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)
Paul J. Battaglia, 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: December 31
Date of reporting period: January 1, 2022 through June 30, 2022
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. § 3507.
ITEM 1(a): REPORTS TO STOCKHOLDERS.
www.manning-napier.com
Manning & Napier Fund, Inc.
Real Estate Series
Real Estate Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service 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 in each class at the beginning of the period and held for the entire period (January 1, 2022 to June 30, 2022).
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 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 each class in 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 a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested 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 sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. 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.
BEGINNING ACCOUNT VALUE 1/1/22 | ENDING ACCOUNT VALUE 6/30/22 | EXPENSES PAID DURING PERIOD* 1/1/22 - 6/30/22 | ANNUALIZED EXPENSE RATIO | |
Class S | ||||
Actual | $1,000.00 | $800.60 | $4.91 | 1.10% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,019.34 | $5.51 | 1.10% |
Class I | ||||
Actual | $1,000.00 | $800.50 | $3.79 | 0.85% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.58 | $4.26 | 0.85% |
Class W | ||||
Actual | $1,000.00 | $804.40 | $0.45 | 0.10% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.30 | $0.50 | 0.10% |
Class Z | ||||
Actual | $1,000.00 | $802.50 | $3.13 | 0.70% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.32 | $3.51 | 0.70% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
1
Real Estate Series
Portfolio Composition as of June 30, 2022
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
Top Ten Stock Holdings2 | ||||
Equinix, Inc. | 10.0% | SBA Communications Corp. | 3.7% | |
Prologis, Inc. | 9.9% | Equity LifeStyle Properties, Inc. | 3.7% | |
Public Storage | 4.8% | Digital Realty Trust, Inc. | 3.4% | |
Radius Global Infrastructure, Inc. - Class A | 4.3% | UDR, Inc. | 3.4% | |
Sun Communities, Inc. | 4.0% | Invitation Homes, Inc. | 3.2% | |
2As a percentage of total investments. |
2
Real Estate Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES | VALUE (NOTE 2) | |||||||
COMMON STOCKS - 99.0% | ||||||||
Communication Services - 6.6% | ||||||||
Integrated Telecommunication Services - 6.6% | ||||||||
Cellnex Telecom S.A. (Spain)1 | 89,626 | $ | 3,488,082 | |||||
Helios Towers plc (Tanzania)* | 2,253,833 | 3,330,659 | ||||||
Radius Global Infrastructure, Inc. - Class A* | 828,843 | 12,648,145 | ||||||
Total Communication Services | 19,466,886 | |||||||
Consumer Discretionary - 1.7% | ||||||||
Hotels, Resorts & Cruise Lines - 1.7% | ||||||||
Marriott Vacations Worldwide Corp. | 26,565 | 3,086,853 | ||||||
Playa Hotels & Resorts N.V.* | 269,230 | 1,849,610 | ||||||
Total Consumer Discretionary | 4,936,463 | |||||||
Real Estate - 90.7% | ||||||||
REITS - Health Care - 9.8% | ||||||||
CareTrust REIT, Inc. | 268,527 | 4,951,638 | ||||||
Community Healthcare Trust, Inc. | 97,307 | 3,523,486 | ||||||
Healthcare Realty Trust, Inc. | 225,228 | 6,126,202 | ||||||
Healthcare Trust of America, Inc. - Class A | 53,583 | 1,495,502 | ||||||
Ventas, Inc. | 89,571 | 4,606,636 | ||||||
Welltower, Inc. | 103,849 | 8,551,965 | ||||||
29,255,429 | ||||||||
REITS - Hotel & Resort - 2.6% | ||||||||
Apple Hospitality REIT, Inc. | 519,309 | 7,618,263 | ||||||
REITS - Industrial - 16.9% | ||||||||
Duke Realty Corp. | 116,981 | 6,428,106 | ||||||
Prologis, Inc. | 250,505 | 29,471,913 | ||||||
Rexford Industrial Realty, Inc. | 154,459 | 8,895,294 | ||||||
Terreno Realty Corp. | 98,986 | 5,516,490 | ||||||
50,311,803 | ||||||||
REITS - Office - 3.0% | ||||||||
Brandywine Realty Trust | 283,017 | 2,728,284 | ||||||
Cousins Properties, Inc. | 217,175 | 6,348,025 | ||||||
9,076,309 | ||||||||
REITS - Residential - 28.1% | ||||||||
American Homes 4 Rent - Class A | 207,322 | 7,347,492 | ||||||
AvalonBay Communities, Inc. | 39,494 | 7,671,710 | ||||||
Camden Property Trust | 38,046 | 5,116,426 | ||||||
Equity LifeStyle Properties, Inc. | 154,027 | 10,854,283 | ||||||
Essex Property Trust, Inc. | 18,662 | 4,880,300 | ||||||
Flagship Communities REIT | 260,343 | 3,983,248 | ||||||
Independence Realty Trust, Inc. | 173,521 | 3,597,090 | ||||||
Invitation Homes, Inc. | 269,211 | 9,578,527 | ||||||
Mid-America Apartment Communities, Inc. | 50,511 | 8,822,756 | ||||||
NexPoint Residential Trust, Inc. | 1 | 47 | ||||||
Sun Communities, Inc. | 74,642 | 11,894,949 | ||||||
UDR, Inc. | 218,628 | 10,065,633 | ||||||
83,812,461 | ||||||||
REITS - Retail - 2.3% | ||||||||
Agree Realty Corp. | 46,949 | 3,386,431 |
SHARES | VALUE (NOTE 2) | |||||||
COMMON STOCKS (continued) | ||||||||
Real Estate (continued) | �� | |||||||
REITS - Retail (continued) | ||||||||
Getty Realty Corp | 124,960 | $ | 3,311,440 | |||||
6,697,871 | ||||||||
REITS - Specialized - 28.0% | ||||||||
American Tower Corp. | 24,935 | 6,373,136 | ||||||
Digital Realty Trust, Inc. | 77,719 | 10,090,258 | ||||||
Equinix, Inc. | 45,150 | 29,664,453 | ||||||
Extra Space Storage, Inc. | 35,876 | 6,103,225 | ||||||
Life Storage, Inc. | 56,189 | 6,274,064 | ||||||
Public Storage | 45,158 | 14,119,552 | ||||||
SBA Communications Corp. | 34,213 | 10,949,871 | ||||||
83,574,559 | ||||||||
Total Real Estate | 270,346,695 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Identified Cost $263,254,199) | 294,750,044 | |||||||
SHORT-TERM INVESTMENT - 0.5% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 1.35%2 | ||||||||
(Identified Cost $1,628,702) | 1,628,702 | 1,628,702 | ||||||
TOTAL INVESTMENTS - 99.5% | ||||||||
(Identified Cost $264,882,901) | 296,378,746 | |||||||
OTHER ASSETS, LESS LIABILITIES - 0.5% | 1,624,061 | |||||||
NET ASSETS - 100% | $ | 298,002,807 |
REIT - Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
3
Real Estate Series
Investment Portfolio - June 30, 2022
(unaudited)
*Non-income producing security.
1Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be liquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2022 was $3,488,082, which represented 1.2% of the Series’ Net Assets.
2Rate shown is the current yield as of June 30, 2022.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
4
Real Estate Series
Statement of Assets and Liabilities
June 30, 2022 (unaudited)
ASSETS: | ||||
Investments, at value (identified cost $264,882,901) (Note 2) | $ | 296,378,746 | ||
Cash | 1,245,560 | |||
Dividends receivable | 598,923 | |||
Receivable for fund shares sold | 267,065 | |||
Foreign tax reclaims receivable | 9,126 | |||
Prepaid expenses | 32,193 | |||
TOTAL ASSETS | 298,531,613 | |||
LIABILITIES: | ||||
Accrued management fees (Note 3) | 36,588 | |||
Accrued sub-transfer agent fees (Note 3) | 32,006 | |||
Accrued fund accounting and administration fees (Note 3) | 15,524 | |||
Accrued distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 7,958 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 714 | |||
Payable for fund shares repurchased | 370,814 | |||
Audit fees payable | 31,877 | |||
Other payables and accrued expenses | 33,325 | |||
TOTAL LIABILITIES | 528,806 | |||
TOTAL NET ASSETS | $ | 298,002,807 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 229,883 | ||
Additional paid-in-capital | 235,783,669 | |||
Total distributable earnings (loss) | 61,989,255 | |||
TOTAL NET ASSETS | $ | 298,002,807 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S ($37,647,956/2,276,311 shares) | $ | 16.54 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I ($43,379,884/7,448,540 shares) | $ | 5.82 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W ($215,148,915/12,951,186 shares) | $ | 16.61 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class Z ($1,826,052/312,236 shares) | $ | 5.85 |
The accompanying notes are an integral part of the financial statements.
5
Real Estate Series
Statement of Operations
For the Six Months Ended June 30, 2022 (unaudited)
INVESTMENT INCOME: | ||||
Dividends (net of foreign taxes withheld, $13,070) | $ | 3,099,585 | ||
EXPENSES: | ||||
Management fees (Note 3) | 1,021,108 | |||
Sub-transfer agent fees (Note 3) | 64,964 | |||
Distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 53,319 | |||
Fund accounting and administration fees (Note 3) | 44,869 | |||
Directors’ fees (Note 3) | 19,255 | |||
Chief Compliance Officer service fees (Note 3) | 3,509 | |||
Custodian fees | 7,404 | |||
Miscellaneous | 110,301 | |||
Total Expenses | 1,324,729 | |||
Less reduction of expenses (Note 3) | (757,723 | ) | ||
Net Expenses | 567,006 | |||
NET INVESTMENT INCOME | 2,532,579 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: | ||||
Net realized gain (loss) on- | ||||
Investments | 23,491,271 | |||
Foreign currency and translation of other assets and liabilities | (1,002 | ) | ||
23,490,269 | ||||
Net change in unrealized appreciation (depreciation) on- | ||||
Investments | (101,785,622 | ) | ||
Foreign currency and translation of other assets and liabilities | (436 | ) | ||
(101,786,058 | ) | |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY | (78,295,789 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (75,763,210 | ) |
The accompanying notes are an integral part of the financial statements.
6
Real Estate Series
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED 12/31/21 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 2,532,579 | $ | 4,711,947 | ||||
Net realized gain (loss) on investments and foreign currency | 23,490,269 | 26,118,997 | ||||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (101,786,058 | ) | 91,600,959 | |||||
Net increase (decrease) from operations | (75,763,210 | ) | 122,431,903 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 10): | ||||||||
Class S | – | (1,665,158 | ) | |||||
Class I | – | (4,881,125 | ) | |||||
Class W | – | (12,260,150 | ) | |||||
Class Z | – | (125,057 | ) | |||||
Total distributions to shareholders | – | (18,931,490 | ) | |||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | (16,778,717 | ) | 3,074,231 | |||||
Net increase (decrease) in net assets | (92,541,927 | ) | 106,574,644 | |||||
NET ASSETS: | ||||||||
Beginning of period | 390,544,734 | 283,970,090 | ||||||
End of period | $ | 298,002,807 | $ | 390,544,734 |
The accompanying notes are an integral part of the financial statements.
7
Real Estate Series
Financial Highlights - Class S
FOR THE | FOR THE YEAR ENDED | |||||||||||||||||||||||
SIX MONTHS | ||||||||||||||||||||||||
ENDED | ||||||||||||||||||||||||
6/30/22 | ||||||||||||||||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||||||||||
Net asset value - Beginning of period | $20.66 | $14.92 | $16.31 | $13.09 | $14.93 | $14.48 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income1 | 0.07 | 0.12 | 0.12 | 2 | 0.15 | 0.26 | 0.24 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | (4.19 | ) | 6.35 | (1.15 | ) | 3.65 | (1.24 | ) | 1.02 | |||||||||||||||
Total from investment operations | (4.12 | ) | 6.47 | (1.03 | ) | 3.80 | (0.98 | ) | 1.26 | |||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||||||
From net investment income | — | (0.10 | ) | (0.13 | ) | (0.16 | ) | (0.21 | ) | (0.25 | ) | |||||||||||||
From net realized gain on investments | — | (0.63 | ) | (0.19 | ) | (0.42 | ) | (0.63 | ) | (0.56 | ) | |||||||||||||
From return of capital | — | — | (0.04 | ) | — | (0.02 | ) | — | ||||||||||||||||
Total distributions to shareholders | — | (0.73 | ) | (0.36 | ) | (0.58 | ) | (0.86 | ) | (0.81 | ) | |||||||||||||
Net asset value - End of period | $16.54 | $20.66 | $14.92 | $16.31 | $13.09 | $14.93 | ||||||||||||||||||
Net assets - End of period (000’s omitted) | $37,648 | $48,549 | $37,762 | $59,923 | $214,722 | $271,496 | ||||||||||||||||||
Total return3 | (19.94% | ) | 43.67% | (6.27% | ) | 29.14% | 4 | (6.73% | ) | 8.66% | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Expenses* | 1.10% | 5 | 1.10% | 1.10% | 1.11% | 1.11% | 1.10% | |||||||||||||||||
Net investment income | 0.73% | 5 | 0.66% | 0.81% | 2 | 1.02% | 1.82% | 1.58% | ||||||||||||||||
Series portfolio turnover | 26% | 26% | 69% | 24% | 44% | 42% | ||||||||||||||||||
*For certain periods presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some periods may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||||||||||||||
0.01% | 5 | 0.01% | 0.03% | 0.00% | 6 | N/A | 0.00% | 6 |
1Calculated based on average shares outstanding during the periods.
2Includes special dividends from two of the Series’ securities. Excluding this amount, the net investment income per share would have been $0.11 and the net investment income ratio would have been 0.72%.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain periods. Periods less than one year are not annualized.
4Includes litigation proceeds. Excluding this amount, the Class’ total return is 29.06%.
5Annualized.
6Less than 0.01%.
The accompanying notes are an integral part of the financial statements.
8
Real Estate Series
Financial Highlights - Class I
FOR THE | FOR THE YEAR ENDED | |||||||||||||||||||||||
SIX MONTHS | ||||||||||||||||||||||||
ENDED | ||||||||||||||||||||||||
6/30/22 | ||||||||||||||||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||||||||||
Net asset value - Beginning of period | $7.27 | $5.63 | $6.44 | $5.50 | $6.81 | $7.03 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income1 | 0.03 | 0.06 | 0.06 | 2 | 0.11 | 0.14 | 0.14 | |||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.48 | ) | 2.38 | (0.45 | ) | 1.49 | (0.55 | ) | 0.49 | |||||||||||||||
Total from investment operations | (1.45 | ) | 2.44 | (0.39 | ) | 1.60 | (0.41 | ) | 0.63 | |||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||||||
From net investment income | — | (0.17 | ) | (0.18 | ) | (0.24 | ) | (0.24 | ) | (0.29 | ) | |||||||||||||
From net realized gain on investments | — | (0.63 | ) | (0.19 | ) | (0.42 | ) | (0.63 | ) | (0.56 | ) | |||||||||||||
From return of capital | — | — | (0.05 | ) | — | (0.03 | ) | — | ||||||||||||||||
Total distributions to shareholders | — | (0.80 | ) | (0.42 | ) | (0.66 | ) | (0.90 | ) | (0.85 | ) | |||||||||||||
Net asset value - End of period | $5.82 | $7.27 | $5.63 | $6.44 | $5.50 | $6.81 | ||||||||||||||||||
Net assets - End of period (000’s omitted) | $43,380 | $51,320 | $30,787 | $50,025 | $50,111 | $47,074 | ||||||||||||||||||
Total return3 | (19.95% | ) | 44.14% | (5.96% | ) | 29.31 | % | (6.41 | %) | 8.85% | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Expenses * | 0.85% | 4 | 0.84% | 5 | 0.85% | 0.84% | 0.86% | 0.85% | ||||||||||||||||
Net investment income | 0.99% | 4 | 0.92% | 1.02% | 2 | 1.62% | 2.12% | 1.95% | ||||||||||||||||
Series portfolio turnover | 26% | 26% | 69% | 24% | 44% | 42% | ||||||||||||||||||
*For certain periods presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some periods may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||||||||||||||
N/A | N/A | 0.01% | N/A | N/A | 0.00 | %6 |
1Calculated based on average shares outstanding during the periods.
2Includes special dividends from two of the Series’ securities. Excluding this amount, the net investment income per share would have been $0.05 and the net investment income ratio would have been 0.93%.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain periods. Periods less than one year are not annualized.
4Annualized.
5Includes recoupment of past waived and/or reimbursed fees. Excluding this amount, the expense ratio (to average net assets) would have decreased by less than 0.01%.
6Less than 0.01%.
The accompanying notes are an integral part of the financial statements.
9
Real Estate Series
Financial Highlights - Class W
FOR THE | FOR THE YEAR ENDED | FOR THE | ||||||||||||||
SIX MONTHS | PERIOD | |||||||||||||||
ENDED 6/30/22 | 3/1/191 TO | |||||||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | |||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||
Net asset value - Beginning of period | $20.65 | $14.89 | $16.27 | $14.76 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income2 | 0.16 | 0.29 | 0.33 | 3 | 0.35 | |||||||||||
Net realized and unrealized gain (loss) on investments | (4.20 | ) | 6.38 | (1.20 | ) | 1.91 | ||||||||||
Total from investment operations | (4.04 | ) | 6.67 | (0.87 | ) | 2.26 | ||||||||||
Less distributions to shareholders: | ||||||||||||||||
From net investment income | — | (0.29 | ) | (0.25 | ) | (0.33 | ) | |||||||||
From net realized gain on investments | — | (0.63 | ) | (0.19 | ) | (0.42 | ) | |||||||||
From return of capital | — | — | (0.07 | ) | — | |||||||||||
Total distributions to shareholders | — | (0.92 | ) | (0.51 | ) | (0.75 | ) | |||||||||
Net asset value - End of period | $16.61 | $20.65 | $14.89 | $16.27 | ||||||||||||
Net assets - End of period (000’s omitted) | $215,149 | $288,394 | $214,871 | $191,373 | ||||||||||||
Total return4 | (19.56% | ) | 45.19% | (5.33% | ) | 15.43% | 5 | |||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Expenses * | 0.10% | 6 | 0.10% | 0.10% | 0.10% | 6 | ||||||||||
Net investment income | 1.72% | 6 | 1.66% | 2.27% | 3 | 2.58% | 6 | |||||||||
Series portfolio turnover | 26% | 26% | 69% | 24% | ||||||||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||||||
0.61% | 6 | 0.61% | 0.64% | 0.62% | 6 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Includes special dividends from two of the Series’ securities. Excluding this amount, the net investment income per share would have been $0.31 and the net investment income ratio would have been 2.14%.
4Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
5Includes litigation proceeds. Excluding this amount, the Class’ total return is 15.36%.
6Annualized.
The accompanying notes are an integral part of the financial statements.
10
Real Estate Series
Financial Highlights - Class Z
FOR THE | FOR THE YEAR ENDED | FOR THE | ||||||||||||||
SIX MONTHS | PERIOD | |||||||||||||||
ENDED 6/30/22 | 3/1/191 TO | |||||||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | |||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||
Net asset value - Beginning of period | $7.29 | $5.64 | $6.46 | $6.21 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income2 | 0.04 | 0.08 | 0.09 | 3 | 0.08 | |||||||||||
Net realized and unrealized gain (loss) on investments | (1.48 | ) | 2.38 | (0.48 | ) | 0.84 | ||||||||||
Total from investment operations | (1.44 | ) | 2.46 | (0.39 | ) | 0.92 | ||||||||||
Less distributions to shareholders: | ||||||||||||||||
From net investment income | — | (0.18 | ) | (0.19 | ) | (0.25 | ) | |||||||||
From net realized gain on investments | — | (0.63 | ) | (0.19 | ) | (0.42 | ) | |||||||||
From return of capital | — | — | (0.05 | ) | — | |||||||||||
Total distributions to shareholders | — | (0.81 | ) | (0.43 | ) | (0.67 | ) | |||||||||
Net asset value - End of period | $5.85 | $7.29 | $5.64 | $6.46 | ||||||||||||
Net assets - End of period (000’s omitted) | $1,826 | $2,281 | $549 | $539 | ||||||||||||
Total return4 | (19.75% | ) | 44.36% | (5.96% | ) | 14.98% | 5 | |||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Expenses * | 0.70% | 6 | 0.70% | 0.70% | 0.70% | 6 | ||||||||||
Net investment income | 1.26% | 6 | 1.15% | 1.51% | 3 | 1.42% | 6 | |||||||||
Series portfolio turnover | 26% | 26% | 69% | 24% | ||||||||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||||||
0.01% | 6 | 0.01% | 0.04% | 0.02% | 6 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Includes special dividends from two of the Series’ securities. Excluding this amount, the net investment income per share would have been $0.08 and the net investment income ratio would have been 1.39%.
4Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
5Includes litigation proceeds. Excluding this amount, the Class’ total return is 14.62%
6Annualized.
The accompanying notes are an integral part of the financial statements.
11
Real Estate Series
Notes to Financial Statements
1. | Organization |
Real Estate 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 high current income and long-term capital appreciation by investing principally in companies in the real estate industry.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The Series is authorized to issue four classes of shares (Class S, I, W, and Z). 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 total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of June 30, 2022, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Real Estate Series Class I common stock, Real Estate Series Class S common stock and Real Estate Series Class Z common stock and 75 million have been designated as Real Estate Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market 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 Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as 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”). 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. In accordance with the procedures approved by the Board, the values of certain securities trading outside the U.S. were adjusted following the close of local trading using a factor from a third party vendor. The third party vendor uses statistical analyses and quantitative models, which consider among other things subsequent movement and changes in the prices of indices, securities and exchange rates in other markets, to determine the factors which are used to adjust local market prices. The value of securities
12
Real Estate Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
used for net asset value calculation under these procedures may differ from published prices for the same securities. It is the Fund’s policy to classify each foreign equity security where a factor from a third party vendor is provided as a Level 2 security.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of June 30, 2022 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2# | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Equity securities: | ||||||||||||||||
Communication Services | $ | 19,466,886 | $ | 12,648,145 | $ | 6,818,741 | $ | — | ||||||||
Consumer Discretionary | 4,936,463 | 4,936,463 | — | — | ||||||||||||
Real Estate* | 270,346,695 | 270,346,695 | — | — | ||||||||||||
Short-Term Investment | 1,628,702 | 1,628,702 | — | — | ||||||||||||
Total assets | $ | 296,378,746 | $ | 289,560,005 | $ | 6,818,741 | $ | — |
*Please refer to the Investment Portfolio for the industry classifications of these portfolio holdings.
#Includes certain foreign equity securities for which a factor from a third party vendor was applied to determine the securities’ fair value following the close of local trading.
There were no Level 3 securities held by the Series as of December 31, 2021 or June 30, 2022.
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 Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair 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 shareholder services fees), 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 Fund records distributions received in excess of income from underlying investments as a reduction of cost of investments and/or realized gain. Such amounts are based on estimates if actual amounts are not available and actual amounts of income, realized gain and return of capital may differ from the estimated amounts. The Fund adjusts the estimated amounts of components of distributions (and consequently its net investment income) as necessary once the issuers provide information about the actual composition of the distributions.
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.
13
Real Estate Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Foreign Currency Translation
The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series does not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the market value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized foreign currency gains and losses represent foreign currency gains and losses between trade date and settlement date on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.
Federal Taxes
The Series’ policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series is not subject to federal income 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.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. At June 30, 2022, the Series has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.
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 December 31, 2018 through December 31, 2021. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation 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.
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 GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
14
Real Estate Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.60% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
The Fund may enter into agreements with financial intermediaries pursuant to which the Fund may pay financial intermediaries for non-distribution related sub-transfer agency, administrative, sub-accounting, and other shareholder services in an annual amount not to exceed 0.15% of the average daily net assets of the Class I and Class S shares of the Series. Payments made pursuant to such agreements are generally based on the current assets and/or number of accounts of the Series attributable to the financial intermediary. Any payments made pursuant to such agreements may be in addition to, rather than in lieu of, any Distribution and Shareholder Services Fee payable under the Rule 12b-1 plan of the Fund. For the six months ended June 30, 2022, the sub-transfer agency expenses incurred by Class S and Class I were $32,237 and $32,727, respectively.
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 S shares pursuant to a distribution plan adopted under Rule 12b-1 of the 1940 Act, regardless of expenses actually incurred. Under the agreement, the Series pays distribution and service fees to the distributor at an annual rate of 0.25% of average daily net assets attributable to Class S shares. There are no distribution and service fees on the Class I, Class W or Class Z shares. The fees are accrued daily and paid monthly.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets; 0.0075% on the next $15 billion of average daily net assets; and 0.0065% of average daily net assets in excess of $40 billion; plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the shareholder services fee and/or distribution and service (12b-1) fees and waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.85% of the average daily net assets of the Class S and Class I shares, 0.10% of the average daily net assets of the Class W shares, and 0.70% of the average daily net assets of the Class Z shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
15
Real Estate Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
Pursuant to the advisory fee waiver, the Advisor waived $744,174 in management fees for Class W for the six months ended June 30, 2022. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $2,316, $11,143 and $90 for Class S, Class W and Class Z, respectively, for the six months ended June 30, 2022. These amounts are included as a reduction of expenses on the Statement of Operations.
As of June 30, 2022, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, | ||||
2022 | 2023 | 2024 | 2025 | Total | |
Class S | $6,660 | $12,058 | $2,956 | $2,316 | $23,990 |
Class I | — | 5 | — | — | 5 |
Class W | 32,160 | 67,990 | 30,356 | 11,143 | 141,649 |
Class Z | 382 | 190 | 96 | 90 | 758 |
For the six months ended June 30, 2022, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
4. | Purchases and Sales of Securities |
For the six months ended June 30, 2022, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $90,125,648 and $101,598,544, respectively. There were no purchases or sales of U.S. Government securities.
5. | Capital Stock Transactions |
Transactions in Class S, Class I, Class W and Class Z shares of Real Estate Series were:
CLASS S | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 241,727 | $ | 4,604,804 | 366,265 | $ | 6,424,926 | ||||||||||
Reinvested | — | — | 82,953 | 1,621,736 | ||||||||||||
Repurchased | (315,103 | ) | (5,719,071 | ) | (631,144 | ) | (10,881,761 | ) | ||||||||
Total | (73,376 | ) | $ | (1,114,267 | ) | (181,926 | ) | $ | (2,835,099 | ) |
CLASS I | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 1,438,083 | $ | 9,664,966 | 2,388,550 | $ | 16,119,743 | ||||||||||
Reinvested | — | — | 631,336 | 4,337,281 | ||||||||||||
Repurchased | (1,051,885 | ) | (6,829,242 | ) | (1,426,591 | ) | (9,257,738 | ) | ||||||||
Total | 386,198 | $ | 2,835,724 | 1,593,295 | $ | 11,199,286 |
16
Real Estate Series
Notes to Financial Statements (continued)
5. | Capital Stock Transactions (continued) |
CLASS W | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 305,890 | $ | 5,930,814 | 636,315 | $ | 11,124,927 | ||||||||||
Reinvested | — | — | 607,420 | 11,862,919 | ||||||||||||
Repurchased | (1,320,304 | ) | (24,401,475 | ) | (1,705,540 | ) | (29,801,017 | ) | ||||||||
Total | (1,014,414 | ) | $ | (18,470,661 | ) | (461,805 | ) | $ | (6,813,171 | ) |
CLASS Z | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 199,357 | $ | 1,298,478 | 218,771 | $ | 1,551,103 | ||||||||||
Reinvested | — | — | 18,047 | 124,519 | ||||||||||||
Repurchased | (199,925 | ) | (1,327,991 | ) | (21,422 | ) | (152,407 | ) | ||||||||
Total | (568 | ) | $ | (29,513 | ) | 215,396 | $ | 1,523,215 |
Approximately 72% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in September 2022 unless extended or renewed. During the six months ended June 30, 2022, the Series did not borrow under the line of credit.
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of June 30, 2022.
8. | Foreign Securities |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the U.S. 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 U.S. Government.
17
Real Estate Series
Notes to Financial Statements (continued)
9. | Real Estate Securities |
The Series may focus its investments in certain real estate related industries; hence, the Series may subject itself to a greater degree of risk than a series that is more diversified.
10. | 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 GAAP. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The final determination of the tax character of current year distributions will be made at the conclusion of the fiscal year. The tax character of distributions paid for the year ended December 31, 2021 were as follows:
Ordinary income | $ | 4,712,706 | |
Long-term capital gains | $ | 14,218,784 |
At June 30, 2022, the identified cost for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized appreciation were as follows:
Cost for federal income tax purposes | $ | 265,755,093 | ||
Unrealized appreciation | 40,152,347 | |||
Unrealized depreciation | (9,528,694 | ) | ||
Net unrealized appreciation | $ | 30,623,653 |
11. | Market Event |
Significant disruptions and volatility in the global financial markets and economies, like the current conditions caused by the Russian invasion of Ukraine and the COVID-19 pandemic, could negatively impact the investment performance of the Series. The global market and economic climate may become increasingly uncertain due to numerous factors beyond our control, including but not limited to, the effectiveness and acceptance of vaccines to prevent COVID-19, impacts on business operations in the U.S. related to the COVID-19 pandemic, such as supply chain disruptions and inflation, concerns related to unpredictable global market and economic factors, uncertainty in U.S. federal fiscal, tax, trade or regulatory policy and the fiscal, tax, trade or regulatory policy of foreign governments, rising interest rates, inflation or deflation, the availability of credit, performance of financial markets, terrorism, natural or biological catastrophes, public health emergencies, or political uncertainty.
12. | Subsequent Event |
In preparing these financial statements, management of the Fund has evaluated events and transactions for potential recognition or disclosure and the following item was noted:
On March 31, 2022, Manning & Napier, Inc. (“the Company”), entered into a definitive agreement under which the Company will go private and be acquired by the Callodine Group, LLC (“Callodine”), a Boston-based asset management firm, in partnership with East Asset Management (the “Transaction”). The Company is the ultimate owner of the Advisor. The proposed Transaction is expected to close in the third quarter of 2022, contingent upon shareholder approval and other customary closing conditions. Following the close, the Company will become a wholly owned subsidiary of an affiliate of Callodine. Closing the Transaction results in a change in control of the Advisor under the 1940 Act and therefore the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides advisory services to the Series. In connection with the Transaction, on May 3, 2022, the Manning & Napier Fund, Inc. Board of Directors unanimously approved a new Investment Advisory Agreement between the Fund and the Advisor for each Series, that will become effective at the closing of the
18
Real Estate Series
Notes to Financial Statements (continued)
12. | Subsequent Event (continued) |
Transaction, subject to shareholder approval. As of the closing date of the Transaction, the Series’ investment objective and fee arrangements will remain unchanged.
19
Real Estate Series
Renewal of Investment Advisory Agreement
(unaudited)
At the Manning & Napier Fund, Inc. (the “Fund”) Board of Directors’ (the “Board”) meeting, held on May 19, 2022, the Investment Advisory Agreement (the “Agreement”) between the Fund and Manning & Napier Advisors, LLC (the “Advisor”) was considered for renewal by the Board, including all of the Directors who are not “interested persons” (“Independent Directors”), within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”). In connection with the decision whether to renew the Agreement, a variety of material was provided to the Board in advance of the meeting for their review and consideration. The Board also held a working session on May 3, 2022 to review and discuss information provided to the Board, and for the Board to request additional information.
Representatives of the Advisor attended a portion of the working session and attended the Board meeting. The Advisor provided supplemental information requested by the Board and presented additional oral information to the Board to assist the Board in its considerations. In addition to the information furnished by the Advisor, the Board was provided with a legal memorandum discussing its fiduciary duties related to its approval of the continuation of the Agreement. Legal counsel for the Fund discussed with the Board the applicable legal considerations. In addition, the Board received in-person presentations about the Fund throughout the year.
At the May 3, 2022 meeting, the Board also considered and approved a new investment advisory agreement (the “New Advisory Agreement”) for each Series between the Advisor and the Fund. The Board was asked to consider the New Advisory Agreement because of a transaction that will affect Manning & Napier, Inc. (“MN Inc.”), which is the ultimate parent company of the Advisor. On March 31, 2022, MN Inc. and Callodine Group, LLC (“Callodine”) entered into an agreement under which Callodine Merger Sub, an affiliate of Callodine, would acquire MN Inc. (the “Transaction”). The Transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2022. Following the closing, MN Inc. will become a wholly owned subsidiary of an affiliate of Callodine. The closing of the Transaction may be deemed to result in a change of control of the Advisor under the 1940 Act. As a result, the Transaction results in the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides investment advisory services to the Series (the “Current Advisory Agreement”). Shareholder approval of the New Advisory Agreement will enable the Advisor to continue to serve the Series following the closing of the Transaction.
