 7) | 1,710 | 19,046 | |||
Unilever plc - ADR (United Kingdom) (Note 7) | 161,774 | 3,649,621 | |||
| 6,547,615 | |||||
Household Products - 0.04% | |||||
Kao Corp. (Japan) (Note 7) | 700 | 20,043 | |||
Reckitt Benckiser Group plc (United Kingdom) (Note 7) | 1,430 | 60,053 | |||
| 80,096 | |||||
| The accompanying notes are an integral part of the financial statements. | 31 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Consumer Staples (continued) | |||||
Personal Products - 0.61% | |||||
L’Oreal S.A. (France) (Note 7) | 17,430 | $ | 1,310,893 | ||
Natura Cosmeticos S.A. (Brazil) (Note 7) | 4,240 | 35,643 | |||
| 1,346,536 | |||||
Total Consumer Staples | 8,438,714 | ||||
Energy - 2.04% | |||||
Energy Equipment & Services - 1.94% | |||||
Baker Hughes, Inc. | 51,285 | 1,792,411 | |||
Calfrac Well Services Ltd. (Canada) (Note 7) | 7,450 | 94,114 | |||
Compagnie Generale de Geophysique - Veritas (CGG - Veritas)* (France) (Note 7) | 5,150 | 82,105 | |||
Dril-Quip, Inc.* | 720 | 17,784 | |||
Trican Well Service Ltd. (Canada) (Note 7) | 5,550 | 52,054 | |||
Weatherford International Ltd.* | 131,100 | 2,212,968 | |||
| 4,251,436 | |||||
Oil, Gas & Consumable Fuels - 0.10% | |||||
BP plc (United Kingdom) (Note 7) | 4,640 | 37,870 | |||
Edge Petroleum Corp.* | 8,170 | 4,820 | |||
Eni S.p.A. (Italy) (Note 7) | 2,745 | 64,822 | |||
Forest Oil Corp.* | 650 | 18,987 | |||
Mariner Energy, Inc.* | 691 | 9,943 | |||
Royal Dutch Shell plc - Class B (Netherlands) (Note 7) | 1,622 | 43,297 | |||
Total S.A. (France) (Note 7) | 820 | 44,742 | |||
| 224,481 | |||||
Total Energy | 4,475,917 | ||||
Financials - 5.03% | |||||
Capital Markets - 0.84% | |||||
Bank of New York Mellon Corp.1 | 2,490 | 81,174 | |||
The Charles Schwab Corp. | 2,090 | 39,961 | |||
Daiwa Securities Group, Inc. (Japan) (Note 7) | 2,000 | 10,945 | |||
Franklin Resources, Inc. | 1,005 | 68,340 | |||
Janus Capital Group, Inc. | 2,180 | 25,593 | |||
SEI Investments Co. | 89,720 | 1,586,250 | |||
T. Rowe Price Group, Inc. | 860 | 34,004 | |||
| 1,846,267 | |||||
Commercial Banks - 2.94% | |||||
The Bancorp, Inc.* | 7,580 | 28,349 | |||
BNP Paribas (France) (Note 7) | 480 | 34,256 | |||
The Chugoku Bank Ltd. (Japan) (Note 7) | 2,800 | 37,953 | |||
| 32 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Financials (continued) | |||||
Commercial Banks (continued) | |||||
Commerzbank AG (Germany) (Note 7) | 1,625 | $ | 17,644 | ||
Credit Agricole S.A. (France) (Note 7) | 1,005 | 14,390 | |||
The Hachijuni Bank Ltd. (Japan) (Note 7) | 4,800 | 23,198 | |||
HSBC Holdings plc (United Kingdom) (Note 7) | 5,360 | 65,717 | |||
HSBC Holdings plc - ADR (United Kingdom) (Note 7) | 2,395 | 141,305 | |||
Huntington Bancshares, Inc. | 3,820 | 36,099 | |||
KeyCorp | 5,385 | 65,859 | |||
Mitsubishi UFJ Financial Group, Inc. (Japan) (Note 7) | 2,800 | 17,001 | |||
PNC Financial Services Group, Inc. | 39,630 | 2,642,132 | |||
Societe Generale (France) (Note 7) | 686 | 36,871 | |||
Societe Generale - ADR (France) (Note 7) | 3,890 | 42,012 | |||
The Sumitomo Trust & Banking Co. Ltd. (Japan) (Note 7) | 4,800 | 21,346 | |||
SunTrust Banks, Inc. | 720 | 28,901 | |||
TCF Financial Corp. | 6,370 | 113,004 | |||
U.S. Bancorp | 98,402 | 2,933,364 | |||
UniCredito Italiano S.p.A. (Italy) (Note 7) | 11,610 | 27,949 | |||
Webster Financial Corp. | 1,740 | 32,260 | |||
Wilmington Trust Corp. | 2,920 | 84,271 | |||
| 6,443,881 | |||||
Consumer Finance - 0.65% | |||||
American Express Co. | 48,000 | 1,320,000 | |||
Capital One Financial Corp. | 2,395 | 93,692 | |||
| 1,413,692 | |||||
Diversified Financial Services - 0.19% | |||||
Financiere Marc de Lacharriere S.A. (Fimalac) (France) (Note 7) | 1,665 | 72,080 | |||
ING Groep N.V. (Netherlands) (Note 7) | 1,285 | 11,848 | |||
JPMorgan Chase & Co. | 4,630 | 190,988 | |||
Moody’s Corp. | 5,530 | 141,568 | |||
| 416,484 | |||||
Insurance - 0.36% | |||||
Allianz SE (Germany) (Note 7) | 1,670 | 126,610 | |||
Axa (France) (Note 7) | 1,260 | 23,845 | |||
Brown & Brown, Inc. | 2,330 | 47,812 | |||
First American Corp. | 3,620 | 73,884 | |||
LandAmerica Financial Group, Inc. | 5,060 | 49,841 | |||
| The accompanying notes are an integral part of the financial statements. | 33 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Financials (continued) | |||||
Insurance (continued) | |||||
Muenchener Rueckver AG (Germany) (Note 7) | 765 | $ | 102,367 | ||
The Progressive Corp. | 10,570 | 150,834 | |||
Torchmark Corp. | 1,840 | 76,857 | |||
Willis Group Holdings Ltd. (United Kingdom) (Note 7) | 5,605 | 147,075 | |||
| 799,125 | |||||
Real Estate Investment Trusts (REITS) - 0.02% | |||||
Alstria Office REIT AG (Germany) (Note 7) | 5,200 | 33,400 | |||
Thrifts & Mortgage Finance - 0.03% | |||||
Aareal Bank AG (Germany) (Note 7) | 3,310 | 26,997 | |||
First Niagara Financial Group, Inc. | 2,490 | 39,267 | |||
| 66,264 | |||||
Total Financials | 11,019,113 | ||||
Health Care - 11.83% | |||||
Biotechnology - 1.07% | |||||
Amgen, Inc.* | 15,785 | 945,364 | |||
Celera Corp.* | 14,510 | 164,108 | |||
Crucell NV - ADR* (Netherlands) (Note 7) | 8,770 | 102,083 | |||
Genomic Health, Inc.* | 6,430 | 118,505 | |||
Genzyme Corp.* | 12,450 | 907,356 | |||
Medarex, Inc.* | 7,600 | 53,428 | |||
QLT, Inc.* (Canada) (Note 7) | 18,710 | 48,459 | |||
Senomyx, Inc.* | 5,220 | 13,050 | |||
| 2,352,353 | |||||
Health Care Equipment & Supplies - 3.59% | |||||
Abaxis, Inc.* | 8,140 | 125,112 | |||
Align Technology, Inc.* | 17,860 | 123,770 | |||
Alsius Corp.*2 | 25,695 | 17,986 | |||
AtriCure, Inc.* | 6,100 | 39,467 | |||
Beckman Coulter, Inc. | 3,380 | 168,730 | |||
Becton, Dickinson and Co. | 22,700 | 1,575,380 | |||
C.R. Bard, Inc. | 1,490 | 131,493 | |||
Covidien Ltd. (Bermuda) (Note 7) | 5,080 | 224,993 | |||
DENTSPLY International, Inc. | 4,680 | 142,178 | |||
Dexcom, Inc.* | 30,540 | 138,041 | |||
Gen-Probe, Inc.* | 3,000 | 141,180 | |||
IDEXX Laboratories, Inc.* | 2,680 | 94,309 | |||
Inverness Medical Innovations, Inc.* | 14,180 | 271,547 | |||
Medtronic, Inc. | 86,439 | 3,486,085 | |||
Micrus Endovascular Corp.* | 6,235 | 73,573 | |||
| 34 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Health Care (continued) | |||||
Health Care Equipment & Supplies (continued) | |||||
Nobel Biocare Holding AG (Switzerland) (Note 7) | 2,590 | $ | 44,258 | ||
OraSure Technologies, Inc.* | 55,800 | 257,238 | |||
Sirona Dental Systems, Inc.* | 9,240 | 147,563 | |||
STAAR Surgical Co.* | 26,740 | 65,780 | |||
Straumann Holding AG (Switzerland) (Note 7) | 860 | 145,398 | |||
Synthes, Inc. | 2,780 | 358,021 | |||
Zimmer Holdings, Inc.* | 1,970 | 91,467 | |||
| 7,863,569 | |||||
Health Care Providers & Services - 1.34% | |||||
Bumrungrad Hospital Public Co. Ltd. - NVDR (Thailand) (Note 7) | 45,000 | 28,261 | |||
Diagnosticos da America S.A. (Brazil) (Note 7) | 13,930 | 162,141 | |||
Quest Diagnostics, Inc. | 53,590 | 2,508,012 | |||
Sonic Healthcare Ltd. (Australia) (Note 7) | 25,540 | 232,608 | |||
| 2,931,022 | |||||
Health Care Technology - 0.91% | |||||
Cerner Corp.* | 44,890 | 1,671,255 | |||
Eclipsys Corp.* | 21,903 | 325,260 | |||
| 1,996,515 | |||||
Life Sciences Tools & Services - 1.80% | |||||
Caliper Life Sciences, Inc.* | 54,758 | 76,661 | |||
Exelixis, Inc.* | 32,140 | 110,562 | |||
Lonza Group AG (Switzerland) (Note 7) | 8,070 | 668,265 | |||
Luminex Corp.* | 11,920 | 222,308 | |||
Millipore Corp.* | 21,170 | 1,098,511 | |||
PerkinElmer, Inc. | 91,349 | 1,638,801 | |||
QIAGEN N.V.* (Netherlands) (Note 7) | 9,700 | 138,322 | |||
| 3,953,430 | |||||
Pharmaceuticals - 3.12% | |||||
Abbott Laboratories | 2,080 | 114,712 | |||
AstraZeneca plc (United Kingdom) (Note 7) | 240 | 10,156 | |||
AstraZeneca plc - ADR (United Kingdom) (Note 7) | 790 | 33,543 | |||
Bayer AG (Germany) (Note 7) | 2,545 | 143,032 | |||
GlaxoSmithKline plc (United Kingdom) (Note 7) | 1,950 | 37,557 | |||
Johnson & Johnson | 56,510 | 3,466,323 | |||
Mylan, Inc.* | 16,030 | 137,377 | |||
Novartis AG - ADR (Switzerland) (Note 7) | 53,520 | 2,728,985 | |||
| The accompanying notes are an integral part of the financial statements. | 35 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Health Care (continued) | |||||
Pharmaceuticals (continued) | |||||
Sanofi-Aventis (France) (Note 7) | 390 | $ | 24,568 | ||
Santen Pharmaceutical Co. Ltd. (Japan) | 1,900 | 47,842 | |||
Shire plc (United Kingdom) (Note 7) | 3,905 | 51,459 | |||
Takeda Pharmaceutical Co. Ltd. (Japan) | 700 | 34,328 | |||
| 6,829,882 | |||||
Total Health Care | 25,926,771 | ||||
Industrials - 7.15% | |||||
Aerospace & Defense - 0.07% | |||||
Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) (Note 7) | 4,580 | 95,814 | |||
Hexcel Corp.* | 3,500 | 46,200 | |||
| 142,014 | |||||
Air Freight & Logistics - 2.91% | |||||
Deutsche Post AG (Germany) (Note 7) | 1,430 | 15,746 | |||
FedEx Corp. | 46,840 | 3,061,931 | |||
TNT N.V. (Netherlands) (Note 7) | 3,200 | 66,473 | |||
United Parcel Service, Inc. - Class B | 61,380 | 3,239,636 | |||
| 6,383,786 | |||||
Airlines - 2.15% | |||||
AirTran Holdings, Inc.* | 6,430 | 26,299 | |||
Deutsche Lufthansa AG (Germany) (Note 7) | 3,875 | 54,272 | |||
JetBlue Airways Corp.* | 231,316 | 1,283,804 | |||
Southwest Airlines Co. | 284,150 | 3,347,287 | |||
| 4,711,662 | |||||
Building Products - 0.03% | |||||
Owens Corning, Inc.* | 4,520 | 71,100 | |||
Commercial Services & Supplies - 0.06% | |||||
Tomra Systems ASA (Norway) (Note 7) | 27,750 | 128,629 | |||
Electrical Equipment - 0.05% | |||||
ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) (Note 7) | 4,070 | 53,520 | |||
General Cable Corp.* | 980 | 16,738 | |||
Nexans S.A. (France) (Note 7) | 620 | 35,098 | |||
| 105,356 | |||||
Industrial Conglomerates - 1.34% | |||||
3M Co. | 43,546 | 2,800,008 | |||
| 36 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Industrials (continued) | |||||
Industrial Conglomerates (continued) | |||||
Siemens AG (Germany) (Note 7) | 1,960 | $ | 118,547 | ||
Sonae Capital S.A. (SGPS)* (Portugal) (Note 7) | 2,074 | 2,141 | |||
Sonae S.A. (SGPS) (Portugal) (Note 7) | 16,575 | 10,139 | |||
| 2,930,835 | |||||
Machinery - 0.06% | |||||
FANUC Ltd. (Japan) (Note 7) | 400 | 25,830 | |||
FreightCar America, Inc. | 2,850 | 74,414 | |||
Schindler Holding AG (Switzerland) (Note 7) | 635 | 27,387 | |||
| 127,631 | |||||
Professional Services - 0.05% | |||||
Equifax, Inc. | 1,590 | 41,467 | |||
Experian plc (Ireland) (Note 7) | 13,980 | 76,817 | |||
| 118,284 | |||||
Road & Rail - 0.42% | |||||
J.B. Hunt Transport Services, Inc. | 32,070 | 911,750 | |||
Trading Companies & Distributors - 0.01% | |||||
Rush Enterprises, Inc. - Class A* | 2,560 | 23,987 | |||
Total Industrials | 15,655,034 | ||||
Information Technology - 14.97% | |||||
Communications Equipment - 3.23% | |||||
Alcatel-Lucent - ADR* (France) (Note 7) | 36,550 | 93,934 | |||
BigBand Networks, Inc.* | 31,610 | 116,957 | |||
Blue Coat Systems, Inc.* | 11,280 | 152,280 | |||
Ceragon Networks Ltd.* (Israel) (Note 7) | 14,880 | 84,072 | |||
Cisco Systems, Inc.* | 175,031 | 3,110,301 | |||
Harris Stratex Networks, Inc. - Class A* | 12,340 | 81,814 | |||
Infinera Corp.* | 21,000 | 163,380 | |||
Juniper Networks, Inc.* | 82,267 | 1,541,684 | |||
Nokia (Finland) (Note 7) | 100,680 | 1,528,322 | |||
Riverbed Technology, Inc.* | 16,730 | 209,627 | |||
| 7,082,371 | |||||
Computers & Peripherals - 2.17% | |||||
EMC Corp.* | 396,890 | 4,675,364 | |||
Rackable Systems, Inc.* | 9,880 | 70,444 | |||
| 4,745,808 | |||||
| The accompanying notes are an integral part of the financial statements. | 37 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Information Technology (continued) | |||||
Electronic Equipment, Instruments & Components - 0.06% | |||||
KEYENCE Corp. (Japan) (Note 7) | 110 | $ | 20,673 | ||
LoJack Corp.* | 24,275 | 106,082 | |||
| 126,755 | |||||
Internet Software & Services - 3.17% | |||||
Google, Inc. - Class A* | 19,310 | 6,939,242 | |||
IT Services - 1.53% | |||||
Automatic Data Processing, Inc. | 88,268 | 3,084,967 | |||
Gevity HR, Inc. | 32,280 | 110,075 | |||
Online Resources Corp.* | 22,600 | 79,100 | |||
Paychex, Inc. | 3,140 | 89,616 | |||
| 3,363,758 | |||||
Semiconductors & Semiconductor Equipment - 0.31% | |||||
ASML Holding N.V. (Netherlands) (Note 7) | 2,590 | 44,890 | |||
ASML Holding N.V. - New York Registered Shares (Netherlands) (Note 7) | 6,440 | 113,022 | |||
Hynix Semiconductor, Inc.* (South Korea) (Note 7) | 1,400 | 11,714 | |||
KLA-Tencor Corp. | 4,560 | 106,020 | |||
Lam Research Corp.* | 4,760 | 106,434 | |||
Netlogic Microsystems, Inc.* | 5,760 | 121,651 | |||
Taiwan Semiconductor Manufacturing Co. | 5,260 | 43,448 | |||
Tokyo Electron Limited (Japan) (Note 7) | 3,800 | 123,850 | |||
| 671,029 | |||||
Software - 4.50% | |||||
Amdocs Ltd.* (Guernsey) (Note 7) | 9,505 | 214,433 | |||
Autodesk, Inc.* | 54,980 | 1,171,624 | |||
Electronic Arts, Inc.* | 101,180 | 2,304,880 | |||
Intuit, Inc.* | 5,470 | 137,078 | |||
Microsoft Corp. | 145,890 | 3,257,724 | |||
Misys plc (United Kingdom) (Note 7) | 11,500 | 20,400 | |||
SAP AG (Germany) (Note 7) | 1,370 | 48,589 | |||
SAP AG - ADR (Germany) (Note 7) | 71,260 | 2,517,616 | |||
Sonic Solutions* | 21,490 | 43,840 | |||
Square Enix Holdings Co. Ltd. (Japan) (Note 7) | 1,500 | 37,313 | |||
THQ, Inc.* | 3,260 | 24,287 | |||
UbiSoft Entertainment S.A.* (France) (Note 7) | 1,720 | 90,244 | |||
| 9,868,028 | |||||
Total Information Technology | 32,796,991 | ||||
| 38 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Materials - 1.78% | |||||
Chemicals - 0.51% | |||||
Arkema (France) (Note 7) | 20 | $ | 454 | ||
Calgon Carbon Corp.* | 4,525 | 60,273 | |||
Monsanto Co. | 11,600 | 1,032,168 | |||
The Scotts Miracle-Gro Co. - Class A | 1,170 | 30,560 | |||
| 1,123,455 | |||||
Containers & Packaging - 0.02% | |||||
Bemis Co., Inc. | 1,570 | 38,999 | |||
Paper & Forest Products - 1.25% | |||||
Louisiana-Pacific Corp. | 115,540 | 554,592 | |||
Norbord, Inc. (Canada) (Note 7) | 25,800 | 40,473 | |||
Weyerhaeuser Co. | 56,120 | 2,144,906 | |||
| 2,739,971 | |||||
Total Materials | 3,902,425 | ||||
Telecommunication Services - 0.24% | |||||
Diversified Telecommunication Services - 0.05% | |||||
France Telecom S.A. (France) (Note 7) | 2,570 | 64,522 | |||
Swisscom AG - ADR (Switzerland) (Note 7) | 1,795 | 54,030 | |||
| 118,552 | |||||
Wireless Telecommunication Services - 0.19% | |||||
American Tower Corp.* | 1,450 | 46,850 | |||
Crown Castle International Corp.* | 4,190 | 88,702 | |||
Hutchison Telecommunications International Ltd.* (Hong Kong) (Note 7) | 34,820 | 37,652 | |||
SBA Communications Corp.* | 2,740 | 57,513 | |||
SK Telecom Co. Ltd. - ADR (South Korea) (Note 7) | 10,220 | 175,886 | |||
| 406,603 | |||||
Total Telecommunication Services | 525,155 | ||||
Utilities - 0.13% | |||||
Electric Utilities - 0.05% | |||||
E.ON AG (Germany) (Note 7) | 2,670 | 103,067 | |||
Independent Power Producers & Energy Traders - 0.01% | |||||
Mirant Corp.* | 1,590 | 27,857 | |||
Multi-Utilities - 0.04% | |||||
GDF Suez (France) (Note 7) | 945 | 41,735 | |||
National Grid plc (United Kingdom) (Note 7) | 4,850 | 54,899 | |||
| 96,634 | |||||
| The accompanying notes are an integral part of the financial statements. | 39 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares/ Principal Amount | Value (Note 2) | ||||
COMMON STOCKS (continued) | ||||||
Utilities (continued) | ||||||
Water Utilities - 0.03% | ||||||
Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) (Brazil) (Note 7) | 2,622 | $ | 30,035 | |||
Companhia de Saneamento de Minas Gerais - Copasa MG (Brazil) (Note 7) | 3,710 | 23,477 | ||||
| 53,512 | ||||||
Total Utilities | 281,070 | |||||
TOTAL COMMON STOCKS | 117,881,571 | |||||
PREFERRED STOCKS - 0.02% | ||||||
Consumer Staples - 0.02% | ||||||
Household Products - 0.02% | ||||||
Henkel AG & Co. KGaA (Germany) (Note 7) | 1,260 | 36,161 | ||||
WARRANTS - 0.00%** | ||||||
Health Care - 0.00%** | ||||||
Life Sciences Tools & Services - 0.00%** | ||||||
Caliper Life Sciences, Inc., 8/10/2011 | 10,455 | 2,718 | ||||
CORPORATE BONDS - 3.99% | ||||||
Convertible Corporate Bonds - 0.58% | ||||||
Consumer Discretionary - 0.09% | ||||||
Hotels, Restaurants & Leisure - 0.06% | ||||||
Carnival Corp., 2.00%, 4/15/2021 | $ | 175,000 | 146,344 | |||
Media - 0.03% | ||||||
Charter Communications, Inc., 6.50%, 10/1/2027 | 342,000 | 64,552 | ||||
Total Consumer Discretionary | 210,896 | |||||
Health Care - 0.20% | ||||||
Biotechnology - 0.16% | ||||||
Amgen, Inc., 0.375%, 2/1/2013 | 400,000 | 353,000 | ||||
Health Care Equipment & Supplies - 0.04% | ||||||
Medtronic, Inc., 1.625%, 4/15/2013 | 90,000 | 77,625 | ||||
Total Health Care | 430,625 | |||||
Industrials - 0.08% | ||||||
Airlines - 0.08% | ||||||
JetBlue Airways Corp., 3.75%, 3/15/2035 | 270,000 | 180,563 | ||||
| 40 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Convertible Corporate Bonds (continued) | ||||||
Information Technology - 0.21% | ||||||
Computers & Peripherals - 0.09% | ||||||
EMC Corp., 1.75%, 12/1/2013 | $ | 215,000 | $ | 194,306 | ||
Software - 0.12% | ||||||
Amdocs Ltd., 0.50%, 3/15/2024 (Guernsey) (Note 7) | 270,000 | 261,225 | ||||
Total Information Technology | 455,531 | |||||
Total Convertible Corporate Bonds | 1,277,615 | |||||
Non-Convertible Corporate Bonds - 3.41% | ||||||
Consumer Discretionary - 0.62% | ||||||
Hotels, Restaurants & Leisure - 0.11% | ||||||
McDonald’s Corp., 5.80%, 10/15/2017 | 255,000 | 233,312 | ||||
Media - 0.24% | ||||||