The Independent Directors were advised by independent legal counsel with respect to these matters. The Independent Directors also met separately in executive sessions on April 13, April 27, May 3 and May 19, with their legal counsel without any representatives of the Advisor present.
The Directors’ determinations at the meeting were made on the basis of each Director’s business judgment after consideration of all the information presented. In deciding to recommend the renewal of the Current Agreement with respect to each Series of the Fund, the Independent Directors did not identify any single or particular piece of information that, in isolation, was sufficient to justify renewal. Each Independent Director may also have weighed information and factors differently. This summary describes the most important, but not all, of the factors considered by the Board and the Independent Directors.
• | The Board considered the nature and quality of services provided by the Advisor under the Current Agreement. The Advisor has provided those services for over 30 years, and they have included, among others: deciding what securities to purchase and sell for each Series; arranging for the purchase and sale of such securities by placing orders with broker-dealers; administering the affairs of the Fund (including the books and records of the Fund not maintained by third party service providers such as the custodian or transfer agent); arranging for the insurance coverage for the Fund; and supervising the preparation of tax returns, SEC filings (including registration statements) and reports to shareholders for the Fund. The Board considered the numerous services performed by the Advisor and its affiliates beyond those stated in the Current Agreement. The Board also considered the Advisor’s personnel who perform services to the Fund, changes in senior or key personnel, industry trends impacting the mutual fund industry, the strength of the Advisor’s compliance infrastructure, policies and procedures relating to compliance with securities regulations, reputation, expertise and resources. The Board discussed the quality of these services with representatives from the Advisor and concluded that the Advisor was performing its services to the Fund required under the Current Agreement in a reasonable manner. |
20
Real Estate Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the Advisor’s investment teams, including changes to the investment teams during the past year, investment team compensation structure and the investment process. The Board considered the performance of each Series since its inception, as well as over multiple time periods including: one year, three year, five year, ten year, and current market cycle. A market cycle includes periods of both rising and falling markets. Returns for established benchmark indices for each Series were provided. In addition, the Board considered (and considers on a quarterly basis) a number of other factors relevant to performance at the meeting including: a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives; the breadth of the Fund’s product offerings; and performance over reasonable time periods. Representatives of the Advisor provided information regarding and, as applicable, led discussions of factors impacting the Advisor’s performance for the Series, outlining current market conditions and explaining their expectations and strategies for the future. The Board also determined that it was appropriate to take into account its consideration of the Advisor’s performance at meetings held prior to the May 19th Board meeting. In doing so, the Board generally determined that the Advisor’s performance was satisfactory. Where the Advisor’s performance was materially below a Series’ benchmarks and or peer group, the Board requested an explanation for the underperformance and/or the steps taken by the Advisor in an effort to improve performance. In all instances, the Board was satisfied with the explanation provided. The Board plans to remain focused in future meetings to address any aberrational underperformance as necessary. After discussion, the Board concluded that the nature and quality of the investment management services provided by the Advisor to the Fund were considered adequate. |
• | The Board considered the fees and expenses of the various Series of the Fund. The Advisor presented the advisory fees and total expenses for each Series, including the advisory fee adjusted for any contractual expense waivers or reimbursements paid by the Advisor. |
• | The Board considered whether the Advisor had achieved economies of scale with respect to its services to the Fund. The Board acknowledged the expense caps incorporated in the Fund’s current fee structure, which requires the Advisor to subsidize the expenses of the Series operating above their expense cap, noting that 11 of 15 Series are currently receiving expense reimbursements from the Advisor. The Board concluded that the Fund would need to grow in assets before the Advisor would be able to achieve meaningful economies of scale. |
• | The Advisor provided the Board with information comparing each Series’ contractual management fees with the Advisor’s standard advisory fees for separate accounts and collective investment trusts. The Board considered that the range of services provided to the Series is more extensive than for the Advisor’s other clients due to additional infrastructure, administrative, operational and regulatory requirements related to operating a mutual fund, as well as associated risks. |
• | The current advisory fees, 12b-1 Distribution and Service Fees, other expenses (e.g. a combination of Shareholder Services Fees, intermediary sub-TA fees, routine operating expenses and Acquired Fund Fees and Expenses for fund-of-fund Series) and total expense ratios of each Series and share class were compared and ranked (on both a mean and median basis) against respective peer universes. Respective peer universes included funds of a similar size and with similar investment objectives and expense characteristics as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the comparisons and rankings of fees and net expense ratios for each Series of the Fund and the methodology behind the comparison. The Board considered the Advisor’s active portfolio management that results in portfolios that are more differentiated than the construction of their benchmarks. The Board will continue to monitor the fees and expenses of the Series compared to peer groups. Based on their review of the information provided, the Board concluded that the current fees and expenses of each Series of the Fund were reasonable on a comparative basis. |
21
Real Estate Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the costs of the Advisor’s services and the profits of the Advisor as they relate to the Advisor’s services to the Fund under the Current Agreement. The Board was provided with information on the Advisor’s financial condition and profitability by mutual fund agreement and by Series. Representatives of the Advisor discussed modest improvements in the Advisor’s profitability derived from the Fund. The Board discussed the Advisor’s revenues generated from the Fund and its expenses associated with providing the services under the Current Agreement. The Advisor presented the Board with information on firm wide investment management profitability to provide a comparison of the Advisor’s profitability from its Fund activities relative to its profitability from its other investment management business. In addition, the Board reviewed the Advisor’s expense allocation methodology used to calculate profitability since many of the Advisor’s resources and expenses are shared across the Advisor’s various investment management vehicles. The Board noted the Advisor’s explanation of the consistent approach taken in calculating profitability, compared to prior periods, including the allocation of expenses as part of that calculation. The Board considered the Advisor’s expenses associated with Fund activities outside of the Current Agreement (such as expense reimbursements pursuant to expense caps and payments made by the Advisor to third party platforms on which shares of the Fund are available for purchase). The Board noted the potential for the Transaction to add resources that have the potential to facilitate the growth of various series, which could improve economies of scale for those Series; however, they also noted that such potential may not be realized. After discussing the above costs and profits, the Board concluded that the Advisor’s profit margin relating to its services provided under the Current Agreement was reasonable. |
• | The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include participation in a joint insurance program, sharing of compensation expenses for certain shared personnel, relationships with large service providers, the utilization of Series within the Advisor’s separately managed accounts and certain research services provided by soft dollars. The Board concluded that these additional benefits to the Advisor were reasonable. |
Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of the Independent Directors, concluded that the compensation under the Current Agreement was fair and reasonable with respect to each Series in light of the services and expenses and such other matters as the Directors considered to be relevant in the exercise of their reasonable judgment, and that the renewal of the Current Agreement would be in the best interests of each Series and its shareholders. The Board did not indicate that any single factor was determinative of its decision to approve the Current Agreement, but indicated that the Board based its determination on the total mix of information available to it.
22
Real Estate Series
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-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling 1-(800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End
2. Fund Holdings - Quarter-End
3. Shareholder Report - Annual
4. Shareholder Report - Semi-Annual
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNRES-06/22-SAR
23
www.manning-napier.com
Manning & Napier Fund, Inc.
Diversified Tax Exempt Series
Diversified Tax Exempt Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service 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 in each class at the beginning of the period and held for the entire period (January 1, 2022 to June 30, 2022).
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 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 each class in 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 a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested 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 sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. 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.
BEGINNING ACCOUNT VALUE 1/1/22 | ENDING ACCOUNT VALUE 6/30/22 | EXPENSES PAID DURING PERIOD* 1/1/22 - 6/30/22 | ANNUALIZED EXPENSE RATIO | |
Class A | ||||
Actual | $1,000.00 | $938.90 | $3.03 | 0.63% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.67 | $3.16 | 0.63% |
Class W | ||||
Actual | $1,000.00 | $941.50 | $0.63 | 0.13% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.15 | $0.65 | 0.13% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
1
Diversified Tax Exempt Series
Portfolio Composition as of June 30, 2022
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
Top Ten States2 | |||
Texas | 12.6% | Wisconsin | 4.2% |
New York | 11.8% | Illinois | 4.0% |
Florida | 6.5% | Washington | 3.9% |
Maryland | 5.0% | North Carolina | 3.9% |
Virginia
2As a percentage of total investments. | 4.9% | Tennessee | 3.0% |
2
Diversified Tax Exempt Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS - 91.1% | ||||||||
ALABAMA - 0.5% | ||||||||
Cullman Utilities Board Water Division, Revenue Bond, AGM, 4.000%, 9/1/2025 | 1,000,000 | $ | 1,048,082 | |||||
ALASKA - 0.9% | ||||||||
Alaska Municipal Bond Bank Authority | ||||||||
Electric Light & Power Impt., Revenue Bond, 5.000%, 12/1/2025 | 750,000 | 813,907 | ||||||
Electric Light & Power Impt., Revenue Bond, 5.000%, 12/1/2030 | 875,000 | 999,769 | ||||||
Public Impt., Unrefunded Balance, Series 2, Revenue Bond, 5.000%, 9/1/2022 | 135,000 | 135,325 | ||||||
1,949,001 | ||||||||
ARIZONA - 1.6% | ||||||||
Mesa | ||||||||
Multiple Utility Impt., Revenue Bond, 5.000%, 7/1/2023 | 1,050,000 | 1,084,215 | ||||||
Multiple Utility Impt., Revenue Bond, 5.000%, 7/1/2024 | 1,200,000 | 1,270,793 | ||||||
Scottsdale, Water & Sewer, Revenue Bond, 5.250%, 7/1/2022 | 1,130,000 | 1,130,133 | ||||||
3,485,141 | ||||||||
CALIFORNIA - 0.7% | ||||||||
California, G.O. Bond, 5.000%, 8/1/2025 | 1,410,000 | 1,530,076 | ||||||
COLORADO - 0.9% | ||||||||
Denver Wastewater Management Division Department of Public Works, Public Impt., Revenue Bond, 5.000%, 11/1/2029 | 750,000 | 858,286 | ||||||
E-470 Public Highway Authority, Senior Lien, Series A, Revenue Bond, 5.000%, 9/1/2026 | 1,000,000 | 1,093,198 | ||||||
1,951,484 | ||||||||
DISTRICT OF COLUMBIA - 0.5% | ||||||||
District of Columbia Water & Sewer Authority, Series C, Revenue Bond, 5.000%, 10/1/2022 | 1,000,000 | 1,008,961 | ||||||
FLORIDA - 6.5% | ||||||||
Central Florida Expressway Authority Senior Lien, Revenue Bond, 5.000%, 7/1/2024 | 500,000 | 527,518 | ||||||
Senior Lien, Revenue Bond, 5.000%, 7/1/2027 | 500,000 | 557,247 | ||||||
Senior Lien, Revenue Bond, 5.000%, 7/1/2038 | 530,000 | 562,944 | ||||||
Florida | ||||||||
Series A, G.O. Bond, 5.000%, 6/1/2025 | 1,857,000 | 2,005,681 | ||||||
Series B, G.O. Bond, 5.000%, 6/1/2024 | 930,000 | 982,767 | ||||||
Florida Department of Transportation Turnpike System, Series B, Revenue Bond, 2.500%, 7/1/2026 | 505,000 | 503,471 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
FLORIDA (continued) | ||||||||
JEA Electric System, Series A, Revenue Bond, 5.000%, 10/1/2028 | 1,000,000 | $ | 1,123,692 | |||||
Miami-Dade County, Revenue Bond, 5.000%, 4/1/2028 | 1,015,000 | 1,144,936 | ||||||
Miami-Dade County, Water & Sewer System, Sewer Impt., Revenue Bond, 5.000%, 10/1/2028 | 2,000,000 | 2,256,385 | ||||||
Orlando Utilities Commission, Series C, Revenue Bond, 5.000%, 10/1/2025 | 665,000 | 721,549 | ||||||
Port St. Lucie Utility System, Water Utility Impt., Revenue Bond, NATL, 5.250%, 9/1/2023 | 500,000 | 518,679 | ||||||
School District of Broward County, School Impt., G.O. Bond, 5.000%, 7/1/2032 | 1,895,000 | 2,214,893 | ||||||
Tampa-Hillsborough County Expressway Authority, Highway Impt., Series A, Revenue Bond, BAM, 5.000%, 7/1/2028 | 1,000,000 | 1,130,942 | ||||||
14,250,704 | ||||||||
GEORGIA - 2.7% | ||||||||
Georgia, School Impt., Series A, G.O. Bond, 5.000%, 7/1/2033 | 5,000,000 | 5,859,892 | ||||||
HAWAII - 2.2% | ||||||||
City & County of Honolulu, Transit Impt., Series E, G.O. Bond, 5.000%, 3/1/2027 | 2,000,000 | 2,234,988 | ||||||
Hawaii | ||||||||
Series FE, G.O. Bond, 5.000%, 10/1/2025 | 1,505,000 | 1,638,485 | ||||||
Series GJ, G.O. Bond, 1.033%, 8/1/2025 | 500,000 | 467,561 | ||||||
Honolulu County, Series E, G.O. Bond, 5.000%, 9/1/2028 | 500,000 | 562,983 | ||||||
4,904,017 | ||||||||
ILLINOIS - 4.0% | ||||||||
Aurora, Waterworks & Sewerage Series B, Revenue Bond, 3.000%, 12/1/2022 | 500,000 | 503,803 | ||||||
Series B, Revenue Bond, 3.000%, 12/1/2023 | 625,000 | 635,568 | ||||||
Illinois, Public Impt., Series A, G.O. Bond, 5.000%, 11/1/2024 | 1,800,000 | 1,880,938 | ||||||
Illinois Municipal Electric Agency | ||||||||
Series A, Revenue Bond, 5.000%, 2/1/2025 | 2,000,000 | 2,118,054 | ||||||
Series A, Revenue Bond, 5.000%, 2/1/2026 | 730,000 | 778,913 | ||||||
Illinois State Toll Highway Authority | ||||||||
Highway Impt., Series B, Revenue | ||||||||
Bond, 5.000%, 1/1/2038 | 1,050,000 | 1,111,815 | ||||||
Series B, Revenue Bond, 5.000%, 1/1/2031 | 1,500,000 | 1,707,196 | ||||||
8,736,287 |
The accompanying notes are an integral part of the financial statements.
3
Diversified Tax Exempt Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
INDIANA - 0.5% | ||||||||
South Bend Sewage Works, Revenue Bond, 3.000%, 12/1/2025 | 1,075,000 | $ | 1,102,096 | |||||
IOWA - 1.2% | ||||||||
Cedar Falls IA, Municipal Electric Utility, Revenue Bond, 5.000%, 12/1/2023 | 2,000,000 | 2,088,531 | ||||||
Johnston, Public Impt., Series A, G.O. Bond, 5.000%, 6/1/2023 | 520,000 | 535,584 | ||||||
2,624,115 | ||||||||
KANSAS - 0.9% | ||||||||
Topeka, Series A, G.O. Bond, 4.000%, 8/15/2024 | 1,440,000 | 1,497,025 | ||||||
Wichita, Water & Sewer Utility, Series A, Revenue Bond, 5.000%, 10/1/2024 | 500,000 | 528,965 | ||||||
2,025,990 | ||||||||
KENTUCKY - 1.9% | ||||||||
Kentucky Municipal Power Agency, Series A, Revenue Bond, NATL, 5.000%, 9/1/2024 | 1,355,000 | 1,412,914 | ||||||
Louisville/Jefferson County Metropolitan Government, Public Impt., G.O. Bond, 4.900%, 11/15/2023 | 2,760,000 | 2,806,959 | ||||||
4,219,873 | ||||||||
LOUISIANA - 0.5% | ||||||||
New Orleans | ||||||||
Sewer Impt., Revenue Bond, 5.000%, 6/1/2023 | 300,000 | 307,886 | ||||||
Sewer Impt., Series B, Revenue Bond, 5.000%, 6/1/2027 | 500,000 | 549,583 | ||||||
Shreveport, Water & Sewer, Series B, Revenue Bond, AGM, 3.000%, 12/1/2022 | 300,000 | 302,067 | ||||||
1,159,536 | ||||||||
MAINE - 0.6% | ||||||||
Maine Municipal Bond Bank, Highway Impt., Series A, Revenue Bond, 5.000%, 9/1/2027 | 675,000 | 753,622 | ||||||
Maine Turnpike Authority, Highway Impt., Revenue Bond, 5.000%, 7/1/2033 | 550,000 | 627,004 | ||||||
1,380,626 | ||||||||
MARYLAND - 5.0% | ||||||||
Baltimore County | ||||||||
G.O. Bond, 5.000%, 3/1/2023 | 665,000 | 680,837 | ||||||
G.O. Bond, 5.000%, 8/1/2028 | 1,000,000 | 1,147,085 | ||||||
Maryland | ||||||||
School Impt., Series A, G.O. Bond, 5.000%, 3/1/2033 | 5,000,000 | 5,822,816 | ||||||
School Impt., Series A, G.O. Bond, 5.000%, 8/1/2035 | 1,000,000 | 1,140,030 | ||||||
Series B, G.O. Bond, 5.000%, 8/1/2025 | 1,000,000 | 1,085,448 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
MARYLAND (continued) | ||||||||
Maryland Health & Higher Educational Facilities Authority, Prerefunded Balance, Revenue Bond, 5.000%, 7/1/2030 | 1,010,000 | $ | 1,094,449 | |||||
10,970,665 | ||||||||
MASSACHUSETTS - 0.7% | ||||||||
Massachusetts | ||||||||
Public Impt., Series D, G.O. Bond, 5.000%, 4/1/2026 | 1,095,000 | 1,204,756 | ||||||
Series B, G.O. Bond, 5.000%, 7/1/2024 | 410,000 | 434,157 | ||||||
1,638,913 | ||||||||
MINNESOTA - 0.5% | ||||||||
Minnesota, Public Impt., Series A, G.O. Bond, 5.000%, 8/1/2026 | 1,030,000 | 1,118,408 | ||||||
MISSISSIPPI - 0.2% | ||||||||
Mississippi, Series E, G.O. Bond, 1.122%, 10/1/2025 | 500,000 | 466,324 | ||||||
MISSOURI - 2.1% | ||||||||
Clayton, G.O. Bond, 4.000%, 3/15/2028 | 510,000 | 552,945 | ||||||
Columbia School District, Series B, G.O. Bond, 5.000%, 3/1/2026 | 1,635,000 | 1,800,792 | ||||||
Kansas City, Sanitary Sewer System, Sewer Impt., Series A, Revenue Bond, 4.000%, 1/1/2025 | 750,000 | 783,043 | ||||||
Missouri Joint Municipal Electric Utility Commission, Prairie Street Project, Revenue Bond, 5.000%, 1/1/2027 | 1,410,000 | 1,554,689 | ||||||
4,691,469 | ||||||||
NEBRASKA - 1.2% | ||||||||
Lincoln Electric System Revenue, Prerefunded Balance, Series A, Revenue Bond, 5.000%, 9/1/2030 | 1,000,000 | 1,087,549 | ||||||
Nebraska Public Power District, Series B, Revenue Bond, 5.000%, 1/1/2030 | 640,000 | 734,679 | ||||||
Omaha, Public Impt., Series A, G.O. Bond, 2.500%, 1/15/2023 | 760,000 | 765,099 | ||||||
2,587,327 | ||||||||
NEVADA - 0.6% | ||||||||
Washoe County School District, School Impt., Series A, G.O. Bond, 5.000%, 10/1/2025 | 1,230,000 | 1,334,584 | ||||||
NEW JERSEY - 1.4% | ||||||||
New Jersey Economic Development Authority | ||||||||
Revenue Bond, 5.000%, 6/15/2028 | 700,000 | 755,516 | ||||||
School Impt., Revenue Bond, 5.000%, 6/15/2029 | 750,000 | 811,456 | ||||||
New Jersey Transportation Trust Fund Authority, Transit Impt., Series AA, Revenue Bond, 5.000%, 6/15/2026 | 1,445,000 | 1,522,330 | ||||||
3,089,302 |
The accompanying notes are an integral part of the financial statements.
4
Diversified Tax Exempt Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
NEW MEXICO - 1.4% | ||||||||
Albuquerque, Series D, G.O. Bond, 5.000%, 7/1/2025 | 1,000,000 | $ | 1,082,420 | |||||
Albuquerque Bernalillo County Water Utility Authority, Water Utility Impt., Revenue Bond, 5.000%, 7/1/2022 | 1,250,000 | 1,250,135 | ||||||
Bernalillo County, Public Impt., Recreational Facility Impt., G.O. Bond, 4.000%, 8/15/2024 | 785,000 | 819,237 | ||||||
3,151,792 | ||||||||
NEW YORK - 11.8% | ||||||||
Metropolitan Transportation Authority, Transit Impt., Green Bond, Series C-1, Revenue Bond, 4.750%, 11/15/2045 | 2,000,000 | 2,022,133 | ||||||
New York City | ||||||||
Public Impt., Subseries F-3, G.O. Bond, 5.000%, 12/1/2024 | 825,000 | 880,335 | ||||||
Series B-1, G.O. Bond, 5.000%, 8/1/2027 | 1,600,000 | 1,791,322 | ||||||
Series D, G.O. Bond, 1.216%, 8/1/2026 | 1,200,000 | 1,095,047 | ||||||
Series E, G.O. Bond, 5.000%, 8/1/2026 | 1,905,000 | 2,100,066 | ||||||
Series J, G.O. Bond, 5.000%, 8/1/2023 | 950,000 | 982,230 | ||||||
New York City Municipal Water Finance Authority, Series EE, Revenue Bond, 5.000%, 6/15/2040 | 3,500,000 | 3,749,941 | ||||||
New York City Transitional Finance Authority, Building Aid, Prerefunded Balance, Series S-4A, Revenue Bond, 5.000%, 7/15/2023 | 645,000 | 669,421 | ||||||
New York State Dormitory Authority | ||||||||
Public Impt., Prerefunded Balance, Series C, Revenue Bond, 5.000%, 3/15/2023 | 2,000,000 | 2,049,319 | ||||||
School Impt., Series E, Revenue Bond, AGM, 5.000%, 10/1/2025 | 860,000 | 890,544 | ||||||
Series C, Revenue Bond, 0.887%, 3/15/2025 | 950,000 | 887,257 | ||||||
Series C, Revenue Bond, 1.187%, 3/15/2026 | 1,110,000 | 1,016,160 | ||||||
New York State Thruway Authority, Series B, Revenue Bond, 4.000%, 1/1/2038 | 2,390,000 | 2,361,765 | ||||||
New York State Urban Development Corp. | ||||||||
Economic Impt., Correctional Facility Impt, Series B, Revenue Bond, 2.020%, 3/15/2024 | 475,000 | 465,971 | ||||||
Highway Impt., Series C, Revenue Bond, 5.000%, 3/15/2024 | 765,000 | 782,462 | ||||||
Port Authority of New York & New Jersey, Airport & Marina Impt., Consolidated Series 222, Revenue Bond, 5.000%, 7/15/2032 | 1,185,000 | 1,333,620 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
NEW YORK (continued) | ||||||||
Triborough Bridge & Tunnel Authority, Series A, Revenue Bond, 5.000%, 11/15/2023 | 2,805,000 | $ | 2,883,337 | |||||
25,960,930 | ||||||||
NORTH CAROLINA - 3.9% | ||||||||
Charlotte, Series A, G.O. Bond, 5.000%, 8/1/2022 | 615,000 | 616,728 | ||||||
Charlotte, Water & Sewer System, Revenue Bond, 5.000%, 7/1/2024 | 1,235,000 | 1,309,996 | ||||||
Mecklenburg County, School Impt., G.O. Bond, 5.000%, 3/1/2030 | 3,675,000 | 4,288,079 | ||||||
North Carolina Turnpike Authority, Highway Impt., Revenue Bond, 5.000%, 2/1/2024 | 1,500,000 | 1,561,505 | ||||||
Raleigh, Series A, G.O. Bond, 5.000%, 9/1/2023 | 700,000 | 725,198 | ||||||
8,501,506 | ||||||||
OHIO - 2.8% | ||||||||
Brecksville-Broadview Heights City School District, School Impt., Prerefunded Balance, G.O. Bond, 5.000%, 12/1/2048 | 1,000,000 | 1,043,534 | ||||||
Cincinnati, Public Impt., Series A, G.O. Bond, 5.000%, 12/1/2027 | 1,100,000 | 1,247,069 | ||||||
Cincinnati, Water System, Water Utility Impt., Series A, Revenue Bond, 5.000%, 12/1/2032 | 1,410,000 | 1,671,770 | ||||||
Mason | ||||||||
Recreational Facility Impt., Series A, G.O. Bond, 3.000%, 12/1/2023 | 595,000 | 604,644 | ||||||
Recreational Facility Impt., Series B, G.O. Bond, 2.000%, 12/1/2023 | 680,000 | 681,630 | ||||||
Middletown City School District, School Impt., Prerefunded Balance, G.O. Bond, 5.250%, 12/1/2040 | 1,000,000 | 1,016,222 | ||||||
6,264,869 | ||||||||
OREGON - 0.6% | ||||||||
Metro, Recreational Facility Impt., Series A, G.O. Bond, 5.000%, 6/1/2023 | 825,000 | 827,318 | ||||||
Oregon, Public Impt., Series K, G.O. Bond, 5.000%, 8/1/2023 | 575,000 | 595,132 | ||||||
1,422,450 | ||||||||
PENNSYLVANIA - 3.0% | ||||||||
Pennsylvania Turnpike Commission | ||||||||
Highway Impt., Series A, Revenue Bond, 5.000%, 12/1/2029 | 750,000 | 829,592 | ||||||
Highway Impt., Series A, Revenue Bond, 5.000%, 12/1/2030 | 850,000 | 938,785 | ||||||
Highway Impt., Series A-1, Revenue Bond, 5.000%, 12/1/2023 | 1,200,000 | 1,250,532 | ||||||
Series A-2, Revenue Bond, 5.000%, 6/1/2028 | 590,000 | 635,778 | ||||||
Philadelphia, Water & Wastewater, Water Utility Impt., Series A, Revenue Bond, 5.000%, 11/1/2040 | 2,450,000 | 2,688,273 |
The accompanying notes are an integral part of the financial statements.
5
Diversified Tax Exempt Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
PENNSYLVANIA (continued) | ||||||||
Pittsburgh Water & Sewer Authority, Series B, Revenue Bond, AGM, 5.000%, 9/1/2032 | 300,000 | $ | 337,467 | |||||
6,680,427 | ||||||||
TENNESSEE - 3.0% | ||||||||
Knoxville Electric System Revenue | ||||||||
Series FF, Revenue Bond, 5.000%, 7/1/2023 | 800,000 | 801,367 | ||||||
Series FF, Revenue Bond, 5.000%, 7/1/2025 | 705,000 | 705,000 | ||||||
Knoxville, Wastewater System, Sewer Impt., Series A, Revenue Bond, 5.000%, 4/1/2032 | 2,500,000 | 2,935,643 | ||||||
Metropolitan Government of Nashville & Davidson County, Water & Sewer, Series B, Revenue Bond, 1.031%, 7/1/2025 | 650,000 | 604,638 | ||||||
Putnam County, G.O. Bond, 5.000%, 4/1/2025 | 500,000 | 537,829 | ||||||
Sullivan County, Correctional Facility Impt, G.O. Bond, 5.000%, 5/1/2027 | 1,000,000 | 1,121,259 | ||||||
6,705,736 | ||||||||
TEXAS - 12.6% | ||||||||
Austin Electric Utility, Series A, Revenue Bond, 5.000%, 11/15/2022 | 500,000 | 506,757 | ||||||
Central Texas Turnpike System, Series C, Revenue Bond, 5.000%, 8/15/2027 | 1,470,000 | 1,545,033 | ||||||
Corpus Christi, G.O. Bond, 5.000%, 3/1/2024 | 1,000,000 | 1,045,609 | ||||||
Dallas, Waterworks & Sewer System, Series C, Revenue Bond, 5.000%, 10/1/2028 | 1,715,000 | 1,962,099 | ||||||
Harris County, Senior Lien, Toll Road Impt., Series B, Revenue Bond, 5.000%, 8/15/2023 | 600,000 | 621,642 | ||||||
Houston, Combined Utility System | ||||||||
Series A, Revenue Bond, 5.000%, 11/15/2031 | 1,140,000 | 1,328,532 | ||||||
Series C, Revenue Bond, 5.000%, 5/15/2024 | 1,005,000 | 1,060,529 | ||||||
Irving, Public Impt., G.O. Bond, 5.000%, 9/15/2032 | 3,030,000 | 3,544,442 | ||||||
North Texas Municipal Water District Water System, Series A, Revenue Bond, 5.000%, 9/1/2027 | 1,500,000 | 1,693,826 | ||||||
North Texas Tollway Authority | ||||||||
Series A, Revenue Bond, 5.000%, 1/1/2026 | 500,000 | 521,467 | ||||||
Series A, Revenue Bond, 5.000%, 1/1/2027 | 2,000,000 | 2,171,728 | ||||||
Series B, Revenue Bond, 5.000%, 1/1/2029 | 925,000 | 1,035,572 | ||||||
San Angelo Independent School District, Series A, G.O. Bond, 5.000%, 2/15/2024 | 1,645,000 | 1,724,140 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
TEXAS (continued) | ||||||||
San Antonio Electric & Gas, Revenue Bond, 5.000%, 2/1/2025 | 1,000,000 | $ | 1,002,794 | |||||
San Antonio Water System, Water Utility Impt., Series A, Revenue Bond, 5.000%, 5/15/2032 | 1,075,000 | 1,196,050 | ||||||
Tarrant County, Highway Impt., G.O. Bond, 5.000%, 7/15/2036 | 2,300,000 | 2,624,439 | ||||||
Texas Municipal Gas Acquisition & Supply Corp. III | ||||||||
Revenue Bond, 5.000%, 12/15/2026 | 200,000 | 211,902 | ||||||
Revenue Bond, 5.000%, 12/15/2027 | 600,000 | 636,969 | ||||||
Revenue Bond, 5.000%, 12/15/2028 | 250,000 | 265,471 | ||||||
Texas Water Development Board | ||||||||
Water Utility Impt., Revenue Bond, 5.000%, 10/15/2025 | 1,000,000 | 1,089,489 | ||||||
Water Utility Impt., Series B, Revenue Bond, 5.000%, 10/15/2025 | 1,845,000 | 2,010,863 | ||||||
27,799,353 | ||||||||
UTAH - 0.4% | ||||||||
Salt Lake City Corp., Series B, G.O. Bond, 5.000%, 6/15/2026 | 830,000 | 919,433 | ||||||
VIRGINIA - 4.8% | ||||||||
Fairfax County | ||||||||
Public Impt., Series A, Prerefunded Balance, G.O. Bond, 5.000%, 10/1/2035 | 3,580,000 | 3,946,016 | ||||||
Series B, G.O. Bond, 5.000%, 10/1/2024 | 5,855,000 | 6,248,812 | ||||||
Richmond, Public Utility, Series B, Revenue Bond, 2.086%, 1/15/2025 | 515,000 | 498,227 | ||||||
10,693,055 | ||||||||
WASHINGTON - 3.9% | ||||||||
Washington | ||||||||
Highway Impt., Series B, G.O. Bond, 5.000%, 8/1/2025 | 1,480,000 | 1,529,613 | ||||||
School Impt., Series 2020A, G.O. Bond, 5.000%, 8/1/2032 | 4,255,000 | 4,829,683 | ||||||
Series R, G.O. Bond, 5.000%, 8/1/2027 | 2,000,000 | 2,252,578 | ||||||
8,611,874 | ||||||||
WEST VIRGINIA - 0.9% | ||||||||
West Virginia, Series A, G.O. Bond, 5.000%, 6/1/2025 | 1,860,000 | 2,009,359 | ||||||
WISCONSIN - 4.2% | ||||||||
Mid-St. Technical College District, G.O. Bond, 2.000%, 3/1/2024 | 600,000 | 599,673 | ||||||
Milwaukee Metropolitan Sewerage District, Sewer Impt., Series A, G.O. Bond, 4.000%, 10/1/2026 | 1,900,000 | 2,038,008 | ||||||
Western Technical College District, Series A, G.O. Bond, 3.000%, 4/1/2025 | 600,000 | 611,424 |
The accompanying notes are an integral part of the financial statements.