AOL Time Warner (now known as Time Warner, Inc.), 7.625%, 4/15/2031 | 190,000 | 151,923 | ||||
Comcast Corp., 6.50%, 11/15/2035 | 280,000 | 214,941 | ||||
The Walt Disney Co., 7.00%, 3/1/2032 | 160,000 | 150,224 | ||||
| 517,088 | ||||||
Multiline Retail - 0.06% | ||||||
Target Corp., 5.875%, 3/1/2012 | 135,000 | 133,663 | ||||
Specialty Retail - 0.12% | ||||||
Home Depot, Inc., 5.40%, 3/1/2016 | 210,000 | 160,986 | ||||
Lowe’s Companies, Inc., 8.25%, 6/1/2010 | 100,000 | 103,038 | ||||
| 264,024 | ||||||
Textiles, Apparel & Luxury Goods - 0.09% | ||||||
VF Corp., 5.95%, 11/1/2017 | 250,000 | 200,896 | ||||
Total Consumer Discretionary | 1,348,983 | |||||
Consumer Staples - 0.36% | ||||||
Beverages - 0.10% | ||||||
Pepsico, Inc., 5.00%, 6/1/2018 | 265,000 | 228,932 | ||||
Food & Staples Retailing - 0.05% | ||||||
The Kroger Co., 7.25%, 6/1/2009 | 55,000 | 55,396 | ||||
The Kroger Co., 6.80%, 4/1/2011 | 55,000 | 54,112 | ||||
| 109,508 | ||||||
| The accompanying notes are an integral part of the financial statements. | 41 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Non-Convertible Corporate Bonds (continued) | ||||||
Consumer Staples (continued) | ||||||
Food Products - 0.21% | ||||||
General Mills, 6.00%, 2/15/2012 | $ | 240,000 | $ | 235,423 | ||
Kraft Foods Inc., 6.125%, 2/1/2018 | 260,000 | 222,766 | ||||
| 458,189 | ||||||
Total Consumer Staples | 796,629 | |||||
Energy - 0.21% | ||||||
Oil, Gas & Consumable Fuels - 0.21% | ||||||
Anadarko Petroleum Corp., 5.95%, 9/15/2016 | 90,000 | 75,069 | ||||
Apache Corp., 6.90%, 9/15/2018 | 180,000 | 170,405 | ||||
Arch Western Finance LLC, 6.75%, 7/1/2013 | 260,000 | 218,400 | ||||
Total Energy | 463,874 | |||||
Financials - 0.92% | ||||||
Capital Markets - 0.22% | ||||||
The Goldman Sachs Group, Inc., 6.345%, 2/15/2034 | 320,000 | 197,493 | ||||
Lehman Brothers Holdings, Inc.3, 2.90688%, 11/16/2009 | 80,000 | 9,400 | ||||
Merrill Lynch & Co., Inc., 6.11%, 1/29/2037 | 110,000 | 72,786 | ||||
Morgan Stanley, 5.55%, 4/27/2017 | 252,000 | 200,694 | ||||
| 480,373 | ||||||
Commercial Banks - 0.53% | ||||||
HSBC Financial Corp., 7.00%, 5/15/2012 | 360,000 | 336,745 | ||||
PNC Bank National Association, 5.25%, 1/15/2017 | 390,000 | 324,113 | ||||
U.S. Bank National Association, 6.375%, 8/1/2011 | 315,000 | 311,825 | ||||
Wachovia Corp., 5.25%, 8/1/2014 | 230,000 | 191,707 | ||||
| 1,164,390 | ||||||
Diversified Financial Services - 0.07% | ||||||
Bank of America Corp. Capital Trust VI, 5.625%, 3/8/2035 | 240,000 | 155,098 | ||||
Insurance - 0.10% | ||||||
Ambac Financial Group, Inc., 5.95%, 12/5/2035 | 425,000 | 174,610 | ||||
American International Group, Inc., 4.25%, 5/15/2013 | 125,000 | 46,694 | ||||
| 221,304 | ||||||
Total Financials | 2,021,165 | |||||
| 42 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Non-Convertible Corporate Bonds (continued) | ||||||
Health Care - 0.12% | ||||||
Pharmaceuticals - 0.12% | ||||||
Abbott Laboratories, 3.50%, 2/17/2009 | $ | 90,000 | $ | 89,892 | ||
Wyeth, 6.50%, 2/1/2034 | 200,000 | 163,417 | ||||
Total Health Care | 253,309 | |||||
Industrials - 0.74% | ||||||
Aerospace & Defense - 0.04% | ||||||
Boeing Capital Corp., 6.50%, 2/15/2012 | 80,000 | 78,951 | ||||
Air Freight & Logistics - 0.04% | ||||||
FedEx Corp., 3.50%, 4/1/2009 | 90,000 | 88,543 | ||||
Airlines - 0.07% | ||||||
Southwest Airlines Co., 5.25%, 10/1/2014 | 190,000 | 154,160 | ||||
Industrial Conglomerates - 0.21% | ||||||
General Electric Capital Corp., 6.75%, 3/15/2032 | 200,000 | 162,286 | ||||
General Electric Co., 5.25%, 12/6/2017 | 370,000 | 309,708 | ||||
| 471,994 | ||||||
Machinery - 0.21% | ||||||
Caterpillar Financial Service Corp., 7.05%, 10/1/2018 | 250,000 | 235,951 | ||||
John Deere Capital Corp., 5.50%, 4/13/2017 | 120,000 | 102,848 | ||||
John Deere Capital Corp., 5.75%, 9/10/2018 | 140,000 | 116,695 | ||||
| 455,494 | ||||||
Road & Rail - 0.17% | ||||||
CSX Corp., 6.00%, 10/1/2036 | 350,000 | 219,598 | ||||
Union Pacific Corp., 5.65%, 5/1/2017 | 180,000 | 153,991 | ||||
| 373,589 | ||||||
Total Industrials | 1,622,731 | |||||
Information Technology - 0.13% | ||||||
Communications Equipment - 0.13% | ||||||
Cisco Systems, Inc., 5.50%, 2/22/2016 | 120,000 | 111,233 | ||||
Corning, Inc., 6.20%, 3/15/2016 | 230,000 | 185,405 | ||||
Total Information Technology | 296,638 | |||||
Materials - 0.03% | ||||||
Metals & Mining - 0.03% | ||||||
Alcoa, Inc., 5.87%, 2/23/2022 | 105,000 | 67,906 | ||||
| The accompanying notes are an integral part of the financial statements. | 43 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Non-Convertible Corporate Bonds (continued) | ||||||
Utilities - 0.28% | ||||||
Electric Utilities - 0.26% | ||||||
Allegheny Energy Supply Co. LLC4, 8.25%, 4/15/2012 | $ | 80,000 | $ | 73,200 | ||
American Electric Power Co., Inc., 5.375%, 3/15/2010 | 235,000 | 228,619 | ||||
Exelon Generation Co. LLC, 5.35%, 1/15/2014 | 315,000 | 256,897 | ||||
| 558,716 | ||||||
Multi-Utilities - 0.02% | ||||||
CenterPoint Energy Resources Corp., 7.875%, 4/1/2013 | 50,000 | 47,092 | ||||
Total Utilities | 605,808 | |||||
Total Non-Convertible Corporate Bonds | 7,477,043 | |||||
TOTAL CORPORATE BONDS | 8,754,658 | |||||
U.S. TREASURY SECURITIES - 21.90% | ||||||
U.S. Treasury Bonds - 12.04% | ||||||
U.S. Treasury Bond, 2.125%, 1/31/2010 | 13,000,000 | 13,103,597 | ||||
U.S. Treasury Bond, 5.50%, 8/15/2028 | 12,160,000 | 13,279,097 | ||||
Total U.S. Treasury Bonds | 26,382,694 | |||||
U.S. Treasury Notes - 9.86% | ||||||
U.S. Treasury Note, 4.50%, 11/15/2010 | 13,200,000 | 14,021,911 | ||||
U.S. Treasury Note, 2.875%, 1/31/2013 | 5,000,000 | 5,102,735 | ||||
U.S. Treasury Note, 4.00%, 8/15/2018 | 2,485,000 | 2,488,300 | ||||
Total U.S. Teasury Notes | 21,612,946 | |||||
TOTAL U.S. TREASURY SECURITIES | 47,995,640 | |||||
U.S. GOVERNMENT AGENCIES - 11.36% | ||||||
Mortgage-Backed Securities - 7.16% | ||||||
Fannie Mae, Pool #545883, 5.50%, 9/1/2017 | 106,464 | 106,888 | ||||
Fannie Mae, Pool #813938, 4.50%, 12/1/2020 | 246,340 | 235,117 | ||||
Fannie Mae, Pool #911750, 4.50%, 12/1/2021 | 440,797 | 419,887 | ||||
Fannie Mae, Pool #908642, 5.00%, 1/1/2022 | 24,523 | 24,000 | ||||
Fannie Mae, Pool #912771, 5.00%, 3/1/2022 | 711,138 | 695,961 | ||||
Fannie Mae, Pool #745147, 4.50%, 12/1/2035 | 3,527,849 | 3,206,741 | ||||
Fannie Mae, Pool #906666, 6.50%, 12/1/2036 | 642,754 | 651,934 | ||||
| 44 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Principal Amount | Value (Note 2) | ||||
U.S. GOVERNMENT AGENCIES (continued) | ||||||
Mortgage-Backed Securities (continued) | ||||||
Fannie Mae, Pool #899393, 6.00%, 4/1/2037 | $ | 1,481,094 | $ | 1,481,165 | ||
Federal Home Loan Mortgage Corp., Pool #B16835, 5.50%, 10/1/2019 | 92,828 | 92,734 | ||||
Federal Home Loan Mortgage Corp., Pool #G11896, 4.50%, 1/1/2021 | 650,269 | 619,220 | ||||
Federal Home Loan Mortgage Corp., Pool #J04222, 5.00%, 1/1/2022 | 420,529 | 410,874 | ||||
Federal Home Loan Mortgage Corp., Pool #G18168, 5.00%, 2/1/2022 | 181,094 | 176,936 | ||||
Federal Home Loan Mortgage Corp., Pool #G18182, 5.50%, 5/1/2022 | 446,048 | 444,386 | ||||
Federal Home Loan Mortgage Corp., Pool #G12833, 4.50%, 9/1/2022 | 1,058,986 | 1,006,436 | ||||
Federal Home Loan Mortgage Corp., Pool #J06711, 5.00%, 1/1/2023 | 1,228,338 | 1,200,135 | ||||
Federal Home Loan Mortgage Corp., Pool #G12966, 5.50%, 1/1/2023 | 624,703 | 622,376 | ||||
Federal Home Loan Mortgage Corp., Pool #G13136, 4.50%, 5/1/2023 | 455,863 | 433,099 | ||||
Federal Home Loan Mortgage Corp., Pool #G01736, 6.50%, 9/1/2034 | 72,371 | 73,710 | ||||
Federal Home Loan Mortgage Corp., Pool #A52716, 6.50%, 10/1/2036 | 879,966 | 892,533 | ||||
Federal Home Loan Mortgage Corp., Pool #A62373, 5.00%, 6/1/2037 | 2,262,347 | 2,141,783 | ||||
Federal Home Loan Mortgage Corp., Pool #A82556, 5.50%, 10/1/2038 | 728,000 | 710,361 | ||||
GNMA, Pool #286310, 9.00%, 2/15/2020 | 1,786 | 1,944 | ||||
GNMA, Pool #288873, 9.50%, 8/15/2020 | 95 | 105 | ||||
GNMA, Pool #550290, 6.50%, 8/15/2031 | 36,641 | 37,221 | ||||
Total Mortgage-Backed Securities | 15,685,546 | |||||
Other Agencies - 4.20% | ||||||
Fannie Mae, 5.25%, 1/15/2009 | 5,000 | 5,026 | ||||
Fannie Mae, 6.375%, 6/15/2009 | 10,000 | 10,224 | ||||
Fannie Mae, 4.875%, 5/18/2012 | 8,980,000 | 9,202,210 | ||||
Total Other Agencies | 9,217,460 | |||||
TOTAL U.S. GOVERNMENT AGENCIES (Identified Cost $25,057,705) | 24,903,006 | |||||
| The accompanying notes are an integral part of the financial statements. | 45 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Moderate Term Series | Shares/ Principal Amount | Value (Note 2) | ||||
SHORT-TERM INVESTMENTS - 8.92% | ||||||
Dreyfus Treasury and Agency Cash Management - Institutional Shares | 2,511,154 | $ | 2,511,154 | |||
Federal Home Loan Bank Discount Note, 1/5/2009 | $ | 11,000,000 | 10,979,595 | |||
U.S. Treasury Bill, 8/27/2009 | 6,105,000 | 6,046,173 | ||||
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $19,482,480) | 19,536,922 | |||||
TOTAL INVESTMENTS - 99.99% | 219,110,676 | |||||
OTHER ASSETS, LESS LIABILITIES - 0.01% | 17,960 | |||||
NET ASSETS - 100% | $ | 219,128,636 | ||||
*Non-income producing security
**Less than 0.01%
ADR - American Depository Receipt
NVDR - Non-Voting Depository Receipt
1Bank of New York Mellon Corp. is the Fund’s custodian.
2The Chairman and CEO of the company serves as a director of the Fund (see Note 2 to the financial statements).
3The coupon rate is a floating rate and is subject to change quarterly. The coupon rate stated is the rate as of October 31, 2008. The issuer is in default of certain debt covenants, has missed its most recent interest payment and has declared bankruptcy. Income is not being accrued.
4Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. This security has been sold under rule 144A and has been determined to be liquid under guidelines established by the Board of Directors. This security amounts to $73,200, or 0.03%, of the Series’ net assets as of October 31, 2008 (see Note 2 to the financial statements).
| 46 | The accompanying notes are an integral part of the financial statements. |
Statement of Assets and Liabilities - Pro-Blend® Moderate Term Series
October 31, 2008
ASSETS: | ||||
Investments, at value (identified cost $253,598,634) (Note 2) | $ | 219,110,676 | ||
Foreign currency, at value (cost $167,646) | 157,200 | |||
Cash | 23,408 | |||
Interest receivable | 948,374 | |||
Receivable for securities sold | 742,814 | |||
Receivable for fund shares sold | 372,165 | |||
Foreign tax reclaims receivable | 55,812 | |||
Dividends receivable | 37,437 | |||
TOTAL ASSETS | 221,447,886 | |||
| LIABILITIES: | ||||
Accrued management fees (Note 3) | 84,861 | |||
Accrued shareholder service fees (Class S) (Note 3) | 47,139 | |||
Accrued fund accounting and transfer agent fees (Note 3) | 14,711 | |||
Accrued directors’ fees (Note 3) | 2,000 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 565 | |||
Payable for securities purchased | 1,975,999 | |||
Payable for fund shares repurchased | 149,951 | |||
Audit fees payable | 32,389 | |||
Other payables and accrued expenses | 11,635 | |||
TOTAL LIABILITIES | 2,319,250 | |||
TOTAL NET ASSETS | $ | 219,128,636 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 210,651 | ||
Additional paid-in-capital | 258,424,406 | |||
Undistributed net investment income | 3,137,475 | |||
Accumulated net realized loss on investments, foreign currency and other assets and liabilities | (8,145,534 | ) | ||
Net unrealized depreciation on investments, foreign currency and other assets and liabilities | (34,498,362 | ) | ||
TOTAL NET ASSETS | $ | 219,128,636 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS S ($218,807,021/21,027,664 shares) | $ | 10.41 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS I ($321,615/37,428 shares) | $ | 8.59 | ||
| The accompanying notes are an integral part of the financial statements. | 47 |
Statement of Operations - Pro-Blend® Moderate Term Series
For the Year Ended October 31, 2008
INVESTMENT INCOME: | ||||
Interest | $ | 5,479,344 | ||
Dividends (net of foreign tax withheld, $65,357) | 2,731,393 | |||
Total Investment Income | 8,210,737 | |||
| EXPENSES: | ||||
Management fees (Note 3) | 2,474,578 | |||
Shareholder service fees (Class S) (Note 3) | 421,853 | |||
Fund accounting and transfer agent fees (Note 3) | 196,571 | |||
Directors’ fees (Note 3) | 12,096 | |||
Chief Compliance Officer service fees (Note 3) | 4,681 | |||
Custodian fees | 33,299 | |||
Miscellaneous | 99,762 | |||
Total Expenses | 3,242,840 | |||
Less reduction of expenses (Note 3) | (56,668 | ) | ||
Net Expenses | 3,186,172 | |||
NET INVESTMENT INCOME | 5,024,565 | |||
| REALIZED AND UNREALIZED LOSS ON INVESTMENTS: | ||||
Net realized loss on - | ||||
Investments | (7,585,338 | ) | ||
Foreign currency and other assets and liabilities | (8,971 | ) | ||
| (7,594,309 | ) | |||
Net change in unrealized appreciation (depreciation) on - | ||||
Investments | (56,868,192 | ) | ||
Foreign currency and other assets and liabilities | (13,784 | ) | ||
| (56,881,976 | ) | |||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (64,476,285 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (59,451,720 | ) | |
| 48 | The accompanying notes are an integral part of the financial statements. |
Statements of Changes in Net Assets - Pro-Blend® Moderate Term Series
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||
| INCREASE (DECREASE) IN NET ASSETS: | ||||||||
| OPERATIONS: | ||||||||
Net investment income | $ | 5,024,565 | $ | 6,244,760 | ||||
Net realized gain (loss) on investments and foreign currency | (7,594,309 | ) | 27,548,500 | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (56,881,976 | ) | 1,135,497 | |||||
Net increase (decrease) from operations | (59,451,720 | ) | 34,928,757 | |||||
| DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
From net investment income (Class S) | (5,900,735 | ) | (5,170,958 | ) | ||||
From net investment income (Class I) | (2 | ) | — | |||||
From net realized gain on investments (Class S) | (27,806,987 | ) | (12,523,112 | ) | ||||
Total distributions to shareholders | (33,707,724 | ) | (17,694,070 | ) | ||||
| CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | (67,097,277 | ) | 65,054,580 | |||||
Net increase (decrease) in net assets | (160,256,721 | ) | 82,289,267 | |||||
| NET ASSETS: | ||||||||
Beginning of year | 379,385,357 | 297,096,090 | ||||||
End of year (including undistributed net investment income of $3,137,475 and $3,990,909, respectively) | $ | 219,128,636 | $ | 379,385,357 | ||||
| The accompanying notes are an integral part of the financial statements. | 49 |
Financial Highlights - Pro-Blend® Moderate Term Series - Class S
| For the Years Ended | ||||||||||
| 10/31/08 | 10/31/07 | 10/31/06 | 10/31/05 | 10/31/04 | ||||||
| Per share data (for a share outstanding throughout each year): | ||||||||||
Net asset value - Beginning of year | $14.18 | $13.55 | $12.75 | $11.81 | $11.07 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income | 0.23 | 0.24 | 0.20 | 0.11 | 0.11 | |||||
Net realized and unrealized gain (loss) on investments | (2.75) | 1.19 | 1.36 | 1.16 | 0.85 | |||||
Total from investment operations | (2.52) | 1.43 | 1.56 | 1.27 | 0.96 | |||||
Less distributions to shareholders: | ||||||||||
From net investment income | (0.23) | (0.23) | (0.14) | (0.11) | (0.10) | |||||
From net realized gain on investments | (1.02) | (0.57) | (0.62) | (0.22) | (0.12) | |||||
Total distributions to shareholders | (1.25) | (0.80) | (0.76) | (0.33) | (0.22) | |||||
Net asset value - End of year | $10.41 | $14.18 | $13.55 | $12.75 | $11.81 | |||||
Net assets - End of year (000’s omitted) | $218,807 | $379,385 | $297,096 | $191,022 | $95,756 | |||||
Total return1 | (19.28%) | 10.91% | 12.88% | 10.94% | 8.76% | |||||
| Ratios (to average net assets)/ Supplemental Data: | ||||||||||
Expenses* | 1.10% | 1.11% | 1.16% | 1.20% | 1.20% | |||||
Net investment income | 1.74% | 1.86% | 1.75% | 1.09% | 1.00% | |||||
Series portfolio turnover | 75% | 78% | 72% | 77% | 42% | |||||
*The investment advisor did not impose all of its management fee in some years. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have been increased by the following amount: | ||||||||||
| 0.02% | N/A | N/A | 0.01% | 0.08% | ||||||
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during certain years.
| 50 | The accompanying notes are an integral part of the financial statements. |
Financial Highlights - Pro-Blend® Moderate Term Series - Class I
| For the Period 3/28/081 to 10/31/08 | ||
| Per share data (for a share outstanding throughout the period): | ||
Net asset value - Beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment income | 0.06 | |
Net realized and unrealized loss on investments | (1.42) | |
Total from investment operations | (1.36) | |
Less distributions to shareholders: | ||
From net investment income | (0.05) | |
Net asset value - End of period | $8.59 | |
Net assets - End of period (000’s omitted) | $322 | |
Total return2 | (13.64%) | |
| Ratios (to average net assets)/Supplemental Data: | ||
Expenses* | 0.85%3 | |
Net investment income | 1.47%3 | |
Series portfolio turnover | 75% | |
*The investment advisor did not impose all of its management fee. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have been increased by 0.10%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. Periods less than one year are not annualized.