6
Diversified Tax Exempt Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
WISCONSIN (continued) | ||||||||
Wisconsin, Public Impt., Series B, G.O. Bond, 5.000%, 5/1/2024 | 5,750,000 | $ | 6,063,093 | |||||
9,312,198 | ||||||||
TOTAL MUNICIPAL BONDS | ||||||||
(Identified Cost $208,946,527) | 201,165,855 | |||||||
MUTUAL FUND - 3.0% | ||||||||
iShares National Muni Bond ETF (Identified Cost $7,083,057) | 62,191 | 6,614,635 | ||||||
SHORT-TERM INVESTMENT - 5.5% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 1.35%2 | ||||||||
(Identified Cost $12,094,193) | 12,094,193 | 12,094,193 | ||||||
TOTAL INVESTMENTS - 99.6% | ||||||||
(Identified Cost $228,123,777) | 219,874,683 | |||||||
OTHER ASSETS, LESS LIABILITIES - 0.4% | 979,256 | |||||||
NET ASSETS - 100.0% | $ | 220,853,939 |
ETF - Exchange-Traded Fund
G.O. Bond - General Obligation Bond
Impt. - Improvement
Scheduled principal and interest payments are guaranteed by:
AGM (Assurance Guaranty Municipal Corp.)
BAM (Build America Mutual Assurance Co.)
NATL (National Public Finance Guarantee Corp.)
The insurance does not guarantee the market value of the municipal bonds.
1Amount is stated in USD unless otherwise noted.
2Rate shown is the current yield as of June 30, 2022.
The accompanying notes are an integral part of the financial statements.
7
Diversified Tax Exempt Series
Statement of Assets and Liabilities
June 30, 2022 (unaudited)
ASSETS: | ||||
Investments, at value (identified cost $228,123,777) (Note 2) | $ | 219,874,683 | ||
Interest receivable | 2,542,346 | |||
Receivable for fund shares sold | 28,957 | |||
Dividends receivable | 13,155 | |||
Prepaid expenses | 17,786 | |||
TOTAL ASSETS | 222,476,927 | |||
LIABILITIES: | ||||
Accrued fund accounting and administration fees (Note 3) | 14,969 | |||
Accrued management fees (Note 3) | 891 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 714 | |||
Payable for fund shares repurchased | 1,573,939 | |||
Other payables and accrued expenses | 32,475 | |||
TOTAL LIABILITIES | 1,622,988 | |||
TOTAL NET ASSETS | $ | 220,853,939 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 215,202 | ||
Additional paid-in-capital | 227,254,621 | |||
Total distributable earnings (loss) | (6,615,884 | ) | ||
TOTAL NET ASSETS | $ | 220,853,939 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A ($1,965,086/191,655 shares) | $ | 10.25 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W ($218,888,853/21,328,564 shares) | $ | 10.26 |
The accompanying notes are an integral part of the financial statements.
8
Diversified Tax Exempt Series
Statement of Operations
For the Six Months Ended June 30, 2022 (unaudited)
INVESTMENT INCOME: | ||||
Interest | $ | 1,170,226 | ||
Dividends | 61,509 | |||
Total Investment Income | 1,231,735 | |||
EXPENSES: | ||||
Management fees (Note 3) | 427,114 | |||
Fund accounting and administration fees (Note 3) | 36,792 | |||
Directors’ fees (Note 3) | 7,777 | |||
Chief Compliance Officer service fees (Note 3) | 3,509 | |||
Custodian fees | 2,719 | |||
Miscellaneous | 62,241 | |||
Total Expenses | 540,152 | |||
Less reduction of expenses (Note 3) | (421,597 | ) | ||
Net Expenses | 118,555 | |||
NET INVESTMENT INCOME | 1,113,180 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | (61,961 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (10,144,003 | ) | ||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | (10,205,964 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (9,092,784 | ) |
The accompanying notes are an integral part of the financial statements.
9
Diversified Tax Exempt Series
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED 12/31/21 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,113,180 | $ | 1,843,322 | ||||
Net realized gain (loss) on investments | (61,961 | ) | 8,714,790 | |||||
Net change in unrealized appreciation (depreciation) on investments | (10,144,003 | ) | (9,903,740 | ) | ||||
Net increase (decrease) from operations | (9,092,784 | ) | 654,372 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
Class A | (4,547 | ) | (151,254 | ) | ||||
Class W | (782,159 | ) | (7,220,650 | ) | ||||
Total distributions to shareholders | (786,706 | ) | (7,371,904 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | 112,363,129 | (131,176,695 | ) | |||||
Net increase (decrease) in net assets | 102,483,639 | (137,894,227 | ) | |||||
NET ASSETS: | ||||||||
Beginning of period | 118,370,300 | 256,264,527 | ||||||
End of period | $ | 220,853,939 | $ | 118,370,300 |
The accompanying notes are an integral part of the financial statements.
10
Diversified Tax Exempt Series
Financial Highlights - Class A
FOR THE | FOR THE YEAR ENDED | |||||||||||||||||
SIX MONTHS | ||||||||||||||||||
ENDED | ||||||||||||||||||
6/30/22 | ||||||||||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||||
Net asset value - Beginning of period | $10.94 | $11.58 | $11.14 | $10.90 | $10.98 | $10.86 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||
Net investment income1 | 0.04 | 0.10 | 0.15 | 0.17 | 0.15 | 0.13 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.71 | ) | (0.08 | ) | 0.48 | 0.39 | (0.08 | ) | 0.13 | |||||||||
Total from investment operations | (0.67 | ) | 0.02 | 0.63 | 0.56 | 0.07 | 0.26 | |||||||||||
Less distributions to shareholders: | ||||||||||||||||||
From net investment income | (0.02 | ) | (0.09 | ) | (0.10 | ) | (0.20 | ) | (0.15 | ) | (0.14 | ) | ||||||
From net realized gain on investments | — | (0.57 | ) | (0.09 | ) | (0.12 | ) | — | — | |||||||||
Total distributions to shareholders | (0.02 | ) | (0.66 | ) | (0.19 | ) | (0.32 | ) | (0.15 | ) | (0.14 | ) | ||||||
Net asset value - End of period | $10.25 | $10.94 | $11.58 | $11.14 | $10.90 | $10.98 | ||||||||||||
Net assets - End of period (000’s omitted) | $1,965 | $2,430 | $2,324 | $4,394 | $297,814 | $278,329 | ||||||||||||
Total return2 | (6.11% | ) | 0.16% | 5.73% | 5.10% | 0.65% | 2.37% | |||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||
Expenses | 0.63% | 3 | 0.67% | 0.61% | 0.58% | 0.59% | 0.58% | |||||||||||
Net investment income | 0.79% | 3 | 0.91% | 1.35% | 1.62% | 1.42% | 1.22% | |||||||||||
Series portfolio turnover | 7% | 23% | 41% | 29% | 12% | 4% |
1Calculated based on average shares outstanding during the periods.
2Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Periods less than one year are not annualized.
3Annualized.
The accompanying notes are an integral part of the financial statements.
11
Diversified Tax Exempt Series
Financial Highlights - Class W
FOR THE | FOR THE YEAR ENDED | FOR THE | ||||||||||
SIX MONTHS | PERIOD | |||||||||||
ENDED 6/30/22 | 3/1/191 TO | |||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | |||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||
Net asset value - Beginning of period | $10.94 | $11.59 | $11.15 | $11.01 | ||||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income2 | 0.07 | 0.16 | 0.21 | 0.20 | ||||||||
Net realized and unrealized gain (loss) on investments | (0.71 | ) | (0.09 | ) | 0.48 | 0.31 | ||||||
Total from investment operations | (0.64 | ) | 0.07 | 0.69 | 0.51 | |||||||
Less distributions to shareholders: | ||||||||||||
From net investment income | (0.04 | ) | (0.15 | ) | (0.16 | ) | (0.25 | ) | ||||
From net realized gain on investments | — | (0.57 | ) | (0.09 | ) | (0.12 | ) | |||||
Total distributions to shareholders | (0.04 | ) | (0.72 | ) | (0.25 | ) | (0.37 | ) | ||||
Net asset value - End of period | $10.26 | $10.94 | $11.59 | $11.15 | ||||||||
Net assets - End of period (000’s omitted) | $218,889 | $115,940 | $253,941 | $189,336 | ||||||||
Total return3 | (5.85% | ) | 0.62% | 6.23% | 4.61% | |||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Expenses * | 0.13% | 4 | 0.17% | 0.11% | 0.11% | 4 | ||||||
Net investment income | 1.31% | 4 | 1.42% | 1.79% | 2.14% | 4 | ||||||
Series portfolio turnover | 7% | 23% | 41% | 29% | ||||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||
0.50% | 4 | 0.50% | 0.50% | 0.50% | 4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
12
Diversified Tax Exempt Series
Notes to Financial Statements
(unaudited)
1. | Organization |
Diversified Tax Exempt Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series’ investment objective is to provide as high a level of current income exempt from federal income tax as the Advisor believes is consistent with the preservation of capital.
The Series is authorized to issue two classes of shares (Class A and Class W). While each class of shares is substantially the same, each class has its own investment eligibility criteria and cost structure.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of June 30, 2022, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Diversified Tax Exempt Series Class A common stock and 50 million have been designated as Diversified Tax Exempt Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Board. 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.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input
13
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of June 30, 2022 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Debt securities: | ||||||||||||||||
Municipal Bonds | $ | 201,165,855 | $ | — | $ | 201,165,855 | $ | — | ||||||||
Mutual fund | 6,614,635 | 6,614,635 | — | — | ||||||||||||
Short-Term Investment | 12,094,193 | 12,094,193 | — | — | ||||||||||||
Total assets | $ | 219,874,683 | $ | 18,708,828 | $ | 201,165,855 | $ | — |
There were no Level 3 securities held by the Series as of December 31, 2021 or June 30, 2022.
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 Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
Expenses are recorded on an accrual basis. Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund’s Board, taking into consideration, among other things, the nature and type of expense.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
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.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. At June 30, 2022, the Series has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.
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 December 31, 2018 through December 31, 2021. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
14
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Distributions of Income and Gains
Distributions to shareholders of net investment income are made quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.50% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
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.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets; 0.0075% on the next $15 billion of average daily net assets; and 0.0065% of average daily net assets in excess of $40 billion; plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.85% of the average daily net assets of the Class A shares and 0.35% of the average daily net assets of the Class W shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the
15
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
3. | Transactions with Affiliates (continued) |
approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $421,597 in management fees for Class W shares for the six months ended June 30, 2022 This amount is included as a reduction of expenses on the Statement of Operations.
As of June 30, 2022 , there are no expenses eligible to be recouped by the Advisor.
4. | Purchases and Sales of Securities |
For the six months ended June 30, 2022, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $119,826,869 and $3,610,000, respectively. Sales of U.S. Government securities, other than short-term securities, were $6,887,988. There were no purchases of U.S. Government securities.
5. | Capital Stock Transactions |
Transactions in shares of Class A and Class W of Diversified Tax Exempt Series were:
CLASS A | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 19,021 | $ | 195,730 | 121,144 | $ | 1,400,116 | ||||||||||
Reinvested | 442 | 4,547 | 13,707 | 150,949 | ||||||||||||
Repurchased | (49,945 | ) | (521,637 | ) | (113,352 | ) | (1,298,287 | ) | ||||||||
Total | (30,482 | ) | $ | (321,360 | ) | 21,499 | $ | 252,778 |
CLASS W | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 12,180,881 | $ | 127,700,612 | 1,222,473 | $ | 14,076,424 | ||||||||||
Reinvested | 68,340 | 703,560 | 629,320 | 6,944,529 | ||||||||||||
Repurchased | (1,516,095 | ) | (15,719,683 | ) | (13,167,815 | ) | (152,450,426 | ) | ||||||||
Total | 10,733,126 | $ | 112,684,489 | (11,316,022 | ) | $ | (131,429,473 | ) |
Over 90% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in September 2022 unless extended or renewed. During the six months ended June 30, 2022, the Series did not borrow under the line of credit.
16
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of June 30, 2022.
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 GAAP. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The final determination of the tax character of current year distributions will be made at the conclusions of the fiscal year. The tax character of distributions paid for the year ended December 31, 2022 were as follows:
Ordinary income | $ | 557,648 | ||
Tax exempt income | $ | 1,548,715 | ||
Long-term capital gains | $ | 5,265,541 |
At June 30, 2022, the identified cost of investments for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
Cost for federal income tax purposes | $ | 228,123,777 | ||
Unrealized appreciation | 329,987 | |||
Unrealized depreciation | (8,579,081 | ) | ||
Net unrealized depreciation | $ | (8,249,094 | ) |
9. | Market Event |
Significant disruptions and volatility in the global financial markets and economies, like the current conditions caused by the Russian invasion of Ukraine and the COVID-19 pandemic, could negatively impact the investment performance of the Series. The global market and economic climate may become increasingly uncertain due to numerous factors beyond our control, including but not limited to, the effectiveness and acceptance of vaccines to prevent COVID-19, impacts on business operations in the U.S. related to the COVID-19 pandemic, such as supply chain disruptions and inflation, concerns related to unpredictable global market and economic factors, uncertainty in U.S. federal fiscal, tax, trade or regulatory policy and the fiscal, tax, trade or regulatory policy of foreign governments, rising interest rates, inflation or deflation, the availability of credit, performance of financial markets, terrorism, natural or biological catastrophes, public health emergencies, or political uncertainty.
17
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
10. | Subsequent Event |
In preparing these financial statements, management of the Fund has evaluated events and transactions for potential recognition or disclosure and the following item was noted:
On March 31, 2022, Manning & Napier, Inc. (“the Company”), entered into a definitive agreement under which the Company will go private and be acquired by the Callodine Group, LLC (“Callodine”), a Boston-based asset management firm, in partnership with East Asset Management (the “Transaction”). The Company is the ultimate owner of the Advisor. The proposed Transaction is expected to close in the third quarter of 2022, contingent upon shareholder approval and other customary closing conditions. Following the close, the Company will become a wholly owned subsidiary of an affiliate of Callodine. Closing the Transaction results in a change in control of the Advisor under the 1940 Act and therefore the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides advisory services to the Series. In connection with the Transaction, on May 3, 2022, the Manning & Napier Fund, Inc. Board of Directors unanimously approved a new Investment Advisory Agreement between the Fund and the Advisor for each Series that will become effective at the closing of the Transaction, subject to shareholder approval. As of the closing date of the Transaction, the Series’ investment objective and fee arrangements will remain unchanged.
18
Diversified Tax Exempt Series
Renewal of Investment Advisory Agreement
(unaudited)
At the Manning & Napier Fund, Inc. (the “Fund”) Board of Directors’ (the “Board”) meeting, held on May 19, 2022, the Investment Advisory Agreement (the “Agreement”) between the Fund and Manning & Napier Advisors, LLC (the “Advisor”) was considered for renewal by the Board, including all of the Directors who are not “interested persons” (“Independent Directors”), within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”). In connection with the decision whether to renew the Agreement, a variety of material was provided to the Board in advance of the meeting for their review and consideration. The Board also held a working session on May 3, 2022 to review and discuss information provided to the Board, and for the Board to request additional information.
Representatives of the Advisor attended a portion of the working session and attended the Board meeting. The Advisor provided supplemental information requested by the Board and presented additional oral information to the Board to assist the Board in its considerations. In addition to the information furnished by the Advisor, the Board was provided with a legal memorandum discussing its fiduciary duties related to its approval of the continuation of the Agreement. Legal counsel for the Fund discussed with the Board the applicable legal considerations. In addition, the Board received in-person presentations about the Fund throughout the year.
At the May 3, 2022 meeting, the Board also considered and approved a new investment advisory agreement (the “New Advisory Agreement”) for each Series between the Advisor and the Fund. The Board was asked to consider the New Advisory Agreement because of a transaction that will affect Manning & Napier, Inc. (“MN Inc.”), which is the ultimate parent company of the Advisor. On March 31, 2022, MN Inc. and Callodine Group, LLC (“Callodine”) entered into an agreement under which Callodine Merger Sub, an affiliate of Callodine, would acquire MN Inc. (the “Transaction”). The Transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2022. Following the closing, MN Inc. will become a wholly owned subsidiary of an affiliate of Callodine. The closing of the Transaction may be deemed to result in a change of control of the Advisor under the 1940 Act. As a result, the Transaction results in the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides investment advisory services to the Series (the “Current Advisory Agreement”). Shareholder approval of the New Advisory Agreement will enable the Advisor to continue to serve the Series following the closing of the Transaction.
The Independent Directors were advised by independent legal counsel with respect to these matters. The Independent Directors also met separately in executive sessions on April 13, April 27, May 3 and May 19, with their legal counsel without any representatives of the Advisor present.
The Directors’ determinations at the meeting were made on the basis of each Director’s business judgment after consideration of all the information presented. In deciding to recommend the renewal of the Current Agreement with respect to each Series of the Fund, the Independent Directors did not identify any single or particular piece of information that, in isolation, was sufficient to justify renewal. Each Independent Director may also have weighed information and factors differently. This summary describes the most important, but not all, of the factors considered by the Board and the Independent Directors.
• | The Board considered the nature and quality of services provided by the Advisor under the Current Agreement. The Advisor has provided those services for over 30 years, and they have included, among others: deciding what securities to purchase and sell for each Series; arranging for the purchase and sale of such securities by placing orders with broker-dealers; administering the affairs of the Fund (including the books and records of the Fund not maintained by third party service providers such as the custodian or transfer agent); arranging for the insurance coverage for the Fund; and supervising the preparation of tax returns, SEC filings (including registration statements) and reports to shareholders for the Fund. The Board considered the numerous services performed by the Advisor and its affiliates beyond those stated in the Current Agreement. The Board also considered the Advisor’s personnel who perform services to the Fund, changes in senior or key personnel, industry trends impacting the mutual fund industry, the strength of the Advisor’s compliance infrastructure, policies and procedures relating to compliance with securities regulations, reputation, expertise and resources. The Board discussed the quality of these services with representatives from the Advisor and concluded that the Advisor was performing its services to the Fund required under the Current Agreement in a reasonable manner. |
19
Diversified Tax Exempt Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the Advisor’s investment teams, including changes to the investment teams during the past year, investment team compensation structure and the investment process. The Board considered the performance of each Series since its inception, as well as over multiple time periods including: one year, three year, five year, ten year, and current market cycle. A market cycle includes periods of both rising and falling markets. Returns for established benchmark indices for each Series were provided. In addition, the Board considered (and considers on a quarterly basis) a number of other factors relevant to performance at the meeting including: a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives; the breadth of the Fund’s product offerings; and performance over reasonable time periods. Representatives of the Advisor provided information regarding and, as applicable, led discussions of factors impacting the Advisor’s performance for the Series, outlining current market conditions and explaining their expectations and strategies for the future. The Board also determined that it was appropriate to take into account its consideration of the Advisor’s performance at meetings held prior to the May 19th Board meeting. In doing so, the Board generally determined that the Advisor’s performance was satisfactory. Where the Advisor’s performance was materially below a Series’ benchmarks and or peer group, the Board requested an explanation for the underperformance and/or the steps taken by the Advisor in an effort to improve performance. In all instances, the Board was satisfied with the explanation provided. The Board plans to remain focused in future meetings to address any aberrational underperformance as necessary. After discussion, the Board concluded that the nature and quality of the investment management services provided by the Advisor to the Fund were considered adequate. |
• | The Board considered the fees and expenses of the various Series of the Fund. The Advisor presented the advisory fees and total expenses for each Series, including the advisory fee adjusted for any contractual expense waivers or reimbursements paid by the Advisor. |
• | The Board considered whether the Advisor had achieved economies of scale with respect to its services to the Fund. The Board acknowledged the expense caps incorporated in the Fund’s current fee structure, which requires the Advisor to subsidize the expenses of the Series operating above their expense cap, noting that 11 of 15 Series are currently receiving expense reimbursements from the Advisor. The Board concluded that the Fund would need to grow in assets before the Advisor would be able to achieve meaningful economies of scale. |
• | The Advisor provided the Board with information comparing each Series’ contractual management fees with the Advisor’s standard advisory fees for separate accounts and collective investment trusts. The Board considered that the range of services provided to the Series is more extensive than for the Advisor’s other clients due to additional infrastructure, administrative, operational and regulatory requirements related to operating a mutual fund, as well as associated risks. |
• | The current advisory fees, 12b-1 Distribution and Service Fees, other expenses (e.g. a combination of Shareholder Services Fees, intermediary sub-TA fees, routine operating expenses and Acquired Fund Fees and Expenses for fund-of-fund Series) and total expense ratios of each Series and share class were compared and ranked (on both a mean and median basis) against respective peer universes. Respective peer universes included funds of a similar size and with similar investment objectives and expense characteristics as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the comparisons and rankings of fees and net expense ratios for each Series of the Fund and the methodology behind the comparison. The Board considered the Advisor’s active portfolio management that results in portfolios that are more differentiated than the construction of their benchmarks. The Board will continue to monitor the fees and expenses of the Series compared to peer groups. Based on their review of the information provided, the Board concluded that the current fees and expenses of each Series of the Fund were reasonable on a comparative basis. |
20
Diversified Tax Exempt Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the costs of the Advisor’s services and the profits of the Advisor as they relate to the Advisor’s services to the Fund under the Current Agreement. The Board was provided with information on the Advisor’s financial condition and profitability by mutual fund agreement and by Series. Representatives of the Advisor discussed modest improvements in the Advisor’s profitability derived from the Fund. The Board discussed the Advisor’s revenues generated from the Fund and its expenses associated with providing the services under the Current Agreement. The Advisor presented the Board with information on firm wide investment management profitability to provide a comparison of the Advisor’s profitability from its Fund activities relative to its profitability from its other investment management business. In addition, the Board reviewed the Advisor’s expense allocation methodology used to calculate profitability since many of the Advisor’s resources and expenses are shared across the Advisor’s various investment management vehicles. The Board noted the Advisor’s explanation of the consistent approach taken in calculating profitability, compared to prior periods, including the allocation of expenses as part of that calculation. The Board considered the Advisor’s expenses associated with Fund activities outside of the Current Agreement (such as expense reimbursements pursuant to expense caps and payments made by the Advisor to third party platforms on which shares of the Fund are available for purchase). The Board noted the potential for the Transaction to add resources that have the potential to facilitate the growth of various series, which could improve economies of scale for those Series; however, they also noted that such potential may not be realized. After discussing the above costs and profits, the Board concluded that the Advisor’s profit margin relating to its services provided under the Current Agreement was reasonable. |
• | The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include participation in a joint insurance program, sharing of compensation expenses for certain shared personnel, relationships with large service providers, the utilization of Series within the Advisor’s separately managed accounts and certain research services provided by soft dollars. The Board concluded that these additional benefits to the Advisor were reasonable. |
Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of the Independent Directors, concluded that the compensation under the Current Agreement was fair and reasonable with respect to each Series in light of the services and expenses and such other matters as the Directors considered to be relevant in the exercise of their reasonable judgment, and that the renewal of the Current Agreement would be in the best interests of each Series and its shareholders. The Board did not indicate that any single factor was determinative of its decision to approve the Current Agreement, but indicated that the Board based its determination on the total mix of information available to it.
21
Diversified Tax Exempt Series
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-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling 1-(800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End
2. Fund Holdings - Quarter-End
3. Shareholder Report - Annual
4. Shareholder Report - Semi-Annual
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNDTE-06/22-SAR
22
www.manning-napier.com
Manning & Napier Fund, Inc.
New York Tax Exempt Series
New York Tax Exempt Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service 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 in each class at the beginning of the period and held for the entire period (January 1, 2022 to June 30, 2022).
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 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 each class in 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 a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested 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 sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. 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.
BEGINNING ACCOUNT VALUE 1/1/22 | ENDING ACCOUNT VALUE 6/30/22 | EXPENSES PAID DURING PERIOD* 1/1/22 - 6/30/22 | ANNUALIZED EXPENSE RATIO | |
Class A | ||||
Actual | $1,000.00 | $939.70 | $3.37 | 0.70% |
Hypothetical | ||||
(5% return before expenses) | $1,000.00 | $1,021.32 | $3.51 | 0.70% |
Class W | ||||
Actual | $1,000.00 | $941.40 | $0.96 | 0.20% |
Hypothetical | ||||
(5% return before expenses) | $1,000.00 | $1,023.80 | $1.00 | 0.20% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
1
New York Tax Exempt Series
Portfolio Composition as of June 30, 2022
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
2
New York Tax Exempt Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
NEW YORK MUNICIPAL BONDS - 91.7% | ||||||||
Albany | ||||||||
Public Impt., G.O. Bond, AGM, 3.000%, 1/15/2026 | 595,000 | $ | 606,626 | |||||
Public Impt., G.O. Bond, AGM, 3.000%, 1/15/2027 | 445,000 | 453,724 | ||||||
Albany County | ||||||||
Public Impt., Series A, G.O. Bond, 5.000%, 6/1/2024 | 250,000 | 264,767 | ||||||
Public Impt., Series A, G.O. Bond, 5.000%, 6/1/2026 | 430,000 | 477,161 | ||||||
Amsterdam City School District, G.O. Bond, AGM, 4.000%, 6/15/2024 | 1,135,000 | 1,173,329 | ||||||
Bath Central School District, G.O. Bond, 4.000%, 6/15/2025 | 750,000 | 788,428 | ||||||
Beacon City School District, G.O. Bond, 2.000%, 6/15/2024 | 390,000 | 389,842 | ||||||
Briarcliff Manor, Public Impt., G.O. Bond, 5.000%, 2/1/2023 | 400,000 | 408,325 | ||||||
Brighton Central School District G.O. Bond, 2.125%, 6/15/2025 | 500,000 | 499,864 | ||||||
School Impt., G.O. Bond, 2.000%, 6/15/2026 | 1,520,000 | 1,506,922 | ||||||
School Impt., G.O. Bond, 2.000%, 6/15/2027 | 1,330,000 | 1,309,937 | ||||||
Brookhaven | ||||||||
Public Impt., Recreational Facility Impt., G.O. Bond, 4.000%, 3/15/2025 | 400,000 | 413,329 | ||||||
Public Impt., Recreational Facility Impt., G.O. Bond, 4.000%, 3/15/2026 | 1,155,000 | 1,193,007 | ||||||
Brookhaven-Comsewogue Union Free | ||||||||
School District, School Impt., G.O. Bond, 2.250%, 5/15/2024 | 500,000 | 502,813 | ||||||
Buffalo, Public Impt., Recreational Facility Impt., Series A, G.O. Bond, 5.000%, 4/1/2024 | 250,000 | 262,334 | ||||||
Buffalo Municipal Water Finance | ||||||||
Authority | ||||||||
Series A, Revenue Bond, 4.000%, 7/1/2022 | 300,000 | 300,023 | ||||||
Series A, Revenue Bond, 5.000%, 7/1/2023 | 300,000 | 309,298 | ||||||
Water Utility Impt., Series A, Revenue Bond, AGM, 5.000%, 7/1/2039 | 250,000 | 262,094 | ||||||
Water Utility Impt., Series A, Revenue Bond, AGM, 5.000%, 7/1/2043 | 600,000 | 625,573 | ||||||
Water Utility Impt., Series A, Revenue Bond, AGM, 5.000%, 7/1/2048 | 250,000 | 259,162 | ||||||
Clarkstown, Public Impt., Series A, G.O. Bond, 2.000%, 6/15/2026 | 535,000 | 530,398 | ||||||
Commack Union Free School District, School Impt., Series A, G.O. Bond, 1.000%, 6/15/2025 | 1,400,000 | 1,354,788 | ||||||
Dutchess County | ||||||||
Series B, G.O. Bond, 2.000%, 4/1/2026 | 1,175,000 | 1,168,466 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
NEW YORK MUNICIPAL BONDS (continued) | ||||||||
Dutchess County (continued) | ||||||||
Series B, G.O. Bond, 2.000%, 4/1/2027 | 1,000,000 | $ | 988,682 | |||||
Enlarged City School District of Troy, G.O. Bond, BAM, 2.000%, 6/1/2026 | 500,000 | 493,875 | ||||||
Erie County | ||||||||
Public Impt., Series A, G.O. Bond, 5.000%, 9/15/2026 | 300,000 | 331,329 | ||||||
Public Impt., Series A, G.O. Bond, 5.000%, 9/15/2027 | 200,000 | 224,495 | ||||||
Erie County Fiscal Stability Authority, | ||||||||
Series D Revenue Bond, 5.000%, 9/1/2038 | 1,000,000 | 1,098,157 | ||||||
Gates Chili Central School District | ||||||||
School Impt., G.O. Bond, 3.125%, 6/15/2024 | 300,000 | 306,399 | ||||||
School Impt., G.O. Bond, 3.125%, 6/15/2025 | 245,000 | 251,595 | ||||||
School Impt., G.O. Bond, 3.125%, 6/15/2026 | 265,000 | 273,390 | ||||||
Greece Central School District, G.O. Bond, BAM, 2.500%, 6/15/2023 | 620,000 | 624,332 | ||||||
Haverstraw-Stony Point Central School District, G.O. Bond, 2.250%, 10/15/2027 | 510,000 | 507,064 | ||||||
Kings Park Central School District, School Impt., G.O. Bond, 2.000%, 9/1/2024 | 415,000 | 413,815 | ||||||
Mamaroneck Union Free School District, School Impt., G.O. Bond, 4.000%, 8/15/2032 | 1,000,000 | 1,064,591 | ||||||
Metropolitan Transportation Authority, Transit Impt., Green Bond, Series C-1, Revenue Bond, 4.750%, 11/15/2045 | 1,175,000 | 1,188,003 | ||||||
Nassau County Interim Finance | ||||||||
Authority | ||||||||
Series A, Revenue Bond, 5.000%, 11/15/2030 | 630,000 | 742,799 | ||||||
Series A, Revenue Bond, 4.000%, 11/15/2034 | 760,000 | 802,215 | ||||||
New Windsor | ||||||||
Public Impt., G.O. Bond, AGM, 3.000%, 6/15/2024 | 580,000 | 590,669 | ||||||
Public Impt., G.O. Bond, AGM, 3.000%, 6/15/2025 | 580,000 | 593,195 | ||||||
Public Impt., G.O. Bond, AGM, 3.000%, 6/15/2026 | 230,000 | 236,049 | ||||||
New York, Highway Impt., Series A, G.O. Bond, 5.000%, 3/15/2023 | 510,000 | 522,938 | ||||||
New York City | ||||||||
G.O. Bond, 5.000%, 8/1/2026 | 515,000 | 567,773 | ||||||
Public Impt., Series 2, G.O. Bond, 3.375%, 3/1/2025 | 500,000 | 500,508 | ||||||
Public Impt., Series D2, G.O. Bond, 3.430%, 12/1/2024 | 500,000 | 501,533 | ||||||
Series B-1, G.O. Bond, 5.000%, 8/1/2027 | 1,400,000 | 1,567,407 |
The accompanying notes are an integral part of the financial statements.