3Annualized.
| The accompanying notes are an integral part of the financial statements. | 51 |
Performance Update - Pro-Blend® Extended Term Series (unaudited)
| Average Annual Total Returns As of October 31, 2008 | ||||||||||
| One Year | Five Year | Ten Year | Since Inception1 | |||||||
Manning & Napier Fund, Inc. - Pro-Blend® Extended Term Series - Class S2 | -25.70% | 4.16% | 5.91% | 8.00% | ||||||
Manning & Napier Fund, Inc. - Pro-Blend® Extended Term Series - Class I2,3 | -25.55% | 4.45% | 6.23% | 8.34% | ||||||
Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index4,6 | 0.30% | 3.48% | 5.00% | 5.67% | ||||||
15%/40%/45% Blended Index4,5,6 | -23.74% | 2.73% | 3.46% | 6.22% | ||||||
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Pro-Blend® Extended Term Series - Class S for the ten years ended October 31, 2008 to the Barclays Capital U.S. Aggregate Bond Index and a 15%/40%/45% Blended Index.
1Performance numbers for the Series are calculated from October 12, 1993, the Class S inception date. The Barclays Capital U.S. Aggregate Bond Index only publishes month-end numbers; therefore, performance numbers for the Indices are calculated from October 31, 1993.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 1.10% for Class S and 0.85% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.10% for Class S and 0.87% for Class I for the period ended October 31, 2008.
3For periods prior to the inception of Class I on March 28, 2008, the performance figures are hypothetical and reflect the performance of the Manning & Napier Fund, Inc. - Pro-Blend® Extended Term Series - Class S adjusted for expense differences.
4The Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income and, unlike Series returns, do not reflect any fees or expenses.
5The 15%/40%/45% Blended Index is 15% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 40% Russell 3000® Index, and 45% Barclays Capital U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S. Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series (see note 1 above) through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. Both Indices’ returns, unlike Series returns, do not reflect any fees or expenses.
6Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Indices’ portfolios.
| 52 |
Shareholder Expense Example - Pro-Blend® Extended Term Series (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2008 to October 31, 2008).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, 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 Actual line for the Class in which you have invested in 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 Hypothetical lines of the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ 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 for the Class in which you have invested in 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 Hypothetical lines of the table are 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 Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense ratio | |||||||||
Class S | ||||||||||||
Actual | $ | 1,000.00 | $ | 786.00 | $ | 4.94 | 1.10 | % | ||||
Hypothetical | $ | 1,000.00 | $ | 1,019.61 | $ | 5.58 | 1.10 | % | ||||
Class I | ||||||||||||
Actual | $ | 1,000.00 | $ | 786.30 | $ | 3.82 | 0.85 | % | ||||
Hypothetical | $ | 1,000.00 | $ | 1,020.86 | $ | 4.32 | 0.85 | % | ||||
1Expenses are equal to the Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data (or since inception (3/28/08) for Class I). The Class’ total return would have been lower had certain expenses not been waived during the period.
| 53 |
Portfolio Composition - Pro-Blend® Extended Term Series (unaudited)
As of October 31, 2008
Asset Allocation1
1As a percentage of net assets.
2A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years.
3A U.S. Treasury Note is an intermediate-term obligation of the U.S. Treasury issued with a maturity period between one and ten years.
Sector Allocation4
Information Technology | 20.80% | |
Health Care | 15.93% | |
Industrials | 10.29% | |
Consumer Discretionary | 9.84% | |
Financials | 7.66% | |
Consumer Staples | 5.81% | |
Energy | 2.95% | |
Materials | 2.43% | |
Utilities | 0.57% | |
Telecommunication Services | 0.25% |
4Including common stocks, preferred stocks, warrants and corporate bonds, as a percentage of total investments.
Top Ten Stock Holdings5
Google, Inc. - Class A | 4.37% | |
EMC Corp. | 2.86% | |
Unilever plc - ADR (United Kingdom) | 2.33% | |
Medtronic, Inc. | 2.06% | |
United Parcel Service, Inc. - Class B | 2.01% | |
Southwest Airlines Co. | 2.00% | |
Cisco Systems, Inc. | 1.99% | |
Microsoft Corp. | 1.99% | |
Johnson & Johnson | 1.96% | |
Automatic Data Processing, Inc. | 1.87% |
5As a percentage of total investments.
| 54 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS - 71.66% | |||||
Consumer Discretionary - 8.96% | |||||
Auto Components - 0.04% | |||||
Hankook Tire Co. Ltd. (South Korea) (Note 7) | 15,560 | $ | 148,271 | ||
Automobiles - 0.02% | |||||
Suzuki Motor Corp. (Japan) (Note 7) | 6,200 | 88,383 | |||
Diversified Consumer Services - 0.10% | |||||
Jackson Hewitt Tax Service, Inc. | 30,790 | 424,286 | |||
Hotels, Restaurants & Leisure - 2.39% | |||||
Carnival Corp. | 261,245 | 6,635,623 | |||
Club Mediterranee S.A.* (France) (Note 7) | 5,750 | 114,314 | |||
International Game Technology | 244,560 | 3,423,840 | |||
| 10,173,777 | |||||
Household Durables - 0.83% | |||||
Corporacion Geo S.A. de C.V. - Class B* (Mexico) (Note 7) | 38,100 | 52,894 | |||
Fortune Brands, Inc. | 85,690 | 3,268,217 | |||
LG Electronics, Inc. (South Korea) (Note 7) | 2,110 | 154,474 | |||
Rodobens Negocios Imobiliarios S.A. (Brazil) (Note 7) | 25,040 | 75,756 | |||
| 3,551,341 | |||||
Leisure Equipment & Products - 0.01% | |||||
Sankyo Co. Ltd. (Japan) (Note 7) | 1,400 | 61,407 | |||
Media - 3.21% | |||||
Charter Communications, Inc. - Class A* | 1,463,790 | 644,068 | |||
Comcast Corp. - Class A | 473,884 | 7,468,412 | |||
Grupo Televisa S.A. - ADR (Mexico) (Note 7) | 9,660 | 170,596 | |||
Impresa S.A. (SGPS)* (Portugal) (Note 7) | 32,800 | 24,662 | |||
The McGraw-Hill Companies, Inc. | 8,740 | 234,582 | |||
Mediacom Communications Corp. - Class A* | 72,740 | 322,966 | |||
Mediaset S.p.A. (Italy) (Note 7) | 11,825 | 63,971 | |||
Reed Elsevier plc - ADR (United Kingdom) (Note 7) | 7,379 | 260,921 | |||
Societe Television Francaise 1 (France) (Note 7) | 15,330 | 195,171 | |||
The Walt Disney Co. | 161,240 | 4,176,116 | |||
Wolters Kluwer N.V. (Netherlands) (Note 7) | 7,425 | 130,771 | |||
| 13,692,236 | |||||
Multiline Retail - 0.02% | |||||
PPR (France) (Note 7) | 1,200 | 75,853 | |||
Specialty Retail - 2.29% | |||||
The Home Depot, Inc. | 199,550 | 4,707,384 | |||
| The accompanying notes are an integral part of the financial statements. | 55 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Consumer Discretionary (continued) | |||||
Specialty Retail (continued) | |||||
KOMERI Co. Ltd. (Japan) (Note 7) | 3,900 | $ | 86,521 | ||
Lowe’s Companies, Inc. | 219,990 | 4,773,783 | |||
Tractor Supply Co.* | 2,880 | 119,693 | |||
Valora Holding AG (Switzerland) (Note 7) | 450 | 65,018 | |||
| 9,752,399 | |||||
Textiles, Apparel & Luxury Goods - 0.05% | |||||
Adidas AG (Germany) (Note 7) | 2,580 | 89,235 | |||
LVMH S.A. (Louis Vuitton Moet Hennessy) (France) (Note 7) | 1,575 | 104,103 | |||
| 193,338 | |||||
Total Consumer Discretionary | 38,161,291 | ||||
Consumer Staples - 5.36% | |||||
Beverages - 0.12% | |||||
Carlsberg A/S - Class B (Denmark) (Note 7) | 2,850 | 112,222 | |||
Diageo plc (United Kingdom) (Note 7) | 8,825 | 135,037 | |||
Heineken N.V. (Netherlands) (Note 7) | 4,270 | 143,280 | |||
Kirin Holdings Co. Ltd. (Japan) (Note 7) | 12,000 | 130,003 | |||
| 520,542 | |||||
Food & Staples Retailing - 0.18% | |||||
BJ’s Wholesale Club, Inc.* | 4,450 | 156,640 | |||
Carrefour S.A. (France) (Note 7) | 7,000 | 293,674 | |||
Casino Guichard-Perrachon S.A. (France) (Note 7) | 1,710 | 118,768 | |||
Tesco plc (United Kingdom) (Note 7) | 36,650 | 200,145 | |||
| 769,227 | |||||
Food Products - 4.13% | |||||
Cadbury plc (United Kingdom) (Note 7) | 26,560 | 242,737 | |||
Dean Foods Co.* | 145,040 | 3,170,574 | |||
Groupe Danone (France) (Note 7) | 4,100 | 226,977 | |||
Nestle S.A. (Switzerland) (Note 7) | 102,250 | 3,968,990 | |||
Sanderson Farms, Inc. | 1,850 | 57,757 | |||
Suedzucker AG (Germany) (Note 7) | 4,250 | 47,338 | |||
Unilever plc - ADR (United Kingdom) (Note 7) | 437,018 | 9,859,126 | |||
| 17,573,499 | |||||
Household Products - 0.06% | |||||
Kao Corp. (Japan) (Note 7) | 3,000 | 85,897 | |||
Reckitt Benckiser Group plc (United Kingdom) (Note 7) | 4,125 | 173,230 | |||
| 259,127 | |||||
| 56 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Consumer Staples (continued) | |||||
Personal Products - 0.87% | |||||
L’Oreal S.A. (France) (Note 7) | 48,170 | $ | 3,622,818 | ||
Natura Cosmeticos S.A. (Brazil) (Note 7) | 7,720 | 64,898 | |||
| 3,687,716 | |||||
Total Consumer Staples | 22,810,111 | ||||
Energy - 2.69% | |||||
Energy Equipment & Services - 2.52% | |||||
Baker Hughes, Inc. | 131,010 | 4,578,799 | |||
Calfrac Well Services Ltd. (Canada) (Note 7) | 15,090 | 190,629 | |||
Compagnie Generale de Geophysique - Veritas (CGG - Veritas)* (France) (Note 7) | 4,925 | 78,518 | |||
Dril-Quip, Inc.* | 2,000 | 49,400 | |||
Trican Well Service Ltd. (Canada) (Note 7) | 17,240 | 161,697 | |||
Weatherford International Ltd.* | 335,110 | 5,656,657 | |||
| 10,715,700 | |||||
Oil, Gas & Consumable Fuels - 0.17% | |||||
BP plc (United Kingdom) (Note 7) | 13,825 | 112,836 | |||
Edge Petroleum Corp.* | 25,180 | 14,856 | |||
Eni S.p.A. (Italy) (Note 7) | 10,575 | 249,726 | |||
Forest Oil Corp.* | 1,900 | 55,499 | |||
Mariner Energy, Inc.* | 2,589 | 37,256 | |||
Royal Dutch Shell plc - Class B (Netherlands) (Note 7) | 4,679 | 124,899 | |||
Total S.A. (France) (Note 7) | 2,700 | 147,322 | |||
| 742,394 | |||||
Total Energy | 11,458,094 | ||||
Financials - 6.62% | |||||
Capital Markets - 1.07% | |||||
Bank of New York Mellon Corp.1 | 7,400 | 241,240 | |||
The Charles Schwab Corp. | 5,800 | 110,896 | |||
Daiwa Securities Group, Inc. (Japan) (Note 7) | 6,000 | 32,836 | |||
Franklin Resources, Inc. | 2,335 | 158,780 | |||
Janus Capital Group, Inc. | 6,050 | 71,027 | |||
SEI Investments Co. | 218,320 | 3,859,898 | |||
T. Rowe Price Group, Inc. | 2,400 | 94,896 | |||
| 4,569,573 | |||||
Commercial Banks - 3.82% | |||||
Banca Monte dei Paschi di Siena S.p.A. (Italy) (Note 7) | 10,950 | 21,072 | |||
The Bancorp, Inc.* | 23,370 | 87,404 | |||
| The accompanying notes are an integral part of the financial statements. | 57 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Financials (continued) | |||||
Commercial Banks (continued) | |||||
BNP Paribas (France) (Note 7) | 1,550 | $ | 110,618 | ||
The Chugoku Bank Ltd. (Japan) (Note 7) | 10,000 | 135,547 | |||
Commerzbank AG (Germany) (Note 7) | 4,775 | 51,847 | |||
Credit Agricole S.A. (France) (Note 7) | 3,800 | 54,408 | |||
The Hachijuni Bank Ltd. (Japan) (Note 7) | 18,000 | 86,994 | |||
HSBC Holdings plc (United Kingdom) | 16,350 | 200,462 | |||
HSBC Holdings plc - ADR (United Kingdom) (Note 7) | 4,710 | 277,890 | |||
Huntington Bancshares, Inc. | 11,850 | 111,982 | |||
Intesa Sanpaolo (Italy) (Note 7) | 9,422 | 34,131 | |||
KeyCorp | 15,075 | 184,367 | |||
Mitsubishi UFJ Financial Group, Inc. (Japan) | 12,000 | 72,860 | |||
PNC Financial Services Group, Inc. | 107,100 | 7,140,357 | |||
Societe Generale (France) (Note 7) | 1,006 | 54,071 | |||
Societe Generale - ADR (France) (Note 7) | 12,015 | 129,762 | |||
The Sumitomo Trust & Banking Co. Ltd. (Japan) | 18,000 | 80,049 | |||
SunTrust Banks, Inc. | 2,300 | 92,322 | |||
TCF Financial Corp. | 16,865 | 299,185 | |||
U.S. Bancorp | 221,990 | 6,617,522 | |||
UniCredito Italiano S.p.A. (Italy) (Note 7) | 29,175 | 70,234 | |||
Webster Financial Corp. | 5,330 | 98,818 | |||
Wilmington Trust Corp. | 9,040 | 260,894 | |||
| 16,272,796 | |||||
Consumer Finance - 0.92% | |||||
American Express Co. | 133,930 | 3,683,075 | |||
Capital One Financial Corp. | 6,385 | 249,781 | |||
| 3,932,856 | |||||
Diversified Financial Services - 0.29% | |||||
Financiere Marc de Lacharriere S.A. (Fimalac) (France) (Note 7) | 5,180 | 224,250 | |||
ING Groep N.V. (Netherlands) (Note 7) | 4,650 | 42,874 | |||
JPMorgan Chase & Co. | 15,485 | 638,756 | |||
Moody’s Corp. | 12,320 | 315,392 | |||
| 1,221,272 | |||||
Insurance - 0.45% | |||||
Allianz SE (Germany) (Note 7) | 4,860 | 368,458 | |||
Axa (France) (Note 7) | 4,550 | 86,108 | |||
| 58 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Financials (continued) | |||||
Insurance (continued) | |||||
First American Corp. | 6,550 | $ | 133,685 | ||
LandAmerica Financial Group, Inc. | 13,790 | 135,831 | |||
Muenchener Rueckver AG (Germany) (Note 7) | 2,275 | 304,423 | |||
The Progressive Corp. | 25,810 | 368,309 | |||
Torchmark Corp. | 5,655 | 236,209 | |||
Willis Group Holdings Ltd. (United Kingdom) | 10,235 | 268,566 | |||
| 1,901,589 | |||||
Real Estate Investment Trusts (REITS) - 0.02% | |||||
Alstria Office REIT AG (Germany) (Note 7) | 16,120 | 103,539 | |||
Thrifts & Mortgage Finance - 0.05% | |||||
Aareal Bank AG (Germany) (Note 7) | 10,265 | 83,723 | |||
First Niagara Financial Group, Inc. | 7,620 | 120,167 | |||
| 203,890 | |||||
Total Financials | 28,205,515 | ||||
Health Care - 15.53% | |||||
Biotechnology - 1.44% | |||||
Amgen, Inc.* | 41,675 | 2,495,916 | |||
Celera Corp.* | 43,270 | 489,384 | |||
Crucell NV - ADR* (Netherlands) (Note 7) | 19,100 | 222,324 | |||
Genomic Health, Inc.* | 16,940 | 312,204 | |||
Genzyme Corp.* | 31,349 | 2,284,715 | |||
Medarex, Inc.* | 18,450 | 129,703 | |||
QLT, Inc.* (Canada) (Note 7) | 51,950 | 134,551 | |||
Senomyx, Inc.* | 16,775 | 41,937 | |||
| 6,110,734 | |||||
Health Care Equipment & Supplies - 4.73% | |||||
Abaxis, Inc.* | 18,230 | 280,195 | |||
Align Technology, Inc.* | 49,590 | 343,659 | |||
Alsius Corp.*2 | 56,230 | 39,361 | |||
AtriCure, Inc.* | 18,520 | 119,824 | |||
Beckman Coulter, Inc. | 8,140 | 406,349 | |||
Becton, Dickinson and Co. | 57,840 | 4,014,096 | |||
bioMerieux (France) (Note 7) | 7,900 | 639,003 | |||
C.R. Bard, Inc. | 4,130 | 364,472 | |||
Covidien Ltd. (Bermuda) (Note 7) | 11,460 | 507,563 | |||
DENTSPLY International, Inc. | 12,990 | 394,636 | |||
Dexcom, Inc.* | 48,235 | 218,022 | |||
Gen-Probe, Inc.* | 8,000 | 376,480 | |||
IDEXX Laboratories, Inc.* | 7,060 | 248,441 | |||
| The accompanying notes are an integral part of the financial statements. | 59 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Health Care (continued) | |||||
Health Care Equipment & Supplies (continued) | |||||
Inverness Medical Innovations, Inc.* | 16,050 | $ | 307,358 | ||
Medtronic, Inc. | 215,950 | 8,709,264 | |||
Micrus Endovascular Corp.* | 19,300 | 227,740 | |||
Nobel Biocare Holding AG (Switzerland) | 6,000 | 102,527 | |||
OraSure Technologies, Inc.* | 154,150 | 710,632 | |||
Sirona Dental Systems, Inc.* | 26,810 | 428,156 | |||
STAAR Surgical Co.* | 82,770 | 203,614 | |||
Straumann Holding AG (Switzerland) (Note 7) | 2,585 | 437,040 | |||
Synthes, Inc. | 6,580 | 847,403 | |||
Zimmer Holdings, Inc.* | 5,200 | 241,436 | |||
| 20,167,271 | |||||
Health Care Providers & Services - 1.64% | |||||
Bumrungrad Hospital Public Co. Ltd. - NVDR (Thailand) (Note 7) | 125,000 | 78,504 | |||
Diagnosticos da America S.A. (Brazil) (Note 7) | 16,470 | 191,706 | |||
Quest Diagnostics, Inc. | 136,130 | 6,370,884 | |||
Sonic Healthcare Ltd. (Australia) (Note 7) | 38,680 | 352,281 | |||
| 6,993,375 | |||||
Health Care Technology - 1.23% | |||||
Cerner Corp.* | 122,250 | 4,551,368 | |||
Eclipsys Corp.* | 45,390 | 674,042 | |||
| 5,225,410 | |||||
Life Sciences Tools & Services - 2.50% | |||||
Caliper Life Sciences, Inc.* | 102,285 | 143,199 | |||
Exelixis, Inc.* | 36,010 | 123,874 | |||
Lonza Group AG (Switzerland) (Note 7) | 20,500 | 1,697,576 | |||
Luminex Corp.* | 37,050 | 690,983 | |||
Millipore Corp.* | 58,970 | 3,059,953 | |||
PerkinElmer, Inc. | 253,345 | 4,545,009 | |||
QIAGEN N.V.* (Netherlands) (Note 7) | 27,480 | 391,865 | |||
| 10,652,459 | |||||
Pharmaceuticals - 3.99% | |||||
Abbott Laboratories | 5,490 | 302,774 | |||
AstraZeneca plc (United Kingdom) (Note 7) | 1,450 | 61,360 | |||
AstraZeneca plc - ADR (United Kingdom) (Note 7) | 2,475 | 105,089 | |||
Bayer AG (Germany) (Note 7) | 6,775 | 380,764 | |||
GlaxoSmithKline plc (United Kingdom) (Note 7) | 9,025 | 173,820 | |||
| 60 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Health Care (continued) | |||||
Pharmaceuticals (continued) | |||||
Johnson & Johnson | 135,620 | $ | 8,318,931 | ||
Mylan, Inc.* | 16,530 | 141,662 | |||
Novartis AG - ADR (Switzerland) (Note 7) | 138,270 | 7,050,387 | |||
Sanofi-Aventis (France) (Note 7) | 1,250 | 78,742 | |||
Santen Pharmaceutical Co. Ltd. (Japan) (Note 7) | 5,800 | 146,045 | |||
Shire plc (United Kingdom) (Note 7) | 11,175 | 147,262 | |||
Takeda Pharmaceutical Co. Ltd. (Japan) (Note 7) | 1,700 | 83,369 | |||
| 16,990,205 | |||||
Total Health Care | 66,139,454 | ||||
Industrials - 9.32% | |||||
Aerospace & Defense - 0.06% | |||||
Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) (Note 7) | 11,370 | 237,860 | |||
Air Freight & Logistics - 3.86% | |||||
Deutsche Post AG (Germany) (Note 7) | 4,275 | 47,071 | |||
FedEx Corp. | 117,580 | 7,686,205 | |||
TNT N.V. (Netherlands) (Note 7) | 9,995 | 207,624 | |||
United Parcel Service, Inc. - Class B | 161,135 | 8,504,705 | |||
| 16,445,605 | |||||
Airlines - 2.81% | |||||
AirTran Holdings, Inc.* | 20,830 | 85,195 | |||
Deutsche Lufthansa AG (Germany) (Note 7) | 11,325 | 158,615 | |||
JetBlue Airways Corp.* | 589,465 | 3,271,531 | |||
Southwest Airlines Co. | 719,210 | 8,472,294 | |||
| 11,987,635 | |||||
Building Products - 0.02% | |||||