3
New York Tax Exempt Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
NEW YORK MUNICIPAL BONDS (continued) | ||||||||
New York City (continued) | ||||||||
Series D, G.O. Bond, 1.216%, 8/1/2026 | 500,000 | $ | 456,270 | |||||
Series E, G.O. Bond, 5.000%, 8/1/2026 | 1,500,000 | 1,653,595 | ||||||
New York City Municipal Water Finance | ||||||||
Authority | ||||||||
Revenue Bond, 5.000%, 6/15/2040 | 1,510,000 | 1,641,789 | ||||||
Water Utility Impt., Series CC-1, Revenue Bond, 5.000%, 6/15/2032 | 1,310,000 | 1,487,563 | ||||||
Water Utility Impt., Subseries BB-1, Revenue Bond, 5.000%, 6/15/2046 | 2,000,000 | 2,113,068 | ||||||
New York City Transitional Finance | ||||||||
Authority Building Aid | ||||||||
Prerefunded Balance, Revenue Bond, 5.000%, 7/15/2023 | 390,000 | 403,277 | ||||||
Public Impt., Series S1, Revenue Bond, 5.000%, 7/15/2025 | 1,030,000 | 1,096,598 | ||||||
Unrefunded Balance, Revenue Bond, 5.000%, 7/15/2023 | 430,000 | 443,349 | ||||||
New York City Transitional Finance | ||||||||
Authority Future Tax Secured | ||||||||
Public Impt., Revenue Bond, 5.000%, 5/1/2031 | 780,000 | 892,225 | ||||||
Revenue Bond, 5.000%, 11/1/2024 | 750,000 | 798,801 | ||||||
New York City Transitional Finance | ||||||||
Authority, Building Aid, Public Impt., | ||||||||
Series S-2, Revenue Bond, 5.000%, 7/15/2023 | 2,000,000 | 2,062,087 | ||||||
New York City Transitional Finance | ||||||||
Authority, Future Tax Secured, Series | ||||||||
B, Revenue Bond, 5.000%, 11/1/2024 | 3,000,000 | 3,034,425 | ||||||
New York State Dormitory Authority | ||||||||
Highway Impt., Series A, Revenue Bond, 5.000%, 3/15/2027 | 1,115,000 | 1,234,417 | ||||||
School Impt., Series A, Revenue Bond, 5.000%, 3/15/2027 | 450,000 | 501,881 | ||||||
School Impt., Series A, Revenue Bond, BAM, 5.000%, 10/1/2031 | 2,500,000 | 2,889,193 | ||||||
School Impt., Series D, Revenue Bond, 5.000%, 2/15/2031 | 1,365,000 | 1,543,927 | ||||||
School Impt., Series D, Revenue Bond, AGM, 5.000%, 10/1/2030 | 1,000,000 | 1,123,434 | ||||||
School Impt., Unrefunded Balance, | ||||||||
Series E, Revenue Bond, 5.000%, 3/15/2026 | 760,000 | 833,429 | ||||||
Series A, Prerefunded Balance, Revenue Bond, 5.000%, 7/1/2024 | 1,680,000 | 1,732,565 | ||||||
Series C, Revenue Bond, 0.887%, 3/15/2025 | 500,000 | 466,977 | ||||||
Series E, Revenue Bond, 5.000%, 3/15/2033 | 1,250,000 | 1,428,005 | ||||||
Unrefunded Balance, Series A, Revenue Bond, 5.000%, 2/15/2030 | 1,500,000 | 1,653,607 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
NEW YORK MUNICIPAL BONDS (continued) | ||||||||
New York State Environmental Facilities Corp. | ||||||||
Water and Sewer, Series A, Revenue Bond, 5.000%, 6/15/2025 | 300,000 | $ | 309,558 | |||||
Water Utility Impt., Revenue Bond, 5.000%, 6/15/2028 | 2,250,000 | 2,588,646 | ||||||
Water Utility Impt., Series B, Revenue Bond, 4.000%, 8/15/2046 | 2,000,000 | 2,001,238 | ||||||
New York State Thruway Authority | ||||||||
Highway Impt., Series A-1, Revenue Bond, 5.000%, 3/15/2023 | 1,025,000 | 1,049,610 | ||||||
Highway Impt., Series A-1, Revenue Bond, 5.000%, 3/15/2025 | 1,245,000 | 1,334,420 | ||||||
Series B, Revenue Bond, 4.000%, 1/1/2038 | 1,000,000 | 988,186 | ||||||
New York State Urban Development Corp. | ||||||||
Economic Impt., Series A, Revenue Bond, 5.000%, 3/15/2025 | 435,000 | 466,262 | ||||||
Economic Impt., Series B, Revenue Bond, 3.250%, 3/15/2025 | 800,000 | 795,427 | ||||||
Public Impt., Recreational Facility Impt., Revenue Bond, 5.000%, 3/15/2032 | 500,000 | 564,449 | ||||||
Public Impt., Series C-3, Revenue Bond, 5.000%, 3/15/2041 | 850,000 | 902,428 | ||||||
Series A, Revenue Bond, 5.000%, 3/15/2027 | 1,875,000 | 2,041,686 | ||||||
North Colonie Central School District, G.O. Bond, 2.000%, 7/15/2027 | 1,000,000 | 982,262 | ||||||
North Rose-Wolcott Central School District, G.O. Bond, AGM, 2.000%, 6/15/2025 | 500,000 | 496,888 | ||||||
Onondaga County, Public Impt., Telecommunications Impt., G.O. Bond, 5.000%, 5/15/2023 | 1,000,000 | 1,029,238 | ||||||
Orangetown, Series B, G.O. Bond, 5.000%, 9/15/2026 | 355,000 | 395,469 | ||||||
Perinton | ||||||||
G.O. Bond, 4.000%, 12/15/2022 | 210,000 | 212,609 | ||||||
G.O. Bond, 4.000%, 12/15/2023 | 160,000 | 164,893 | ||||||
Phelps-Clifton Springs Central School District, G.O. Bond, 3.750%, 6/15/2023 | 955,000 | 973,429 | ||||||
Port Authority of New York & New Jersey | ||||||||
Airport & Marina Impt., Consolidated Series 222, Revenue Bond, 5.000%, 7/15/2032 | 1,065,000 | 1,198,570 | ||||||
Consolidated Series 184, Revenue Bond, 5.000%, 9/1/2025 | 1,000,000 | 1,058,337 | ||||||
Rochester, School Impt., Series A, G.O. Bond, AMBAC, 5.000%, 8/15/2022 | 95,000 | 95,397 | ||||||
Sachem Central School District, G.O. Bond, 5.000%, 10/15/2023 | 250,000 | 260,164 | ||||||
Sales Tax Asset Receivable Corp. | ||||||||
Series A, Prerefunded Balance, Revenue Bond, 5.000%, 10/15/2028 | 2,500,000 | 2,667,636 |
The accompanying notes are an integral part of the financial statements.
4
New York Tax Exempt Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
NEW YORK MUNICIPAL BONDS (continued) | ||||||||
Sales Tax Asset Receivable Corp. | ||||||||
(continued) | ||||||||
Series A, Prerefunded Balance, Revenue Bond, 5.000%, 10/15/2030 | 520,000 | $ | 554,875 | |||||
Schenectady, School Impt., G.O. Bond, 2.000%, 12/15/2024 | 1,485,000 | 1,485,797 | ||||||
Smithtown, Public Impt., Recreational Facility Impt., G.O. Bond, 2.000%, 2/15/2023 | 435,000 | 437,071 | ||||||
South Glens Falls Central School District, Series A, G.O. Bond, 2.000%, 7/15/2027 | 2,655,000 | 2,619,569 | ||||||
South Jefferson Central School District, G.O. Bond, AGM, 4.000%, 4/15/2025 | 1,125,000 | 1,176,509 | ||||||
Sullivan County, Public Impt., G.O. Bond, 3.000%, 11/15/2023 | 500,000 | 507,135 | ||||||
Triborough Bridge & Tunnel Authority | ||||||||
Highway Impt., Series A, Revenue Bond, 5.000%, 11/15/2023 | 350,000 | 365,266 | ||||||
Highway Impt., Series A, Revenue Bond, 4.000%, 11/15/2044 | 500,000 | 490,223 | ||||||
Series B, Revenue Bond, 5.000%, 11/15/2023 | 2,000,000 | 2,087,495 | ||||||
Series B, Revenue Bond, 5.000%, 11/15/2029 | 360,000 | 403,096 | ||||||
Ulster County, G.O. Bond, 4.000%, 11/15/2025 | 490,000 | 518,812 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
NEW YORK MUNICIPAL BONDS (continued) | ||||||||
Uniondale Union Free School District, School Impt., G.O. Bond, 5.000%, 5/1/2024 | 1,955,000 | $ | 2,062,009 | |||||
Vestal Central School District, G.O. Bond, 2.000%, 6/15/2025 | 685,000 | 681,441 | ||||||
Wappinger | ||||||||
Highway Impt., G.O. Bond, 2.000%, 10/1/2027 | 310,000 | 303,645 | ||||||
Highway Impt., G.O. Bond, 2.000%, 10/1/2028 | 320,000 | 309,618 | ||||||
Webster Central School District | ||||||||
School Impt., G.O. Bond, 2.125%, 10/15/2025 | 320,000 | 319,551 | ||||||
School Impt., G.O. Bond, 2.250%, 10/15/2026 | 330,000 | 329,834 | ||||||
TOTAL MUNICIPAL BONDS | 96,170,253 | |||||||
(Identified Cost $99,457,452) | ||||||||
MUTUAL FUND - 3.0% | ||||||||
iShares New York Muni Bond ETF | ||||||||
(Identified Cost $3,338,368) | 58,863 | 3,096,194 | ||||||
SHORT-TERM INVESTMENT - 5.0% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 1.35%2 | ||||||||
(Identified Cost $5,290,332) | 5,290,332 | 5,290,332 | ||||||
TOTAL INVESTMENTS - 99.7% | 104,556,779 | |||||||
(Identified Cost $108,086,152) | ||||||||
OTHER ASSETS, LESS LIABILITIES - 0.3% | 286,621 | |||||||
NET ASSETS - 100.0% | $ | 104,843,400 |
ETF - Exchange-Traded Fund
G.O. Bond - General Obligation Bond
Impt. - Improvement
Scheduled principal and interest payments are guaranteed by:
AGM (Assurance Guaranty Municipal Corp.)
AMBAC (AMBAC Assurance Corp.)
BAM (Build America Mutual Assurance Co.)
The insurance does not guarantee the market value of the municipal bonds.
1Amount is stated in USD unless otherwise noted.
2Rate shown is the current yield as of June 30, 2022.
The accompanying notes are an integral part of the financial statements.
5
New York Tax Exempt Series
Statement of Assets and Liabilities
June 30, 2022 (unaudited)
ASSETS: | ||||
Investments, at value (identified cost $108,086,152) (Note 2) | $ | 104,556,779 | ||
Interest receivable | 900,706 | |||
Receivable for fund shares sold | 227,365 | |||
Dividends receivable | 8,112 | |||
Prepaid expenses | 3,539 | |||
TOTAL ASSETS | 105,696,501 | |||
LIABILITIES:
| ||||
Accrued fund accounting and administration fees (Note 3) | 11,043 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 714 | |||
Accrued management fees (Note 3) | 631 | |||
Payable for fund shares repurchased | 810,686 | |||
Other payables and accrued expenses | 30,027 | |||
TOTAL LIABILITIES | 853,101 | |||
TOTAL NET ASSETS | $ | 104,843,400 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 108,402 | ||
Additional paid-in-capital | 107,536,812 | |||
Total distributable earnings (loss) | (2,801,814 | ) | ||
TOTAL NET ASSETS | $ | 104,843,400 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A | ||||
($1,536,764/159,070 shares) | $ | 9.66 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W | ||||
($103,306,636/10,681,158 shares) | $ | 9.67 |
The accompanying notes are an integral part of the financial statements.
6
New York Tax Exempt Series
Statement of Operations
For the Six Months Ended June 30, 2022 (unaudited)
INVESTMENT INCOME:
Interest | $ | 556,850 | ||
Dividends | 32,741 | |||
Total Investment Income | 589,591 | |||
EXPENSES: | ||||
Management fees (Note 3) | 201,628 | |||
Fund accounting and administration fees (Note 3) | 29,569 | |||
Chief Compliance Officer service fees (Note 3) | 3,510 | |||
Directors’ fees (Note 3) | 3,403 | |||
Audit fees | 22,554 | |||
Custodian fees | 1,373 | |||
Miscellaneous | 20,983 | |||
Total Expenses | 283,020 | |||
Less reduction of expenses (Note 3) | (197,417 | ) | ||
Net Expenses | 85,603 | |||
NET INVESTMENT INCOME | 503,988 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | (32,526 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (4,697,371 | ) | ||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | (4,729,897 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (4,225,909 | ) |
The accompanying notes are an integral part of the financial statements.
7
New York Tax Exempt Series
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED 12/31/21 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 503,988 | $ | 830,645 | ||||
Net realized gain (loss) on investments | (32,526 | ) | 3,380,547 | |||||
Net change in unrealized appreciation (depreciation) on investments | (4,697,371 | ) | (3,800,351 | ) | ||||
Net increase (decrease) from operations | (4,225,909 | ) | 410,841 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | ||||||||
Class A | (3,206 | ) | (98,977 | ) | ||||
Class W | (354,510 | ) | (2,874,985 | ) | ||||
Total distributions to shareholders | (357,716 | ) | (2,973,962 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | 56,873,571 | (52,921,093 | ) | |||||
Net increase (decrease) in net assets | 52,289,946 | (55,484,214 | ) | |||||
NET ASSETS: | ||||||||
Beginning of period | 52,553,454 | 108,037,668 | ||||||
End of period | $ | 104,843,400 | $ | 52,553,454 |
The accompanying notes are an integral part of the financial statements.
8
New York Tax Exempt Series
Financial Highlights - Class A
FOR THE | FOR THE YEAR ENDED | |||||||||||||||||||||||
SIX MONTHS ENDED 6/30/22 (UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||||||||||
Net asset value - Beginning of period | $10.30 | $10.83 | $10.49 | $10.34 | $10.43 | $10.31 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income1 | 0.04 | 0.11 | 0.14 | 0.16 | 0.14 | 0.12 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.66 | ) | (0.08 | ) | 0.36 | 0.34 | (0.08 | ) | 0.11 | |||||||||||||||
Total from investment operations | (0.62 | ) | 0.03 | 0.50 | 0.50 | 0.06 | 0.23 | |||||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||||||
From net investment income | (0.02 | ) | (0.09 | ) | (0.10 | ) | (0.18 | ) | (0.15 | ) | (0.11 | ) | ||||||||||||
From net realized gain on investments | — | (0.47 | ) | (0.06 | ) | (0.17 | ) | — | (0.00 | )2 | ||||||||||||||
Total distributions to shareholders | (0.02 | ) | (0.56 | ) | (0.16 | ) | (0.35 | ) | (0.15 | ) | (0.11 | ) | ||||||||||||
Net asset value - End of period | $9.66 | $10.30 | $10.83 | $10.49 | $10.34 | $10.43 | ||||||||||||||||||
Net assets - End of period (000’s omitted) | $1,537 | $1,931 | $1,797 | $1,952 | $138,694 | $154,018 | ||||||||||||||||||
Total return3 | (6.03% | ) | 0.24% | 4.73% | 4.86% | 0.54% | 2.27% | |||||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||||||
Expenses | 0.70% | 4 | 0.79% | 0.67% | 0.63% | 0.62% | 0.60% | |||||||||||||||||
Net investment income | 0.75% | 4 | 0.99% | 1.29% | 1.56% | 1.39% | 1.12% | |||||||||||||||||
Series portfolio turnover | 4% | 31% | 35% | 24% | 21% | 9% |
1Calculated based on average shares outstanding during the periods.
2Less than $0.01 per share.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
9
New York Tax Exempt Series
Financial Highlights - Class W
FOR THE | FOR THE YEAR ENDED | FOR THE | ||||||||||||||
SIX MONTHS ENDED 6/30/22 (UNAUDITED) | 12/31/21 | 12/31/20 | PERIOD 3/1/191 TO 12/31/19 | |||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||
Net asset value - Beginning of period | $10.31 | $10.84 | $10.49 | $10.45 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income2 | 0.06 | 0.16 | 0.19 | 0.19 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (0.66 | ) | (0.07 | ) | 0.37 | 0.25 | ||||||||||
Total from investment operations | (0.60 | ) | 0.09 | 0.56 | 0.44 | |||||||||||
Less distributions to shareholders: | ||||||||||||||||
From net investment income | (0.04 | ) | (0.15 | ) | (0.15 | ) | (0.23 | ) | ||||||||
From net realized gain on investments | — | (0.47 | ) | (0.06 | ) | (0.17 | ) | |||||||||
Total distributions to shareholders | (0.04 | ) | (0.62 | ) | (0.21 | ) | (0.40 | ) | ||||||||
Net asset value - End of period | $9.67 | $10.31 | $10.84 | $10.49 | ||||||||||||
Net assets - End of period (000’s omitted) | $103,307 | $50,622 | $106,241 | $87,721 | ||||||||||||
Total return3 | (5.86% | ) | 0.80% | 5.33% | 4.23% | |||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Expenses* | 0.20% | 4 | 0.29% | 0.17% | 0.16% | 4 | ||||||||||
Net investment income | 1.26% | 4 | 1.50% | 1.77% | 2.09% | 4 | ||||||||||
Series portfolio turnover | 4% | 31% | 35% | 24% | ||||||||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||||||
0.50% | 4 | 0.50% | 0.50% | 0.50% | 4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
10
New York Tax Exempt Series
Notes to Financial Statements
(unaudited)
1. | Organization |
New York Tax Exempt Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series’ investment objective is to provide as high a level of current income exempt from federal income tax and New York State personal income tax as the Advisor believes is consistent with the preservation of capital.
The Series is authorized to issue two classes of shares (Class A and Class W). While each class of shares is substantially the same, each class has its own investment eligibility criteria and cost structure.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of June 30, 2022, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as New York Tax Exempt Series Class A common stock and 50 million have been designated as New York Tax Exempt Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value.
Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Board. 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.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input
11
New York Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of June 30, 2022 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Debt securities: | ||||||||||||||||
New York Municipal Bonds | $ | 96,170,253 | $ | — | $ | 96,170,253 | $ | — | ||||||||
Mutual fund | 3,096,194 | 3,096,194 | — | — | ||||||||||||
Short-Term Investment | 5,290,332 | 5,290,332 | — | — | ||||||||||||
Total assets | $ | 104,556,779 | $ | 8,386,526 | $ | 96,170,253 | $ | — |
There were no Level 3 securities held by the Series as of December 31, 2021 or June 30, 2022.
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 Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
Expenses are recorded on an accrual basis. Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund’s Board, taking into consideration, among other things, the nature and type of expense.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
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.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. At June 30, 2022, the Series has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.
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 December 31, 2018 through December 31, 2021. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
12
New York Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Distributions of Income and Gains
Distributions to shareholders of net investment income are made quarterly. Distributions of net realized gains are made annually.
An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.50% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
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.
Pursuant to a master services agreement dated February 13, 2020 as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets; 0.0075% on the next $15 billion of average daily net assets; and 0.0065% of average daily net assets in excess of $40 billion; plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.85% of the average daily net assets of the Class A shares and 0.35% of the average daily net assets of the Class W shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the
13
New York Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
3. | Transactions with Affiliates (continued) |
approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $197,417 in management fees for Class W shares for the six months ended June 30, 2022. This amount is included as a reduction of expenses on the Statement of Operations.
As of June 30, 2022, there are no expenses eligible to be recouped by the Advisor.
4. | Purchases and Sales of Securities |
For the six months ended June 30, 2022, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $57,466,430 and $675,000, respectively. Sales of U.S. Government securities, other than short-term securities, were $2,227,527. There were no purchases of U.S. Government securities.
5. | Capital Stock Transactions |
Transactions in shares of Class A and Class W of New York Tax Exempt Series were:
CLASS A | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||
Sold | 802 | $ | 7,901 | 17,220 | $ | 185,742 | ||||||||
Reinvested | 290 | 2,817 | 9,384 | 97,244 | ||||||||||
Repurchased | (29,454 | ) | (291,258 | ) | (5,153 | ) | (55,716 | ) | ||||||
Total | (28,362 | ) | $ | (280,540 | ) | 21,451 | $ | 227,270 | ||||||
CLASS W | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||
Sold | 6,311,156 | $ | 62,451,067 | 512,584 | $ | 5,518,545 | ||||||||
Reinvested | 34,354 | 333,137 | 268,406 | 2,789,603 | ||||||||||
Repurchased | (576,308 | ) | (5,630,093 | ) | (5,673,889 | ) | (61,456,511 | ) | ||||||
Total | 5,769,202 | $ | 57,154,111 | (4,892,899 | ) | $ | (53,148,363 | ) |
Over 90% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in September 2022 unless extended or renewed. During the six months ended June 30, 2022, the Series did not borrow under the line of credit.
14
New York Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of June 30, 2022.
8. | Concentration of Credit |
The Series primarily invests in debt obligations issued by the State of New York and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Series is more susceptible to factors adversely affecting issues of New York municipal securities than is a municipal bond fund that is not concentrated in these issues to the same extent.
9. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The final determination of the tax character of current year distributions will be made at the conclusion of the fiscal year. The tax character of distributions paid for the year ended December 31, 2021 were as follows:
Ordinary income | $ | 257,981 | ||
Tax exempt income | $ | 684,443 | ||
Long-term capital gains | $ | 2,031,538 |
At June 30, 2022, the identified cost for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
Cost for federal income tax purposes | $ | 108,086,152 | ||
Unrealized appreciation | 75,571 | |||
Unrealized depreciation | (3,604,944 | ) | ||
Net unrealized depreciation | $ | (3,529,373 | ) |
10. | Market Event |
Significant disruptions and volatility in the global financial markets and economies, like the current conditions caused by the Russian invasion of Ukraine and the COVID-19 pandemic, could negatively impact the investment performance of the Series. The global market and economic climate may become increasingly uncertain due to numerous factors beyond our control, including but not limited to, the effectiveness and acceptance of vaccines to prevent COVID-19, impacts on business operations in the U.S. related to the COVID-19 pandemic, such as supply chain disruptions and inflation, concerns related to unpredictable global market and economic factors, uncertainty in U.S. federal fiscal, tax, trade or regulatory policy and the fiscal, tax, trade or regulatory policy of foreign governments, rising interest rates, inflation or deflation, the availability of credit, performance of financial markets, terrorism, natural or biological catastrophes, public health emergencies, or political uncertainty.
15
New York Tax Exempt Series
Notes to Financial Statements (continued)
(unaudited)
11. | Subsequent Event |
In preparing these financial statements, management of the Fund has evaluated events and transactions for potential recognition or disclosure and the following item was noted:
On March 31, 2022, Manning & Napier, Inc. (“the Company”), entered into a definitive agreement under which the Company will go private and be acquired by the Callodine Group, LLC (“Callodine”), a Boston-based asset management firm, in partnership with East Asset Management (the “Transaction”). The Company is the ultimate owner of the Advisor. The proposed Transaction is expected to close in the third quarter of 2022, contingent upon shareholder approval and other customary closing conditions. Following the close, the Company will become a wholly owned subsidiary of an affiliate of Callodine. Closing the Transaction results in a change in control of the Advisor under the 1940 Act and therefore the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides advisory services to the Series. In connection with the Transaction, on May 3, 2022, the Manning & Napier Fund, Inc. Board of Directors unanimously approved a new Investment Advisory Agreement between the Fund and the Advisor for each Series, that will become effective at the closing of the Transaction, subject to shareholder approval. As of the closing date of the Transaction, the Series’ investment objective and fee arrangements will remain unchanged.
16
New York Tax Exempt Series
Renewal of Investment Advisory Agreement
(unaudited)
At the Manning & Napier Fund, Inc. (the “Fund”) Board of Directors’ (the “Board”) meeting, held on May 19, 2022, the Investment Advisory Agreement (the “Agreement”) between the Fund and Manning & Napier Advisors, LLC (the “Advisor”) was considered for renewal by the Board, including all of the Directors who are not “interested persons” (“Independent Directors”), within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”). In connection with the decision whether to renew the Agreement, a variety of material was provided to the Board in advance of the meeting for their review and consideration. The Board also held a working session on May 3, 2022 to review and discuss information provided to the Board, and for the Board to request additional information.
Representatives of the Advisor attended a portion of the working session and attended the Board meeting. The Advisor provided supplemental information requested by the Board and presented additional oral information to the Board to assist the Board in its considerations. In addition to the information furnished by the Advisor, the Board was provided with a legal memorandum discussing its fiduciary duties related to its approval of the continuation of the Agreement. Legal counsel for the Fund discussed with the Board the applicable legal considerations. In addition, the Board received in-person presentations about the Fund throughout the year.
At the May 3, 2022 meeting, the Board also considered and approved a new investment advisory agreement (the “New Advisory Agreement”) for each Series between the Advisor and the Fund. The Board was asked to consider the New Advisory Agreement because of a transaction that will affect Manning & Napier, Inc. (“MN Inc.”), which is the ultimate parent company of the Advisor. On March 31, 2022, MN Inc. and Callodine Group, LLC (“Callodine”) entered into an agreement under which Callodine Merger Sub, an affiliate of Callodine, would acquire MN Inc. (the “Transaction”). The Transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2022. Following the closing, MN Inc. will become a wholly owned subsidiary of an affiliate of Callodine. The closing of the Transaction may be deemed to result in a change of control of the Advisor under the 1940 Act. As a result, the Transaction results in the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides investment advisory services to the Series (the “Current Advisory Agreement”). Shareholder approval of the New Advisory Agreement will enable the Advisor to continue to serve the Series following the closing of the Transaction.
The Independent Directors were advised by independent legal counsel with respect to these matters. The Independent Directors also met separately in executive sessions on April 13, April 27, May 3 and May 19, with their legal counsel without any representatives of the Advisor present.
The Directors’ determinations at the meeting were made on the basis of each Director’s business judgment after consideration of all the information presented. In deciding to recommend the renewal of the Current Agreement with respect to each Series of the Fund, the Independent Directors did not identify any single or particular piece of information that, in isolation, was sufficient to justify renewal. Each Independent Director may also have weighed information and factors differently. This summary describes the most important, but not all, of the factors considered by the Board and the Independent Directors.
• | The Board considered the nature and quality of services provided by the Advisor under the Current Agreement. The Advisor has provided those services for over 30 years, and they have included, among others: deciding what securities to purchase and sell for each Series; arranging for the purchase and sale of such securities by placing orders with broker-dealers; administering the affairs of the Fund (including the books and records of the Fund not maintained by third party service providers such as the custodian or transfer agent); arranging for the insurance coverage for the Fund; and supervising the preparation of tax returns, SEC filings (including registration statements) and reports to shareholders for the Fund. The Board considered the numerous services performed by the Advisor and its affiliates beyond those stated in the Current Agreement. The Board also considered the Advisor’s personnel who perform services to the Fund, changes in senior or key personnel, industry trends impacting the mutual fund industry, the strength of the Advisor’s compliance infrastructure, policies and procedures relating to compliance with securities regulations, reputation, expertise and resources. The Board discussed the quality of these services with representatives from the Advisor and concluded that the Advisor was performing its services to the Fund required under the Current Agreement in a reasonable manner. |
17
New York Tax Exempt Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the Advisor’s investment teams, including changes to the investment teams during the past year, investment team compensation structure and the investment process. The Board considered the performance of each Series since its inception, as well as over multiple time periods including: one year, three year, five year, ten year, and current market cycle. A market cycle includes periods of both rising and falling markets. Returns for established benchmark indices for each Series were provided. In addition, the Board considered (and considers on a quarterly basis) a number of other factors relevant to performance at the meeting including: a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives; the breadth of the Fund’s product offerings; and performance over reasonable time periods. Representatives of the Advisor provided information regarding and, as applicable, led discussions of factors impacting the Advisor’s performance for the Series, outlining current market conditions and explaining their expectations and strategies for the future. The Board also determined that it was appropriate to take into account its consideration of the Advisor’s performance at meetings held prior to the May 19th Board meeting. In doing so, the Board generally determined that the Advisor’s performance was satisfactory. Where the Advisor’s performance was materially below a Series’ benchmarks and or peer group, the Board requested an explanation for the underperformance and/or the steps taken by the Advisor in an effort to improve performance. In all instances, the Board was satisfied with the explanation provided. The Board plans to remain focused in future meetings to address any aberrational underperformance as necessary. After discussion, the Board concluded that the nature and quality of the investment management services provided by the Advisor to the Fund were considered adequate. |
• | The Board considered the fees and expenses of the various Series of the Fund. The Advisor presented the advisory fees and total expenses for each Series, including the advisory fee adjusted for any contractual expense waivers or reimbursements paid by the Advisor. |
• | The Board considered whether the Advisor had achieved economies of scale with respect to its services to the Fund. The Board acknowledged the expense caps incorporated in the Fund’s current fee structure, which requires the Advisor to subsidize the expenses of the Series operating above their expense cap, noting that 11 of 15 Series are currently receiving expense reimbursements from the Advisor. The Board concluded that the Fund would need to grow in assets before the Advisor would be able to achieve meaningful economies of scale. |
• | The Advisor provided the Board with information comparing each Series’ contractual management fees with the Advisor’s standard advisory fees for separate accounts and collective investment trusts. The Board considered that the range of services provided to the Series is more extensive than for the Advisor’s other clients due to additional infrastructure, administrative, operational and regulatory requirements related to operating a mutual fund, as well as associated risks. |
• | The current advisory fees, 12b-1 Distribution and Service Fees, other expenses (e.g. a combination of Shareholder Services Fees, intermediary sub-TA fees, routine operating expenses and Acquired Fund Fees and Expenses for fund-of-fund Series) and total expense ratios of each Series and share class were compared and ranked (on both a mean and median basis) against respective peer universes. Respective peer universes included funds of a similar size and with similar investment objectives and expense characteristics as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the comparisons and rankings of fees and net expense ratios for each Series of the Fund and the methodology behind the comparison. The Board considered the Advisor’s active portfolio management that results in portfolios that are more differentiated than the construction of their benchmarks. The Board will continue to monitor the fees and expenses of the Series compared to peer groups. Based on their review of the information provided, the Board concluded that the current fees and expenses of each Series of the Fund were reasonable on a comparative basis. |
18
New York Tax Exempt Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the costs of the Advisor’s services and the profits of the Advisor as they relate to the Advisor’s services to the Fund under the Current Agreement. The Board was provided with information on the Advisor’s financial condition and profitability by mutual fund agreement and by Series. Representatives of the Advisor discussed modest improvements in the Advisor’s profitability derived from the Fund. The Board discussed the Advisor’s revenues generated from the Fund and its expenses associated with providing the services under the Current Agreement. The Advisor presented the Board with information on firm wide investment management profitability to provide a comparison of the Advisor’s profitability from its Fund activities relative to its profitability from its other investment management business. In addition, the Board reviewed the Advisor’s expense allocation methodology used to calculate profitability since many of the Advisor’s resources and expenses are shared across the Advisor’s various investment management vehicles. The Board noted the Advisor’s explanation of the consistent approach taken in calculating profitability, compared to prior periods, including the allocation of expenses as part of that calculation. The Board considered the Advisor’s expenses associated with Fund activities outside of the Current Agreement (such as expense reimbursements pursuant to expense caps and payments made by the Advisor to third party platforms on which shares of the Fund are available for purchase). The Board noted the potential for the Transaction to add resources that have the potential to facilitate the growth of various series, which could improve economies of scale for those Series; however, they also noted that such potential may not be realized. After discussing the above costs and profits, the Board concluded that the Advisor’s profit margin relating to its services provided under the Current Agreement was reasonable. |
• | The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include participation in a joint insurance program, sharing of compensation expenses for certain shared personnel, relationships with large service providers, the utilization of Series within the Advisor’s separately managed accounts and certain research services provided by soft dollars. The Board concluded that these additional benefits to the Advisor were reasonable. |
Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of the Independent Directors, concluded that the compensation under the Current Agreement was fair and reasonable with respect to each Series in light of the services and expenses and such other matters as the Directors considered to be relevant in the exercise of their reasonable judgment, and that the renewal of the Current Agreement would be in the best interests of each Series and its shareholders. The Board did not indicate that any single factor was determinative of its decision to approve the Current Agreement, but indicated that the Board based its determination on the total mix of information available to it.
19
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21
New York Tax Exempt Series
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-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling 1-(800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. | Fund Holdings - Month-End |
2. | Fund Holdings - Quarter-End |
3. | Shareholder Report - Annual |
4. | Shareholder Report - Semi-Annual |
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNNYT-06/22-SAR
22
www.manning-napier.com
Manning & Napier Fund, Inc.
Core Bond Series
Core Bond Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service 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 in each class at the beginning of the period and held for the entire period (January 1, 2022 to June 30, 2022).
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 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 each class in 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 a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested 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 sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. 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.