Owens Corning, Inc.* | 6,560 | 103,189 | |||
Commercial Services & Supplies - 0.07% | |||||
Tomra Systems ASA (Norway) (Note 7) | 61,390 | 284,559 | |||
Electrical Equipment - 0.04% | |||||
ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) (Note 7) | 5,080 | 66,802 | |||
General Cable Corp.* | 2,730 | 46,628 | |||
Nexans S.A. (France) (Note 7) | 830 | 46,986 | |||
| 160,416 | |||||
| The accompanying notes are an integral part of the financial statements. | 61 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Industrials (continued) | |||||
Industrial Conglomerates - 1.76% | |||||
3M Co. | 111,260 | $ | 7,154,018 | ||
Siemens AG (Germany) (Note 7) | 4,670 | 282,457 | |||
Sonae Capital S.A. (SGPS)* (Portugal) (Note 7) | 7,657 | 7,904 | |||
Sonae S.A. (SGPS) (Portugal) (Note 7) | 61,250 | 37,468 | |||
| 7,481,847 | |||||
Machinery - 0.08% | |||||
FANUC Ltd. (Japan) (Note 7) | 1,000 | 64,575 | |||
FreightCar America, Inc. | 7,900 | 206,269 | |||
Schindler Holding AG (Switzerland) (Note 7) | 2,050 | 88,415 | |||
| 359,259 | |||||
Professional Services - 0.08% | |||||
Equifax, Inc. | 4,200 | 109,536 | |||
Experian plc (Ireland) (Note 7) | 38,890 | 213,692 | |||
| 323,228 | |||||
Road & Rail - 0.54% | |||||
J.B. Hunt Transport Services, Inc. | 81,600 | 2,319,888 | |||
Total Industrials | 39,703,486 | ||||
Information Technology - 20.34% | |||||
Communications Equipment - 4.44% | |||||
Alcatel-Lucent - ADR* (France) (Note 7) | 94,660 | 243,276 | |||
BigBand Networks, Inc.* | 96,660 | 357,642 | |||
Blue Coat Systems, Inc.* | 29,810 | 402,435 | |||
Ceragon Networks Ltd.* (Israel) (Note 7) | 37,000 | 209,050 | |||
Cisco Systems, Inc.* | 474,340 | 8,429,022 | |||
Harris Stratex Networks, Inc. - Class A* | 26,430 | 175,231 | |||
Infinera Corp.* | 56,000 | 435,680 | |||
Juniper Networks, Inc.* | 223,730 | 4,192,700 | |||
Nokia (Finland) (Note 7) | 265,270 | 4,026,799 | |||
Riverbed Technology, Inc.* | 34,950 | 437,924 | |||
| 18,909,759 | |||||
Computers & Peripherals - 2.89% | |||||
EMC Corp.* | 1,028,420 | 12,114,788 | |||
Rackable Systems, Inc.* | 30,240 | 215,611 | |||
| 12,330,399 | |||||
Electronic Equipment, Instruments & Components - 0.11% | |||||
KEYENCE Corp. (Japan) (Note 7) | 330 | 62,019 | |||
| 62 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Information Technology (continued) | |||||
Electronic Equipment, Instruments & Components (continued) | |||||
LoJack Corp.* | 54,015 | $ | 236,046 | ||
Planar Systems, Inc.* | 74,640 | 149,280 | |||
| 447,345 | |||||
Internet Software & Services - 4.34% | |||||
Google, Inc. - Class A* | 51,470 | 18,496,259 | |||
IT Services - 2.04% | |||||
Automatic Data Processing, Inc. | 227,085 | 7,936,621 | |||
Gevity HR, Inc. | 90,460 | 308,469 | |||
Online Resources Corp.* | 52,480 | 183,680 | |||
Paychex, Inc. | 8,985 | 256,432 | |||
| 8,685,202 | |||||
Semiconductors & Semiconductor Equipment - 0.44% | |||||
ASML Holding N.V. (Netherlands) (Note 7) | 7,180 | 124,443 | |||
ASML Holding N.V. - New York Registered Shares (Netherlands) (Note 7) | 17,490 | 306,950 | |||
Hynix Semiconductor, Inc.* (South Korea) (Note 7) | 4,490 | 37,567 | |||
KLA-Tencor Corp. | 12,360 | 287,370 | |||
Lam Research Corp.* | 12,870 | 287,773 | |||
Netlogic Microsystems, Inc.* | 17,760 | 375,091 | |||
Taiwan Semiconductor Manufacturing Co. Ltd. - ADR (Taiwan) (Note 7) | 14,211 | 117,383 | |||
Tokyo Electron Limited (Japan) (Note 7) | 10,200 | 332,440 | |||
| 1,869,017 | |||||
Software - 6.08% | |||||
Aladdin Knowledge Systems Ltd.* (Israel) (Note 7) | 29,580 | 328,042 | |||
Amdocs Ltd.* (Guernsey) (Note 7) | 22,870 | 515,947 | |||
Autodesk, Inc.* | 146,240 | 3,116,374 | |||
Electronic Arts, Inc.* | 257,820 | 5,873,140 | |||
Intuit, Inc.* | 15,170 | 380,160 | |||
Microsoft Corp. | 376,680 | 8,411,264 | |||
Misys plc (United Kingdom) (Note 7) | 27,900 | 49,493 | |||
SAP AG (Germany) (Note 7) | 5,200 | 184,427 | |||
SAP AG - ADR (Germany) (Note 7) | 184,320 | 6,512,026 | |||
Sonic Solutions* | 66,010 | 134,660 | |||
Square Enix Holdings Co. Ltd. (Japan) (Note 7) | 4,600 | 114,428 | |||
THQ, Inc.* | 5,840 | 43,508 | |||
| The accompanying notes are an integral part of the financial statements. | 63 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Information Technology (continued) | |||||
Software (continued) | |||||
UbiSoft Entertainment S.A.* (France) (Note 7) | 4,660 | $ | 244,497 | ||
| 25,907,966 | |||||
Total Information Technology | 86,645,947 | ||||
Materials - 2.38% | |||||
Chemicals - 0.67% | |||||
Arkema (France) (Note 7) | 67 | 1,522 | |||
Calgon Carbon Corp.* | 12,075 | 160,839 | |||
Monsanto Co. | 29,200 | 2,598,216 | |||
The Scotts Miracle-Gro Co. - Class A | 3,270 | 85,412 | |||
| 2,845,989 | |||||
Containers & Packaging - 0.03% | |||||
Bemis Co., Inc. | 4,760 | 118,238 | |||
Paper & Forest Products - 1.68% | |||||
Louisiana-Pacific Corp. | 309,165 | 1,483,992 | |||
Norbord, Inc. (Canada) (Note 7) | 48,540 | 76,146 | |||
Weyerhaeuser Co. | 146,560 | 5,601,523 | |||
| 7,161,661 | |||||
Total Materials | 10,125,888 | ||||
Telecommunication Services - 0.25% | |||||
Diversified Telecommunication Services - 0.08% | |||||
France Telecom S.A. (France) (Note 7) | 7,800 | 195,825 | |||
Swisscom AG - ADR (Switzerland) (Note 7) | 5,650 | 170,065 | |||
| 365,890 | |||||
Wireless Telecommunication Services - 0.17% | |||||
American Tower Corp.* | 4,010 | 129,563 | |||
Crown Castle International Corp.* | 11,620 | 245,995 | |||
Hutchison Telecommunications International Ltd.* (Hong Kong) (Note 7) | 105,000 | 113,538 | |||
SBA Communications Corp.* | 7,580 | 159,104 | |||
SK Telecom Co. Ltd. - ADR (South Korea) (Note 7) | 3,750 | 64,538 | |||
| 712,738 | |||||
Total Telecommunication Services | 1,078,628 | ||||
Utilities - 0.21% | |||||
Electric Utilities - 0.09% | |||||
E.ON AG (Germany) (Note 7) | 9,900 | 382,157 | |||
| 64 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Shares/ Principal Amount | Value (Note 2) | ||||
COMMON STOCKS (continued) | ||||||
Utilities (continued) | ||||||
Independent Power Producers & Energy Traders - 0.02% | ||||||
Mirant Corp.* | 4,200 | $ | 73,584 | |||
Multi-Utilities - 0.06% | ||||||
GDF Suez (France) (Note 7) | 2,457 | 108,512 | ||||
National Grid plc (United Kingdom) (Note 7) | 15,275 | 172,904 | ||||
| 281,416 | ||||||
Water Utilities - 0.04% | ||||||
Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) (Brazil) (Note 7) | 8,129 | 93,117 | ||||
Companhia de Saneamento de Minas Gerais - Copasa MG (Brazil) (Note 7) | 11,480 | 72,645 | ||||
| 165,762 | ||||||
Total Utilities | 902,919 | |||||
TOTAL COMMON STOCKS | 305,231,333 | |||||
PREFERRED STOCKS - 0.02% | ||||||
Consumer Staples - 0.02% | ||||||
Household Products - 0.02% | ||||||
Henkel AG & Co. KGaA (Germany) (Note 7) (Identified Cost $137,345) | 3,500 | 100,449 | ||||
WARRANTS - 0.00%** | ||||||
Health Care - 0.00%** | ||||||
Life Sciences Tools & Services - 0.00%** | ||||||
Caliper Life Sciences, Inc., 8/10/2011 | 8,377 | 2,178 | ||||
CORPORATE BONDS - 4.38% | ||||||
Convertible Corporate Bonds - 0.47% | ||||||
Consumer Discretionary - 0.08% | ||||||
Hotels, Restaurants & Leisure - 0.06% | ||||||
Carnival Corp., 2.00%, 4/15/2021 | $ | 285,000 | 238,331 | |||
Media - 0.02% | ||||||
Charter Communications, Inc., | 546,000 | 103,058 | ||||
Total Consumer Discretionary | 341,389 | |||||
Health Care - 0.16% | ||||||
Biotechnology - 0.13% | ||||||
Amgen, Inc., 0.375%, 2/1/2013 | 635,000 | 560,388 | ||||
| The accompanying notes are an integral part of the financial statements. | 65 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Convertible Corporate Bonds (continued) | ||||||
Health Care (continued) | ||||||
Health Care Equipment & Supplies - 0.03% | ||||||
Medtronic, Inc., 1.625%, 4/15/2013 | $ | 140,000 | $ | 120,750 | ||
Total Health Care | 681,138 | |||||
Industrials - 0.06% | ||||||
Airlines - 0.06% | ||||||
JetBlue Airways Corp., 3.75%, 3/15/2035 | 420,000 | 280,875 | ||||
Information Technology - 0.17% | ||||||
Computers & Peripherals - 0.07% | ||||||
EMC Corp., 1.75%, 12/1/2013 | 335,000 | 302,756 | ||||
Software - 0.10% | ||||||
Amdocs Ltd., 0.50%, 3/15/2024 (Guernsey) (Note 7) | 435,000 | 420,863 | ||||
Total Information Technology | 723,619 | |||||
Total Convertible Corporate Bonds | 2,027,021 | |||||
Non-Convertible Corporate Bonds - 3.91% | ||||||
Consumer Discretionary - 0.74% | ||||||
Hotels, Restaurants & Leisure - 0.13% | ||||||
McDonald’s Corp., 5.80%, 10/15/2017 | 600,000 | 548,971 | ||||
Media - 0.30% | ||||||
AOL Time Warner (now known as Time Warner, Inc.), 7.625%, 4/15/2031 | 500,000 | 399,799 | ||||
Comcast Corp., 6.50%, 11/15/2035 | 670,000 | 514,322 | ||||
The Walt Disney Co., 7.00%, 3/1/2032 | 380,000 | 356,782 | ||||
| 1,270,903 | ||||||
Multiline Retail - 0.08% | ||||||
Target Corp., 5.875%, 3/1/2012 | 365,000 | 361,386 | ||||
Specialty Retail - 0.14% | ||||||
Home Depot, Inc., 5.40%, 3/1/2016 | 410,000 | 314,307 | ||||
Lowe’s Companies, Inc., 8.25%, 6/1/2010 | 265,000 | 273,051 | ||||
| 587,358 | ||||||
Textiles, Apparel & Luxury Goods - 0.09% | ||||||
VF Corp., 5.95%, 11/1/2017 | 490,000 | 393,756 | ||||
Total Consumer Discretionary | 3,162,374 | |||||
| 66 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Non-Convertible Corporate Bonds (continued) | ||||||
Consumer Staples - 0.39% | ||||||
Beverages - 0.11% | ||||||
Pepsico, Inc., 5.00%, 6/1/2018 | $ | 560,000 | $ | 483,781 | ||
Food & Staples Retailing - 0.07% | ||||||
The Kroger Co., 7.25%, 6/1/2009 | 140,000 | 141,008 | ||||
The Kroger Co., 6.80%, 4/1/2011 | 145,000 | 142,659 | ||||
| 283,667 | ||||||
Food Products - 0.21% | ||||||
General Mills, 6.00%, 2/15/2012 | 470,000 | 461,038 | ||||
Kraft Foods Inc., 6.125%, 2/1/2018 | 515,000 | 441,248 | ||||
| 902,286 | ||||||
Total Consumer Staples | 1,669,734 | |||||
Energy - 0.24% | ||||||
Oil, Gas & Consumable Fuels - 0.24% | ||||||
Anadarko Petroleum Corp., 5.95%, 9/15/2016 | 220,000 | 183,502 | ||||
Apache Corp., 6.90%, 9/15/2018 | 355,000 | 336,076 | ||||
Arch Western Finance LLC, 6.75%, 7/1/2013 | 605,000 | 508,200 | ||||
Total Energy | 1,027,778 | |||||
Financials - 0.99% | ||||||
Capital Markets - 0.25% | ||||||
The Goldman Sachs Group, Inc., 6.345%, 2/15/2034 | 750,000 | 462,874 | ||||
Lehman Brothers Holdings, Inc.3, 2.90688%, 11/16/2009 | 215,000 | 25,263 | ||||
Merrill Lynch & Co., Inc., 6.11%, 1/29/2037 | 255,000 | 168,732 | ||||
Morgan Stanley, 5.55%, 4/27/2017 | 515,000 | 410,148 | ||||
| 1,067,017 | ||||||
Commercial Banks - 0.53% | ||||||
HSBC Financial Corp., 7.00%, 5/15/2012 | 700,000 | 654,781 | ||||
PNC Bank National Association, 5.25%, 1/15/2017 | 615,000 | 511,101 | ||||
U.S. Bank National Association, 6.375%, 8/1/2011 | 575,000 | 569,204 | ||||
Wachovia Corp., 5.25%, 8/1/2014 | 615,000 | 512,609 | ||||
| 2,247,695 | ||||||
Diversified Financial Services - 0.09% | ||||||
Bank of America Corp. Capital Trust VI, 5.625%, 3/8/2035 | 565,000 | 365,126 | ||||
| The accompanying notes are an integral part of the financial statements. | 67 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Non-Convertible Corporate Bonds (continued) | ||||||
Financials (continued) | ||||||
Insurance - 0.12% | ||||||
Ambac Financial Group, Inc., 5.95%, 12/5/2035 | $ | 980,000 | $ | 402,630 | ||
American International Group, Inc., 4.25%, 5/15/2013 | 345,000 | 128,875 | ||||
| 531,505 | ||||||
Total Financials | 4,211,343 | |||||
Health Care - 0.15% | ||||||
Pharmaceuticals - 0.15% | ||||||
Abbott Laboratories, 3.50%, 2/17/2009 | 240,000 | 239,713 | ||||
Wyeth, 6.50%, 2/1/2034 | 470,000 | 384,029 | ||||
Total Health Care | 623,742 | |||||
Industrials - 0.84% | ||||||
Aerospace & Defense - 0.05% | ||||||
Boeing Capital Corp., 6.50%, 2/15/2012 | 215,000 | 212,180 | ||||
Air Freight & Logistics - 0.06% | ||||||
FedEx Corp., 3.50%, 4/1/2009 | 240,000 | 236,114 | ||||
Airlines - 0.10% | ||||||
Southwest Airlines Co., 5.25%, 10/1/2014 | 525,000 | 425,967 | ||||
Industrial Conglomerates - 0.25% | ||||||
General Electric Capital Corp., 6.75%, 3/15/2032 | 535,000 | 434,115 | ||||
General Electric Co., 5.25%, 12/6/2017 | 765,000 | 640,343 | ||||
| 1,074,458 | ||||||
Machinery - 0.18% | ||||||
Caterpillar Financial Service Corp., 7.05%, 10/1/2018 | 490,000 | 462,463 | ||||
John Deere Capital Corp., 5.50%, 4/13/2017 | 275,000 | 235,693 | ||||
John Deere Capital Corp., 5.75%, 9/10/2018 | 75,000 | 62,515 | ||||
| 760,671 | ||||||
Road & Rail - 0.20% | ||||||
CSX Corp., 6.00%, 10/1/2036 | 820,000 | 514,486 | ||||
Union Pacific Corp., 5.65%, 5/1/2017 | 415,000 | 355,034 | ||||
| 869,520 | ||||||
Total Industrials | 3,578,910 | |||||
Information Technology - 0.17% | ||||||
Communications Equipment - 0.17% | ||||||
Cisco Systems, Inc., 5.50%, 2/22/2016 | 275,000 | 254,908 | ||||
| 68 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Principal Amount | Value (Note 2) | ||||
CORPORATE BONDS (continued) | ||||||
Non-Convertible Corporate Bonds (continued) | ||||||
Information Technology (continued) | ||||||
Communications Equipment (continued) | ||||||
Corning, Inc., 6.20%, 3/15/2016 | $ | 560,000 | $ | 451,422 | ||
Total Information Technology | 706,330 | |||||
Materials - 0.04% | ||||||
Metals & Mining - 0.04% | ||||||
Alcoa, Inc., 5.87%, 2/23/2022 | 275,000 | 177,849 | ||||
Utilities - 0.35% | ||||||
Electric Utilities - 0.32% | ||||||
Allegheny Energy Supply Co. LLC4, 8.25%, 4/15/2012 | 220,000 | 201,300 | ||||
American Electric Power Co., Inc., 5.375%, 3/15/2010 | 550,000 | 535,065 | ||||
Exelon Generation Co. LLC, 5.35%, 1/15/2014 | 770,000 | 627,971 | ||||
| 1,364,336 | ||||||
Multi-Utilities - 0.03% | ||||||
CenterPoint Energy Resources Corp., 7.875%, 4/1/2013 | 135,000 | 127,148 | ||||
Total Utilities | 1,491,484 | |||||
Total Non-Convertible Corporate Bonds | 16,649,544 | |||||
TOTAL CORPORATE BONDS | 18,676,565 | |||||
U.S. TREASURY SECURITIES - 15.23% | ||||||
U.S. Treasury Bonds - 3.91% | ||||||
U.S. Treasury Bond, 5.50%, 8/15/2028 | 15,260,000 | 16,664,393 | ||||
U.S. Treasury Notes - 11.32% | ||||||
U.S. Treasury Note, 4.75%, 1/31/2012 | 7,000,000 | 7,620,158 | ||||
U.S. Treasury Note, 2.875%, 1/31/2013 | 15,300,000 | 15,614,369 | ||||
U.S. Treasury Note, 4.00%, 8/15/2018 | 24,950,000 | 24,983,134 | ||||
Total U.S. Treasury Notes | 48,217,661 | |||||
TOTAL U.S. TREASURY SECURITIES | 64,882,054 | |||||
U.S. GOVERNMENT AGENCIES - 6.44% | ||||||
Mortgage-Backed Securities - 5.89% | ||||||
Fannie Mae, Pool #621881, 5.50%, 1/1/2017 | 1,123 | 1,127 | ||||
| The accompanying notes are an integral part of the financial statements. | 69 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Principal Amount | Value (Note 2) | ||||
U.S. GOVERNMENT AGENCIES (continued) | ||||||
Mortgage-Backed Securities (continued) | ||||||
Fannie Mae, Pool #252210, 6.50%, 2/1/2019 | $ | 10,545 | $ | 10,723 | ||
Fannie Mae, Pool #725793, 5.50%, 9/1/2019 | 297,013 | 297,826 | ||||
Fannie Mae, Pool #844917, 4.50%, 11/1/2020 | 347,589 | 331,752 | ||||
Fannie Mae, Pool #813938, 4.50%, 12/1/2020 | 264,987 | 252,915 | ||||
Fannie Mae, Pool #813954, 4.50%, 12/1/2020 | 261,562 | 249,645 | ||||
Fannie Mae, Pool #864435, 4.50%, 12/1/2020 | 154,620 | 147,575 | ||||
Fannie Mae, Pool #837190, 5.00%, 12/1/2020 | 78,214 | 76,630 | ||||
Fannie Mae, Pool #909732, 5.00%, 2/1/2022 | 104,347 | 102,082 | ||||
Fannie Mae, Pool #912520, 5.00%, 2/1/2022 | 884,580 | 865,702 | ||||
Fannie Mae, Pool #745147, 4.50%, 12/1/2035 | 5,638,833 | 5,125,582 | ||||
Fannie Mae, Pool #901895, 6.50%, 9/1/2036 | 653,072 | 662,398 | ||||
Fannie Mae, Pool #899393, 6.00%, 4/1/2037 | 2,303,246 | 2,303,356 | ||||
Federal Home Loan Mortgage Corp., Pool #B16835, 5.50%, 10/1/2019 | 255,276 | 255,017 | ||||
Federal Home Loan Mortgage Corp., Pool #G11896, 4.50%, 1/1/2021 | 1,056,885 | 1,006,421 | ||||
Federal Home Loan Mortgage Corp., Pool #G12419, 5.00%, 10/1/2021 | 584,082 | 570,887 | ||||
Federal Home Loan Mortgage Corp., Pool #G18156, 5.00%, 12/1/2021 | 172,368 | 168,474 | ||||
Federal Home Loan Mortgage Corp., Pool #G18168, 5.00%, 2/1/2022 | 231,452 | 226,138 | ||||
Federal Home Loan Mortgage Corp., Pool #G18182, 5.50%, 5/1/2022 | 705,290 | 702,663 | ||||
Federal Home Loan Mortgage Corp., Pool #G12833, 4.50%, 9/1/2022 | 1,643,907 | 1,562,331 | ||||
Federal Home Loan Mortgage Corp., Pool #J06711, 5.00%, 1/1/2023 | 1,907,300 | 1,863,508 | ||||
Federal Home Loan Mortgage Corp., Pool #G12966, 5.50%, 1/1/2023 | 969,196 | 965,585 | ||||
Federal Home Loan Mortgage Corp., Pool #G13136, 4.50%, 5/1/2023 | 930,473 | 884,010 | ||||
Federal Home Loan Mortgage Corp., Pool #A22067, 6.50%, 5/1/2034 | 185,357 | 188,554 | ||||
Federal Home Loan Mortgage Corp., Pool #A52716, 6.50%, 10/1/2036 | 1,398,555 | 1,418,528 | ||||
Federal Home Loan Mortgage Corp., Pool #A62373, 5.50%, 6/1/2037 | 3,518,992 | 3,331,459 | ||||
Federal Home Loan Mortgage Corp., Pool #A82556, 5.00%, 10/1/2038 | 1,404,000 | 1,369,982 | ||||
GNMA, Pool #631703, 6.50%, 9/15/2034 | 127,884 | 129,588 | ||||
Total Mortgage-Backed Securities | 25,070,458 | |||||
| 70 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Extended Term Series | Principal Amount/ Shares | Value (Note 2) | ||||
U.S. GOVERNMENT AGENCIES (continued) | ||||||
Other Agencies - 0.55% | ||||||
Federal Home Loan Bank, 5.00%, 11/17/2017 | $ | 2,395,000 | $ | 2,338,756 | ||
TOTAL U.S. GOVERNMENT AGENCIES (Identified Cost $27,990,129) | 27,409,214 | |||||
SHORT-TERM INVESTMENTS - 1.66% | ||||||
Dreyfus Treasury and Agency Cash Management - Institutional Shares | 7,062,959 | 7,062,959 | ||||
TOTAL INVESTMENTS - 99.39% | 423,364,752 | |||||
OTHER ASSETS, LESS LIABILITIES - 0.61% | 2,595,233 | |||||
NET ASSETS - 100% | $ | 425,959,985 | ||||
*Non-income producing security
**Less than 0.01%
ADR - American Depository Receipt
NVDR - Non-Voting Depository Receipt
1Bank of New York Mellon Corp. is the Fund’s custodian.
2The Chairman and CEO of the company serves as a director of the Fund (see Note 2 to the financial statements).
3The coupon rate is a floating rate and is subject to change quarterly. The coupon rate stated is the rate as of October 31, 2008. The issuer is in default of certain debt covenants, has missed its most recent interest payment and has declared bankruptcy. Income is not being accrued.
4Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. This security has been sold under rule 144A and has been determined to be liquid under guidelines established by the Board of Directors. This security amounts to $201,300, or 0.05%, of the Series’ net assets as of October 31, 2008. (see Note 2 to the financial statements).
| The accompanying notes are an integral part of the financial statements. | 71 |
Statement of Assets and Liabilities - Pro-Blend® Extended Term Series
October 31, 2008
ASSETS: | ||||
Investments, at value (identified cost $518,563,780) (Note 2) | $ | 423,364,752 | ||
Cash | 72,004 | |||
Foreign currency, at value (cost $429,515) | 402,749 | |||
Receivable for securities sold | 15,192,861 | |||
Interest receivable | 1,048,889 | |||
Receivable for fund shares sold | 644,461 | |||
Foreign tax reclaims receivable | 133,058 | |||
Dividends receivable | 103,572 | |||
TOTAL ASSETS | 440,962,346 | |||
| LIABILITIES: | ||||
Accrued management fees (Note 3) | 229,247 | |||
Accrued shareholder service fees (Class S) (Note 3) | 91,222 | |||
Accrued fund accounting and transfer agent fees (Note 3) | 28,996 | |||
Accrued directors’ fees (Note 3) | 2,000 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 565 | |||
Payable for securities purchased | 13,825,177 | |||
Payable for fund shares repurchased | 769,468 | |||
Audit fees payable | 32,951 | |||
Other payables and accrued expenses | 22,735 | |||
TOTAL LIABILITIES | 15,002,361 | |||
TOTAL NET ASSETS | $ | 425,959,985 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 363,046 | ||
Additional paid-in-capital | 522,923,273 | |||
Undistributed net investment income | 5,212,739 | |||
Accumulated net realized loss on investments, foreign currency and other assets and liabilities | (7,311,990 | ) | ||
Net unrealized depreciation on investments, foreign currency and other assets and liabilities | (95,227,083 | ) | ||
TOTAL NET ASSETS | $ | 425,959,985 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION | $ | 11.75 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION | $ | 8.10 | ||
| 72 | The accompanying notes are an integral part of the financial statements. |
Statement of Operations - Pro-Blend® Extended Term Series
For the Year Ended October 31, 2008
INVESTMENT INCOME: | ||||
Interest | $ | 7,236,591 | ||
Dividends (net of foreign tax withheld, $174,452) | 6,577,402 | |||
Total Investment Income | 13,813,993 | |||
| EXPENSES: | ||||
Management fees (Note 3) | 4,470,456 | |||
Shareholder service fees (Class S) (Note 3) | 858,774 | |||
Fund accounting and transfer agent fees (Note 3) | 368,430 | |||
Directors’ fees (Note 3) | 12,080 | |||
Chief Compliance Officer service fees (Note 3) | 4,681 | |||
Custodian fees | 48,601 | |||
Miscellaneous | 135,052 | |||
Total Expenses | 5,898,074 | |||
Less reduction of expenses (Note 3) | (45,102 | ) | ||
Net Expenses | 5,852,972 | |||
NET INVESTMENT INCOME | 7,961,021 | |||
| REALIZED AND UNREALIZED LOSS ON INVESTMENTS: | ||||
Net realized loss on - | ||||
Investments | (6,170,778 | ) | ||
Foreign currency and other assets and liabilities | (22,684 | ) | ||
| (6,193,462 | ) | |||
Net change in unrealized appreciation (depreciation) on - | ||||
Investments | (150,898,888 | ) | ||
Foreign currency and other assets and liabilities | (36,079 | ) | ||
| (150,934,967 | ) | |||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (157,128,429 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (149,167,408 | ) | |
| The accompanying notes are an integral part of the financial statements. | 73 |
Statements of Changes in Net Assets - Pro-Blend® Extended Term Series
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||
| INCREASE (DECREASE) IN NET ASSETS: | ||||||||
| OPERATIONS: | ||||||||
Net investment income | $ | 7,961,021 | $ | 7,364,960 | ||||
Net realized gain (loss) on investments and foreign currency | (6,193,462 | ) | 57,891,407 | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (150,934,967 | ) | (479,326 | ) | ||||
Net increase (decrease) from operations | (149,167,408 | ) | 64,777,041 | |||||
| DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
From net investment income (Class S) | (7,143,286 | ) | (7,295,757 | ) | ||||
From net investment income (Class I) | (6,624 | ) | — | |||||
From net realized gain on investments (Class S) | (58,266,919 | ) | (33,430,415 | ) | ||||
Total distributions to shareholders | (65,416,829 | ) | (40,726,172 | ) | ||||
| CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase from capital share transactions (Note 5) | 43,553,483 | 88,936,956 | ||||||
Net increase (decrease) in net assets | (171,030,754 | ) | 112,987,825 | |||||
| NET ASSETS: | ||||||||
Beginning of year | 596,990,739 | 484,002,914 | ||||||
End of year (including undistributed net investment income of $5,212,739 and $4,357,890, respectively) | $ | 425,959,985 | $ | 596,990,739 | ||||
| 74 | The accompanying notes are an integral part of the financial statements. |
Financial Highlights - Pro-Blend® Extended Term Series - Class S
For the Years Ended | ||||||||||
| 10/31/08 | 10/31/07 | 10/31/06 | 10/31/05 | 10/31/04 | ||||||
| Per share data (for a share outstanding throughout each year): | ||||||||||
Net asset value - Beginning of year | $17.82 | $17.12 | $15.82 | $14.45 | $13.14 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income | 0.22 | 0.22 | 0.21 | 0.13 | 0.11 | |||||
Net realized and unrealized gain (loss) on investments | (4.36) | 1.88 | 2.18 | 1.71 | 1.39 | |||||
Total from investment operations | (4.14) | 2.10 | 2.39 | 1.84 | 1.50 | |||||
Less distributions to shareholders: | ||||||||||
From net investment income | (0.21) | (0.25) | (0.14) | (0.11) | (0.10) | |||||
From net realized gain on investments | (1.72) | (1.15) | (0.95) | (0.36) | (0.09) | |||||
Total distributions to shareholders | (1.93) | (1.40) | (1.09) | (0.47) | (0.19) | |||||
Net asset value - End of year | $11.75 | $17.82 | $17.12 | $15.82 | $14.45 | |||||
Net assets - End of year (000’s omitted) | $424,876 | $596,991 | $484,003 | $365,726 | $275,597 | |||||
Total return1 | (25.70%) | 12.95% | 16.03% | 12.92% | 11.52% | |||||
| Ratios (to average net assets)/ Supplemental Data: | ||||||||||
Expenses* | 1.10% | 1.11% | 1.14% | 1.17% | 1.17% | |||||
Net investment income | 1.50% | 1.37% | 1.42% | 0.89% | 0.86% | |||||
Series portfolio turnover | 76% | 82% | 82% | 71% | 50% | |||||
*The investment advisor did not impose all of its management fee in some years. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have been increased by the following amount: | ||||||||||
| 0.00%2 | N/A | N/A | 0.01% | 0.04% | ||||||
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during certain years.
2 Less than 0.01%.
| The accompanying notes are an integral part of the financial statements. | 75 |
Financial Highlights - Pro-Blend® Extended Term Series - Class I
| For the Period 3/28/081 to 10/31/08 | ||
| Per share data (for a share outstanding throughout the period): | ||
Net asset value - Beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment income | 0.08 | |
Net realized and unrealized loss on investments | (1.91) | |
Total from investment operations | (1.83) | |
Less distributions to shareholders: | ||
From net investment income | (0.07) | |
Net asset value - End of period | $8.10 | |
Net assets - End of period (000’s omitted) | $1,084 | |
Total return2 | (18.46%) | |
| Ratios (to average net assets)/Supplemental Data: | ||
Expenses* | 0.85%3 | |
Net investment income | 1.62%3 | |
Series portfolio turnover | 76% | |
*The investment advisor did not impose all of its management fee. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have been increased by 0.02%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. Periods less than one year are not annualized.
3Annualized
| 76 | The accompanying notes are an integral part of the financial statements. |
Performance Update - Pro-Blend® Maximum Term Series (unaudited)
| Average Annual Total Returns As of October 31, 2008 | ||||||||||
| One Year | Five Year | Ten Year | Since Inception1 | |||||||
Manning & Napier Fund, Inc. - Pro-Blend® Maximum Term Series - Class S2 | -34.19% | 3.43% | 6.92% | 7.88% | ||||||
Manning & Napier Fund, Inc. - Pro-Blend® Maximum Term Series - Class I2,3 | -34.03% | 3.74% | 7.27% | 8.24% | ||||||
Russell 3000® Index4,6 | -36.60% | 0.46% | 1.05% | 5.80% | ||||||
20%/65%/15% Blended Index4,5,6 | -34.48% | 1.92% | 2.22% | 5.60% | ||||||
The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Pro-Blend® Maximum Term Series - Class S for the ten years ended October 31, 2008 to the Russell 3000® Index and a 20%/65%/15% Blended Index.
1Performance numbers for the Series and Indices are calculated from November 1, 1995, the Class S inception date.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended October 31, 2008, this net expense ratio was 1.10% for Class S and 0.85% for Class I. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.14% for Class S and 0.93% for Class I for the period ended October 31, 2008.
3For periods prior to the inception of Class I on March 28, 2008, the performance figures are hypothetical and reflect the performance of the Manning & Napier Fund, Inc. - Pro-Blend® Maximum Term Series - Class S adjusted for expense differences.
4The Russell 3000® Index is an unmanaged index that consists of 3,000 of the largest U.S. companies based on total market capitalization. The Index returns are based on a market capitalization weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. The Index returns, unlike Series returns, do not reflect any fees or expenses.
5The 20%/65%/15% Blended Index is 20% Morgan Stanley Capital International (MSCI) All Country World Index ex U.S., 65% Russell 3000® Index, and 15% Barclays Capital (formerly Lehman Brothers) U.S. Aggregate Bond Index. The MSCI All Country World Index ex U.S. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns assume reinvestment of income. Both Indices’ returns, unlike Series returns, do not reflect any fees or expenses.
6Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Indices’ portfolios.
| 77 |
Shareholder Expense Example - Pro-Blend® Maximum Term Series (unaudited)
As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2008 to October 31, 2008).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, 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 Actual line for the Class in which you have invested in 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 Hypothetical lines of the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ 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 for the Class in which you have invested in 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 Hypothetical lines of the table are 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 Account Value 5/1/08 | Ending Account Value 10/31/08 | Expenses Paid During Period 5/1/08-10/31/081 | Annualized Expense ratio | |||||||||
Class S | ||||||||||||
Actual | $ | 1,000.00 | $ | 722.40 | $ | 4.76 | 1.10 | % | ||||
Hypothetical | $ | 1,000.00 | $ | 1,019.61 | $ | 5.58 | 1.10 | % | ||||
Class I | ||||||||||||
Actual | $ | 1,000.00 | $ | 723.00 | $ | 3.68 | 0.85 | % | ||||
Hypothetical | $ | 1,000.00 | $ | 1,020.86 | $ | 4.32 | 0.85 | % | ||||
1Expenses are equal to the Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data (or since inception (3/28/08) for Class I). The Class’ total return would have been lower had certain expenses not been waived during the period.
| 78 |
Portfolio Composition - Pro-Blend® Maximum Term Series (unaudited)
As of October 31, 2008
Asset Allocation1
1As a percentage of net assets.
2A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years.
Sector Allocation3
Information Technology | 25.58% | |
Health Care | 20.48% | |
Industrials | 12.84% | |
Consumer Discretionary | 11.69% | |
Financials | 9.10% | |
Consumer Staples | 6.71% | |
Energy | 3.17% | |
Materials | 2.65% | |
Utilities | 1.25% | |
Telecommunication Services | 0.41% |
3Including common stocks, preferred stocks and warrants, as a percentage of total investments.
Top Ten Stock Holdings4
Google, Inc. - Class A | 5.29% | |
EMC Corp. | 3.37% | |
Unilever plc - ADR (United Kingdom) | 2.83% | |
United Parcel Service, Inc. - Class B | 2.69% | |
Medtronic, Inc. | 2.60% | |
Microsoft Corp. | 2.59% | |
Johnson & Johnson | 2.51% | |
Southwest Airlines Co. | 2.50% | |
FedEx Corp. | 2.50% | |
Carnival Corp. | 2.37% |
4As a percentage of total investments.