BEGINNING ACCOUNT VALUE 1/1/22 | ENDING ACCOUNT VALUE 6/30/22 | EXPENSES PAID DURING PERIOD* 1/1/22 - 6/30/22 | ANNUALIZED EXPENSE RATIO | |
Class S | ||||
Actual | $1,000.00 | $896.50 | $3.29 | 0.70% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.32 | $3.51 | 0.70% |
Class I | ||||
Actual | $1,000.00 | $897.20 | $2.12 | 0.45% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.56 | $2.26 | 0.45% |
Class W | ||||
Actual | $1,000.00 | $899.20 | $0.24 | 0.05% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.55 | $0.25 | 0.05% |
Class Z | ||||
Actual | $1,000.00 | $898.90 | $1.41 | 0.30% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,023.31 | $1.51 | 0.30% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
1
Core Bond Series
Portfolio Composition as of June 30, 2022
(unaudited)
Sector 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 long-term obligation of the U.S. Treasury issued with a maturity period between one and ten years. |
2
Core Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS - 23.0% | ||||||||
Non-Convertible Corporate Bonds- 23.0% | ||||||||
Communication Services - 3.5% | ||||||||
Entertainment - 1.3% | ||||||||
Magallanes, Inc., 4.054%, 3/15/20292 | 4,560,000 | $ | 4,188,656 | |||||
Interactive Media & Services - 2.2% | ||||||||
Tencent Holdings Ltd. (China), 3.975%, 4/11/20292 | 7,120,000 | 6,771,751 | ||||||
Total Communication Services | 10,960,407 | |||||||
Consumer Discretionary - 2.9% | ||||||||
Hotels, Restaurants & Leisure - 0.5% | ||||||||
Expedia Group, Inc., 3.25%, 2/15/2030 | 1,850,000 | 1,539,153 | ||||||
Internet & Direct Marketing Retail - 2.4% | ||||||||
Alibaba Group Holding Ltd., | ||||||||
(China), 2.125%, 2/9/2031 | 1,310,000 | 1,086,957 | ||||||
(China), 4.00%, 12/6/2037 | 3,440,000 | 2,987,740 | ||||||
Amazon.com, Inc., 3.30%, 4/13/2027 | 3,520,000 | 3,458,898 | ||||||
7,533,595 | ||||||||
Total Consumer Discretionary | 9,072,748 | |||||||
Energy - 2.6% | ||||||||
Oil, Gas & Consumable Fuels - 2.6% | ||||||||
Cenovus Energy, Inc. (Canada), 6.75%, 11/15/2039 | 4,200,000 | 4,488,184 | ||||||
Energy Transfer LP, 6.50%, 2/1/2042 | 3,590,000 | 3,610,435 | ||||||
Total Energy | 8,098,619 | |||||||
Financials - 4.3% | ||||||||
Banks - 2.8% | ||||||||
Bank of America Corp., (U.S. Secured Overnight Financing Rate + 1.320%), 2.687%, 4/22/20323 | 2,790,000 | 2,349,047 | ||||||
Citigroup, Inc., (U.S. Secured Overnight Financing Rate + 0.770%), 1.462%, 6/9/20273 | 2,670,000 | 2,362,768 | ||||||
JPMorgan Chase & Co., (U.S. Secured Overnight Financing Rate + 3.790%), 4.493%, 3/24/20313 | 4,000,000 | 3,913,309 | ||||||
8,625,124 | ||||||||
Capital Markets - 1.0% | ||||||||
Blackstone Secured Lending Fund, 2.75%, 9/16/2026 | 1,810,000 | 1,588,230 | ||||||
Owl Rock Technology Finance Corp., 3.75%, 6/17/20262 | 1,680,000 | 1,521,391 | ||||||
3,109,621 | ||||||||
Diversified Financial Services - 0.5% | ||||||||
Blackstone Private Credit Fund, 2.625%, 12/15/20262 | 1,910,000 | 1,599,184 | ||||||
Total Financials | 13,333,92 | |||||||
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Health Care - 0.8% | ||||||||
Health Care Providers & Services - 0.8% | ||||||||
HCA, Inc., 4.125%, 6/15/2029 | 2,590,000 | $ | 2,368,963 | |||||
Industrials - 4.2% | ||||||||
Airlines - 0.9% | ||||||||
Southwest Airlines Co., 5.125%, 6/15/2027 | 2,970,000 | 3,001,642 | ||||||
Road & Rail - 0.5% | ||||||||
BNSF Funding Trust I, (3 mo. LIBOR US + 2.350%), 6.613%, 12/15/20553 | 1,570,000 | 1,542,926 | ||||||
Trading Companies & Distributors - 2.8% | ||||||||
AerCap Ireland Capital DAC - AerCap Global Aviation Trust (Ireland), 3.00%, 10/29/2028 | 1,970,000 | 1,659,972 | ||||||
Air Lease Corp., 3.625%, 4/1/2027 | 1,700,000 | 1,573,982 | ||||||
Ashtead Capital, Inc. (United Kingdom), 4.00%, 5/1/20282 | 1,800,000 | 1,619,711 | ||||||
Avolon Holdings Funding Ltd. (Ireland), 2.75%, 2/21/20282 | 4,820,000 | 3,913,009 | ||||||
8,766,674 | ||||||||
Total Industrials | 13,311,242 | |||||||
Information Technology - 1.0% | ||||||||
Semiconductors & Semiconductor Equipment - 1.0% | ||||||||
QUALCOMM, Inc., 4.25%, 5/20/2032 | 3,170,000 | 3,235,793 | ||||||
Materials - 0.5% | ||||||||
Metals & Mining - 0.5% | ||||||||
Newcastle Coal Infrastructure Group Pty Ltd. (Australia), 4.40%, 9/29/20272 | 1,810,000 | 1,602,994 | ||||||
Real Estate - 2.1% | ||||||||
Equity Real Estate Investment Trusts (REITS) - 2.1% | ||||||||
Crown Castle International Corp., 3.10%, 11/15/2029 | 2,270,000 | 2,001,531 | ||||||
Simon Property Group LP, 2.65%, 2/1/2032 | 5,680,000 | 4,707,272 | ||||||
Total Real Estate | 6,708,803 | |||||||
Utilities - 1.1% | ||||||||
Independent Power and Renewable Electricity Producers - 1.1% | ||||||||
Vistra Operations Co. LLC, | ||||||||
4.875%, 5/13/20242 | 2,630,000 | 2,617,966 | ||||||
3.55%, 7/15/20242 | 810,000 | 782,399 | ||||||
Total Utilities | 3,400,365 | |||||||
TOTAL CORPORATE BONDS (Identified Cost $81,293,006) | 72,093,863 | |||||||
ASSET-BACKED SECURITIES - 12.4% | ||||||||
Business Jet Securities LLC, Series 2021-1A, Class A, 2.162%, 4/15/20362 | 2,147,058 | 1,943,022 |
The accompanying notes are an integral part of the financial statements.
3
Core Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
CF Hippolyta Issuer LLC, | ||||||||
Series 2020-1, Class A2, 1.99%, 7/15/20602 | 1,200,935 | $ | 1,027,803 | |||||
Series 2020-1, Class B1, 2.28%, 7/15/20602 | 1,518,831 | 1,363,727 | ||||||
Series 2021-1A, Class B1, 1.98%, 3/15/20612 | 1,697,529 | 1,466,909 | ||||||
CLI Funding VIII LLC, Series 2021-1A, Class A, 1.64%, 2/18/20462 | 3,032,083 | 2,667,890 | ||||||
Commonbond Student Loan Trust, Series 2019-AGS, Class A1, 2.54%, 1/25/20472 | 497,988 | 471,715 | ||||||
CoreVest American Finance Trust, Series 2020-3, Class A, 1.358%, 8/15/20532 | 962,414 | 877,466 | ||||||
Credit Acceptance Auto Loan Trust, | ||||||||
Series 2020-1A, Class A, 2.01%, 2/15/20292 | 239,456 | 238,578 | ||||||
Series 2020-1A, Class B, 2.39%, 4/16/20292 | 600,000 | 590,649 | ||||||
Series 2020-3A, Class A, 1.24%, 10/15/20292 | 4,500,000 | 4,383,421 | ||||||
DataBank Issuer, Series 2021-1A, Class A2, 2.06%, 2/27/20512 | 2,400,000 | 2,171,473 | ||||||
EDvestinU Private Education Loan Issue No. 3 LLC, Series 2021-A, Class A, 1.80%, 11/25/20452 | 1,187,253 | 1,055,494 | ||||||
Flexential Issuer, Series 2021-1A, Class A2, 3.25%, 11/27/20512 | 2,825,000 | 2,586,140 | ||||||
Goodgreen Trust, Series 2020-1A, Class A, 2.63%, 4/15/20552 | 1,727,361 | 1,566,553 | ||||||
Navient Private Education Refi Loan Trust, Series 2019-EA, Class A2A, 2.64%, 5/15/20682 | 516,313 | 506,384 | ||||||
Oxford Finance Funding LLC, | ||||||||
Series 2019-1A, Class A2, 4.459%, 2/15/20272 | 584,892 | 583,120 | ||||||
Series 2020-1A, Class A2, 3.101%, 2/15/20282 | 1,348,098 | 1,335,808 | ||||||
Series 2022-1A, Class A2, 3.602%, 2/15/20302 | 2,650,000 | 2,497,595 | ||||||
PEAR LLC, Series 2021-1, Class A, 2.60%, 1/15/2034 (Acquired 11/16/2021, cost $3,134,740)4 | 3,134,740 | 2,992,527 | ||||||
SMB Private Education Loan Trust, Series 2020-A, Class A2A, 2.23%, 9/15/20372 | 1,000,787 | 941,459 | ||||||
SoFi Professional Loan Program LLC, | ||||||||
Series 2017-F, Class A2FX, 2.84%, 1/25/20412 | 1,033,752 | 1,019,420 | ||||||
Series 2020-A, Class A2FX, 2.54%, 5/15/20462 | 641,235 | 618,629 | ||||||
Series 2020-C, Class AFX, 1.95%, 2/15/20462 | 396,966 | 381,209 | ||||||
Towd Point Mortgage Trust, | ||||||||
Series 2016-5, Class A1, 2.50%, 10/25/20562,5 | 82,964 | 82,329 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
Towd Point Mortgage Trust, (continued) | ||||||||
Series 2017-1, Class A1, 2.75%, 10/25/20562,5 | 70,438 | $ | 69,874 | |||||
Series 2019-HY1, Class A1, (1 mo. LIBOR US + 1.000%), 2.624%, 10/25/20482,6 | 127,666 | 126,169 | ||||||
Tricon American Homes, Series 2020- SFR1, Class B, 2.049%, 7/17/20382 | 1,300,000 | 1,168,959 | ||||||
Triton Container Finance VIII LLC, Series 2021-1A, Class A, (Bermuda), 1.86%, 3/20/20462 | 2,502,500 | 2,196,268 | ||||||
Vertical Bridge Holdings LLC, Series 2020-2A, Class A, 2.636%, 9/15/20502 | 2,250,000 | 2,093,701 | ||||||
TOTAL ASSET-BACKED SECURITIES (Identified Cost $42,190,792) | 39,024,291 | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES - 7.4% | ||||||||
Brean Asset Backed Securities Trust, Series 2021-RM2, Class A, 1.75%, 10/25/20612,5 | 1,422,167 | 1,274,084 | ||||||
CIM Trust, Series 2019-INV1, Class A1, 4.00%, 2/25/20492,5 | 22,850 | 22,761 | ||||||
Citigroup Mortgage Loan Trust, Inc., Series 2021-INV1, Class A3A, 2.50%, 5/25/20512,5 | 904,823 | 777,743 | ||||||
Credit Suisse Mortgage Capital Trust, | ||||||||
Series 2013-6, Class 2A1, 3.50%, 8/25/20432,5 | 188,179 | 180,921 | ||||||
Series 2013-IVR2, Class A2, 3.00%, 4/25/20432,5 | 199,787 | 187,171 | ||||||
Series 2013-IVR3, Class A1, 2.50%, 5/25/20432,5 | 57,214 | 52,490 | ||||||
Series 2013-TH1, Class A1, 2.13%, 2/25/20432,5 | 34,981 | 31,555 | ||||||
Fannie Mae REMICS, | ||||||||
Series 2018-13, Class PA, 3.00%, 3/25/2048 | 1,898,742 | 1,782,401 | ||||||
Series 2018-31, Class KP, 3.50%, 7/25/2047 | 24,746 | 24,716 | ||||||
Series 2021-69, Class WJ, 1.50%, 10/25/2050 | 1,299,901 | 1,145,646 | ||||||
Fontainebleau Miami Beach Trust, Series 2019-FBLU, Class A, 3.144%, 12/10/20362 | 1,050,000 | 1,008,659 | ||||||
Freddie Mac Multifamily Structured Pass-Through Certificates, | ||||||||
Series K030, Class X1 (IO), 0.259%, 4/25/20235 | 11,786,173 | 11,966 | ||||||
Series K032, Class X1 (IO), 0.181%, 5/25/20235 | 7,085,585 | 5,541 | ||||||
Freddie Mac REMICS, Series 5189, Class CP, 2.50%, 6/25/2049 | 1,505,437 | 1,386,503 | ||||||
FREMF Mortgage Trust, | ||||||||
Series 2015-K42, Class B, 3.980%, 1/25/20482,5 | 380,000 | 372,665 |
The accompanying notes are an integral part of the financial statements.
4
Core Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
FREMF Mortgage Trust, (continued) | ||||||||
Series 2015-K720, Class B, 3.602%, 7/25/20222,5 | 75,214 | $ | 75,214 | |||||
Government National Mortgage Association, Series 2017-54, Class AH, 2.60%, 12/16/2056 | 129,978 | 125,040 | ||||||
GS Mortgage-Backed Securities Corp. Trust, | ||||||||
Series 2020-PJ3, Class A14, 3.00%, 10/25/20502,5 | 576,524 | 515,575 | ||||||
Series 2021-INV1, Class A9, (U.S. Secured Overnight Financing Rate 30 Day Average + 0.850%), 1.776%, 12/25/20512,6 | 1,737,414 | 1,614,577 | ||||||
Series 2021-PJ6, Class A8, 2.50%, 11/25/20512,5 | 1,341,145 | 1,215,704 | ||||||
Series 2021-PJ9, Class A8, 2.50%, 2/26/20522,5 | 1,327,292 | 1,207,124 | ||||||
Imperial Fund Mortgage Trust, Series 2021-NQM3, Class A1, 1.595%, 11/25/20562,5 | 1,589,436 | 1,353,838 | ||||||
JP Morgan Mortgage Trust, | ||||||||
Series 2014-2, Class 1A1, 3.00%, 6/25/20292,5 | 52,707 | 50,598 | ||||||
Series 2017-6, Class A3, 3.50%, 12/25/20482,5 | 23,820 | 22,629 | ||||||
New Residential Mortgage Loan Trust, | ||||||||
Series 2014-1A, Class A, 3.75%, 1/25/20542,5 | 124,379 | 120,946 | ||||||
Series 2014-3A, Class AFX3, 3.75%, 11/25/20542,5 | 57,375 | 55,553 | ||||||
Series 2015-2A, Class A1, 3.75%, 8/25/20552,5 | 109,356 | 105,629 | ||||||
Series 2016-4A, Class A1, 3.75%, 11/25/20562,5 | 100,337 | 97,134 | ||||||
OBX Trust, Series 2022-INV1, Class A1, 3.00%, 12/25/20512,5 | 1,442,184 | 1,278,539 | ||||||
PMT Loan Trust, Series 2013-J1, Class A9, 3.50%, 9/25/20432,5 | 179,945 | 172,918 | ||||||
Provident Funding Mortgage Trust, | ||||||||
Series 2021-2, Class A2A, 2.00%, 4/25/20512,5 | 1,739,994 | 1,547,994 | ||||||
Series 2021-INV1, Class A1, 2.50%, 8/25/20512,5 | 2,653,558 | 2,272,770 | ||||||
RCKT Mortgage Trust, Series 2021-6, Class A1, 2.50%, 12/25/20512,5 | 1,719,000 | 1,468,101 | ||||||
Sequoia Mortgage Trust, | ||||||||
Series 2013-6, Class A2, 3.00%, 5/25/20435 | 487,137 | 455,155 | ||||||
Series 2013-7, Class A2, 3.00%, 6/25/20435 | 36,269 | 33,907 | ||||||
Series 2013-8, Class A1, 3.00%, 6/25/20435 | 92,704 | 86,857 | ||||||
Sutherland Commercial Mortgage Trust, Series 2019-SBC8, Class A, 2.86%, 4/25/20412,5 | 558,642 | 520,672 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
WinWater Mortgage Loan Trust, | ||||||||
Series 2015-1, Class A1, 3.50%, 1/20/20452,5 | 15,898 | $ | 15,359 | |||||
Series 2015-2, Class A11, 3.50%, 2/20/20452,5 | 496,927 | 477,602 | ||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (Identified Cost $25,633,019) | 23,154,257 | |||||||
MUNICIPAL BONDS - 1.5% | ||||||||
Clark County, Public Impt., Series A, G.O. Bond, 1.15%, 11/1/2026 | 3,410,000 | 3,085,957 | ||||||
Hawaii, Series GC, G.O. Bond, 2.682%, 10/1/2038 | 95,000 | 75,714 | ||||||
New York City Transitional Finance Authority, Future Tax Secured, Public Impt., Revenue Bond, 1.58%, 5/1/2024 | 910,000 | 882,345 | ||||||
South Carolina Public Service Authority, Series B, Revenue Bond, 2.329%, 12/1/2028 | 600,000 | 539,019 | ||||||
TOTAL MUNICIPAL BONDS (Identified Cost $5,030,678) | 4,583,035 | |||||||
U.S. TREASURY SECURITIES - 45.3% | ||||||||
U.S. Treasury Bonds - 17.8% | ||||||||
U.S. Treasury Bond, 3.00%, 5/15/2047 | 25,502,000 | 24,011,727 | ||||||
U.S. Treasury Bond | ||||||||
2.375%, 2/15/2042 | 27,890,000 | 23,784,941 | ||||||
1.875%, 11/15/2051 | 10,560,000 | 7,994,250 | ||||||
Total U.S. Treasury Bonds (Identified Cost $56,319,404) | 55,790,918 | |||||||
U.S. Treasury Notes - 27.5% | ||||||||
U.S. Treasury Note | ||||||||
1.75%, 5/15/2023 | 19,035,000 | 18,849,111 | ||||||
2.25%, 11/15/2025 | 19,390,000 | 18,905,250 | ||||||
2.00%, 11/15/2026 | 16,233,000 | 15,543,097 | ||||||
2.25%, 11/15/2027 | 16,210,000 | 15,566,666 | ||||||
3.125%, 11/15/2028 | 17,102,000 | 17,167,469 | ||||||
Total U.S. Treasury Notes (Identified Cost $85,415,857) | 86,031,593 | |||||||
TOTAL U.S. TREASURY SECURITIES (Identified Cost $141,735,261) | 141,822,511 | |||||||
U.S. GOVERNMENT AGENCIES - 8.7% | ||||||||
Mortgage-Backed Securities - 8.7% | ||||||||
Fannie Mae | ||||||||
Pool #888810, UMBS, 5.50%, 11/1/2022 | 16 | 16 | ||||||
Pool #AD0462, UMBS, 5.50%, 10/1/2024 | 1,212 | 1,237 |
The accompanying notes are an integral part of the financial statements.
5
Core Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
U.S. GOVERNMENT AGENCIES (continued) | ||||||||
Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae (continued) | ||||||||
Pool #MA3463, UMBS, 4.00%, 9/1/2033 | 117,191 | $ | 119,455 | |||||
Pool #MA1834, UMBS, 4.50%, 2/1/2034 | 34,215 | 35,091 | ||||||
Pool #FM1158, UMBS, 3.50%, 6/1/2034 | 415,109 | 415,522 | ||||||
Pool #MA2587, UMBS, 3.50%, 4/1/2036 | 214,616 | 214,012 | ||||||
Pool #MA3215, UMBS, 3.50%, 12/1/2037 | 677,872 | 666,776 | ||||||
Pool #FM2568, UMBS, 3.00%, 5/1/2038 | 447,392 | 437,310 | ||||||
Pool #995876, UMBS, 6.00%, 11/1/2038 | 63,721 | 69,644 | ||||||
Pool #MA4203, UMBS, 2.50%, 12/1/2040 | 2,992,278 | 2,772,378 | ||||||
Pool #AI5172, UMBS, 4.00%, 8/1/2041 | 44,584 | 45,098 | ||||||
Pool #AH3858, UMBS, 4.50%, 8/1/2041 | 210,995 | 217,612 | ||||||
Pool #MA4687, UMBS, 4.00%, 6/1/2042 | 3,149,208 | 3,165,170 | ||||||
Pool #AL7729, UMBS, 4.00%, 6/1/2043 | 52,359 | 52,963 | ||||||
Pool #AX1685, UMBS, 3.50%, 11/1/2044 | 498,706 | 490,330 | ||||||
Pool #AS4103, UMBS, 4.50%, 12/1/2044 | 141,369 | 145,222 | ||||||
Pool #AY8604, UMBS, 3.50%, 4/1/2045 | 77,869 | 76,318 | ||||||
Pool #BC6764, UMBS, 3.50%, 4/1/2046 | 30,632 | 29,988 | ||||||
Pool #BC8677, UMBS, 4.00%, 5/1/2046 | 26,960 | 27,025 | ||||||
Pool #BD1191, UMBS, 3.50%, 1/1/2047 | 200,630 | 196,413 | ||||||
Pool #BE7845, UMBS, 4.50%, 2/1/2047 | 35,113 | 35,826 | ||||||
Pool #MA3007, UMBS, 3.00%, 4/1/2047 | 746,004 | 705,674 | ||||||
Pool #FM2232, UMBS, 4.00%, 6/1/2048 | 117,177 | 117,381 | ||||||
Pool #AL8674, 5.659%, 1/1/2049 | 286,437 | 307,913 | ||||||
Pool #FS1179, UMBS, 3.50%, 12/1/2049 | 3,014,936 | 2,947,853 | ||||||
Pool #MA4600, UMBS, 3.50%, 5/1/2052 | 3,167,227 | 3,052,731 | ||||||
Pool #MA4644, UMBS, 4.00%, 5/1/2052 | 3,129,372 | 3,091,722 | ||||||
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
U.S. GOVERNMENT AGENCIES (continued) | ||||||||
Mortgage-Backed Securities (continued) | ||||||||
Freddie Mac | ||||||||
Pool #G12988, 6.00%, 1/1/2023 | 81 | $ | 81 | |||||
Pool #G13078, 6.00%, 3/1/2023 | 127 | 128 | ||||||
Pool #D98711, 4.50%, 7/1/2031 | 54,108 | 55,853 | ||||||
Pool #C91746, 4.50%, 12/1/2033 | 42,360 | 43,486 | ||||||
Pool #C91771, 4.50%, 6/1/2034 | 51,654 | 53,026 | ||||||
Pool #C91780, 4.50%, 7/1/2034 | 65,920 | 67,887 | ||||||
Pool #QN0349, UMBS, 3.00%, 8/1/2034 | 404,183 | 397,825 | ||||||
Pool #C91832, 3.50%, 6/1/2035 | 240,765 | 240,057 | ||||||
Pool #G08268, 5.00%, 5/1/2038 | 302,570 | 318,907 | ||||||
Pool #G05900, 6.00%, 3/1/2040 | 20,449 | 22,480 | ||||||
Pool #A92889, 4.50%, 7/1/2040 | 119,441 | 123,329 | ||||||
Pool #A93451, 4.50%, 8/1/2040 | 344,798 | 356,030 | ||||||
Pool #G60513, 5.00%, 7/1/2041 | 311,592 | 328,120 | ||||||
Pool #G60071, 4.50%, 7/1/2042 | 121,550 | 125,510 | ||||||
Pool #Q17513, 3.50%, 4/1/2043 | 64,793 | 63,856 | ||||||
Pool #Q37857, 4.00%, 12/1/2045 | 268,086 | 269,704 | ||||||
Pool #G60855, 4.50%, 12/1/2045 | 110,331 | 113,444 | ||||||
Pool #Q38388, 4.00%, 1/1/2046 | 271,896 | 273,537 | ||||||
Pool #Q47544, 4.00%, 3/1/2047 | 260,906 | 261,607 | ||||||
Pool #Q47130, 4.50%, 4/1/2047 | 25,748 | 26,273 | ||||||
Pool #G08786, 4.50%, 10/1/2047 | 82,140 | 83,815 | ||||||
Pool #SD8044, UMBS, 3.00%, 2/1/2050 | 3,124,467 | 2,943,995 | ||||||
Pool #SD8230, UMBS, 4.50%, 6/1/2052 | 1,723,293 | 1,734,716 | ||||||
TOTAL U.S. GOVERNMENT AGENCIES (Identified Cost $28,153,389) | 27,340,346 | |||||||
SHORT-TERM INVESTMENT - 1.2% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 1.35%7 | ||||||||
(Identified Cost $3,604,563) | 3,604,563 | 3,604,563 | ||||||
TOTAL INVESTMENTS - 99.5% (Identified Cost $327,640,708) | 311,622,866 | |||||||
OTHER ASSETS, LESS LIABILITIES - 0.5% | 1,603,482 | |||||||
NET ASSETS - 100% | $ | 313,226,348 |
G.O. Bond - General Obligation Bond
Impt. - Improvement
IO - Interest only
The accompanying notes are an integral part of the financial statements.
6
Core Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
LIBOR - London Interbank Offered Rate
No. - Number
REMICS - Real Estate Mortgage Investment Conduits
UMBS - Uniform Mortgage-Backed Securities
1Amount is stated in USD unless otherwise noted.
2Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be liquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2022 was $78,745,350, which represented 25.1% of the Series’ Net Assets.
3Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of June 30, 2022.
4Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of such securities at June 30, 2022 was $2,992,527, or 1.0% of the Series’ Net Assets.
5Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of June 30, 2022.
6Floating rate security. Rate shown is the rate in effect as of June 30, 2022.
7Rate shown is the current yield as of June 30, 2022.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
7
Core Bond Series
Statement of Assets and Liabilities
June 30, 2022 (unaudited)
ASSETS: | ||||
Investments, at value (identified cost $327,640,708) (Note 2) | $ | 311,622,866 | ||
Cash | 3,842 | |||
Receivable from Advisor (Note 3) | 10,952 | |||
Interest receivable | 1,508,702 | |||
Receivable for fund shares sold | 168,523 | |||
Dividends receivable | 3,343 | |||
Prepaid expenses | 32,803 | |||
TOTAL ASSETS | 313,351,031 | |||
LIABILITIES: | ||||
Accrued fund accounting and administration fees (Note 3) | 24,353 | |||
Accrued sub-transfer agent fees (Note 3) | 2,851 | |||
Directors’ fees payable (Note 3) | 1,505 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 714 | |||
Accrued distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 597 | |||
Payable for fund shares repurchased | 53,731 | |||
Audit fees payable | 27,567 | |||
Accrued custodian fees | 8,015 | |||
Other payables and accrued expenses | 5,350 | |||
TOTAL LIABILITIES | 124,683 | |||
TOTAL NET ASSETS | $ | 313,226,348 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 327,344 | ||
Additional paid-in-capital | 356,331,631 | |||
Total distributable earnings (loss) | (43,432,627 | ) | ||
TOTAL NET ASSETS | $ | 313,226,348 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S ($2,904,455/301,055 shares) | $ | 9.65 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I ($6,108,438/693,251 shares) | $ | 8.81 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W ($282,232,907/29,252,704 shares) | $ | 9.65 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class Z ($21,980,548/2,487,394 shares) | $ | 8.84 |
The accompanying notes are an integral part of the financial statements.
8
Core Bond Series
Statement of Operations
For the Six Months Ended June 30, 2022 (unaudited)
INVESTMENT INCOME: | ||||
Interest | $ | 3,686,620 | ||
Dividends | 6,523 | |||
Total Investment Income | 3,693,143 | |||
EXPENSES: | ||||
Management fees (Note 3) | 426,396 | |||
Fund accounting and administration fees (Note 3) | 57,543 | |||
Directors’ fees (Note 3) | 21,755 | |||
Sub-transfer agent fees (Note 3) | 5,690 | |||
Distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 4,732 | |||
Chief Compliance Officer service fees (Note 3) | 3,509 | |||
Registration and filing fees | 31,901 | |||
Custodian fees | 10,134 | |||
Miscellaneous | 61,563 | |||
Total Expenses | 623,223 | |||
Less reduction of expenses (Note 3) | (484,751 | ) | ||
Net Expenses | 138,472 | |||
NET INVESTMENT INCOME | 3,554,671 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | (27,941,232 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (13,108,173 | ) | ||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | (41,049,405 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (37,494,734 | ) |
The accompanying notes are an integral part of the financial statements.
9
Core Bond Series
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED 12/31/21 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,554,671 | $ | 6,211,759 | ||||
Net realized gain (loss) on investments | (27,941,232 | ) | 3,476,960 | |||||
Net change in unrealized appreciation (depreciation) on investments | (13,108,173 | ) | (14,150,627 | ) | ||||
Net increase (decrease) from operations | (37,494,734 | ) | (4,461,908 | ) | ||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | ||||||||
Class S | (18,265 | ) | (103,827 | ) | ||||
Class I | (42,634 | ) | (171,481 | ) | ||||
Class W | (2,380,761 | ) | (9,639,144 | ) | ||||
Class Z | (167,826 | ) | (640,465 | ) | ||||
Total distributions to shareholders | (2,609,486 | ) | (10,554,917 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | (27,060,127 | ) | 43,705,280 | |||||
Net increase (decrease) in net assets | (67,164,347 | ) | 28,688,455 | |||||
NET ASSETS: | ||||||||
Beginning of period | 380,390,695 | 351,702,240 | ||||||
End of period
| $ | 313,226,348 | $ | 380,390,695 |
The accompanying notes are an integral part of the financial statements.
10
Core Bond Series
Financial Highlights - Class S
FOR THE | FOR THE YEAR ENDED | |||||||||||||||||
SIX MONTHS | ||||||||||||||||||
ENDED | ||||||||||||||||||
6/30/22 | ||||||||||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||||
Net asset value - Beginning of period | $10.82 | $11.28 | $10.92 | $10.30 | $10.62 | $10.52 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||
Net investment income1 | 0.07 | 0.12 | 0.16 | 0.23 | 0.24 | 0.20 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (1.19 | ) | (0.33 | ) | 0.78 | 0.61 | (0.32 | ) | 0.10 | |||||||||
Total from investment operations | (1.12 | ) | (0.21 | ) | 0.94 | 0.84 | (0.08 | ) | 0.30 | |||||||||
Less distributions to shareholders: | ||||||||||||||||||
From net investment income | (0.05 | ) | (0.12 | ) | (0.16 | ) | (0.22 | ) | (0.24 | ) | (0.19 | ) | ||||||
From net realized gain on investments | — | (0.13 | ) | (0.42 | ) | — | — | (0.01 | ) | |||||||||
Total distributions to shareholders | (0.05 | ) | (0.25 | ) | (0.58 | ) | (0.22 | ) | (0.24 | ) | (0.20 | ) | ||||||
Net asset value - End of period | $9.65 | $10.82 | $11.28 | $10.92 | $10.30 | $10.62 | ||||||||||||
Net assets - End of period (000’s omitted) | $2,904 | $4,185 | $5,760 | $2,382 | $101,314 | $119,137 | ||||||||||||
Total return2 | (10.35% | ) | (1.89% | ) | 8.67% | 8.18% | (0.75% | ) | 2.91% | |||||||||
Ratios (to average net assets)/ Supplemental Data: | ||||||||||||||||||
Expenses* | 0.70% | 3 | 0.65% | 0.64% | 0.69% | 0.70% | 0.70% | |||||||||||
Net investment income | 1.44% | 3 | 1.07% | 1.38% | 2.27% | 2.35% | 1.86% | |||||||||||
Series portfolio turnover | 69% | 69% | 110% | 66% | 78% | 48% |
*For certain periods presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some periods may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts:
0.01% | 3 | N/A | N/A | 0.07% | 0.08% | 0.07% |
1Calculated based on average shares outstanding during the periods.
2Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain periods. Periods less than one year are not annualized.
3Annualized.
The accompanying notes are an integral part of the financial statements.