| 79 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS - 93.84% | |||||
Consumer Discretionary - 11.69% | |||||
Auto Components - 0.03% | |||||
Hankook Tire Co. Ltd. (South Korea) (Note 7) | 12,990 | $ | 123,781 | ||
Automobiles - 0.04% | |||||
Suzuki Motor Corp. (Japan) (Note 7) | 9,700 | 138,276 | |||
Diversified Consumer Services - 0.13% | |||||
Jackson Hewitt Tax Service, Inc. | 32,550 | 448,539 | |||
Hotels, Restaurants & Leisure - 3.48% | |||||
Carnival Corp. | 321,621 | 8,169,173 | |||
Club Mediterranee S.A.* (France) (Note 7) | 6,455 | 128,330 | |||
International Game Technology | 263,575 | 3,690,050 | |||
| 11,987,553 | |||||
Household Durables - 0.97% | |||||
Corporacion Geo S.A. de C.V. - Class B* (Mexico) (Note 7) | 35,870 | 49,798 | |||
Fortune Brands, Inc. | 80,520 | 3,071,033 | |||
LG Electronics, Inc. (South Korea) (Note 7) | 1,750 | 128,118 | |||
Rodobens Negocios Imobiliarios S.A. (Brazil) (Note 7) | 30,840 | 93,303 | |||
| 3,342,252 | |||||
Leisure Equipment & Products - 0.04% | |||||
Sankyo Co. Ltd. (Japan) (Note 7) | 3,100 | 135,973 | |||
Media - 3.97% | |||||
Charter Communications, Inc. - Class A* | 1,833,590 | 806,780 | |||
Comcast Corp. - Class A | 483,834 | 7,625,224 | |||
Grupo Televisa S.A. - ADR (Mexico) (Note 7) | 9,530 | 168,300 | |||
Impresa S.A. (SGPS)* (Portugal) (Note 7) | 18,150 | 13,647 | |||
The McGraw-Hill Companies, Inc. | 9,330 | 250,417 | |||
Mediacom Communications Corp. - Class A* | 67,580 | 300,055 | |||
Mediaset S.p.A. (Italy) (Note 7) | 7,725 | 41,791 | |||
Reed Elsevier plc - ADR (United Kingdom) (Note 7) | 3,895 | 137,727 | |||
Societe Television Francaise 1 (France) (Note 7) | 14,250 | 181,421 | |||
The Walt Disney Co. | 157,760 | 4,085,984 | |||
Wolters Kluwer N.V. (Netherlands) (Note 7) | 5,100 | 89,823 | |||
| 13,701,169 | |||||
Multiline Retail - 0.02% | |||||
PPR (France) (Note 7) | 885 | 55,941 | |||
Specialty Retail - 2.97% | |||||
The Home Depot, Inc. | 205,340 | 4,843,971 | |||
| 80 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Consumer Discretionary (continued) | |||||
Specialty Retail (continued) | |||||
KOMERI Co. Ltd. (Japan) (Note 7) | 3,700 | $ | 82,084 | ||
Lowe’s Companies, Inc. | 226,370 | 4,912,229 | |||
Tractor Supply Co.* | 7,679 | 319,139 | |||
Valora Holding AG (Switzerland) (Note 7) | 480 | 69,352 | |||
| 10,226,775 | |||||
Textiles, Apparel & Luxury Goods - 0.04% | |||||
Adidas AG (Germany) (Note 7) | 1,870 | 64,678 | |||
LVMH S.A. (Louis Vuitton Moet Hennessy) (France) (Note 7) | 1,000 | 66,097 | |||
| 130,775 | |||||
Total Consumer Discretionary | 40,291,034 | ||||
Consumer Staples - 6.68% | |||||
Beverages - 0.16% | |||||
Carlsberg A/S - Class B (Denmark) (Note 7) | 2,900 | 114,191 | |||
Diageo plc (United Kingdom) (Note 7) | 6,410 | 98,084 | |||
Heineken N.V. (Netherlands) (Note 7) | 7,100 | 238,241 | |||
Kirin Holdings Co. Ltd. (Japan) (Note 7) | 8,000 | 86,669 | |||
| 537,185 | |||||
Food & Staples Retailing - 0.20% | |||||
BJ’s Wholesale Club, Inc.* | 4,360 | 153,472 | |||
Carrefour S.A. (France) (Note 7) | 7,000 | 293,674 | |||
Casino Guichard-Perrachon S.A. (France) (Note 7) | 1,550 | 107,655 | |||
Tesco plc (United Kingdom) (Note 7) | 26,120 | 142,641 | |||
| 697,442 | |||||
Food Products - 5.17% | |||||
Cadbury plc (United Kingdom) (Note 7) | 24,554 | 224,403 | |||
Dean Foods Co.* | 149,250 | 3,262,605 | |||
Groupe Danone (France) (Note 7) | 2,500 | 138,400 | |||
Nestle S.A. (Switzerland) (Note 7) | 111,560 | 4,330,372 | |||
Sanderson Farms, Inc. | 1,980 | 61,816 | |||
Suedzucker AG (Germany) (Note 7) | 4,050 | 45,110 | |||
Unilever plc - ADR (United Kingdom) | 432,793 | 9,763,810 | |||
| 17,826,516 | |||||
Household Products - 0.05% | |||||
Kao Corp. (Japan) (Note 7) | 2,000 | 57,265 | |||
Reckitt Benckiser Group plc (United Kingdom) (Note 7) | 3,060 | 128,505 | |||
| 185,770 | |||||
| The accompanying notes are an integral part of the financial statements. | 81 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Consumer Staples (continued) | |||||
Personal Products - 1.10% | |||||
L’Oreal S.A. (France) (Note 7) | 49,055 | $ | 3,689,378 | ||
Natura Cosmeticos S.A. (Brazil) (Note 7) | 11,864 | 99,734 | |||
| 3,789,112 | |||||
Total Consumer Staples | 23,036,025 | ||||
Energy - 3.17% | |||||
Energy Equipment & Services - 3.01% | |||||
Baker Hughes, Inc. | 123,117 | 4,302,939 | |||
Calfrac Well Services Ltd. (Canada) (Note 7) | 24,560 | 310,262 | |||
Compagnie Generale de Geophysique - Veritas (CGG - Veritas)* (France) (Note 7) | 14,050 | 223,996 | |||
Dril-Quip, Inc.* | 2,140 | 52,858 | |||
Trican Well Service Ltd. (Canada) (Note 7) | 16,100 | 151,004 | |||
Weatherford International Ltd.* | 314,756 | 5,313,081 | |||
| 10,354,140 | |||||
Oil, Gas & Consumable Fuels - 0.16% | |||||
BP plc (United Kingdom) (Note 7) | 9,950 | 81,209 | |||
Edge Petroleum Corp.* | 25,910 | 15,287 | |||
Eni S.p.A. (Italy) (Note 7) | 7,887 | 186,249 | |||
Forest Oil Corp.* | 1,750 | 51,118 | |||
Mariner Energy, Inc.* | 1,375 | 19,786 | |||
Royal Dutch Shell plc - Class B (Netherlands) (Note 7) | 3,414 | 91,132 | |||
Total S.A. (France) (Note 7) | 2,200 | 120,040 | |||
| 564,821 | |||||
Total Energy | 10,918,961 | ||||
Financials - 9.10% | |||||
Capital Markets - 1.59% | |||||
Bank of New York Mellon Corp.1 | 7,500 | 244,500 | |||
The Charles Schwab Corp. | 6,200 | 118,544 | |||
Daiwa Securities Group, Inc. (Japan) (Note 7) | 4,000 | 21,891 | |||
Franklin Resources, Inc. | 3,605 | 245,140 | |||
Janus Capital Group, Inc. | 6,470 | 75,958 | |||
Nomura Holdings, Inc. (Japan) (Note 7) | 2,300 | 21,064 | |||
SEI Investments Co. | 263,280 | 4,654,790 | |||
T. Rowe Price Group, Inc. | 2,560 | 101,222 | |||
| 5,483,109 | |||||
Commercial Banks - 5.13% | |||||
The Bancorp, Inc.* | 20,760 | 77,642 | |||
BNP Paribas (France) (Note 7) | 1,403 | 100,127 | |||
| 82 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Financials (continued) | |||||
Commercial Banks (continued) | |||||
The Chugoku Bank Ltd. (Japan) (Note 7) | 7,300 | $ | 98,949 | ||
Commerzbank AG (Germany) (Note 7) | 3,075 | 33,388 | |||
Credit Agricole S.A. (France) (Note 7) | 2,840 | 40,663 | |||
The Hachijuni Bank Ltd. (Japan) (Note 7) | 13,400 | 64,762 | |||
HSBC Holdings plc (United Kingdom) (Note 7) | 15,557 | 190,739 | |||
HSBC Holdings plc - ADR (United Kingdom) (Note 7) | 5,678 | 335,002 | |||
Huntington Bancshares, Inc. | 11,045 | 104,375 | |||
KeyCorp | 15,498 | 189,541 | |||
Mitsubishi UFJ Financial Group, Inc. (Japan) (Note 7) | 6,000 | 36,430 | |||
PNC Financial Services Group, Inc. | 110,066 | 7,338,100 | |||
Societe Generale (France) (Note 7) | 1,475 | 79,278 | |||
Societe Generale - ADR (France) (Note 7) | 10,860 | 117,288 | |||
The Sumitomo Trust & Banking Co. Ltd. (Japan) (Note 7) | 12,000 | 53,366 | |||
SunTrust Banks, Inc. | 1,905 | 76,467 | |||
TCF Financial Corp. | 17,800 | 315,772 | |||
U.S. Bancorp | 268,987 | 8,018,502 | |||
UniCredito Italiano S.p.A. (Italy) (Note 7) | 26,122 | 62,885 | |||
Webster Financial Corp. | 5,160 | 95,666 | |||
Wilmington Trust Corp. | 8,360 | 241,270 | |||
| 17,670,212 | |||||
Consumer Finance - 1.14% | |||||
American Express Co. | 133,940 | 3,683,350 | |||
Capital One Financial Corp. | 6,565 | 256,823 | |||
| 3,940,173 | |||||
Diversified Financial Services - 0.54% | |||||
Financiere Marc de Lacharriere S.A. (Fimalac) (France) (Note 7) | 5,100 | 220,787 | |||
ING Groep N.V. (Netherlands) (Note 7) | 3,225 | 29,736 | |||
JPMorgan Chase & Co. | 14,321 | 590,741 | |||
Moody’s Corp. | 39,080 | 1,000,448 | |||
| 1,841,712 | |||||
Insurance - 0.62% | |||||
Allianz SE (Germany) (Note 7) | 4,248 | 322,059 | |||
Axa (France) (Note 7) | 2,675 | 50,624 | |||
Brown & Brown, Inc. | 6,920 | 141,998 | |||
First American Corp. | 11,250 | 229,613 | |||
| The accompanying notes are an integral part of the financial statements. | 83 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Financials (continued) | |||||
Insurance (continued) | |||||
LandAmerica Financial Group, Inc. | 14,420 | $ | 142,037 | ||
Muenchener Rueckver AG (Germany) (Note 7) | 1,773 | 237,250 | |||
The Progressive Corp. | 31,480 | 449,220 | |||
Torchmark Corp. | 5,550 | 231,824 | |||
Willis Group Holdings Ltd. (United Kingdom) (Note 7) | 12,765 | 334,954 | |||
| 2,139,579 | |||||
Real Estate Investment Trusts (REITS) - 0.03% | |||||
Alstria Office REIT AG (Germany) (Note 7) | 13,000 | 83,499 | |||
Thrifts & Mortgage Finance - 0.05% | |||||
Aareal Bank AG (Germany) (Note 7) | 8,327 | 67,917 | |||
First Niagara Financial Group, Inc. | 7,360 | 116,067 | |||
| 183,984 | |||||
Total Financials | 31,342,268 | ||||
Health Care - 20.48% | |||||
Biotechnology - 1.81% | |||||
Amgen, Inc.* | 43,806 | 2,623,541 | |||
Celera Corp.* | 40,580 | 458,960 | |||
Crucell NV - ADR* (Netherlands) (Note 7) | 21,000 | 244,440 | |||
Genomic Health, Inc.* | 15,470 | 285,112 | |||
Genzyme Corp.* | 32,263 | 2,351,327 | |||
Medarex, Inc.* | 16,500 | 115,995 | |||
QLT, Inc.* (Canada) (Note 7) | 51,790 | 134,136 | |||
Senomyx, Inc.* | 15,362 | 38,405 | |||
| 6,251,916 | |||||
Health Care Equipment & Supplies - 6.59% | |||||
Abaxis, Inc.* | 22,520 | 346,132 | |||
Align Technology, Inc.* | 49,440 | 342,619 | |||
Alsius Corp.*2 | 46,698 | 32,689 | |||
AtriCure, Inc.* | 16,790 | 108,631 | |||
Beckman Coulter, Inc. | 8,620 | 430,310 | |||
Becton, Dickinson and Co. | 58,770 | 4,078,638 | |||
C.R. Bard, Inc. | 4,120 | 363,590 | |||
Covidien Ltd. (Bermuda) (Note 7) | 12,400 | 549,196 | |||
DENTSPLY International, Inc. | 12,950 | 393,421 | |||
Dexcom, Inc.* | 64,524 | 291,648 | |||
Gen-Probe, Inc.* | 8,500 | 400,010 | |||
IDEXX Laboratories, Inc.* | 6,450 | 226,976 | |||
Inverness Medical Innovations, Inc.* | 153,235 | 2,934,450 | |||
| 84 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Health Care (continued) | |||||
Health Care Equipment & Supplies (continued) | |||||
Medtronic, Inc. | 222,228 | $ | 8,962,455 | ||
Micrus Endovascular Corp.* | 18,058 | 213,084 | |||
Nobel Biocare Holding AG (Switzerland) (Note 7) | 5,550 | 94,838 | |||
OraSure Technologies, Inc.* | 153,636 | 708,262 | |||
Sirona Dental Systems, Inc.* | 26,430 | 422,087 | |||
STAAR Surgical Co.* | 66,780 | 164,279 | |||
Straumann Holding AG (Switzerland) (Note 7) | 2,544 | 430,108 | |||
Synthes, Inc. | 7,660 | 986,490 | |||
Zimmer Holdings, Inc.* | 4,750 | 220,543 | |||
| 22,700,456 | |||||
Health Care Providers & Services - 2.44% | |||||
Bumrungrad Hospital Public Co. Ltd. - NVDR (Thailand) (Note 7) | 124,000 | 77,876 | |||
Diagnosticos da America S.A. (Brazil) (Note 7) | 35,980 | 418,797 | |||
Quest Diagnostics, Inc. | 155,330 | 7,269,444 | |||
Sonic Healthcare Ltd. (Australia) (Note 7) | 68,950 | 627,968 | |||
| 8,394,085 | |||||
Health Care Technology - 1.34% | |||||
Cerner Corp.* | 124,213 | 4,624,450 | |||
Life Sciences Tools & Services - 3.31% | |||||
Caliper Life Sciences, Inc.* | 184,520 | 258,328 | |||
Exelixis, Inc.* | 85,380 | 293,707 | |||
Lonza Group AG (Switzerland) (Note 7) | 19,400 | 1,606,487 | |||
Luminex Corp.* | 37,100 | 691,915 | |||
Millipore Corp.* | 63,850 | 3,313,177 | |||
PerkinElmer, Inc. | 270,471 | 4,852,250 | |||
QIAGEN N.V.* (Netherlands) (Note 7) | 27,190 | 387,729 | |||
| 11,403,593 | |||||
Pharmaceuticals - 4.99% | |||||
Abbott Laboratories | 5,010 | 276,302 | |||
AstraZeneca plc (United Kingdom) (Note 7) | 675 | 28,564 | |||
AstraZeneca plc - ADR (United Kingdom) (Note 7) | 1,500 | 63,690 | |||
Bayer AG (Germany) (Note 7) | 5,746 | 322,932 | |||
GlaxoSmithKline plc (United Kingdom) (Note 7) | 6,775 | 130,486 | |||
Johnson & Johnson | 140,950 | 8,645,873 | |||
Mylan, Inc.* | 44,370 | 380,251 | |||
Novartis AG - ADR (Switzerland) (Note 7) | 136,487 | 6,959,472 | |||
| The accompanying notes are an integral part of the financial statements. | 85 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Health Care (continued) | |||||
Pharmaceuticals (continued) | |||||
Sanofi-Aventis (France) (Note 7) | 837 | $ | 52,726 | ||
Santen Pharmaceutical Co. Ltd. (Japan) (Note 7) | 5,500 | 138,491 | |||
Shire plc (United Kingdom) (Note 7) | 9,080 | 119,654 | |||
Takeda Pharmaceutical Co. Ltd. (Japan) (Note 7) | 1,400 | 68,657 | |||
| 17,187,098 | |||||
Total Health Care | 70,561,598 | ||||
Industrials - 12.84% | |||||
Aerospace & Defense - 0.11% | |||||
Empresa Brasileira de Aeronautica S.A. (Embraer) - ADR (Brazil) (Note 7) | 11,610 | 242,881 | |||
Hexcel Corp.* | 10,360 | 136,752 | |||
| 379,633 | |||||
Air Freight & Logistics - 5.26% | |||||
Deutsche Post AG (Germany) (Note 7) | 4,985 | 54,889 | |||
FedEx Corp. | 131,540 | 8,598,770 | |||
TNT N.V. (Netherlands) (Note 7) | 9,504 | 197,425 | |||
United Parcel Service, Inc. - Class B | 175,663 | 9,271,493 | |||
| 18,122,577 | |||||
Airlines - 3.26% | |||||
AirTran Holdings, Inc.* | 14,860 | 60,777 | |||
Deutsche Lufthansa AG (Germany) (Note 7) | 8,080 | 113,166 | |||
JetBlue Airways Corp.* | 441,852 | 2,452,279 | |||
Southwest Airlines Co. | 730,697 | 8,607,611 | |||
| 11,233,833 | |||||
Building Products - 0.06% | |||||
Owens Corning, Inc.* | 12,930 | 203,389 | |||
Commercial Services & Supplies - 0.10% | |||||
Tomra Systems ASA (Norway) (Note 7) | 77,800 | 360,624 | |||
Electrical Equipment - 0.07% | |||||
ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland) (Note 7) | 11,260 | 148,069 | |||
General Cable Corp.* | 2,920 | 49,874 | |||
Nexans S.A. (France) (Note 7) | 820 | 46,419 | |||
| 244,362 | |||||
Industrial Conglomerates - 2.26% | |||||
3M Co. | 116,255 | 7,475,197 | |||
| 86 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Industrials (continued) | |||||
Industrial Conglomerates (continued) | |||||
Siemens AG (Germany) (Note 7) | 4,470 | $ | 270,360 | ||
Sonae Capital S.A. (SGPS)* (Portugal) (Note 7) | 4,159 | 4,293 | |||
Sonae S.A. (SGPS) (Portugal) (Note 7) | 33,275 | 20,355 | |||
| 7,770,205 | |||||
Machinery - 0.10% | |||||
FANUC Ltd. (Japan) (Note 7) | 900 | 58,118 | |||
FreightCar America, Inc. | 8,000 | 208,880 | |||
Schindler Holding AG (Switzerland) (Note 7) | 2,102 | 90,658 | |||
| 357,656 | |||||
Professional Services - 0.10% | |||||
Equifax, Inc. | 4,110 | 107,189 | |||
Experian plc (Ireland) (Note 7) | 41,540 | 228,253 | |||
| 335,442 | |||||
Road & Rail - 1.50% | |||||
Heartland Express, Inc. | 94,170 | 1,444,568 | |||
J.B. Hunt Transport Services, Inc. | 79,210 | 2,251,940 | |||
Knight Transportation, Inc. | 91,890 | 1,461,051 | |||
| 5,157,559 | |||||
Trading Companies & Distributors - 0.02% | |||||
Rush Enterprises, Inc. - Class A* | 7,590 | 71,118 | |||
Total Industrials | 44,236,398 | ||||
Information Technology - 25.57% | |||||
Communications Equipment - 5.36% | |||||
Alcatel-Lucent - ADR* (France) (Note 7) | 109,100 | 280,387 | |||
BigBand Networks, Inc.* | 91,010 | 336,737 | |||
Blue Coat Systems, Inc.* | 42,550 | 574,425 | |||
Ceragon Networks Ltd.* (Israel) (Note 7) | 42,580 | 240,577 | |||
Cisco Systems, Inc.* | 459,590 | 8,166,914 | |||
Harris Stratex Networks, Inc. - Class A* | 29,730 | 197,110 | |||
Infinera Corp.* | 56,000 | 435,680 | |||
Juniper Networks, Inc.* | 222,998 | 4,178,983 | |||
Nokia (Finland) (Note 7) | 237,850 | 3,610,563 | |||
Riverbed Technology, Inc.* | 35,080 | 439,552 | |||
| 18,460,928 | |||||
Computers & Peripherals - 3.42% | |||||
EMC Corp.* | 986,170 | 11,617,083 | |||
Rackable Systems, Inc.* | 26,370 | 188,018 | |||
| 11,805,101 | |||||
| The accompanying notes are an integral part of the financial statements. | 87 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Information Technology (continued) | |||||
Electronic Equipment, Instruments & Components - 0.15% | |||||
KEYENCE Corp. (Japan) (Note 7) | 220 | $ | 41,346 | ||
LoJack Corp.* | 76,166 | 332,845 | |||
Planar Systems, Inc.* | 78,160 | 156,320 | |||
| 530,511 | |||||
Internet Software & Services - 5.29% | |||||
Google, Inc. - Class A* | 50,692 | 18,216,677 | |||
IT Services - 1.55% | |||||
Automatic Data Processing, Inc. | 131,302 | 4,589,005 | |||
Gevity HR, Inc. | 95,980 | 327,292 | |||
Online Resources Corp.* | 50,110 | 175,385 | |||
Paychex, Inc. | 8,805 | 251,295 | |||
| 5,342,977 | |||||
Semiconductors & Semiconductor Equipment - 2.25% | |||||
ASML Holding N.V. (Netherlands) (Note 7) | 110,590 | 1,916,735 | |||
ASML Holding N.V. - New York Registered Shares (Netherlands) (Note 7) | 16,870 | 296,069 | |||
Hynix Semiconductor, Inc.* (South Korea) (Note 7) | 3,260 | 27,276 | |||
KLA-Tencor Corp. | 76,630 | 1,781,648 | |||
Lam Research Corp.* | 77,420 | 1,731,111 | |||
Netlogic Microsystems, Inc.* | 16,430 | 347,002 | |||
Taiwan Semiconductor Manufacturing Co. Ltd. - ADR (Taiwan) (Note 7) | 10,004 | 82,633 | |||
Tokyo Electron Limited (Japan) (Note 7) | 48,000 | 1,564,423 | |||
| 7,746,897 | |||||
Software - 7.55% | |||||
Aladdin Knowledge Systems Ltd.* (Israel) (Note 7) | 32,063 | 355,579 | |||
Amdocs Ltd.* (Guernsey) (Note 7) | 26,470 | 597,163 | |||
Autodesk, Inc.* | 153,920 | 3,280,035 | |||
Electronic Arts, Inc.* | 242,310 | 5,519,822 | |||
Intuit, Inc.* | 15,120 | 378,907 | |||
Microsoft Corp. | 400,100 | 8,934,233 | |||
Misys plc (United Kingdom) (Note 7) | 22,890 | 40,605 | |||
SAP AG (Germany) (Note 7) | 3,200 | 113,493 | |||
SAP AG - ADR (Germany) (Note 7) | 176,780 | 6,245,637 | |||
Sonic Solutions* | 61,330 | 125,113 | |||
Square Enix Holdings Co. Ltd. (Japan) | 4,600 | 114,428 | |||
THQ, Inc.* | 9,310 | 69,360 | |||
| 88 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares | Value (Note 2) | |||
COMMON STOCKS (continued) | |||||
Information Technology (continued) | |||||
Software (continued) | |||||
UbiSoft Entertainment S.A.* (France) (Note 7) | 4,742 | $ | 248,800 | ||
| 26,023,175 | |||||
Total Information Technology | 88,126,266 | ||||
Materials - 2.65% | |||||
Chemicals - 0.85% | |||||
Arkema (France) (Note 7) | 40 | 909 | |||
Calgon Carbon Corp.* | 12,448 | 165,807 | |||
Monsanto Co. | 30,060 | 2,674,739 | |||
The Scotts Miracle-Gro Co. - Class A | 3,280 | 85,674 | |||
| 2,927,129 | |||||
Containers & Packaging - 0.03% | |||||
Bemis Co., Inc. | 4,610 | 114,512 | |||
Paper & Forest Products - 1.77% | |||||
Louisiana-Pacific Corp. | 2,730 | 13,104 | |||
Norbord, Inc. (Canada) (Note 7) | 70,027 | 109,853 | |||
Weyerhaeuser Co. | 155,830 | 5,955,823 | |||
| 6,078,780 | |||||
Total Materials | 9,120,421 | ||||
Telecommunication Services - 0.41% | |||||
Diversified Telecommunication Services - 0.10% | |||||
France Telecom S.A. (France) (Note 7) | 7,070 | 177,498 | |||
Swisscom AG - ADR (Switzerland) (Note 7) | 4,606 | 138,641 | |||
Telenor ASA - ADR (Norway) (Note 7) | 1,950 | 34,418 | |||
| 350,557 | |||||
Wireless Telecommunication Services - 0.31% | |||||
American Tower Corp.* | 4,000 | 129,240 | |||
Crown Castle International Corp.* | 11,580 | 245,149 | |||
Hutchison Telecommunications International Ltd.* (Hong Kong) (Note 7) | 95,000 | 102,725 | |||
SBA Communications Corp.* | 7,560 | 158,684 | |||
SK Telecom Co. Ltd. - ADR (South Korea) | 25,150 | 432,832 | |||
| 1,068,630 | |||||
Total Telecommunication Services | 1,419,187 | ||||
Utilities - 1.25% | |||||
Electric Utilities - 0.08% | |||||
E.ON AG (Germany) (Note 7) | 7,050 | 272,142 | |||
| The accompanying notes are an integral part of the financial statements. | 89 |
Investment Portfolio - October 31, 2008
| Pro-Blend® Maximum Term Series | Shares/ Principal Amount | Value (Note 2) | ||||
COMMON STOCKS (continued) | ||||||
Utilities (continued) | ||||||
Independent Power Producers & Energy Traders - 1.07% | ||||||
Mirant Corp.* | 210,190 | $ | 3,682,529 | |||
Multi-Utilities - 0.06% | ||||||
GDF Suez (France) (Note 7) | 2,184 | 96,455 | ||||
National Grid plc (United Kingdom) (Note 7) | 11,210 | 126,890 | ||||
| 223,345 | ||||||
Water Utilities - 0.04% | ||||||
Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) (Brazil) (Note 7) | 6,976 | 79,910 | ||||
Companhia de Saneamento de Minas Gerais - Copasa MG (Brazil) (Note 7) | 9,850 | 62,330 | ||||
| 142,240 | ||||||
Total Utilities | 4,320,256 | |||||
TOTAL COMMON STOCKS | 323,372,414 | |||||
PREFERRED STOCKS - 0.03% | ||||||
Consumer Staples - 0.03% | ||||||
Household Products - 0.03% | ||||||
Henkel AG & Co. KGaA (Germany) (Note 7) | 3,490 | 100,162 | ||||
WARRANTS - 0.00%** | ||||||
Health Care - 0.00%** | ||||||
Life Sciences Tools & Services - 0.00%** | ||||||
Caliper Life Sciences, Inc., 8/10/2011 | 4,132 | 1,074 | ||||
U.S. TREASURY BONDS - 2.54% | ||||||
U.S. Treasury Bond, 5.375%, 2/15/2031 | $ | 8,000,000 | 8,753,128 | |||
SHORT-TERM INVESTMENTS - 3.58% | ||||||
Dreyfus Treasury and Agency Cash Management - Institutional Shares | 12,350,552 | 12,350,552 | ||||
TOTAL INVESTMENTS - 99.99% | 344,577,330 | |||||
OTHER ASSETS, LESS LIABILITIES - 0.01% | 34,961 | |||||
NET ASSETS - 100% | $ | 344,612,291 | ||||
| 90 | The accompanying notes are an integral part of the financial statements. |
Investment Portfolio - October 31, 2008
*Non-income producing security
**Less than 0.01%
ADR - American Depository Receipt
NVDR - Non-Voting Depository Receipt
1Bank of New York Mellon Corp. is the Fund’s custodian.