11
Core Bond Series
Financial Highlights - Class I
FOR THE | FOR THE YEAR ENDED | |||||||||||||||||
SIX MONTHS | ||||||||||||||||||
ENDED | ||||||||||||||||||
6/30/22 | ||||||||||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||||
Net asset value - Beginning of period | $9.89 | $10.33 | $10.04 | $9.52 | $9.84 | $9.77 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||
Net investment income1 | 0.08 | 0.13 | 0.17 | 0.24 | 0.25 | 0.21 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (1.10 | ) | (0.30 | ) | 0.72 | 0.55 | (0.31 | ) | 0.09 | |||||||||
Total from investment operations | (1.02 | ) | (0.17 | ) | 0.89 | 0.79 | (0.06 | ) | 0.30 | |||||||||
Less distributions to shareholders: | ||||||||||||||||||
From net investment income | (0.06 | ) | (0.14 | ) | (0.18 | ) | (0.27 | ) | (0.26 | ) | (0.22 | ) | ||||||
From net realized gain on investments | — | (0.13 | ) | (0.42 | ) | — | — | (0.01 | ) | |||||||||
Total distributions to shareholders | (0.06 | ) | (0.27 | ) | (0.60 | ) | (0.27 | ) | (0.26 | ) | (0.23 | ) | ||||||
Net asset value - End of period | $8.81 | $9.89 | $10.33 | $10.04 | $9.52 | $9.84 | ||||||||||||
Net assets - End of period (000’s omitted) | $6,108 | $6,621 | $4,387 | $5,416 | $76,761 | $76,407 | ||||||||||||
Total return2 | (10.28% | ) | (1.65% | ) | 8.93% | 8.38% | (0.53% | ) | 3.10% | |||||||||
Ratios (to average net assets)/ Supplemental Data: | ||||||||||||||||||
Expenses* | 0.45% | 3 | 0.45% | 0.45% | 0.45% | 0.45% | 0.45% | |||||||||||
Net investment income | 1.73% | 3 | 1.29% | 1.67% | 2.53% | 2.60% | 2.12% | |||||||||||
Series portfolio turnover | 69% | 69% | 110% | 66% | 78% | 48% |
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts:
0.03% | 3 | 0.02% | 0.01% | 0.06% | 0.08% | 0.07% |
1Calculated based on average shares outstanding during the periods.
2Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
3Annualized.
The accompanying notes are an integral part of the financial statements.
12
Core Bond Series
Financial Highlights - Class W
FOR THE | FOR THE YEAR ENDED | FOR THE | ||||||||||
SIX MONTHS | PERIOD | |||||||||||
ENDED 6/30/22 | 3/1/191 TO | |||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | |||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||
Net asset value - Beginning of period | $10.82 | $11.27 | $10.90 | $10.40 | ||||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income2 | 0.11 | 0.19 | 0.22 | 0.26 | ||||||||
Net realized and unrealized gain (loss) on investments | (1.20 | ) | (0.33 | ) | 0.78 | 0.54 | ||||||
Total from investment operations | (1.09 | ) | (0.14 | ) | 1.00 | 0.80 | ||||||
Less distributions to shareholders: | ||||||||||||
From net investment income | (0.08 | ) | (0.18 | ) | (0.21 | ) | (0.30 | ) | ||||
From net realized gain on investments | — | (0.13 | ) | (0.42 | ) | — | ||||||
Total distributions to shareholders | (0.08 | ) | (0.31 | ) | (0.63 | ) | (0.30 | ) | ||||
Net asset value - End of period | $9.65 | $10.82 | $11.27 | $10.90 | ||||||||
Net assets - End of period (000’s omitted) | $282,233 | $344,304 | $321,288 | $192,391 | ||||||||
Total return3 | (10.08% | ) | (1.25% | ) | 9.31% | 7.74% | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Expenses* | 0.05% | 4 | 0.05% | 0.05% | 0.05% | 4 | ||||||
Net investment income | 2.11% | 4 | 1.68% | 1.97% | 2.87% | 4 | ||||||
Series portfolio turnover | 69% | 69% | 110% | 66% |
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts:
0.31% | 4 | 0.30% | 0.32% | 0.34% | 4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
13
Core Bond Series
Financial Highlights - Class Z
FOR THE | FOR THE YEAR ENDED | FOR THE | ||||||||||
SIX MONTHS | PERIOD | |||||||||||
ENDED 6/30/22 | 3/1/191 TO | |||||||||||
(UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | |||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||
Net asset value - Beginning of period | $9.91 | | $10.35 | | $10.06 | | $9.62 | | ||||
Income (loss) from investment operations: | ||||||||||||
Net investment income2 | 0.09 | 0.15 | 0.18 | 0.22 | ||||||||
Net realized and unrealized gain (loss) on investments | (1.09 | ) | (0.31 | ) | 0.72 | 0.50 | ||||||
Total from investment operations | (1.00 | ) | (0.16 | ) | 0.90 | 0.72 | ||||||
Less distributions to shareholders: | ||||||||||||
From net investment income | (0.07 | ) | (0.15 | ) | (0.19 | ) | (0.28 | ) | ||||
From net realized gain on investments | — | (0.13 | ) | (0.42 | ) | — | ||||||
Total distributions to shareholders | (0.07 | ) | (0.28 | ) | (0.61 | ) | (0.28 | ) | ||||
Net asset value - End of period | $8.84 | $9.91 | $10.35 | $10.06 | ||||||||
Net assets - End of period (000’s omitted) | $21,981 | $25,281 | $20,266 | $10,372 | ||||||||
Total return3 | (10.11% | ) | (1.53% | ) | 9.02% | 7.50% | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Expenses* | 0.30% | 4 | 0.30% | 0.30% | 0.30% | 4 | ||||||
Net investment income | 1.87% | 4 | 1.43% | 1.75% | 2.64% | 4 | ||||||
Series portfolio turnover | 69% | 69% | 110% | 66% |
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts:
0.06% | 4 | 0.05% | 0.07% | 0.09% | 4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
14
Core Bond Series
Notes to Financial Statements
(unaudited)
1. | Organization |
Core Bond 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 total return by investing primarily in fixed income securities.
The Series is authorized to issue four classes of shares (Class S, I, W, and Z). 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, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of June 30, 2022, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Core Bond Series Class I common stock, 125 million have been designated as Core Bond Series Class S common stock, 150 million have been designated as Core Bond Series Class W common stock and Core Bond Series Class Z common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market 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 Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Debt securities, including government bonds, foreign bonds, asset-backed securities, structured notes, supranational obligations, sovereign bonds, corporate bonds and mortgage-backed securities will normally be valued on the basis of evaluated bid prices provided directly by an independent pricing service (the “Service”). The pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Certain investments in securities held by the Series may be valued on a basis of a price provided directly by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
Municipal securities will normally be valued on the basis of market valuations provided by the Service. The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
15
Core Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as 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”). 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.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of June 30, 2022 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Debt securities: | ||||||||||||||||
U.S. Treasury and other U.S. Government agencies | $ | 169,162,857 | $ | — | $ | 169,162,857 | $ | — | ||||||||
States and political subdivisions (municipals) | 4,583,035 | — | 4,583,035 | — | ||||||||||||
Corporate debt: | ||||||||||||||||
Communication Services | 10,960,407 | — | 10,960,407 | — | ||||||||||||
Consumer Discretionary | 9,072,748 | — | 9,072,748 | — | ||||||||||||
Energy | 8,098,619 | — | 8,098,619 | — | ||||||||||||
Financials | 13,333,929 | — | 13,333,929 | — | ||||||||||||
Health Care | 2,368,963 | — | 2,368,963 | — | ||||||||||||
Industrials | 13,311,242 | — | 13,311,242 | — | ||||||||||||
Information Technology | 3,235,793 | — | 3,235,793 | — | ||||||||||||
Materials | 1,602,994 | — | 1,602,994 | — | ||||||||||||
Real Estate | 6,708,803 | — | 6,708,803 | — | ||||||||||||
Utilities | 3,400,365 | — | 3,400,365 | — | ||||||||||||
Asset-backed securities | 39,024,291 | — | 39,024,291 | — | ||||||||||||
Commercial mortgage-backed securities | 23,154,257 | — | 23,154,257 | — | ||||||||||||
Short-Term Investment | 3,604,563 | 3,604,563 | — | — | ||||||||||||
Total assets | $ | 311,622,866 | $ | 3,604,563 | $ | 308,018,303 | $ | — |
There were no Level 3 securities held by the Series as of December 31, 2021 or June 30, 2022.
16
Core Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
LIBOR Transition Risk
The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”). Although many LIBOR rates will cease to be published or no longer will be representative of the underlying market they seek to measure after December 31, 2021, a selection of widely used USD LIBOR rates will continue to be published through June 2023 in order to assist with the transition. The Series may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process away from LIBOR might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against, instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the Series is uncertain.
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 Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair 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 shareholder services fees), 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 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 fair 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.
Asset-Backed Securities
The Series may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e. loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Series may subsequently have to reinvest the proceeds at lower interest rates. If the Series has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
17
Core Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Mortgage-Backed Securities
The Series may invest in mortgage-backed securities (“MBS” or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the Series to the periodic payments of principal and interest from those mortgages. MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. For MBS there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury. Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Inflation-Indexed Bonds
The Series may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
Securities Purchased on a When-Issued Basis or Forward Commitment
The Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss. No such investments were held by the Series on June 30, 2022.
In connection with its ability to purchase or sell securities on a forward commitment basis, the Series may enter into forward roll transactions principally using To Be Announced (TBA) securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Series to receive inferior securities at redelivery as compared to the securities sold to the counterparty; counterparty credit risk; and the potential pay down speed variance between the mortgage-backed pools. During the roll period, the Series forgoes principal and interest paid on the securities. The Series accounts for such dollar rolls as purchases and sales. Information regarding securities purchased on a when-issued basis is included in the Series’ Investment Portfolio. No such investments were held by the Series on June 30, 2022.
Restricted Securities
Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of the Series’ Investment Portfolio.
18
Core Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Federal Taxes
The Series’ policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series is not subject to federal income 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.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. At June 30, 2022, the Series has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.
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 December 31, 2018 through December 31, 2021. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation 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 quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP 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 0.25% 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
19
Core Bond Series
Notes to Financial Statements (continued)
(unaudited)
3. | Transactions with Affiliates (continued) |
all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
The Fund may enter into agreements with financial intermediaries pursuant to which the Fund may pay financial intermediaries for non-distribution related sub-transfer agency, administrative, sub-accounting, and other shareholder services in an annual amount not to exceed 0.15% of the average daily net assets of the Class I and Class S shares of the Series. Payments made pursuant to such agreements are generally based on the current assets and/or number of accounts of the Series attributable to the financial intermediary. Any payments made pursuant to such agreements may be in addition to, rather than in lieu of, any Distribution and Shareholder Services Fee payable under the Rule 12b-1 plan of the Fund. For the six months ended June 30, 2022, the sub-transfer agency expenses incurred by Class S and Class I were $1,985 and $3,705, respectively.
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 S shares pursuant to a distribution plan adopted under Rule 12b-1 of the 1940 Act, regardless of expenses actually incurred. Under the agreement, the Series pays distribution and service fees to the distributor at an annual rate of 0.25% of average daily net assets attributable to Class S shares. There are no distribution and service fees on the Class I, Class W or Class Z shares. The fees are accrued daily and paid monthly.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets; 0.0075% on the next $15 billion of average daily net assets; and 0.0065% of average daily net assets in excess of $40 billion; plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the shareholder services fee and/or distribution and service (12b-1) fees and waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.45% of the average daily net assets of the Class S and Class I shares, 0.05% of the average daily net assets of the Class W shares, and 0.30% of the average daily net assets of the Class Z shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $385,417 in management fees for Class W shares for the six months ended June 30, 2022. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $256, $912, $91,378 and $6,788 for Class S, Class I, Class W and Class Z shares, respectively, for the six months ended June 30, 2022. These amounts are included as a reduction of expenses on the Statement of Operations.
20
Core Bond Series
Notes to Financial Statements (continued)
(unaudited)
3. | Transactions with Affiliates (continued) |
As of June 30, 2022, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, | |||||||||
2022 | 2023 | 2024 | 2025 | Total | ||||||
Class S | $ | — | $ | — | $ | — | $ | 256 | $ | 256 |
Class I | — | 448 | 1,037 | 912 | 2,397 | |||||
Class W | 136,322 | 171,244 | 170,505 | 91,378 | 569,449 | |||||
Class Z | 17,743 | 10,229 | 11,009 | 6,788 | 45,769 |
For the six months ended June 30, 2022, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
4. | Purchases and Sales of Securities |
For the six months ended June 30, 2022, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $37,655,829 and $80,139,047, respectively. Purchases and sales of U.S. Government securities, other than short-term securities, were $193,460,107 and $193,541,189, respectively.
5. | Capital Stock Transactions |
Transactions in Class S, Class I, Class W and Class Z shares of Core Bond Series were:
CLASS S | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 117,236 | $ | 1,221,619 | 207,182 | $ | 2,288,163 | ||||||||||
Reinvested | 1,834 | 17,890 | 9,348 | 102,072 | ||||||||||||
Repurchased | (204,753 | ) | (2,060,427 | ) | (340,592 | ) | (3,767,629 | ) | ||||||||
Total | (85,683 | ) | $ | (820,918 | ) | (124,062 | ) | $ | (1,377,394 | ) |
CLASS I | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 101,346 | $ | 930,184 | 397,051 | $ | 4,026,057 | ||||||||||
Reinvested | 4,485 | 39,502 | 16,449 | 163,961 | ||||||||||||
Repurchased | (82,148 | ) | (763,426 | ) | (168,610 | ) | (1,704,084 | ) | ||||||||
Total | 23,683 | $ | 206,260 | 244,890 | $ | 2,485,934 |
CLASS W | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 930,157 | $ | 9,425,576 | 4,762,413 | $ | 52,744,658 | ||||||||||
Reinvested | 230,769 | 2,235,987 | 839,927 | 9,165,523 | ||||||||||||
Repurchased | (3,738,326 | ) | (37,478,552 | ) | (2,285,988 | ) | (25,261,115 | ) | ||||||||
Total | (2,577,400 | ) | $ | (25,816,989 | ) | 3,316,352 | $ | 36,649,066 |
21
Core Bond Series
Notes to Financial Statements (continued)
(unaudited)
5. | Capital Stock Transactions (continued) |
CLASS Z | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 64,357 | $ | 584,438 | 699,232 | $ | 7,061,796 | ||||||||||
Reinvested | 18,952 | 167,826 | 64,083 | 640,465 | ||||||||||||
Repurchased | (145,809 | ) | (1,380,744 | ) | (171,107 | ) | (1,754,587 | ) | ||||||||
Total | (62,500 | ) | $ | (628,480 | ) | 592,208 | $ | 5,947,674 |
Approximately 90% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in September 2022 unless extended or renewed. During the six months ended June 30, 2022, the Series did not borrow under the line of credit.
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of June 30, 2022.
8. | Foreign Securities |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the U.S. 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 U.S. Government.
9. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The final determination of the tax character of current year distributions will be made at the conclusion of the fiscal year. The tax character of distributions paid for the year ended December 31, 2021 were as follows:
Ordinary income | $ 7,941,545 | |||
Long-term capital gains | $ 2,613,372 |
22
Core Bond Series
Notes to Financial Statements (continued)
(unaudited)
9. | Federal Income Tax Information (continued) |
At June 30, 2022, the identified cost for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
Cost for federal income tax purposes | $ | 327,692,271 | ||
Unrealized appreciation | 1,273,813 | |||
Unrealized depreciation | (17,343,218 | ) | ||
Net unrealized depreciation | $ | (16,069,405 | ) | |
Post October short-term deferred losses | $ | 30,725 |
10. | Market Event |
Significant disruptions and volatility in the global financial markets and economies, like the current conditions caused by the Russian invasion of Ukraine and the COVID-19 pandemic, could negatively impact the investment performance of the Series. The global market and economic climate may become increasingly uncertain due to numerous factors beyond our control, including but not limited to, the effectiveness and acceptance of vaccines to prevent COVID-19, impacts on business operations in the U.S. related to the COVID-19 pandemic, such as supply chain disruptions and inflation, concerns related to unpredictable global market and economic factors, uncertainty in U.S. federal fiscal, tax, trade or regulatory policy and the fiscal, tax, trade or regulatory policy of foreign governments, rising interest rates, inflation or deflation, the availability of credit, performance of financial markets, terrorism, natural or biological catastrophes, public health emergencies, or political uncertainty.
11. | Subsequent Event |
In preparing these financial statements, management of the Fund has evaluated events and transactions for potential recognition or disclosure and the following item was noted:
On March 31, 2022, Manning & Napier, Inc. (“the Company”), entered into a definitive agreement under which the Company will go private and be acquired by the Callodine Group, LLC (“Callodine”), a Boston-based asset management firm, in partnership with East Asset Management (the “Transaction”). The Company is the ultimate owner of the Advisor. The proposed Transaction is expected to close in the third quarter of 2022, contingent upon shareholder approval and other customary closing conditions. Following the close, the Company will become a wholly owned subsidiary of an affiliate of Callodine. Closing the Transaction results in a change in control of the Advisor under the 1940 Act and therefore the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides advisory services to the Series. In connection with the Transaction, on May 3, 2022, the Manning & Napier Fund, Inc. Board of Directors unanimously approved a new Investment Advisory Agreement between the Fund and the Advisor for each Series, that will become effective at the closing of the Transaction, subject to shareholder approval. As of the closing date of the Transaction, the Series’ investment objective and fee arrangements will remain unchanged.
23
Core Bond Series
Renewal of Investment Advisory Agreement
(unaudited)
At the Manning & Napier Fund, Inc. (the “Fund”) Board of Directors’ (the “Board”) meeting, held on May 19, 2022, the Investment Advisory Agreement (the “Agreement”) between the Fund and Manning & Napier Advisors, LLC (the “Advisor”) was considered for renewal by the Board, including all of the Directors who are not “interested persons” (“Independent Directors”), within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”). In connection with the decision whether to renew the Agreement, a variety of material was provided to the Board in advance of the meeting for their review and consideration. The Board also held a working session on May 3, 2022 to review and discuss information provided to the Board, and for the Board to request additional information.
Representatives of the Advisor attended a portion of the working session and attended the Board meeting. The Advisor provided supplemental information requested by the Board and presented additional oral information to the Board to assist the Board in its considerations. In addition to the information furnished by the Advisor, the Board was provided with a legal memorandum discussing its fiduciary duties related to its approval of the continuation of the Agreement. Legal counsel for the Fund discussed with the Board the applicable legal considerations. In addition, the Board received in-person presentations about the Fund throughout the year.
At the May 3, 2022 meeting, the Board also considered and approved a new investment advisory agreement (the “New Advisory Agreement”) for each Series between the Advisor and the Fund. The Board was asked to consider the New Advisory Agreement because of a transaction that will affect Manning & Napier, Inc. (“MN Inc.”), which is the ultimate parent company of the Advisor. On March 31, 2022, MN Inc. and Callodine Group, LLC (“Callodine”) entered into an agreement under which Callodine Merger Sub, an affiliate of Callodine, would acquire MN Inc. (the “Transaction”). The Transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2022. Following the closing, MN Inc. will become a wholly owned subsidiary of an affiliate of Callodine. The closing of the Transaction may be deemed to result in a change of control of the Advisor under the 1940 Act. As a result, the Transaction results in the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides investment advisory services to the Series (the “Current Advisory Agreement”). Shareholder approval of the New Advisory Agreement will enable the Advisor to continue to serve the Series following the closing of the Transaction.
The Independent Directors were advised by independent legal counsel with respect to these matters. The Independent Directors also met separately in executive sessions on April 13, April 27, May 3 and May 19, with their legal counsel without any representatives of the Advisor present.
The Directors’ determinations at the meeting were made on the basis of each Director’s business judgment after consideration of all the information presented. In deciding to recommend the renewal of the Current Agreement with respect to each Series of the Fund, the Independent Directors did not identify any single or particular piece of information that, in isolation, was sufficient to justify renewal. Each Independent Director may also have weighed information and factors differently. This summary describes the most important, but not all, of the factors considered by the Board and the Independent Directors.
• | The Board considered the nature and quality of services provided by the Advisor under the Current Agreement. The Advisor has provided those services for over 30 years, and they have included, among others: deciding what securities to purchase and sell for each Series; arranging for the purchase and sale of such securities by placing orders with broker-dealers; administering the affairs of the Fund (including the books and records of the Fund not maintained by third party service providers such as the custodian or transfer agent); arranging for the insurance coverage for the Fund; and supervising the preparation of tax returns, SEC filings (including registration statements) and reports to shareholders for the Fund. The Board considered the numerous services performed by the Advisor and its affiliates beyond those stated in the Current Agreement. The Board also considered the Advisor’s personnel who perform services to the Fund, changes in senior or key personnel, industry trends impacting the mutual fund industry, the strength of the Advisor’s compliance infrastructure, policies and procedures relating to compliance with securities regulations, reputation, expertise and resources. The Board discussed the quality of these services with representatives from the Advisor and concluded that the Advisor was performing its services to the Fund required under the Current Agreement in a reasonable manner. |
24
Core Bond Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the Advisor’s investment teams, including changes to the investment teams during the past year, investment team compensation structure and the investment process. The Board considered the performance of each Series since its inception, as well as over multiple time periods including: one year, three year, five year, ten year, and current market cycle. A market cycle includes periods of both rising and falling markets. Returns for established benchmark indices for each Series were provided. In addition, the Board considered (and considers on a quarterly basis) a number of other factors relevant to performance at the meeting including: a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives; the breadth of the Fund’s product offerings; and performance over reasonable time periods. Representatives of the Advisor provided information regarding and, as applicable, led discussions of factors impacting the Advisor’s performance for the Series, outlining current market conditions and explaining their expectations and strategies for the future. The Board also determined that it was appropriate to take into account its consideration of the Advisor’s performance at meetings held prior to the May 19th Board meeting. In doing so, the Board generally determined that the Advisor’s performance was satisfactory. Where the Advisor’s performance was materially below a Series’ benchmarks and or peer group, the Board requested an explanation for the underperformance and/or the steps taken by the Advisor in an effort to improve performance. In all instances, the Board was satisfied with the explanation provided. The Board plans to remain focused in future meetings to address any aberrational underperformance as necessary. After discussion, the Board concluded that the nature and quality of the investment management services provided by the Advisor to the Fund were considered adequate. |
• | The Board considered the fees and expenses of the various Series of the Fund. The Advisor presented the advisory fees and total expenses for each Series, including the advisory fee adjusted for any contractual expense waivers or reimbursements paid by the Advisor. |
• | The Board considered whether the Advisor had achieved economies of scale with respect to its services to the Fund. The Board acknowledged the expense caps incorporated in the Fund’s current fee structure, which requires the Advisor to subsidize the expenses of the Series operating above their expense cap, noting that 11 of 15 Series are currently receiving expense reimbursements from the Advisor. The Board concluded that the Fund would need to grow in assets before the Advisor would be able to achieve meaningful economies of scale. |
• | The Advisor provided the Board with information comparing each Series’ contractual management fees with the Advisor’s standard advisory fees for separate accounts and collective investment trusts. The Board considered that the range of services provided to the Series is more extensive than for the Advisor’s other clients due to additional infrastructure, administrative, operational and regulatory requirements related to operating a mutual fund, as well as associated risks. |
• | The current advisory fees, 12b-1 Distribution and Service Fees, other expenses (e.g. a combination of Shareholder Services Fees, intermediary sub-TA fees, routine operating expenses and Acquired Fund Fees and Expenses for fund-of-fund Series) and total expense ratios of each Series and share class were compared and ranked (on both a mean and median basis) against respective peer universes. Respective peer universes included funds of a similar size and with similar investment objectives and expense characteristics as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the comparisons and rankings of fees and net expense ratios for each Series of the Fund and the methodology behind the comparison. The Board considered the Advisor’s active portfolio management that results in portfolios that are more differentiated than the construction of their benchmarks. The Board will continue to monitor the fees and expenses of the Series compared to peer groups. Based on their review of the information provided, the Board concluded that the current fees and expenses of each Series of the Fund were reasonable on a comparative basis. |
25
Core Bond Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the costs of the Advisor’s services and the profits of the Advisor as they relate to the Advisor’s services to the Fund under the Current Agreement. The Board was provided with information on the Advisor’s financial condition and profitability by mutual fund agreement and by Series. Representatives of the Advisor discussed modest improvements in the Advisor’s profitability derived from the Fund. The Board discussed the Advisor’s revenues generated from the Fund and its expenses associated with providing the services under the Current Agreement. The Advisor presented the Board with information on firm wide investment management profitability to provide a comparison of the Advisor’s profitability from its Fund activities relative to its profitability from its other investment management business. In addition, the Board reviewed the Advisor’s expense allocation methodology used to calculate profitability since many of the Advisor’s resources and expenses are shared across the Advisor’s various investment management vehicles. The Board noted the Advisor’s explanation of the consistent approach taken in calculating profitability, compared to prior periods, including the allocation of expenses as part of that calculation. The Board considered the Advisor’s expenses associated with Fund activities outside of the Current Agreement (such as expense reimbursements pursuant to expense caps and payments made by the Advisor to third party platforms on which shares of the Fund are available for purchase). The Board noted the potential for the Transaction to add resources that have the potential to facilitate the growth of various series, which could improve economies of scale for those Series; however, they also noted that such potential may not be realized. After discussing the above costs and profits, the Board concluded that the Advisor’s profit margin relating to its services provided under the Current Agreement was reasonable. |
• | The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include participation in a joint insurance program, sharing of compensation expenses for certain shared personnel, relationships with large service providers, the utilization of Series within the Advisor’s separately managed accounts and certain research services provided by soft dollars. The Board concluded that these additional benefits to the Advisor were reasonable. |
Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of the Independent Directors, concluded that the compensation under the Current Agreement was fair and reasonable with respect to each Series in light of the services and expenses and such other matters as the Directors considered to be relevant in the exercise of their reasonable judgment, and that the renewal of the Current Agreement would be in the best interests of each Series and its shareholders. The Board did not indicate that any single factor was determinative of its decision to approve the Current Agreement, but indicated that the Board based its determination on the total mix of information available to it.
26
Core Bond Series
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 | 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-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling 1-(800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End |
2. Fund Holdings - Quarter-End |
3. Shareholder Report - Annual |
4. Shareholder Report - Semi-Annual |
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNCOB-06/22-SAR
27
www.manning-napier.com
Manning & Napier Fund, Inc.
Credit Series
Credit Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2022 to June 30, 2022).
Actual Expenses
The Actual lines of the table below provide 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 Actual 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 Hypothetical line in 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 a class of the Series and other funds. To do so, compare this 5% hypothetical example for the class in which you have invested 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 sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. 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.
BEGINNING ACCOUNT VALUE 1/1/22 | ENDING ACCOUNT VALUE 6/30/22 | EXPENSES PAID DURING PERIOD* 1/1/22 - 6/30/22 | ANNUALIZED EXPENSE RATIO | |
Class W | ||||
Actual | $1,000.00 | $902.40 | $0.47 | 0.10% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.30 | $0.50 | 0.10% |
*Expenses are equal to each Series’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Series’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
1
Credit Series
Portfolio Composition as of June 30, 2022
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. 2A U.S. Treasury Note is an intermediate long-term obligation of the U.S. Treasury issued with a maturity period between one and ten years. |
2
Credit Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS - 41.1% | ||||||||
Non-Convertible Corporate Bonds- 41.1% | ||||||||
Communication Services - 6.0% | ||||||||
Entertainment - 2.3% | ||||||||
Magallanes, Inc., 4.054%, 3/15/20292 | 6,850,000 | $ | 6,292,170 | |||||
Interactive Media & Services - 3.7% | ||||||||
Tencent Holdings Ltd. (China), 3.975%, 4/11/20292 | 10,890,000 | 10,357,354 | ||||||
Total Communication Services | 16,649,524 | |||||||
Consumer Discretionary - 5.2% | ||||||||
Hotels, Restaurants & Leisure - 0.9% | ||||||||
Expedia Group, Inc., 3.25%, 2/15/2030 | 2,940,000 | 2,446,004 | ||||||
Internet & Direct Marketing Retail - 4.3% | ||||||||
Alibaba Group Holding Ltd., | ||||||||
(China), 2.125%, 2/9/2031 | 1,700,000 | 1,410,555 | ||||||
(China), 4.00%, 12/6/2037 | 6,090,000 | 5,289,341 | ||||||
Amazon.com, Inc., 3.30%, 4/13/2027 | 5,230,000 | 5,139,216 | ||||||
11,839,112 | ||||||||
Total Consumer Discretionary | 14,285,116 | |||||||
Energy - 5.0% | ||||||||
Oil, Gas & Consumable Fuels - 5.0% | ||||||||
Cenovus Energy, Inc. (Canada), 6.75%, 11/15/2039 | 7,020,000 | 7,501,679 | ||||||
Energy Transfer LP, 6.50%, 2/1/2042 | 6,320,000 | 6,355,974 | ||||||
Total Energy | 13,857,653 | |||||||
Financials - 7.8% | ||||||||
Banks - 5.1% | ||||||||
Bank of America Corp., (U.S. Secured Overnight Financing Rate + 1.320%), 2.687%, 4/22/20323 | 4,530,000 | 3,814,044 | ||||||
Citigroup, Inc., (U.S. Secured Overnight Financing Rate + 0.770%), 1.462%, 6/9/20273 | 4,360,000 | 3,858,303 | ||||||
JPMorgan Chase & Co., (U.S. Secured Overnight Financing Rate + 3.790%), 4.493%, 3/24/20313 | 6,500,000 | 6,359,128 | ||||||
14,031,475 | ||||||||
Capital Markets - 1.8% | ||||||||
Blackstone Secured Lending Fund, 2.75%, 9/16/2026 | 2,840,000 | 2,492,029 | ||||||
Owl Rock Technology Finance Corp., 3.75%, 6/17/20262 | 2,780,000 | 2,517,540 | ||||||
5,009,569 | ||||||||
Diversified Financial Services - 0.9% | ||||||||
Blackstone Private Credit Fund, 2.625%, 12/15/20262 | 2,970,000 | 2,486,689 | ||||||
Total Financials | 21,527,733 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Health Care - 1.4% | ||||||||
Health Care Providers & Services - 1.4% | ||||||||
HCA, Inc., 4.125%, 6/15/2029 | 4,060,000 | $ | 3,713,510 | |||||
Industrials - 7.7% | ||||||||
Airlines - 1.8% | ||||||||
Southwest Airlines Co., 5.125%, 6/15/2027 | 4,990,000 | 5,043,164 | ||||||
Road & Rail - 0.9% | ||||||||
BNSF Funding Trust I, (3 mo. LIBOR US + 2.350%), 6.613%, 12/15/20553 | 2,540,000 | 2,496,199 | ||||||
Trading Companies & Distributors - 5.0% | ||||||||
AerCap Ireland Capital DAC - AerCap Global Aviation Trust (Ireland), 3.00%, 10/29/2028 | 3,000,000 | 2,527,878 | ||||||
Air Lease Corp., 3.625%, 4/1/2027 | 2,740,000 | 2,536,888 | ||||||
Ashtead Capital, Inc. (United Kingdom), 4.00%, 5/1/20282 | 2,890,000 | 2,600,536 | ||||||
Avolon Holdings Funding Ltd. (Ireland), 2.75%, 2/21/20282 | 7,520,000 | 6,104,943 | ||||||
13,770,245 | ||||||||
Total Industrials | 21,309,608 | |||||||
Information Technology - 1.9% | ||||||||
Semiconductors & Semiconductor Equipment - 1.9% | ||||||||
QUALCOMM, Inc., 4.25%, 5/20/2032 | 5,080,000 | 5,185,435 | ||||||
Materials - 0.9% | ||||||||
Metals & Mining - 0.9% | ||||||||
Newcastle Coal Infrastructure Group Pty Ltd. (Australia), 4.40%, 9/29/20272 | 2,870,000 | 2,541,764 | ||||||
Real Estate - 3.9% | ||||||||
Equity Real Estate Investment Trusts (REITS) - 3.9% | ||||||||
Crown Castle International Corp., 3.10%, 11/15/2029 | 3,470,000 | 3,059,610 | ||||||
Simon Property Group LP, 2.65%, 2/1/2032 | 9,100,000 | 7,541,580 | ||||||
Total Real Estate | 10,601,190 | |||||||
Utilities - 1.3% | ||||||||
Independent Power and Renewable Electricity Producers - 1.3% | ||||||||
Vistra Operations Co. LLC, 4.875%, 5/13/20242 | 2,855,000 | 2,841,937 | ||||||
3.55%, 7/15/20242 | 885,000 | 854,843 | ||||||
Total Utilities | 3,696,780 | |||||||
TOTAL CORPORATE BONDS | ||||||||
(Identified Cost $123,974,107) | 113,368,313 | |||||||
ASSET-BACKED SECURITIES - 17.5% | ||||||||
Business Jet Securities LLC, Series 2021-1A, Class A, 2.162%, 4/15/20362 | 1,164,893 | 1,054,193 |
The accompanying notes are an integral part of the financial statements.