2The Chairman and CEO of the company serves as a director of the Fund (see Note 2 to the financial statements).
| The accompanying notes are an integral part of the financial statements. | 91 |
Statement of Assets and Liabilities - Pro-Blend® Maximum Term Series
October 31, 2008
ASSETS: | ||||
Investments, at value (identified cost $451,842,723) (Note 2) | $ | 344,577,330 | ||
Foreign currency, at value (cost $441,928) | 414,316 | |||
Receivable for securities sold | 4,487,531 | |||
Receivable for fund shares sold | 546,311 | |||
Foreign tax reclaims receivable | 113,513 | |||
Dividends receivable | 102,426 | |||
Interest receivable | 91,141 | |||
TOTAL ASSETS | 350,332,568 | |||
| LIABILITIES: | ||||
Accrued shareholder service fees (Class S) (Note 3) | 74,453 | |||
Accrued management fees (Note 3) | 43,353 | |||
Accrued fund accounting and transfer agent fees (Note 3) | 33,969 | |||
Accrued directors’ fees (Note 3) | 2,000 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 565 | |||
Payable for securities purchased | 5,392,199 | |||
Payable for fund shares repurchased | 101,727 | |||
Audit fees payable | 32,692 | |||
Accrued printing and postage fees | 28,520 | |||
Other payables and accrued expenses | 10,799 | |||
TOTAL LIABILITIES | 5,720,277 | |||
TOTAL NET ASSETS | $ | 344,612,291 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 300,851 | ||
Additional paid-in-capital | 494,825,131 | |||
Undistributed net investment income | 2,357,782 | |||
Accumulated net realized loss on investments, foreign currency and other assets and liabilities | (45,575,167 | ) | ||
Net unrealized depreciation on investments, foreign currency and other assets and liabilities | (107,296,306 | ) | ||
TOTAL NET ASSETS | $ | 344,612,291 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS S ($342,014,903/29,741,832 shares) | $ | 11.50 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS I ($2,597,388/343,219 shares) | $ | 7.57 | ||
| 92 | The accompanying notes are an integral part of the financial statements. |
Statement of Operations - Pro-Blend® Maximum Term Series
For the Year Ended October 31, 2008
INVESTMENT INCOME: | ||||
Dividends (net of foreign tax withheld, $181,046) | $ | 7,320,415 | ||
Interest | 1,413,797 | |||
Total Investment Income | 8,734,212 | |||
| EXPENSES: | ||||
Management fees (Note 3) | 3,916,217 | |||
Shareholder service fees (Class S) (Note 3) | 754,361 | |||
Fund accounting and transfer agent fees (Note 3) | 378,317 | |||
Directors’ fees (Note 3) | 12,079 | |||
Chief Compliance Officer service fees (Note 3) | 4,681 | |||
Custodian fees | 43,899 | |||
Miscellaneous | 217,698 | |||
Total Expenses | 5,327,252 | |||
Less reduction of expenses (Note 3) | (181,925 | ) | ||
Net Expenses | 5,145,327 | |||
NET INVESTMENT INCOME | 3,588,885 | |||
| REALIZED AND UNREALIZED LOSS ON INVESTMENTS: | ||||
Net realized loss on - | ||||
Investments | (44,336,443 | ) | ||
Foreign currency and other assets and liabilities | (25,437 | ) | ||
| (44,361,880 | ) | |||
Net change in unrealized appreciation (depreciation) on - | ||||
Investments | (140,846,095 | ) | ||
Foreign currency and other assets and liabilities | (38,404 | ) | ||
| (140,884,499 | ) | |||
NET REALIZED AND UNREALIZED LOSS ON | (185,246,379 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM | $ | (181,657,494 | ) | |
| The accompanying notes are an integral part of the financial statements. | 93 |
Statements of Changes in Net Assets - Pro-Blend® Maximum Term Series
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||
| INCREASE (DECREASE) IN NET ASSETS: | ||||||||
| OPERATIONS: | ||||||||
Net investment income | $ | 3,588,885 | $ | 2,723,776 | ||||
Net realized gain (loss) on investments and foreign currency | (44,361,880 | ) | 50,353,082 | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (140,884,499 | ) | (754,525 | ) | ||||
Net increase (decrease) from operations | (181,657,494 | ) | 52,322,333 | |||||
| DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
From net investment income (Class S) | (2,811,804 | ) | (2,695,726 | ) | ||||
From net investment income (Class I) | (13,150 | ) | — | |||||
From net realized gain on investments (Class S) | (51,012,468 | ) | (19,147,965 | ) | ||||
Total distributions to shareholders | (53,837,422 | ) | (21,843,691 | ) | ||||
| CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase from capital share transactions (Note 5) | 62,341,092 | 201,573,397 | ||||||
Net increase (decrease) in net assets | (173,153,824 | ) | 232,052,039 | |||||
| NET ASSETS: | ||||||||
Beginning of year | 517,766,115 | 285,714,076 | ||||||
End of year (including undistributed net investment income of $2,357,782 and $1,622,259, respectively) | $ | 344,612,291 | $ | 517,766,115 | ||||
| 94 | The accompanying notes are an integral part of the financial statements. |
Financial Highlights - Pro-Blend® Maximum Term Series - Class S
| For the Years Ended | ||||||||||
| 10/31/08 | 10/31/07 | 10/31/06 | 10/31/05 | 10/31/04 | ||||||
| Per share data (for a share outstanding throughout each year): | ||||||||||
Net asset value - Beginning of year | $19.57 | $18.35 | $16.79 | $15.00 | $13.05 | |||||
Income (loss) from investment operations: | ||||||||||
Net investment income | 0.12 | 0.11 | 0.14 | 0.08 | 0.04 | |||||
Net realized and unrealized gain (loss) on investments | (6.22) | 2.41 | 2.80 | 2.11 | 1.94 | |||||
Total from investment operations | (6.10) | 2.52 | 2.94 | 2.19 | 1.98 | |||||
Less distributions to shareholders: | ||||||||||
From net investment income | (0.10) | (0.15) | (0.08) | (0.05) | (0.03) | |||||
From net realized gain on investments | (1.87) | (1.15) | (1.30) | (0.35) | — | |||||
Total distributions to shareholders | (1.97) | (1.30) | (1.38) | (0.40) | (0.03) | |||||
Net asset value - End of year | $11.50 | $19.57 | $18.35 | $16.79 | $15.00 | |||||
Net assets - End of year (000’s omitted) | $342,015 | $517,766 | $285,714 | $186,547 | $131,747 | |||||
Total return1 | (34.19%) | 14.37% | 18.87% | 14.84% | 15.20% | |||||
| Ratios (to average net assets)/Supplemental Data: | ||||||||||
Expenses* | 1.10% | 1.12% | 1.16% | 1.20% | 1.20% | |||||
Net investment income | 0.77% | 0.67% | 0.94% | 0.51% | 0.31% | |||||
Series portfolio turnover | 82% | 61% | 56% | 61% | 68% | |||||
*The investment advisor did not impose all of its management fee in some years. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have been increased by the following amount: | ||||||||||
| 0.04% | N/A | N/A | 0.02% | 0.06% | ||||||
1Represents aggregate total return for the year indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during certain years.
| The accompanying notes are an integral part of the financial statements. | 95 |
Financial Highlights - Pro-Blend® Maximum Term Series - Class I
| For the Period 3/28/081 to 10/31/08 | ||
| Per share data (for a share outstanding throughout the period): | ||
Net asset value - Beginning of period | $10.00 | |
Income (loss) from investment operations: | ||
Net investment income | 0.05 | |
Net realized and unrealized loss on investments | (2.44) | |
Total from investment operations | (2.39) | |
Less distributions to shareholders: | ||
From net investment income | (0.04) | |
Net asset value - End of period | $7.57 | |
Net assets - End of period (000’s omitted) | $2,597 | |
Total return2 | (24.01%) | |
| Ratios (to average net assets)/Supplemental Data: | ||
Expenses* | 0.85%3 | |
Net investment income | 0.88%3 | |
Series portfolio turnover | 82% | |
*The investment advisor did not impose all of its management fee. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have been increased by 0.08%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. Periods less than one year are not annualized.
3Annualized.
| 96 | The accompanying notes are an integral part of the financial statements. |
Notes to Financial Statements
| 1. | ORGANIZATION |
Pro-Blend® Conservative Term Series, Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series (each the “Series”) are no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as an open-end management investment company.
The Series are asset allocation funds. Each invests in a combination of stocks, bonds and cash and is managed according to specific goals. The goals are as follows: Pro-Blend® Conservative Term Series - primary goal is preservation of capital; secondary goal is long-term growth of capital. Pro-Blend® Moderate Term Series - equal emphasis on long-term growth of capital and preservation of capital. Pro-Blend® Extended Term Series - primary goal is long-term growth of capital; secondary goal is preservation of capital. Pro-Blend® Maximum Term Series – primary goal is long-term growth of capital.
Each Series is authorized to issue six classes of shares (Class B, D, E, I, S and Z). Currently, only Class S and I shares have been issued. Each class of shares is substantially the same, except that class-specific transfer agency 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 each Series are offered to investors and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 5.0 billion shares of common stock each having a par value of $0.01. As of October 31, 2008, 3.4 billion shares have been designated in total among 27 series, of which 87.5 million have been designated as Pro-Blend® Conservative Term Series Class S common stock, 75 million have been designated as Pro-Blend® Conservative Term Series Class I common stock, 125 million each have been designated as Class S common stock and Class I common stock for Pro-Blend® Moderate Term Series, 125 million each have been designated as Class S common stock for Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series, and 200 million each have been designated as Class I common stock for Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
Security Valuation
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.
Debt securities, including government bonds, corporate bonds and mortgage-backed securities, will normally be valued on the basis of evaluated bid prices provided by the Fund’s pricing service.
Securities for which representative valuations or prices are not available from the Fund’s pricing service may be valued at fair value. 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
| 97 |
Notes to Financial Statements
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Security Valuation (continued)
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, which are valued at the closing price on the exchange.
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.
Income, expenses (other than class specific expenses), and realized and unrealized gains and losses are prorated among the classes based on the relative net assets of each class. Class specific expenses are directly charged to that Class.
The Series use the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
Foreign Currency Translation
The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series do not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized foreign currency gains and losses represent foreign currency gains and losses between trade date and settlement date on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.
Securities Purchased on a When-Issued Basis or Forward Commitment
Each Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet
| 98 |
Notes to Financial Statements
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Securities Purchased on a When-Issued Basis or Forward Commitment (continued)
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 account for such dollar rolls as purchases and sales. None of the Series had securities purchased on a when-issued basis or TBA dollar rolls outstanding as of October 31, 2008.
Restricted Securities
Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of each applicable Series’ Investment Portfolio.
Affiliated Companies
The Chairman and CEO of Alsius Corp. serves as a director of the Fund. Therefore, Alsius Corp. (formerly Ithaka Acquisition Corp.) is considered an “affiliated company”, as defined in the 1940 Act. The following transactions were effected in shares of Alsius Corp. for the year ended October 31, 2008:
| Pro-Blend® Conservative Term Series | |||||||||||||||||
Name of Issuer | Number of Shares Held as of 10/31/07 | Gross Additions | Gross Reductions | Number of Shares Held as of 10/31/08 | Value as of 10/31/08 | Investment Income | Realized Gain | ||||||||||
Alsius Corp. | 2,120 | 1,416 | — | 3,536 | $ | 2,475 | $ | — | $ | — | |||||||
Alsius Corp., 8/3/2009 Warrants* | 7,770 | — | 7,770 | — | — | — | — | ||||||||||
| 99 |
Notes to Financial Statements
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Affiliated Companies (continued)
| Pro-Blend® Moderate Term Series | |||||||||||||||||
Name of Issuer | Number of Shares Held as of 10/31/07 | Gross Additions | Gross Reductions | Number of Shares Held as of 10/31/08 | Value as of 10/31/08 | Investment Income | Realized Gain | ||||||||||
Alsius Corp. | 15,410 | 10,285 | — | 25,695 | $ | 17,986 | $ | — | $ | — | |||||||
Alsius Corp., 8/3/2009 Warrants* | 56,550 | — | 56,550 | — | — | — | — | ||||||||||
| Pro-Blend® Extended Term Series | |||||||||||||||||
Name of Issuer | Number of Shares Held as of 10/31/07 | Gross Additions | Gross Reductions | Number of Shares Held as of 10/31/08 | Value as of 10/31/08 | Investment Income | Realized Gain | ||||||||||
Alsius Corp. | 33,730 | 22,500 | — | 56,230 | $ | 39,361 | $ | — | $ | — | |||||||
Alsius Corp., 8/3/2009 Warrants* | 123,750 | — | 123,750 | — | — | — | — | ||||||||||
| Pro-Blend® Maximum Term Series | |||||||||||||||||
Name of Issuer | Number of Shares Held as of 10/31/07 | Gross Additions | Gross Reductions | Number of Shares Held as of 10/31/08 | Value as of 10/31/08 | Investment Income | Realized Gain | ||||||||||
Alsius Corp. | 30,371 | 16,327 | — | 46,698 | $ | 32,689 | $ | — | $ | — | |||||||
Alsius Corp., 8/3/2009 Warrants* | 89,790 | — | 89,790 | — | — | — | — | ||||||||||
*The warrants were exercised into new common shares of Alsius Corp. during the period.
Federal Taxes
Each Series’ policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series are not subject to federal income tax or excise tax to the extent that each Series distributes to shareholders each year its taxable income, including any net realized gains on investments, in accordance with requirements of the Internal Revenue Code. Accordingly, no provision for federal income tax or excise tax has been made in the financial statements.
On April 30, 2008, the Series adopted Financial Accounting Standards Board Interpretation No. 48 - Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being measured and recognized in the financial statements. Management has determined that the adoption of FIN 48 did not have a material impact on the Series’ financial statements. The Series files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions,
| 100 |
Notes to Financial Statements
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
Federal Taxes (continued)
as required. No income tax returns are currently under investigation. The statute of limitations on the Series’ tax returns remains open for the years ended October 31, 2005 through October 31, 2008.
Additionally, based on the Fund’s understanding of the tax rules and rates related to income, gains and transactions for foreign jurisdictions in which it invests, the Series will provide for foreign taxes, and where appropriate, deferred foreign tax
Distributions of Income and Gains
Distributions to shareholders of net investment income are made semi-annually. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of a Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
| 3. | TRANSACTIONS WITH AFFILIATES |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which each Series pays a fee, computed daily and payable monthly, at an annual rate of 0.60% for Pro-Blend® Conservative Term Series and 0.75% for Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series, of the Series’ average daily net assets. Prior to March 1, 2008, the annual advisory fee was 0.80% for Pro-Blend® Conservative Term Series and 1.00% for Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series, of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and 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.
| 101 |
Notes to Financial Statements
| 3. | TRANSACTIONS WITH AFFILIATES (continued) |
Effective March 1, 2008, Class S shares of each Series are subject to a shareholder services fee in accordance with a shareholder services plan adopted by the Fund’s Board. The shareholder services fee is intended to compensate financial intermediaries, including affiliates of the Fund, in connection with the provision of direct client service, personal services, maintenance of shareholder accounts and reporting services. For these services, Class S of each Series pays a fee, computed daily and payable monthly, at an annual rate of 0.20% for Pro-Blend® Conservative Term Series Class S and 0.25% for Pro-Blend® Moderate Term Series Class S, Pro-Blend® Extended Term Series Class S and Pro-Blend® Maximum Term Series Class S, of the Class’ average daily net assets. The Fund has a Shareholder Services Agreement with the Advisor, for which the Advisor receives the shareholder services fee as stated above.
The Advisor has contractually agreed, until at least February 28, 2010, 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 the following amounts of average daily net assets each year:
Series/Class | Expense Limit | ||
Pro-Blend® Conservative Term Series Class S | 1.00 | % | |
Pro-Blend® Conservative Term Series Class I | 0.70 | % | |
Pro-Blend® Moderate Term Series Class S | 1.20 | % | |
Pro-Blend® Moderate Term Series Class I | 0.85 | % | |
Pro-Blend® Extended Term Series Class S | 1.20 | % | |
Pro-Blend® Extended Term Series Class I | 0.85 | % | |
Pro-Blend® Maximum Term Series Class S | 1.20 | % | |
Pro-Blend® Maximum Term Series Class I | 0.85 | % |
In addition, the Advisor has voluntarily agreed to waive fees and reimburse expenses during the current fiscal year in order to keep total direct annual Fund operating expenses from exceeding 0.90% for Pro-Blend® Conservative Term Series Class S and 1.10% for Pro-Blend® Moderate Term Series Class S, Pro-Blend® Extended Term Series Class S and Pro-Blend® Maximum Term Series Class S, of the Class’ average daily net assets. The Advisor may change or eliminate all or part of its voluntary waiver at any time. For the year ended October 31, 2008, the Advisor waived the following expenses:
Series/Class | Waiver Amount | ||
Pro-Blend® Conservative Term Series Class S | $ | 63,194 | |
Pro-Blend® Conservative Term Series Class I | 4 | ||
Pro-Blend® Moderate Term Series Class S | 56,644 | ||
Pro-Blend® Moderate Term Series Class I | 24 | ||
Pro-Blend® Extended Term Series Class S | 44,992 | ||
Pro-Blend® Extended Term Series Class I | 110 | ||
Pro-Blend® Maximum Term Series Class S | 180,488 | ||
Pro-Blend® Maximum Term Series Class I | 1,437 | ||
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.
| 102 |
Notes to Financial Statements
| 3. | TRANSACTIONS WITH AFFILIATES (continued) |
For fund accounting and transfer agent services, through October 31, 2008, the Fund paid 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. Effective November 1, 2008, the fee rates are as follows: 0.055% of the Fund’s average daily net assets up to $4.5 billion, 0.03% of the Fund’s average daily net assets between $4.5 billion and $7.5 billion, and 0.02% of the Fund’s average daily net assets over $7.5 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 Citi Fund Services Ohio, Inc. (“Citi”) under which Citi serves as sub-accountant and sub-transfer agent.
| 4. | PURCHASES AND SALES OF SECURITIES |
For the year ended October 31, 2008, purchases and sales of securities, other than short-term securities, were as follows:
| Purchases | Sales | |||||||||||
Series | Other Issuers | Government | Other Issuers | Government | ||||||||
Pro-Blend® Conservative Term Series | $ | 45,904,249 | $ | 41,014,639 | $ | 25,297,301 | $ | 23,176,110 | ||||
Pro-Blend® Moderate Term Series | 139,590,727 | 51,549,009 | 158,596,201 | 113,897,739 | ||||||||
Pro-Blend® Extended Term Series | 293,731,890 | 100,672,331 | 246,261,359 | 168,802,423 | ||||||||
Pro-Blend® Maximum Term Series | 363,742,843 | 27,105,000 | 320,197,075 | 54,766,250 | ||||||||
| 5. | CAPITAL STOCK TRANSACTIONS |
Transactions in Class S and Class I shares:
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
| Pro-Blend® Conservative Term Series Class S: | ||||||||||||||
Sold | 9,686,341 | $ | 115,140,188 | 4,876,424 | $ | 60,404,387 | ||||||||
Reinvested | 530,547 | 6,344,345 | 284,828 | 3,457,488 | ||||||||||
Repurchased | (6,391,392 | ) | (75,749,834 | ) | (2,296,456 | ) | (28,414,629 | ) | ||||||
Total | 3,825,496 | $ | 45,734,699 | 2,864,796 | $ | 35,447,246 | ||||||||
| 103 |
Notes to Financial Statements
| 5. | CAPITAL STOCK TRANSACTIONS (continued) |
| For the Period 3/28/08 (commencement of operations) to 10/31/08 | |||||||
| Shares | Amount | ||||||
| Pro-Blend® Conservative Term Series Class I: | |||||||
Sold | 8,307 | $ | 76,952 | ||||
Reinvested | — | * | 2 | ||||
Repurchased | (1 | ) | (17 | ) | |||
Total | 8,306 | $ | 76,937 | ||||
* Less than 1 share.
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
| Pro-Blend® Moderate Term Series Class S: | ||||||||||||||
Sold | 7,782,766 | $ | 96,005,211 | 9,073,065 | $ | 123,510,029 | ||||||||
Reinvested | 2,667,069 | 33,443,964 | 1,322,158 | 17,558,141 | ||||||||||
Repurchased | (16,173,088 | ) | (196,886,611 | ) | (5,569,323 | ) | (76,013,590 | ) | ||||||
Total | (5,723,253 | ) | $ | (67,437,436 | ) | 4,825,900 | $ | 65,054,580 | ||||||
| For the Period 3/28/08 (commencement of operations) to 10/31/08 | |||||||
| Shares | Amount | ||||||
| Pro-Blend® Moderate Term Series Class I: | |||||||
Sold | 37,519 | $ | 340,954 | ||||
Reinvested | — | * | 2 | ||||
Repurchased | (91 | ) | (797 | ) | |||
Total | 37,428 | $ | 340,159 | ||||
* Less than 1 share.
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
| Pro-Blend® Extended Term Series Class S: | ||||||||||||||
Sold | 11,894,127 | $ | 172,115,091 | 9,943,703 | $ | 169,452,954 | ||||||||
Reinvested | 4,209,783 | 64,070,176 | 2,429,935 | 40,020,138 | ||||||||||
Repurchased | (13,438,599 | ) | (193,980,336 | ) | (7,131,585 | ) | (120,536,136 | ) | ||||||
Total | 2,665,311 | $ | 42,204,931 | 5,242,053 | $ | 88,936,956 | ||||||||
| 104 |
Notes to Financial Statements
| 5. | CAPITAL STOCK TRANSACTIONS (continued) |
| For the Period 3/28/08 (commencement of operations) to 10/31/08 | |||||||
| Shares | Amount | ||||||
| Pro-Blend® Extended Term Series Class I: | |||||||
Sold | 135,225 | $ | 1,358,275 | ||||
Reinvested | 657 | 6,624 | |||||
Repurchased | (2,078 | ) | (16,347 | ) | |||
Total | 133,804 | $ | 1,348,552 | ||||
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||
| Pro-Blend® Maximum Term Series Class S: | ||||||||||||||
Sold | 10,653,804 | $ | 166,873,813 | 14,828,132 | $ | 275,616,079 | ||||||||
Reinvested | 3,228,443 | 53,214,698 | 1,211,084 | 21,749,413 | ||||||||||
Repurchased | (10,596,526 | ) | (160,847,579 | ) | (5,151,684 | ) | (95,792,095 | ) | ||||||
Total | 3,285,721 | $ | 59,240,932 | 10,887,532 | $ | 201,573,397 | ||||||||
| For the Period 3/28/08 (commencement of operations) to 10/31/08 | |||||||
| Shares | Amount | ||||||
| Pro-Blend® Maximum Term Series Class I: | |||||||
Sold | 341,941 | $ | 3,087,078 | ||||
Reinvested | 1,285 | 13,150 | |||||
Repurchased | (7 | ) | (68 | ) | |||
Total | 343,219 | $ | 3,100,160 | ||||
| 6. | FINANCIAL INSTRUMENTS |
Each of the Series may trade in financial instruments with off-balance sheet risk in the normal course of their investing activities to assist in managing exposure to various market risks. These financial instruments include written options, forward foreign currency exchange contracts and futures contracts and may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. No such investments were held by any of the Series on October 31, 2008.
| 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
| 105 |
Notes to Financial Statements
| 7. | FOREIGN SECURITIES (continued) |
political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the United States Government.
| 8. | FEDERAL INCOME TAX INFORMATION |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses, losses deferred due to wash sales and market discount. Each Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
| Pro-Blend® Conservative Term Series | Pro-Blend® Moderate Term Series | |||||||||
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||
Ordinary income | 3,868,243 | $ | 2,566,142 | 13,982,331 | $ | 10,202,367 | ||||
Long-term capital gains | 2,577,655 | 922,976 | 19,725,393 | 7,491,703 | ||||||
| Pro-Blend® Extended Term Series | Pro-Blend® Maximum Term Series | |||||||||
| For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | For the Year Ended 10/31/08 | For the Year Ended 10/31/07 | |||||||
Ordinary income | 18,545,376 | $ | 16,544,877 | 23,424,978 | $ | 7,856,689 | ||||
Long-term capital gains | 46,871,453 | 24,181,295 | 30,412,444 | 13,987,002 | ||||||
At October 31, 2008, the tax basis components of distributable earnings and the net unrealized depreciation based on identified cost for federal income tax purposes were as follows:
| Pro-Blend® Conservative Term Series | Pro-Blend® Moderate Term Series | Pro-Blend® Extended Term Series | Pro-Blend® Maximum Term Series | |||||||||||||
Cost for federal income tax purposes | $ | 144,545,909 | $ | 254,827,089 | $ | 519,148,334 | $ | 453,039,000 | ||||||||
Unrealized appreciation | $ | 2,577,998 | $ | 3,008,816 | $ | 7,162,765 | $ | 2,798,476 | ||||||||
Unrealized depreciation | (10,650,670 | ) | (38,725,229 | ) | (102,946,347 | ) | (111,260,146 | ) | ||||||||
Net unrealized depreciation | $ | (8,072,672 | ) | $ | (35,716,413 | ) | $ | (95,783,582 | ) | $ | (108,461,670 | ) | ||||
Undistributed ordinary income | 1,882,651 | 3,168,827 | 5,263,942 | 2,357,782 | ||||||||||||
Capital loss carryover | 2,125,221 | 6,948,431 | 6,778,639 | 44,378,890 | ||||||||||||
The capital loss carryover, disclosed above, available to the extent allowed by tax law to offset future net capital gain, if any, will expire on October 31, 2016.
| 106 |
Notes to Financial Statements
| 9. | RECENT ACCOUNTING PRONOUNCEMENTS |
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.
In September 2008, FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45” (the “Position”) was issued. The Position amends FASB Statement No. 133 (“FAS 133”), Accounting for Derivative Instruments and Hedging Activities, and also amends FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The amendments to FAS 133 include required disclosure for (i) the nature and terms of the credit derivative, reasons for entering into the credit derivative, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment performance risk of the credit derivative, (ii) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative, (iii) the fair value of the credit derivative, and (iv) the nature of any recourse provisions and assets held either as collateral or by third parties. The amendments to FIN 45 require additional disclosures about the current status of the payment/performance risk of a guarantee. At this time, Management is evaluating the implications of FAS 133-1 and FIN 45-4, but it is not expected to materially impact the Series’ financial statements.
In March 2008, FASB Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”) was issued and is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about the Series’ derivative and hedging activities, including how such activities are accounted for and their effect on the Series’ financial position and performance. Management is currently evaluating the impact of the adoption of FAS 161, but it is not expected to materially impact the Series’ financial statements.
| 107 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of - Pro-Blend® Conservative Term Series, Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series:
In our opinion, the accompanying statements of assets and liabilities, including the investment portfolios, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Pro-Blend® Conservative Term Series, Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series and Pro-Blend® Maximum Term Series (each a series of Manning & Napier Fund, Inc., hereafter collectively referred to as the “Series”) at October 31, 2008, and the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2008 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
Columbus, Ohio
December 12, 2008
| 108 |
Supplemental Tax Information (unaudited)
For federal income tax purposes, each of the Series designates for the current fiscal year the amount disclosed below or, if different, the maximum amount allowable under the tax law as qualified dividend income (“QDI”).
Series | QDI | ||
Pro-Blend® Conservative Term Series | $ | 325,245 | |
Pro-Blend® Moderate Term Series | 2,091,842 | ||
Pro-Blend® Extended Term Series | 5,124,746 | ||
Pro-Blend® Maximum Term Series | 4,984,153 | ||
Pursuant to Section 852 of the Internal Revenue Code, as amended, the Series hereby designates the long-term capital gains disclosed as capital gains for its taxable year ended October 31, 2008.
Series | Capital Gains | |
Pro-Blend® Conservative Term Series | 2,577,655 | |
Pro-Blend® Moderate Term Series | 19,725,393 | |
Pro-Blend® Extended Term Series | 46,871,453 | |
Pro-Blend® Maximum Term Series | 30,412,444 |
For corporate shareholders, the percentage of investment income (dividend income plus short-term gain, if any) that qualifies for the dividends received deduction (DRD) for the current fiscal year is as follows:
Series | DRD% | ||
Pro-Blend® Conservative Term Series | 8.0 | % | |
Pro-Blend® Moderate Term Series | 15.4 | % | |
Pro-Blend® Extended Term Series | 24.2 | % | |
Pro-Blend® Maximum Term Series | 42.2 | % |
| 109 |
Directors’ and Officers’ Information (unaudited)
The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http://www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.
INTERESTED DIRECTOR/OFFICER
| Name: | B. Reuben Auspitz* | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 61 | |
| Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director | |
| Term of Office1 & Length of Time Served: | Indefinite - Director since 1984; Vice President 1984 - 2003; President since 2004; Principal Executive Officer since 2002 | |
| Principal Occupation(s) During Past 5 Years: | Executive Vice President; Co-Executive Director; Executive Group Member**; Chief Compliance Officer since 2004 - Manning & Napier Advisors, Inc. President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| INDEPENDENT DIRECTORS | ||
| Name: | Stephen B. Ashley | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 68 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1996 | |
| Principal Occupation(s) During Past 5 Years: | Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Chairman (non-executive) 2004 - 2008; Director 1995 - 2008 - Fannie Mae (mortgage) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | The Ashley Group | |
| Name: | Peter L. Faber | |
| Address: | 290 Woodcliff Drive | |
| Fairport, NY 14450 | ||
| Age: | 70 | |
| Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1987 | |
| Principal Occupation(s) During Past 5 Years: | Senior Counsel, McDermott, Will & Emery LLP (law firm) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Partnership for New York City, Inc. New York Collegium Boston Early Music Festival | |
| Name: | Harris H. Rusitzky | |
| Address: | 290 Woodcliff Drive | |
| Fairport, NY 14450 | ||
| Age: | 73 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 1985 | |
| Principal Occupation(s) During Past 5 Years: | President, The Greening Group (business consultants); Partner, The Restaurant Group (restaurants) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
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Directors’ and Officers’ Information (unaudited)
| INDEPENDENT DIRECTORS (continued) | ||
| Name: | Paul A. Brooke | |
| Address: | 290 Woodcliff Drive | |
| Fairport, NY 14450 | ||
| Age: | 63 | |
| Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Member | |
| Term of Office & Length of Time Served: | Indefinite - Since 2007 | |
| Principal Occupation(s) During Past 5 Years: | Chairman & CEO, Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | Incyte Corp. ViroPharma, Inc. HLTH Corp. Cheyne Captial International MPM Bio-equities GMP Companies HoustonPharma | |
| OFFICERS | ||
| Name: | Jeffrey S. Coons, Ph.D., CFA | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 45 | |
| Current Position(s) Held with Fund: | Vice President | |
| Term of Office1 & Length of Time Served: | Since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Co-Director of Research since 2002 & Executive Group Member**, Manning & Napier Advisors, Inc. Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Christine Glavin | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 42 | |
| Current Position(s) Held with Fund: | Principal Financial Officer, Chief Financial Officer | |
| Term of Office1 & Length of Time Served: | Principal Financial Officer since 2002; Chief Financial Officer since 2001 | |
| Principal Occupation(s) During Past 5 Years: | Fund Reporting Manager, Manning & Napier Advisors, Inc. | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
| Name: | Jodi L. Hedberg | |
| Address: | 290 Woodcliff Drive Fairport, NY 14450 | |
| Age: | 40 | |
| Current Position(s) Held with Fund: | Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer | |
| Term of Office1 & Length of Time Served: | Corporate Secretary since 1997; Chief Compliance Officer since 2004 | |
| Principal Occupation(s) During Past 5 Years: | Director of Compliance, Manning & Napier Advisors, Inc. and affiliates; Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006 | |
| Number of Portfolios Overseen within Fund Complex: | 27 | |
| Other Directorships Held Outside Fund Complex: | N/A | |
*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, Inc. and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.
**The Executive Group performs the duties of the Office of the Chief Executive of Manning & Napier Advisors, Inc.
1The term of office for President, Vice President, Chief Financial Officer, and Corporate Secretary is one year and until their respective successors are chosen and qualified. All other officers’ terms are indefinite.
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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
| 114 |
| ITEM 2: | CODE OF ETHICS |
(a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrant’s code of ethics is filed herewith as Exhibit 12(a)(1).
(b) During the period covered by this report, no amendments were made to the provisions of the code of ethics adopted in 2 (a) above.
(c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2 (a) above were granted.
(d) Not applicable to the registrant due to the response given in 2 (c) above.
| ITEM 3: | AUDIT COMMITTEE FINANCIAL EXPERT |
All of the members of the Audit committee have been determined by the Registrant’s Board of Directors to be Audit Committee Financial Experts as defined in this item. The members of the Audit Committee are: Harris H. Rusitzky, Stephen B. Ashley and Paul A. Brooke. All Audit Committee members are independent under applicable rules. This designation will not increase the designee’s duties, obligations or liability as compared to their duties, obligations and liability as a member of the Audit Committee and of the Board.
| ITEM 4: | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Principal Accountant Fees and Services
Aggregate fees for professional services rendered for the Manning & Napier Fund, Inc. (Pro-Blend® Conservative Term Series, Pro-Blend® Moderate Term Series, Pro-Blend® Extended Term Series, Pro-Blend® Maximum Term Series, Tax Managed Series, Equity Series, Overseas Series, Target Income Series, Target 2010 Series, Target 2020 Series, Target 2030 Series, Target 2040 Series and Target 2050 Series, collectively the “Fund”) by PricewaterhouseCoopers LLP (“PwC”) as of and for the years ended October 31, 2008 and 2007 were:
| 2008 | 2007 | |||||
Audit Fees (a) | $ | 252,435 | $ | 164,685 | ||
Audit Related Fees (b) | — | — | ||||
Tax Fees (c) | 86,180 | 45,345 | ||||
All Other Fees (d) | — | — | ||||
| $ | 338,615 | $ | 210,030 | |||
| (a) | Audit Fees |
These fees relate to professional services rendered by PwC for the audit of the Fund’s annual financial statements or services normally provided by the accountant in connection with statutory and regulatory filing or engagements. These services include the audits of the financial statements of the Fund, issuance of consents, income tax provision procedures and assistance with review of documents filed with the SEC.
| (b) | Audit-Related Fees |
These fees relate to assurance and related services by PwC that are reasonably related to the performance of the audit of the Fund’s financial statements and are not reported under “Audit Fees” above.
| (c) | Tax Fees |
These fees relate to professional services rendered by PwC for tax compliance, tax advice and tax planning. The tax services provided by PwC related to the preparation of the Fund’s federal and state income tax returns, excise tax calculations and returns, a review of the Fund’s calculations of capital gain and income distributions, and additional tax research for compliance purposes.
| (d) | All Other Fees |
These fees relate to products and services provided by PwC other than those reported above under “Audit Fees,” “Audit-Related Fees,” and “Tax Fees” above.
There were no amounts that were approved by the Audit Committee pursuant to the de minimus exception (Rule 2-01(c)(7) of Regulation S-X) for the fiscal years ended October 31, 2008 and 2007.
Non-Audit Services to the Fund’s Service Affiliates that were Pre-Approved by the Fund’s Audit Committee
The Fund’s Audit Committee is required to pre-approve non-audit services which meet both the following criteria:
| i) | Directly relate to the Fund’s operations and financial reporting; and |
| ii) | Rendered by PwC to the Fund’s advisor, Manning & Napier Advisors, Inc., and entities in a control relationship with the advisor (“service affiliate”) that provide ongoing services to the Fund. For purposes of disclosure, Manning & Napier Investor Services, Inc. is considered to be a service affiliate. |
| 2008 | 2007 | |||||
Audit Related Fees | $ | 9,392 | $ | 9,092 | ||
Tax Fees | 5,000 | — | ||||
| $ | 14,392 | $ | 9,092 | |||
The Audit Related fees for the years ended October 31, 2008 and 2007 were for 17Ad-13 internal control examinations, a license for proprietary automated financial statement disclosure software and a license for proprietary authoritative financial reporting and assurance literature library software.
The Tax fees for the year ended October 31, 2008 relate to research on the tax implications for various funds holding a certain investment type.
There were no amounts that were approved by the Audit Committee pursuant to the de minimus exception (Rule 2-01(c)(7) of Regulation S-X) for the fiscal years ended October 31, 2008 and 2007.
Aggregate Fees
Aggregate fees billed to the Fund for non-audit services for 2008 and 2007 were $86,180 and $45,345, respectively. Aggregate fees billed to the Fund’s advisor and service affiliates for non-audit services were $14,392 and $9,092, respectively. These amounts include fees for non-audit services required to be pre-approved and fees for non-audit services that did not require pre-approval since they did not relate to the Fund’s operations and financial reporting.
The Fund’s Audit Committee has considered whether the provisions for non-audit services to the Fund’s advisor and service affiliates, which did not require pre-approval, are compatible with maintaining PwC’s independence.
| ITEM 5: | AUDIT COMMITTEE OF LISTED REGISTRANTS |
Not Applicable.
| ITEM 6: | SCHEDULE OF INVESTMENTS |
See Investment Portfolios under Item 1 on this Form N-CSR.
| ITEM 7: | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Not applicable.
| ITEM 8: | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Not applicable.
| ITEM 9: | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS |
Not applicable.
| ITEM 10: | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
There have been no material changes to the procedure by which shareholders may recommend nominees to the registrant’s board of directors.
| ITEM 11: | CONTROLS AND PROCEDURES |
(a) Based on their evaluation of the Funds’ disclosure controls and procedures, as of a date within 90 days of the filing date, the Funds’ Principal Executive Officer and Principal Financial Officer have concluded that the Funds’ disclosure controls and procedures are: (i) reasonably designed to ensure that information required to be disclosed in this report is appropriately communicated to the Funds’ officers to allow timely decisions regarding disclosures required in this report; (ii) reasonably designed to ensure that information required to be disclosed in this report is recorded, processed, summarized and reported in a timely manner; and (iii) are effective in achieving the goals described in (i) and (ii) above.
(b) During the second fiscal quarter of the period covered by this report, there have been no changes in the Funds’ internal control over financial reporting that the above officers believe to have materially affected, or to be reasonably likely to materially affect, the Funds’ internal control over financial reporting.
| ITEM 12: | EXHIBITS |
(a)(1) Code of ethics that is subject to the disclosure of Item 2 above.
(a)(2) Separate certifications for the Registrant’s principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX-99.CERT.
(a)(3) Not applicable.
(b) A certification of the Registrant’s principal executive officer and principal financial officer, as required by 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX-99.906CERT. The certification furnished pursuant to this paragraph is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Manning & Napier Fund, Inc.
/s/B. Reuben Auspitz
B. Reuben Auspitz
President & Principal Executive Officer of Manning & Napier Fund, Inc.
December 30, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/B. Reuben Auspitz
B. Reuben Auspitz
President & Principal Executive Officer of Manning & Napier Fund, Inc.
December 30, 2008
/s/Christine Glavin
Christine Glavin
Chief Financial Officer & Principal Financial Officer of Manning & Napier Fund, Inc.
December 30, 2008