3
Credit Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
CF Hippolyta Issuer LLC, | ||||||||
Series 2020-1, Class A2, 1.99%, 7/15/20602 | 677,219 | $ | 579,588 | |||||
Series 2020-1, Class B1, 2.28%, 7/15/20602 | 2,163,183 | 1,942,277 | ||||||
Series 2021-1A, Class B1, 1.98%, 3/15/20612 | 916,280 | 791,798 | ||||||
CLI Funding VIII LLC, Series 2021-1A, Class A, 1.64%, 2/18/20462 | 1,559,357 | 1,372,058 | ||||||
Commonbond Student Loan Trust, Series 2020-AGS, Class A, 1.98%, 8/25/20502 | 775,020 | 743,935 | ||||||
Credit Acceptance Auto Loan Trust, Series 2020-3A, Class A, 1.24%, 10/15/20292 | 2,700,000 | 2,630,052 | ||||||
Series 2021-2A, Class A, 0.96%, 2/15/20302 | 800,000 | 766,331 | ||||||
Series 2021-2A, Class C, 1.64%, 6/17/20302 | 1,000,000 | 903,482 | ||||||
Series 2021-3A, Class B, 1.38%, 7/15/20302 | 1,300,000 | 1,198,766 | ||||||
Series 2022-1A, Class A, 4.60%, 6/15/20322 | 2,600,000 | 2,606,153 | ||||||
DataBank Issuer, Series 2021-2A, Class A2, 2.40%, 10/25/20512 | 900,000 | 802,448 | ||||||
EDvestinU Private Education Loan Issue No. 3 LLC, Series 2021-A, Class A, 1.80%, 11/25/20452 | 667,830 | 593,715 | ||||||
Flexential Issuer, Series 2021-1A, Class A2, 3.25%, 11/27/20512 | 1,525,000 | 1,396,058 | ||||||
Goodgreen Trust, Series 2020-1A, Class A, 2.63%, 4/15/20552 | 935,654 | 848,549 | ||||||
Hotwire Funding LLC, Series 2021-1, Class A2, 2.311%, 11/20/20512 | 1,470,000 | 1,305,729 | ||||||
KREF Ltd., Series 2021-FL2, Class AS, (1 mo. LIBOR US + 1.300%), 2.823%, 2/15/20392,4 | 1,500,000 | 1,412,688 | ||||||
Navient Private Education Refi Loan Trust, | ||||||||
Series 2017-2A, Class A, (1 mo. LIBOR US + 1.050%), 2.674%, 12/27/20662,4 | 1,987,116 | 1,973,454 | ||||||
Series 2020-DA, Class A, 1.69%, 5/15/20692 | 731,874 | 693,053 | ||||||
Series 2021-A, Class A, 0.84%, 5/15/20692 | 487,436 | 446,368 | ||||||
Nelnet Student Loan Trust, Series 2012-3A, Class A, (1 mo. LIBOR US + 0.700%), 2.324%, 2/25/20452,4. | 969,152 | 953,111 | ||||||
Oxford Finance Funding LLC, Series 2019-1A, Class A2, 4.459%, 2/15/20272 | 891,263 | 888,564 | ||||||
Series 2022-1A, Class A2, 3.602%, 2/15/20302 | 2,850,000 | 2,686,093 | ||||||
PEAR LLC, Series 2021-1, Class A, 2.60%, 1/15/2034 (Acquired 11/16/2021, cost $1,710,636)5 | 1,710,636 | 1,633,030 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
PHEAA Student Loan Trust, Series 2016-1A, Class A, (1 mo. LIBOR US + 1.150%), 2.774%, 9/25/20652,4 | 649,307 | $ | 641,024 | |||||
Slam Ltd., Series 2021-1A, Class A, (Cayman Islands), 2.434%, 6/15/20462 | 1,781,250 | 1,538,181 | ||||||
SLM Student Loan Trust, | ||||||||
Series 2011-2, Class A2, (1 mo. LIBOR US + 1.200%), 2.824%, 10/25/20344 | 782,383 | 779,151 | ||||||
Series 2013-6, Class A3, (1 mo. LIBOR US + 0.650%), 2.274%, 6/26/20284 | 1,576,312 | 1,512,852 | ||||||
SMB Private Education Loan Trust, | ||||||||
Series 2015-B, Class A3, (1 mo. LIBOR US + 1.750%), 3.074%, 5/17/20322,4 | 1,400,783 | 1,408,558 | ||||||
Series 2016-B, Class A2A, 2.43%, 2/17/20322 | 1,038,816 | 1,010,919 | ||||||
Series 2017-B, Class A2A, 2.82%, 10/15/20352 | 240,513 | 234,106 | ||||||
Series 2017-B, Class A2B, (1 mo. LIBOR US + 0.750%), 2.074%, 10/15/20352,4 | 1,089,281 | 1,078,531 | ||||||
SoFi Professional Loan Program LLC, Series 2017-F, Class A2FX, 2.84%, 1/25/20412 | 659,113 | 649,974 | ||||||
Series 2018-B, Class A2FX, 3.34%, 8/25/20472 | 174,099 | 172,148 | ||||||
Stack Infrastructure Issuer LLC, Series 2021-1A, Class A2, 1.877%, 3/26/20462 | 1,050,000 | 940,253 | ||||||
Store Master Funding I-VII, Series 2018- 1A, Class A1, 3.96%, 10/20/20482 | 1,413,016 | 1,400,017 | ||||||
Textainer Marine Containers VII Ltd., | ||||||||
Series 2021-1A, Class A, (China), 1.68%, 2/20/20462 | 1,697,333 | 1,482,112 | ||||||
Tricon American Homes, | ||||||||
Series 2017-SFR2, Class A, 2.928%, 1/17/20362 | 1,177,180 | 1,154,672 | ||||||
Series 2020-SFR1, Class A, 1.499%, 7/17/20382 | 1,397,147 | 1,277,346 | ||||||
Triton Container Finance VIII LLC, Series 2021-1A, Class A, (Bermuda), 1.86%, 3/20/20462 | 1,318,281 | 1,156,962 | ||||||
Vantage Data Centers Issuer LLC, | ||||||||
Series 2020-1A, Class A2, 1.645%, 9/15/20452 | 1,750,000 | 1,587,564 | ||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||
(Identified Cost $51,302,975) | 48,245,863 | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES - 17.1% | ||||||||
Brean Asset Backed Securities Trust, Series 2021-RM2, Class A, 1.75%, 10/25/20612,6 | 948,112 | 849,389 |
The accompanying notes are an integral part of the financial statements.
4
Credit Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
Credit Suisse Mortgage Capital Trust, Series 2013-7, Class A6, 3.50%, 8/25/20432,6 | 276,063 | $ | 265,002 | |||||
Series 2018-J1, Class A2, 3.50%, 2/25/20482,6 | 4,628,665 | 4,370,295 | ||||||
Fannie Mae REMICS, | ||||||||
Series 2020-48, Class DC, 2.50%, 7/25/2050 | 4,993,820 | 4,594,723 | ||||||
Series 2021-69, Class WJ, 1.50%, 10/25/2050 | 699,947 | 616,886 | ||||||
Flagstar Mortgage Trust, Series 2021-8INV, Class A3, 2.50%, 9/25/20512,6 | 908,197 | 778,504 | ||||||
Freddie Mac Multifamily Structured Pass-Through Certificates, | ||||||||
Series K072, Class A2, 3.444%, 12/25/2027 | 1,000,000 | 1,003,739 | ||||||
Series K106, Class X1 (IO), 1.477%, 1/25/20306 | 15,946,101 | 1,302,909 | ||||||
Freddie Mac REMICS, Series 5189, Class CP, 2.50%, 6/25/2049 | 4,786,519 | 4,408,370 | ||||||
FREMF Mortgage Trust, | ||||||||
Series 2015-K43, Class B, 3.859%, 2/25/20482,6 | 400,000 | 391,412 | ||||||
Series 2015-K720, Class B, 3.602%, 7/25/20222,6 | 553,047 | 553,047 | ||||||
GCT Commercial Mortgage Trust, Series 2021-GCT, Class A, (1 mo. LIBOR US + 0.800%), 2.124%, 2/15/20382,4 | 1,900,000 | 1,828,240 | ||||||
GS Mortgage-Backed Securities Corp. Trust, | ||||||||
Series 2020-PJ3, Class A14, 3.00%, 10/25/20502,6 | 288,262 | 257,787 | ||||||
Series 2021-INV1, Class A6, 2.50%, 12/25/20512,6 | 930,200 | 850,285 | ||||||
Series 2021-PJ6, Class A8, 2.50%, 11/25/20512,6 | 614,331 | 556,871 | ||||||
Series 2021-PJ9, Class A8, 2.50%, 2/26/20522,6 | 707,889 | 643,799 | ||||||
Series 2022-PJ3, Class A6, 3.00%, 8/25/20522,6 | 1,962,308 | 1,742,549 | ||||||
Imperial Fund Mortgage Trust, Series 2021-NQM3, Class A1, 1.595%, 11/25/20562,6 | 863,624 | 735,611 | ||||||
Series 2022-NQM2, Class A1, 3.638%, 3/25/20672,7 | 1,452,470 | 1,372,234 | ||||||
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2019-ICON, Class A, 3.884%, 1/5/20342 | 2,000,000 | 1,960,135 | ||||||
J.P. Morgan Mortgage Trust, Series 2022-INV3, Class A3B, 3.00%, 9/25/20522,6 | 1,924,048 | 1,709,859 | ||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C19, Class A4, 3.526%, 12/15/2047 | 965,361 | 949,842 | ||||||
Morgan Stanley Capital I Trust, Series 2016-UB11, Class A4, 2.782%, 8/15/2049 | 500,000 | 471,605 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
Morgan Stanley Capital I Trust, (continued) | ||||||||
Series 2020-CNP, Class A, 2.509%, 4/5/20422,6 | 1,000,000 | $ | 846,003 | |||||
NewRez Warehouse Securitization Trust, Series 2021-1, Class A, (1 mo. LIBOR US + 0.750%), 2.374%, 5/25/20552,4 | 2,000,000 | 1,978,330 | ||||||
Oceanview Mortgage Loan Trust, Series 2020-1, Class A1A, 1.733%, 5/28/20502,6 | 755,548 | 727,162 | ||||||
Provident Funding Mortgage Trust, Series 2021-2, Class A2A, 2.00%, 4/25/20512,6 | 762,324 | 678,205 | ||||||
Series 2021-INV1, Class A1, 2.50%, 8/25/20512,6 | 1,464,032 | 1,253,942 | ||||||
RCKT Mortgage Trust, Series 2021-6, Class A1, 2.50%, 12/25/20512,6 | 907,250 | 774,831 | ||||||
Series 2021-6, Class A5, 2.50%, 12/25/20512,6 | 1,057,500 | 960,812 | ||||||
RUN Trust, Series 2022-NQM1, Class A1, 4.00%, 3/25/20672 | 973,964 | 950,694 | ||||||
Sequoia Mortgage Trust, Series 2013-5, Class A1, 2.50%, 5/25/20432,6 | 543,621 | 495,387 | ||||||
Series 2013-9, Class A1, 3.50%, 7/25/20432,6 | 4,126,475 | 4,031,702 | ||||||
Wells Fargo Commercial Mortgage Trust, Series 2015-NXS4, Class A4, 3.718%, 12/15/2048 | 1,000,000 | 985,396 | ||||||
WinWater Mortgage Loan Trust, Series 2015-3, Class A1, 3.50%, 3/20/20452,6 | 1,398,152 | 1,344,598 | ||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES | ||||||||
(Identified Cost $49,471,359) | 47,240,155 | |||||||
MUNICIPAL BONDS - 1.7% | ||||||||
Hawaii, Series GC, G.O. Bond, 2.632%, 10/1/2037 | 2,240,000 | 1,802,908 | ||||||
New York City Transitional Finance Authority, Future Tax Secured, Public Impt., Revenue Bond, 1.58%, 5/1/2024 | 985,000 | 955,066 | ||||||
South Carolina Public Service Authority, Series B, Revenue Bond, 2.329%, 12/1/2028 | 1,355,000 | 1,217,284 | ||||||
Tampa-Hillsborough County Expressway Authority, Series B, Revenue Bond, BAM, 1.892%, 7/1/2029 | 1,000,000 | 839,328 | ||||||
TOTAL MUNICIPAL BONDS | ||||||||
(Identified Cost $5,680,053) | 4,814,586 |
The accompanying notes are an integral part of the financial statements.
5
Credit Series
Investment Portfolio - June 30, 2022
(unaudited)
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
U.S. TREASURY SECURITIES - 2.5% | ||||||||
U.S. Treasury Notes - 2.5% | ||||||||
U.S. Treasury Note | ||||||||
1.75%, 5/15/2023 | 3,005,000 | $ | 2,975,654 | |||||
2.50%, 5/15/2024 | 3,945,000 | 3,912,947 | ||||||
TOTAL U.S. TREASURY SECURITIES | ||||||||
(Identified Cost $7,021,882) | 6,888,601 | |||||||
U.S. GOVERNMENT AGENCIES - 18.5% | ||||||||
Mortgage-Backed Securities - 18.5% | ||||||||
Fannie Mae | ||||||||
Pool #MA4687, UMBS, 4.00%, 6/1/2042 | 4,982,924 | 5,008,181 | ||||||
Pool #BK0433, UMBS, 3.50%, 12/1/2049 | 5,858,806 | 5,701,412 | ||||||
Pool #FM6890, UMBS, 3.00%, 6/1/2050 | 2,330,540 | 2,190,781 | ||||||
Pool #CA6316, UMBS, 3.00%, 7/1/2050 | 5,203,745 | 4,889,618 | ||||||
Pool #FS1807, UMBS, 3.50%, 7/1/2051 | 4,881,823 | 4,738,206 | ||||||
Pool #FS1838, UMBS, 3.00%, 12/1/2051 | 5,016,684 | 4,714,815 | ||||||
Pool #MA4514, UMBS, 3.50%, 1/1/2052 | 1,860,397 | 1,796,209 | ||||||
Pool #BV5383, UMBS, 3.00%, 4/1/2052 | 2,985,456 | 2,790,985 | ||||||
Pool #MA4626, UMBS, 4.00%, 6/1/2052 | 6,975,470 | 6,891,547 | ||||||
Freddie Mac | ||||||||
Pool #RB5169, UMBS, 3.50%, 6/1/2042 | 4,976,253 | 4,870,144 | ||||||
Pool #QE0356, UMBS, 3.50%, 4/1/2052 | 1,992,942 | 1,928,241 | ||||||
Pool #SD8230, UMBS, 4.50%, 6/1/2052 | 5,314,316 | 5,349,543 | ||||||
TOTAL U.S. GOVERNMENT AGENCIES | ||||||||
(Identified Cost $51,710,710) | 50,869,682 | |||||||
SHORT-TERM INVESTMENT - 1.4% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 1.35%8 | ||||||||
(Identified Cost $3,800,724) | 3,800,724 | 3,800,724 | ||||||
TOTAL INVESTMENTS - 99.8% | ||||||||
(Identified Cost $292,961,810) | 275,227,924 | |||||||
OTHER ASSETS, LESS LIABILITIES - 0.2% | 421,132 | |||||||
NET ASSETS - 100% | $ | 275,649,056 |
The accompanying notes are an integral part of the financial statements.
6
Credit Series
Investment Portfolio - June 30, 2022
(unaudited)
G.O. Bond - General Obligation Bond
Impt. - Improvement
IO- Interest only
LIBOR - London Interbank Offered Rate
No. - Number
REMICS - Real Estate Mortgage Investment Conduits
UMBS - Uniform Mortgage-Backed Securities
Scheduled principal and interest payments are guaranteed by:
BAM (Build America Mutual Assurance Co.)
The insurance does not guarantee the market value of the municipal bonds.
1Amount is stated in USD unless otherwise noted.
2Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be liquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2022 was $113,825,291, which represented 41.3% of the Series’ Net Assets.
3Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of June 30, 2022.
4Floating rate security. Rate shown is the rate in effect as of June 30, 2022.
5Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of such securities at June 30, 2022 was $1,633,030, or 0.6% of the Series’ Net Assets.
6Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of June 30, 2022.
7Represents a step-up bond that pays initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown reflects the current coupon as of June 30, 2022.
8Rate shown is the current yield as of June 30, 2022.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
7
Credit Series
Statement of Assets and Liabilities
June 30, 2022 (unaudited)
ASSETS: | ||||
Investments, at value (identified cost $292,961,810) (Note 2) | $ | 275,227,924 | ||
Cash | 39,007 | |||
Interest receivable | 1,479,122 | |||
Receivable for fund shares sold | 416,082 | |||
Receivable for securities sold | 12,482 | |||
Dividends receivable | 3,989 | |||
Foreign tax reclaims receivable | 3,100 | |||
Prepaid expenses | 16,716 | |||
TOTAL ASSETS | 277,198,422 | |||
LIABILITIES: | ||||
Accrued fund accounting and administration fees (Note 3) | 14,344 | |||
Accrued management fees (Note 3) | 2,635 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 714 | |||
Payable for fund shares repurchased | 1,502,150 | |||
Other payables and accrued expenses | 29,523 | |||
TOTAL LIABILITIES | 1,549,366 | |||
TOTAL NET ASSETS | $ | 275,649,056 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 303,618 | ||
Additional paid-in-capital | 297,046,537 | |||
Total distributable earnings (loss) | (21,701,099 | ) | ||
TOTAL NET ASSETS | $ | 275,649,056 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W ($275,649,056/30,361,784 shares) | $ | 9.08 |
The accompanying notes are an integral part of the financial statements.
8
Credit Series
Statement of Operations
For the Six Months Ended June 30, 2022 (unaudited)
INVESTMENT INCOME: | ||||
Interest (net of foreign taxes withheld, $5,271) | $ | 3,114,207 | ||
Dividends | 25,617 | |||
Total Investment Income | 3,139,824 | |||
EXPENSES: | ||||
Management fees (Note 3) | 277,740 | |||
Fund accounting and administration fees (Note 3) | 35,482 | |||
Directors’ fees (Note 3) | 11,618 | |||
Chief Compliance Officer service fees (Note 3) | 3,510 | |||
Audit fees | 25,837 | |||
Custodian fees | 4,860 | |||
Miscellaneous | 34,912 | |||
Total Expenses | 393,959 | |||
Less reduction of expenses (Note 3) | (282,863 | ) | ||
Net Expenses | 111,096 | |||
NET INVESTMENT INCOME | 3,028,728 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | (5,013,134 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (19,067,362 | ) | ||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | (24,080,496 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (21,051,768 | ) |
The accompanying notes are an integral part of the financial statements.
9
Credit Series
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED 12/31/21 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 3,028,728 | $ | 4,440,597 | ||||
Net realized gain (loss) on investments | (5,013,134 | ) | 3,919,220 | |||||
Net change in unrealized appreciation (depreciation) on investments | (19,067,362 | ) | (8,155,311 | ) | ||||
Net increase (decrease) from operations | (21,051,768 | ) | 204,506 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
Class W | (2,114,335 | ) | (8,777,239 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | 92,338,036 | 22,923,299 | ||||||
Net increase (decrease) in net assets | 69,171,933 | 14,350,566 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 206,477,123 | 192,126,557 | ||||||
End of period | $ | 275,649,056 | $ | 206,477,123 |
The accompanying notes are an integral part of the financial statements.
10
Credit Series
Financial Highlights - Class W
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED 12/31/21 | FOR THE PERIOD 4/14/201 TO 12/31/20 | ||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||
Net asset value - Beginning of period | $10.15 | $10.60 | $10.00 | |||||||||
Income (loss) from investment operations: | ||||||||||||
Net investment income2 | 0.13 | 0.23 | 0.19 | |||||||||
Net realized and unrealized gain (loss) on investments | (1.12 | ) | (0.22 | ) | 0.68 | |||||||
Total from investment operations | (0.99 | ) | 0.01 | 0.87 | ||||||||
Less distributions to shareholders: | ||||||||||||
From net investment income | (0.08 | ) | (0.24 | ) | (0.18 | ) | ||||||
From net realized gain on investments | — | (0.22 | ) | (0.09 | ) | |||||||
Total distributions to shareholders | (0.08 | ) | (0.46 | ) | (0.27 | ) | ||||||
Net asset value - End of period | $9.08 | $10.15 | $10.60 | |||||||||
Net assets - End of period (000’s omitted) | $275,649 | $206,477 | $192,127 | |||||||||
Total return3 | (9.76 | %) | 0.02 | % | 8.77 | % | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||
Expenses* | 0.10 | %4 | 0.10 | % | 0.10 | %4 | ||||||
Net investment income | 2.73 | %4 | 2.23 | % | 2.52 | %4 | ||||||
Series portfolio turnover | 32 | % | 69 | % | 44 | % | ||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||
0.25 | %4 | 0.27 | % | 0.33 | %4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
11
Credit Series
Notes to Financial Statements
(unaudited)
1. | Organization |
Credit Series (the “Series”) is a no-load non-diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series’ investment objective is to provide long-term total return by investing primarily in fixed income securities.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares are only offered to discretionary investment accounts and other funds managed by the Advisor. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of June 30, 2022, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Credit Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market 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 Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Debt securities, including government bonds, foreign bonds, asset-backed securities, structured notes, supranational obligations, sovereign bonds, corporate bonds and mortgage-backed securities will normally be valued on the basis of evaluated bid prices provided directly by an independent pricing service (the “Service”). The pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Certain investments in securities held by the Series may be valued on a basis of a price provided directly by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
Municipal securities will normally be valued on the basis of market valuations provided by the Service. The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
12
Credit Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as 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”). 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.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of June 30, 2022 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Debt securities: | ||||||||||||||||
U.S. Treasury and other U.S. Government agencies | $ | 57,758,283 | $ | — | $ | 57,758,283 | $ | — | ||||||||
States and political subdivisions (municipals) | 4,814,586 | — | 4,814,586 | — | ||||||||||||
Corporate debt: | ||||||||||||||||
Communication Services | 16,649,524 | — | 16,649,524 | — | ||||||||||||
Consumer Discretionary | 14,285,116 | — | 14,285,116 | — | ||||||||||||
Energy | 13,857,653 | — | 13,857,653 | — | ||||||||||||
Financials | 21,527,733 | — | 21,527,733 | — | ||||||||||||
Health Care | 3,713,510 | — | 3,713,510 | — | ||||||||||||
Industrials | 21,309,608 | — | 21,309,608 | — | ||||||||||||
Information Technology | 5,185,435 | — | 5,185,435 | — | ||||||||||||
Materials | 2,541,764 | — | 2,541,764 | — | ||||||||||||
Real Estate | 10,601,190 | — | 10,601,190 | — | ||||||||||||
Utilities | 3,696,780 | — | 3,696,780 | — | ||||||||||||
Asset-backed securities | 48,245,863 | — | 48,245,863 | — | ||||||||||||
Commercial mortgage-backed securities | 47,240,155 | — | 47,240,155 | — | ||||||||||||
Short-Term Investment | 3,800,724 | 3,800,724 | — | — | ||||||||||||
Total assets | $ | 275,227,924 | $ | 3,800,724 | $ | 271,427,200 | $ | — |
There were no Level 3 securities held by the Series as of December 31, 2021 or June 30, 2022.
LIBOR Transition Risk
The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”). Although many LIBOR rates will cease to be published or no longer will be representative of the underlying market they seek to measure after December 31, 2021, a selection of widely used USD LIBOR rates will continue to be published through June 2023 in order to assist with the transition. The Series may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process away from LIBOR might lead to
13
Credit Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
LIBOR Transition Risk (continued)
increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against, instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the Series is uncertain.
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 Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
Expenses are recorded on an accrual basis. Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund’s Board, taking into consideration, among other things, the nature and type of expense.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
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 fair 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.
Asset-Backed Securities
The Series may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e. loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Series may subsequently have to reinvest the proceeds at lower interest rates. If the Series has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
Mortgage-Backed Securities
The Series may invest in mortgage-backed securities (“MBS” or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the Series to the periodic payments of principal and interest from those mortgages. MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. For MBS there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States.
14
Credit Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Mortgage-Backed Securities (continued)
However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury. Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Inflation-Indexed Bonds
The Series may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
Securities Purchased on a When-Issued Basis or Forward Commitment
The Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss. No such investments were held by the Series on June 30, 2022.
In connection with its ability to purchase or sell securities on a forward commitment basis, the Series may enter into forward roll transactions principally using To Be Announced (TBA) securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Series to receive inferior securities at redelivery as compared to the securities sold to the counterparty; counterparty credit risk; and the potential pay down speed variance between the mortgage-backed pools. During the roll period, the Series forgoes principal and interest paid on the securities. The Series accounts for such dollar rolls as purchases and sales. Information regarding securities purchased on a when-issued basis is included in the Series’ Investment Portfolio. No such investments were held by the Series on June 30, 2022.
Restricted Securities
Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of the Series’ Investment Portfolio.
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.
15
Credit Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Federal Taxes (continued)
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. At June 30, 2022, the Series has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.
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 period ended December 31, 2020 and for the year ended December 31, 2021. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation 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 quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP 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 0.25% 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 plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director who each receive an additional annual stipend for these roles.
16
Credit Series
Notes to Financial Statements (continued)
(unaudited)
3. | Transactions with Affiliates (continued) |
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. There are no distribution and service fees on the Class W shares.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets; 0.0075% on the next $15 billion of average daily net assets; and 0.0065% of average daily net assets in excess of $40 billion; plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent. Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.10% of the average daily net assets of the Class W shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $277,740 in management fees for Class W for the six months ended June 30, 2022. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $5,123 for Class W shares, respectively, for the six months ended June 30, 2022. These amounts are included as a reduction of expenses on the Statement of Operations.
As of June 30, 2022, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, | |||||||||||||||
2023 | 2024 | 2025 | TOTAL | |||||||||||||
Class W | $ | 93,809 | $ | 34,013 | $ | 5,123 | $ | 132,945 |
For the six months ended June 30, 2022, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
4. | Purchases and Sales of Securities |
For the six months ended June 30, 2022, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $98,457,949 and $64,911,638, respectively. Purchases and sales of U.S. Government securities, other than short-term securities, were $69,761,426 and $3,941,786, respectively.
17
Credit Series
Notes to Financial Statements (continued)
(unaudited)
5. | Capital Stock Transactions |
Transactions in Class W shares of Credit Series were:
CLASS W | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 11,821,126 | $ | 109,344,820 | 3,674,022 | $ | 38,389,686 | ||||||||||
Reinvested | 224,379 | 2,044,575 | 828,766 | 8,498,088 | ||||||||||||
Repurchased | (2,027,525 | ) | (19,051,359 | ) | (2,291,219 | ) | (23,964,475 | ) | ||||||||
Total | 10,017,980 | $ | 92,338,036 | 2,211,569 | $ | 22,923,299 |
Over 90% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of June 30, 2022.
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 U.S. 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 U.S. 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 GAAP. 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 assets. Any such reclassifications are not reflected in the financial highlights.
The final determination of the tax character of current year distributions will be made at the conclusion of the fiscal year. The tax character of distributions paid for the year ended December 31, 2021 were as follows:
Ordinary income | $ | 6,724,292 | ||
Long-term capital gains | $ | 2,052,947 |
18
Credit Series
Notes to Financial Statements (continued)
(unaudited)
8. | Federal Income Tax Information (continued) |
At June 30, 2022, the identified cost for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
Cost for federal income tax purposes | $ | 292,961,810 | ||
Unrealized appreciation | 363,323 | |||
Unrealized depreciation | (18,097,209 | ) | ||
Net unrealized depreciation | $ | (17,733,886 | ) |
9. | Market Event |
Significant disruptions and volatility in the global financial markets and economies, like the current conditions caused by the Russian invasion of Ukraine and the COVID-19 pandemic, could negatively impact the investment performance of the Series. The global market and economic climate may become increasingly uncertain due to numerous factors beyond our control, including but not limited to, the effectiveness and acceptance of vaccines to prevent COVID-19, impacts on business operations in the U.S. related to the COVID-19 pandemic, such as supply chain disruptions and inflation, concerns related to unpredictable global market and economic factors, uncertainty in U.S. federal fiscal, tax, trade or regulatory policy and the fiscal, tax, trade or regulatory policy of foreign governments, rising interest rates, inflation or deflation, the availability of credit, performance of financial markets, terrorism, natural or biological catastrophes, public health emergencies, or political uncertainty.
10. | Subsequent Event |
In preparing these financial statements, management of the Fund has evaluated events and transactions for potential recognition or disclosure and the following item was noted:
On March 31, 2022, Manning & Napier, Inc. (“the Company”), entered into a definitive agreement under which the Company will go private and be acquired by the Callodine Group, LLC (“Callodine”), a Boston-based asset management firm, in partnership with East Asset Management (the “Transaction”). The Company is the ultimate owner of the Advisor. The proposed Transaction is expected to close in the third quarter of 2022, contingent upon shareholder approval and other customary closing conditions. Following the close, the Company will become a wholly owned subsidiary of an affiliate of Callodine. Closing the Transaction results in a change in control of the Advisor under the 1940 Act and therefore the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides advisory services to the Series. In connection with the Transaction, on May 3, 2022, the Manning & Napier Fund, Inc. Board of Directors unanimously approved a new Investment Advisory Agreement between the Fund and the Advisor for each Series, that will become effective at the closing of the Transaction, subject to shareholder approval. As of the closing date of the Transaction, the Series’ investment objective and fee arrangements will remain unchanged.
19
Credit Series
Renewal of Investment Advisory Agreement
(unaudited)
At the Manning & Napier Fund, Inc. (the “Fund”) Board of Directors’ (the “Board”) meeting, held on May 19, 2022, the Investment Advisory Agreement (the “Agreement”) between the Fund and Manning & Napier Advisors, LLC (the “Advisor”) was considered for renewal by the Board, including all of the Directors who are not “interested persons” (“Independent Directors”), within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”). In connection with the decision whether to renew the Agreement, a variety of material was provided to the Board in advance of the meeting for their review and consideration. The Board also held a working session on May 3, 2022 to review and discuss information provided to the Board, and for the Board to request additional information.
Representatives of the Advisor attended a portion of the working session and attended the Board meeting. The Advisor provided supplemental information requested by the Board and presented additional oral information to the Board to assist the Board in its considerations. In addition to the information furnished by the Advisor, the Board was provided with a legal memorandum discussing its fiduciary duties related to its approval of the continuation of the Agreement. Legal counsel for the Fund discussed with the Board the applicable legal considerations. In addition, the Board received in-person presentations about the Fund throughout the year.
At the May 3, 2022 meeting, the Board also considered and approved a new investment advisory agreement (the “New Advisory Agreement”) for each Series between the Advisor and the Fund. The Board was asked to consider the New Advisory Agreement because of a transaction that will affect Manning & Napier, Inc. (“MN Inc.”), which is the ultimate parent company of the Advisor. On March 31, 2022, MN Inc. and Callodine Group, LLC (“Callodine”) entered into an agreement under which Callodine Merger Sub, an affiliate of Callodine, would acquire MN Inc. (the “Transaction”). The Transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2022. Following the closing, MN Inc. will become a wholly owned subsidiary of an affiliate of Callodine. The closing of the Transaction may be deemed to result in a change of control of the Advisor under the 1940 Act. As a result, the Transaction results in the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides investment advisory services to the Series (the “Current Advisory Agreement”). Shareholder approval of the New Advisory Agreement will enable the Advisor to continue to serve the Series following the closing of the Transaction.
The Independent Directors were advised by independent legal counsel with respect to these matters. The Independent Directors also met separately in executive sessions on April 13, April 27, May 3 and May 19, with their legal counsel without any representatives of the Advisor present.
The Directors’ determinations at the meeting were made on the basis of each Director’s business judgment after consideration of all the information presented. In deciding to recommend the renewal of the Current Agreement with respect to each Series of the Fund, the Independent Directors did not identify any single or particular piece of information that, in isolation, was sufficient to justify renewal. Each Independent Director may also have weighed information and factors differently. This summary describes the most important, but not all, of the factors considered by the Board and the Independent Directors.
• | The Board considered the nature and quality of services provided by the Advisor under the Current Agreement. The Advisor has provided those services for over 30 years, and they have included, among others: deciding what securities to purchase and sell for each Series; arranging for the purchase and sale of such securities by placing orders with broker-dealers; administering the affairs of the Fund (including the books and records of the Fund not maintained by third party service providers such as the custodian or transfer agent); arranging for the insurance coverage for the Fund; and supervising the preparation of tax returns, SEC filings (including registration statements) and reports to shareholders for the Fund. The Board considered the numerous services performed by the Advisor and its affiliates beyond those stated in the Current Agreement. The Board also considered the Advisor’s personnel who perform services to the Fund, changes in senior or key personnel, industry trends impacting the mutual fund industry, the strength of the Advisor’s compliance infrastructure, policies and procedures relating to compliance with securities regulations, reputation, expertise and resources. The Board discussed the quality of these services with representatives from the Advisor and concluded that the Advisor was performing its services to the Fund required under the Current Agreement in a reasonable manner. |
20
Credit Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the Advisor’s investment teams, including changes to the investment teams during the past year, investment team compensation structure and the investment process. The Board considered the performance of each Series since its inception, as well as over multiple time periods including: one year, three year, five year, ten year, and current market cycle. A market cycle includes periods of both rising and falling markets. Returns for established benchmark indices for each Series were provided. In addition, the Board considered (and considers on a quarterly basis) a number of other factors relevant to performance at the meeting including: a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives; the breadth of the Fund’s product offerings; and performance over reasonable time periods. Representatives of the Advisor provided information regarding and, as applicable, led discussions of factors impacting the Advisor’s performance for the Series, outlining current market conditions and explaining their expectations and strategies for the future. The Board also determined that it was appropriate to take into account its consideration of the Advisor’s performance at meetings held prior to the May 19th Board meeting. In doing so, the Board generally determined that the Advisor’s performance was satisfactory. Where the Advisor’s performance was materially below a Series’ benchmarks and or peer group, the Board requested an explanation for the underperformance and/or the steps taken by the Advisor in an effort to improve performance. In all instances, the Board was satisfied with the explanation provided. The Board plans to remain focused in future meetings to address any aberrational underperformance as necessary. After discussion, the Board concluded that the nature and quality of the investment management services provided by the Advisor to the Fund were considered adequate. |
• | The Board considered the fees and expenses of the various Series of the Fund. The Advisor presented the advisory fees and total expenses for each Series, including the advisory fee adjusted for any contractual expense waivers or reimbursements paid by the Advisor. |
• | The Board considered whether the Advisor had achieved economies of scale with respect to its services to the Fund. The Board acknowledged the expense caps incorporated in the Fund’s current fee structure, which requires the Advisor to subsidize the expenses of the Series operating above their expense cap, noting that 11 of 15 Series are currently receiving expense reimbursements from the Advisor. The Board concluded that the Fund would need to grow in assets before the Advisor would be able to achieve meaningful economies of scale. |
• | The Advisor provided the Board with information comparing each Series’ contractual management fees with the Advisor’s standard advisory fees for separate accounts and collective investment trusts. The Board considered that the range of services provided to the Series is more extensive than for the Advisor’s other clients due to additional infrastructure, administrative, operational and regulatory requirements related to operating a mutual fund, as well as associated risks. |
• | The current advisory fees, 12b-1 Distribution and Service Fees, other expenses (e.g. a combination of Shareholder Services Fees, intermediary sub-TA fees, routine operating expenses and Acquired Fund Fees and Expenses for fund-of-fund Series) and total expense ratios of each Series and share class were compared and ranked (on both a mean and median basis) against respective peer universes. Respective peer universes included funds of a similar size and with similar investment objectives and expense characteristics as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the comparisons and rankings of fees and net expense ratios for each Series of the Fund and the methodology behind the comparison. The Board considered the Advisor’s active portfolio management that results in portfolios that are more differentiated than the construction of their benchmarks. The Board will continue to monitor the fees and expenses of the Series compared to peer groups. Based on their review of the information provided, the Board concluded that the current fees and expenses of each Series of the Fund were reasonable on a comparative basis. |
21
Credit Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the costs of the Advisor’s services and the profits of the Advisor as they relate to the Advisor’s services to the Fund under the Current Agreement. The Board was provided with information on the Advisor’s financial condition and profitability by mutual fund agreement and by Series. Representatives of the Advisor discussed modest improvements in the Advisor’s profitability derived from the Fund. The Board discussed the Advisor’s revenues generated from the Fund and its expenses associated with providing the services under the Current Agreement. The Advisor presented the Board with information on firm wide investment management profitability to provide a comparison of the Advisor’s profitability from its Fund activities relative to its profitability from its other investment management business. In addition, the Board reviewed the Advisor’s expense allocation methodology used to calculate profitability since many of the Advisor’s resources and expenses are shared across the Advisor’s various investment management vehicles. The Board noted the Advisor’s explanation of the consistent approach taken in calculating profitability, compared to prior periods, including the allocation of expenses as part of that calculation. The Board considered the Advisor’s expenses associated with Fund activities outside of the Current Agreement (such as expense reimbursements pursuant to expense caps and payments made by the Advisor to third party platforms on which shares of the Fund are available for purchase). The Board noted the potential for the Transaction to add resources that have the potential to facilitate the growth of various series, which could improve economies of scale for those Series; however, they also noted that such potential may not be realized. After discussing the above costs and profits, the Board concluded that the Advisor’s profit margin relating to its services provided under the Current Agreement was reasonable. |
• | The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include participation in a joint insurance program, sharing of compensation expenses for certain shared personnel, relationships with large service providers, the utilization of Series within the Advisor’s separately managed accounts and certain research services provided by soft dollars. The Board concluded that these additional benefits to the Advisor were reasonable. |
Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of the Independent Directors, concluded that the compensation under the Current Agreement was fair and reasonable with respect to each Series in light of the services and expenses and such other matters as the Directors considered to be relevant in the exercise of their reasonable judgment, and that the renewal of the Current Agreement would be in the best interests of each Series and its shareholders. The Board did not indicate that any single factor was determinative of its decision to approve the Current Agreement, but indicated that the Board based its determination on the total mix of information available to it.
22
Credit Series
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-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling 1-(800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End
2. Fund Holdings - Quarter-End
3. Shareholder Report - Annual
4. Shareholder Report - Semi-Annual
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNCRE-06/22-SAR
23
www.manning-napier.com
Manning & Napier Fund, Inc. |
High Yield Bond Series |
High Yield Bond Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service 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 in each class at the beginning of the period and held for the entire period (January 1, 2022 to June 30, 2022).
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 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 each class in 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 a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested 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 sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. 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.
BEGINNING ACCOUNT VALUE 1/1/22 | ENDING ACCOUNT VALUE 6/30/22 | EXPENSES PAID DURING PERIOD* 1/1/22 - 6/30/22 | ANNUALIZED EXPENSE RATIO | |
Class S | ||||
Actual | $1,000.00 | $899.60 | $4.24 | 0.90% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.33 | $4.51 | 0.90% |
Class I | ||||
Actual | $1,000.00 | $900.70 | $3.06 | 0.65% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.57 | $3.26 | 0.65% |
Class W | ||||
Actual | $1,000.00 | $902.80 | $0.47 | 0.10% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.30 | $0.50 | 0.10% |
Class Z | ||||
Actual | $1,000.00 | $900.10 | $2.36 | 0.50% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.32 | $2.51 | 0.50% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
1
High Yield Bond Series
Portfolio Composition as of June 30, 2022
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
2
High Yield Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
COMMON STOCKS - 1.3% | ||||||||
Energy - 1.3% | ||||||||
Oil, Gas & Consumable Fuels - 1.3% | ||||||||
Jonah Energy Parent LLC*2 | ||||||||
(ldentified Cost $980,115) | 65,341 | $ | 3,506,198 | |||||
PREFERRED STOCKS - 1.6% | ||||||||
Health Care - 0.9% | ||||||||
Pharmaceuticals - 0.9% | ||||||||
Harrow Health, lnc., 8.625%, 4/30/2026 | 94,800 | 2,313,120 | ||||||
Information Technology - 0.7% | ||||||||
Software - 0.7% | ||||||||
Synchronoss Technologies, Inc., 8.375%, 6/30/2026 | 104,700 | 1,992,441 | ||||||
TOTAL PREFERRED STOCKS (ldentified Cost $5,011,579) | 4,305,561 | |||||||
LOAN ASSIGNMENTS - 4.3% | ||||||||
Evolution Well Services Holdings LLC, Term Loan, (U.S. Secured Overnight Financing Rate + 7.25%), 9.50%, 3/4/20273 | 4,000,000 | 3,740,000 | ||||||
American Axle & Manufacturing, Inc., Tranche B Term Loan, Term B, (1 mo. LIBOR US + 2.250%), 3.13%, 4/6/20243 | 4,528,281 | 4,381,112 | ||||||
Tutor Perini Corp., Term Loan, Term B, (1 mo. LIBOR US + 4.75%), 5.75%, 8/18/20273 | 3,848,200 | 3,593,256 | ||||||
TOTAL LOAN ASSIGNMENTS | ||||||||
(ldentified Cost $12,312,102) | 11,714,368 | |||||||
CORPORATE BONDS - 86.3% | ||||||||
Non-Convertible Corporate Bonds- 86.3% | ||||||||
Communication Services - 5.6% | ||||||||
Diversified Telecommunication Services - 2.5% | ||||||||
IHS Holding Ltd. (Nigeria), 6.25%, 11/29/20284 | 4,250,000 | 3,426,807 | ||||||
Lumen Technologies, Inc., 7.50%, 4/1/2024 | 3,475,000 | 3,435,008 | ||||||
6,861,815 | ||||||||
Media - 3.1% | ||||||||
Beasley Mezzanine Holdings LLC, 8.625%, 2/1/20264 | 6,401,000 | 4,786,831 | ||||||
Sirius X.M. Radio, Inc., 4.00%, 7/15/20284 | 4,250,000 | 3,677,371 | ||||||
8,464,202 | ||||||||
Total Communication Services | 15,326,017 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Consumer Discretionary - 6.4% | ||||||||
Auto Components - 1.5% | ||||||||
The Goodyear Tire & Rubber Co., 5.00%, 7/15/2029 | 5,018,000 | $ | 4,192,293 | |||||
Automobiles - 2.1% | ||||||||
Ford Motor Credit Co. LLC, | ||||||||
3.087%, 1/9/2023 | 3,000,000 | 2,978,445 | ||||||
5.113%, 5/3/2029 | 3,000,000 | 2,688,251 | ||||||
5,666,696 | ||||||||
Hotels, Restaurants, & Leisure-1.0% | ||||||||
Affinity Gaming, 6.875%, 12/15/20274 | 3,100,000 | 2,610,623 | ||||||
Multiline Retail - 1.3% | ||||||||
Macy’s Retail Holdings LLC, 4.50%, 12/15/2034 | 5,000,000 | 3,561,458 | ||||||
Specialty Retail - 0.5% | ||||||||
Bed Bath & Beyond, Inc., 4.915%, 8/1/2034 | 3,750,000 | 1,270,915 | ||||||
Total Consumer Discretionary | 17,301,985 | |||||||
Consumer Staples - 1.4% | ||||||||
Food & Staples Retailing - 1.4% | ||||||||
Pilgrim’s Pride Corp., 4.25%, 4/15/20314 | 4,500,000 | 3,759,296 | ||||||
Energy - 9.6% | ||||||||
Energy Equipment & Services - 1.4% | ||||||||
Kent Global plc (United Kingdom), 10.00%, 6/28/2026 | 3,965,000 | 3,864,518 | ||||||
Oil, Gas & Consumable Fuels - 8.2% | ||||||||
Brooge Petroleum and Gas Investment Co. FZE (United Arab Emirates), 8.50%, 9/24/20254 | 3,906,000 | 3,835,279 | ||||||
Guara Norte Sarl (Brazil), 5.198%, 6/15/20344 | 3,885,023 | 3,157,913 | ||||||
Hess Midstream Operations LP, 4.25%, 2/15/20304 | 4,000,000 | 3,389,030 | ||||||
Moss Creek Resources Holdings, Inc., 7.50%, 1/15/20264 | 4,000,000 | 3,554,917 | ||||||
Navigator Holdings Ltd., 8.00%, 9/10/20254 | 3,200,000 | 3,198,291 | ||||||
PetroTal Corp. (Peru), 12.00%, 2/16/2024 (Acquired 02/01/2021 - 03/11/2022, cost $3,114,931)5 | 3,064,000 | 3,114,294 | ||||||
Ping Petroleum UK Ltd. (Bermuda), 12.00%, 7/29/2024 (Acquired 07/14/2021, cost $1,960,000)5 | 2,000,000 | 1,935,423 | ||||||
22,185,147 | ||||||||
Total Energy | 26,049,665 | |||||||
Financials - 20.2% | ||||||||
Banks - 1.6% | ||||||||
Popular, Inc. (Puerto Rico), 6.125%, 9/14/2023 | 4,185,000 | 4,220,422 |
The accompanying notes are an integral part of the financial statements.
3
High Yield Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Financials (continued) | ||||||||
Capital Markets - 2.0% | ||||||||
Drawbridge Special Opportunities Fund LP - Drawbridge Special Opportunities Finance Corporation, 3.875%, 2/15/20264 | 2,400,000 | $ | 2,214,313 | |||||
StoneX Group, Inc., 8.625%, 6/15/20254 | 3,230,000 | 3,260,240 | ||||||
5,474,553 | ||||||||
Consumer Finance - 5.2% | ||||||||
Navient Corp., | ||||||||
6.75%, 6/25/2025 | 2,800,000 | 2,559,764 | ||||||
5.625%, 8/1/2033 | 4,000,000 | 2,805,709 | ||||||
PRA Group, Inc., 5.00%, 10/1/20294 | 5,000,000 | 4,120,172 | ||||||
SLM Corp., 3.125%, 11/2/2026 | 5,700,000 | 4,572,708 | ||||||
14,058,353 | ||||||||
Diversified Financial Services - 6.4% | ||||||||
Burford Capital Global Finance LLC, 6.875%, 4/15/20304 | 4,750,000 | 4,166,007 | ||||||
Coinbase Global, Inc., 3.375%, 10/1/20284 | 4,000,000 | 2,498,895 | ||||||
FS Energy & Power Fund, 7.50%, 8/15/20234 | 5,670,000 | 5,719,470 | ||||||
Midcap Financial Issuer Trust, 6.50%, 5/1/20284 | 5,910,000 | 5,081,217 | ||||||
17,465,589 | ||||||||
Insurance - 2.1% | ||||||||
Enact Holdings, Inc., 6.50%, 8/15/20254 | 6,125,000 | 5,784,115 | ||||||
Thrifts & Mortgage Finance - 2.9% | ||||||||
LD Holdings Group LLC, 6.125%, 4/1/20284 | 4,000,000 | 2,438,477 | ||||||
MGIC Investment Corp., 5.25%, 8/15/2028 | 2,625,000 | 2,351,251 | ||||||
United Wholesale Mortgage LLC, 5.50%, 4/15/20294 | 4,000,000 | 3,060,739 | ||||||
7,850,467 | ||||||||
Total Financials | 54,853,499 | |||||||
Health Care - 3.9% | ||||||||
Health Care Providers & Services - 1.0% | ||||||||
DaVita, Inc., 4.625%, 6/1/20304 | 3,500,000 | 2,728,357 | ||||||
Pharmaceuticals - 2.9% | ||||||||
Bausch Health Companies, Inc., 4.875%, 6/1/20284 | 5,125,000 | 3,990,241 | ||||||
Teva Pharmaceutical Finance Netherlands III B.V. (Israel), 7.125%, 1/31/2025 | 4,100,000 | 3,983,495 | ||||||
7,973,736 | ||||||||
Total Health Care | 10,702,093 | |||||||
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Industrials - 19.0% | ||||||||
Air Freight & Logistics - 0.9% | ||||||||
Cargo Aircraft Management, Inc., 4.75%, 2/1/20284 | 2,750,000 | $ | 2,512,117 | |||||
Airlines - 5.7% | ||||||||
Alaska Airlines Pass-Through Trust, Series 2020-1, Class B, 8.00%, 8/15/20254 | 2,497,580 | 2,616,837 | ||||||
United Airlines Pass-Through Trust, Series 2019-2, Class B, 3.50%, 5/1/2028 | 5,682,032 | 4,863,662 | ||||||
United Airlines Pass-Through Trust, Series 2018-1, Class B, 4.60%, 3/1/2026 | 1,340,471 | 1,190,497 | ||||||
VistaJet Malta Finance plc - XO Management Holding, Inc. (Switzerland), 7.875%, 5/1/20274 | 3,000,000 | 2,647,500 | ||||||
Western Global Airlines LLC, 10.375%, 8/15/20254 | 4,275,000 | 4,131,357 | ||||||
15,449,853 | ||||||||
Building Products - 1.3% | ||||||||
Eco Material Technologies, Inc., 7.875%, 1/31/20274 | 4,000,000 | 3,560,976 | ||||||
Commercial Services & Supplies - 3.1% | ||||||||
Airswift Global AS (United Kingdom) (3 mo. LIBOR US + 8.500%), 10.389%, 5/12/2025 (Acquired 05/03/2021 - 12/08/2021, cost $3,506,500)3,5 | 3,500,000 | 3,456,250 | ||||||
Prime Security Services Borrower LLC - Prime Finance, Inc., 5.75%, 4/15/20264 | 5,250,000 | 4,920,280 | ||||||
8,376,530 | ||||||||
Construction & Engineering - 3.0% | ||||||||
IEA Energy Services LLC, 6.625%, 8/15/20294 | 6,800,000 | 5,622,382 | ||||||
Tutor Perini Corp., 6.875%, 5/1/20254 | 3,000,000 | 2,453,224 | ||||||
8,075,606 | ||||||||
Electrical Equipment-1.0% | ||||||||
GrafTech Finance, Inc., 4.625%, 12/15/20284 | 3,103,000 | 2,589,077 | ||||||
Marine - 4.0% | ||||||||
American Tanker, Inc. (Norway), 7.75%, 7/2/2025 | 5,605,000 | 5,210,789 | ||||||
Seaspan Corp. (Hong Kong), 6.50%, 2/5/20244 | 5,800,000 | 5,729,290 | ||||||
10,940,079 | ||||||||
Total Industrials | 51,504,238 | |||||||
Information Technology - 1.3% | ||||||||
Software - 1.3% | ||||||||
LogMeIn, Inc., 5.50%, 9/1/20274 | 5,250,000 | 3,599,929 | ||||||
The accompanying notes are an integral part of the financial statements.
4
High Yield Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Materials - 6.6% | ||||||||
Metals & Mining - 4.7% | ||||||||
Copper Mountain Mining Corp. (Canada), 8.00%, 4/9/20264 | 4,032,000 | $ | 3,777,112 | |||||
Endeavour Mining plc (Burkina Faso), 5.00%, 10/14/20264 | 4,000,000 | 3,217,315 | ||||||
Infrabuild Australia Pty Ltd. (Australia), 12.00%, 10/1/20244 | 3,018,000 | 2,895,454 | ||||||
Jervois Mining USA Ltd. (Australia), 12.50%, 7/20/20264 | 2,800,000 | 2,889,400 | ||||||
Northwest Acquisitions ULC - Dominion Finco, Inc., 7.125%, 11/1/2022 (Acquired 10/10/2017 - 05/15/2020, cost $1,518,841)5,6 | 6,535,000 | 653 | ||||||
12,779,934 | ||||||||
Paper & Forest Products - 1.9% | ||||||||
Clearwater Paper Corp., 4.75%, 8/15/20284 | 6,000,000 | 5,218,481 | ||||||
Total Materials | 17,998,415 | |||||||
Real Estate - 5.7% | ||||||||
Equity Real Estate Investment Trusts (REITS) - 2.7% | ||||||||
IIP Operating Partnership LP, 5.50%, 5/25/2026 | 5,455,000 | 4,936,841 | ||||||
Pelorus Fund REIT LLC, 7.00%, 9/30/2026 (Acquired 09/21/2021, cost $2,750,000)5 | 2,750,000 | 2,490,328 | ||||||
7,427,169 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Real Estate (continued) | ||||||||
Real Estate Management & Development - 3.0% | ||||||||
Carrington Holding Co. LLC, 8.00%, 1/1/20264 | 3,000,000 | $ | 2,813,561 | |||||
Five Point Operating Co. LP - Five Point Capital Corp., 7.875%, 11/15/20254 | 3,250,000 | 2,728,700 | ||||||
ForestarGroup,Inc.,5.00%,3/1/20284 | 3,000,000 | 2,508,409 | ||||||
8,050,670 | ||||||||
Total Real Estate | 15,477,839 | |||||||
Utilities - 6.6% | ||||||||
Electric Utilities - 1.5% | ||||||||
NRG Energy, Inc., 3.375%, 2/15/20294 | 5,250,000 | 4,243,008 | ||||||
Independent Power and Renewable Electricity Producers - 5.1% | ||||||||
Atlantica Sustainable Infrastructure plc (Spain), 4.125%, 6/15/20284 | 5,551,000 | 4,852,469 | ||||||
Sunnova Energy Corp., 5.875%, 9/1/20264 | 4,000,000 | 3,476,707 | ||||||
Vistra Operations Co. LLC, 4.375%, 5/1/20294 | 6,500,000 | 5,454,569 | ||||||
13,783,745 | ||||||||
Total Utilities | 18,026,753 | |||||||
TOTAL CORPORATE BONDS (ldentified Cost $266,051,747) | 234,599,729 | |||||||
SHORT-TERM INVESTMENT - 4.6% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 1.35%7 (ldentified Cost $12,449,109) | 12,449,109 | 12,449,109 | ||||||
TOTAL INVESTMENTS - 98.1% (ldentified Cost $296,804,652) | 266,574,965 | |||||||
OTHER ASSETS, LESS LIABILITIES - 1.9% | 5,205,891 | |||||||
NET ASSETS - 100% | $ | 271,780,856 |
LIBOR - London Interbank Offered Rate
*Non-income producing security.
1Amount is stated in USD unless otherwise noted.
2Security has been valued using significant unobservable inputs.
3Floating rate security. Rate shown is the rate in effect as of June 30, 2022.
4Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be liquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2022 was $164,916,755, which represented 60.7% of the Series’ Net Assets.
5Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of such securities at June 30, 2022 was $10,996,948, or 4.0% of the Series’ Net Assets.
6Issuer filed for bankruptcy and/or is in default of interest payments.
7Rate shown is the current yield as of June 30, 2022.
The accompanying notes are an integral part of the financial statements.
5
High Yield Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
6
High Yield Bond Series
Statement of Assets and Liabilities
June 30, 2022 (unaudited)
ASSETS: | ||||
Investments, at value (identified cost $296,804,652) (Note 2) | $ | 266,574,965 | ||
Cash | 45,879 | |||
Receivable for securities sold | 7,225,151 | |||
Interest receivable | 4,746,027 | |||
Receivable for fund shares sold | 322,791 | |||
Dividends receivable | 10,945 | |||
Prepaid expenses | 50,165 | |||
TOTAL ASSETS | 278,975,923 | |||
LIABILITIES: | ||||
Accrued management fees (Note 3) | 51,865 | |||
Accrued sub-transfer agent fees (Note 3) | 47,372 | |||
Accrued fund accounting and administration fees (Note 3) | 17,031 | |||
Accrued distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 9,076 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 714 | |||
Payable for fund shares repurchased | 5,626,881 | |||
Payable for securities purchased | 1,397,142 | |||
Other payables and accrued expenses | 44,986 | |||
TOTAL LIABILITIES | 7,195,067 | |||
TOTAL NET ASSETS | $ | 271,780,856 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 322,875 | ||
Additional paid-in-capital | 301,422,822 | |||
Total distributable earnings (loss) | (29,964,841 | ) | ||
TOTAL NET ASSETS | $ | 271,780,856 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S ($40,286,002/4,399,568 shares) | $ | 9.16 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I ($113,033,981/14,881,050 shares) | $ | 7.60 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W ($115,702,454/12,644,019 shares) | $ | 9.15 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class Z ($2,758,419/362,834 shares) | $ | 7.60 |
The accompanying notes are an integral part of the financial statements.
7
High Yield Bond Series
Statement of Operations
For the Six Months Ended June 30, 2022 (unaudited)
INVESTMENT INCOME: | ||||
Interest | $ | 8,398,225 | ||
Dividends | 234,406 | |||
Total Investment Income | 8,632,631 | |||
EXPENSES: | ||||
Management fees (Note 3) | 544,134 | |||
Sub-transfer agent fees (Note 3) | 98,479 | |||
Distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 56,954 | |||
Fund accounting and administration fees (Note 3) | 43,869 | |||
Directors’ fees (Note 3) | 12,435 | |||
Chief Compliance Officer service fees (Note 3) | 3,510 | |||
Custodian fees | 7,071 | |||
Miscellaneous | 116,391 | |||
Total Expenses | 882,843 | |||
Less reduction of expenses (Note 3) | (290,713 | ) | ||
Net Expenses | 592,130 | |||
NET INVESTMENT INCOME | 8,040,501 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | (2,788,062 | ) | ||
Net change in unrealized appreciation (depreciation) on investments | (34,306,816 | ) | ||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | (37,094,878 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (29,054,377 | ) |
The accompanying notes are an integral part of the financial statements.
8
High Yield Bond Series
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED 12/31/21 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 8,040,501 | $ | 11,633,491 | ||||
Net realized gain (loss) on investments | (2,788,062 | ) | 11,120,514 | |||||
Net change in unrealized appreciation (depreciation) on investments | (34,306,816 | ) | (2,626,100 | ) | ||||
Net increase (decrease) from operations | (29,054,377 | ) | 20,127,905 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | ||||||||
Class S | (799,373 | ) | (2,851,858 | ) | ||||
Class I | (2,520,478 | ) | (5,700,231 | ) | ||||
Class W | (2,646,859 | ) | (11,182,645 | ) | ||||
Class Z | (62,423 | ) | (297,832 | ) | ||||
Total distributions to shareholders | (6,029,133 | ) | (20,032,566 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | 44,967,739 | 107,301,099 | ||||||
Net increase (decrease) in net assets | 9,884,229 | 107,396,438 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 261,896,627 | 154,500,189 | ||||||
End of period | $ | 271,780,856 | $ | 261,896,627 |
The accompanying notes are an integral part of the financial statements.
9
High Yield Bond Series
Financial Highlights - Class S
FOR THE | FOR THE YEAR ENDED | |||||||||||||||||||||||
SIX MONTHS ENDED 6/30/22 (UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||||||||||
Net asset value - Beginning of period | $10.37 | $10.19 | $10.10 | $9.47 | $10.09 | $9.79 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income1 | 0.27 | 0.53 | 0.57 | 0.57 | 0.53 | 0.54 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.31 | ) | 0.47 | 0.03 | 0.73 | (0.65 | ) | 0.28 | ||||||||||||||||
Total from investment operations | (1.04 | ) | 1.00 | 0.60 | 1.30 | (0.12 | ) | 0.82 | ||||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||||||
From net investment income | (0.17 | ) | (0.47 | ) | (0.51 | ) | (0.67 | ) | (0.50 | ) | (0.51 | ) | ||||||||||||
From net realized gain on investments | — | (0.35 | ) | — | — | — | — | |||||||||||||||||
From return of capital | — | — | — | — | — | (0.01 | ) | |||||||||||||||||
Total distributions to shareholders | (0.17 | ) | (0.82 | ) | (0.51 | ) | (0.67 | ) | (0.50 | ) | (0.52 | ) | ||||||||||||
Net asset value - End of period | $9.16 | $10.37 | $10.19 | $10.10 | $9.47 | $10.09 | ||||||||||||||||||
Net assets - End of period (000’s omitted) | $40,286 | $47,108 | $10,197 | $13,113 | $82,399 | $94,533 | ||||||||||||||||||
Total return2 | (10.04% | ) | 9.99% | 6.28% | 13.97% | (1.31% | ) | 8.49% | ||||||||||||||||
Ratios (to average net assets)/ Supplemental Data: | ||||||||||||||||||||||||
Expenses* | 0.90% | 3 | 0.90% | 0.90% | 0.90% | 0.90% | 0.90% | |||||||||||||||||
Net investment income | 5.42% | 3 | 5.02% | 5.91% | 5.90% | 5.32% | 5.31% | |||||||||||||||||
Series portfolio turnover | 36% | 128% | 208% | 143% | 100% | 106% |
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts:
0.05% | 3 | 0.05% | 0.13% | 0.12% | 0.08% | 0.07% |
1Calculated based on average shares outstanding during the periods.
2Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
3Annualized.
The accompanying notes are an integral part of the financial statements.
10
High Yield Bond Series
Financial Highlights - Class I
FOR THE | FOR THE YEAR ENDED | |||||||||||||||||||||||
SIX MONTHS ENDED 6/30/22 (UNAUDITED) | 12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||||||||||
Net asset value - Beginning of period | $8.64 | $8.62 | $8.63 | $8.20 | $8.80 | $8.61 | ||||||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||||||
Net investment income1 | 0.23 | 0.47 | 0.51 | 0.53 | 0.49 | 0.49 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (1.08 | ) | 0.40 | 0.02 | 0.61 | (0.57 | ) | 0.25 | ||||||||||||||||
Total from investment operations | (0.85 | ) | 0.87 | 0.53 | 1.14 | (0.08 | ) | 0.74 | ||||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||||||
From net investment income | (0.19 | ) | (0.50 | ) | (0.54 | ) | (0.71 | ) | (0.52 | ) | (0.54 | ) | ||||||||||||
From net realized gain on investments | — | (0.35 | ) | — | — | — | — | |||||||||||||||||
From return of capital | — | — | — | — | — | (0.01 | ) | |||||||||||||||||
Total distributions to shareholders | $(0.19 | ) | (0.85 | ) | (0.54 | ) | (0.71 | ) | (0.52 | ) | (0.55 | ) | ||||||||||||
Net asset value - End of period | $7.60 | $8.64 | $8.62 | $8.63 | $8.20 | $8.80 | ||||||||||||||||||
Net assets - End of period (000’s omitted) | $113,034 | $67,760 | $22,477 | $20,974 | $32,962 | $26,459 | ||||||||||||||||||
Total return2 | (9.93% | ) | 10.27% | 6.60% | 14.24% | (0.98% | ) | 8.68% | ||||||||||||||||
Ratios (to average net assets)/ Supplemental Data: | ||||||||||||||||||||||||
Expenses* | 0.65% | 3 | 0.65% | 0.65% | 0.65% | 0.65% | 0.65% | |||||||||||||||||
Net investment income | 5.74% | 3 | 5.28% | 6.17% | 6.17% | 5.63% | 5.57% | |||||||||||||||||
Series portfolio turnover | 36% | 128% | 208% | 143% | 100% | 106% | ||||||||||||||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts:
0.01% | 3 | 0.02% | 0.10% | 0.13% | 0.08% | 0.07% |
1Calculated based on average shares outstanding during the periods.
2Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
3Annualized.
The accompanying notes are an integral part of the financial statements.
11
High Yield Bond Series
Financial Highlights - Class W
FOR THE | FOR THE YEAR ENDED | FOR THE | ||||||||||||||
SIX MONTHS ENDED 6/30/22 (UNAUDITED) | 12/31/21 | 12/31/20 | PERIOD 3/1/191 TO 12/31/19 | |||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||
Net asset value - Beginning of period | $10.36 | $10.17 | $10.08 | $10.01 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income2 | 0.31 | 0.63 | 0.64 | 0.56 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (1.31 | ) | 0.46 | 0.03 | 0.27 | |||||||||||
Total from investment operations | (1.00 | ) | 1.09 | 0.67 | 0.83 | |||||||||||
Less distributions to shareholders: | ||||||||||||||||
From net investment income | (0.21 | ) | (0.55 | ) | (0.58 | ) | (0.76 | ) | ||||||||
From net realized gain on investments | — | (0.35 | ) | — | — | |||||||||||
Total distributions to shareholders | (0.21 | ) | (0.90 | ) | (0.58 | ) | (0.76 | ) | ||||||||
Net asset value - End of period | $9.15 | $10.36 | $10.17 | $10.08 | ||||||||||||
Net assets - End of period (000’s omitted) | $115,702 | $137,215 | $119,895 | $30,363 | ||||||||||||
Total return3 | (9.72% | ) | 10.89% | 7.11% | 8.63% | |||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Expenses* | 0.10% | 4 | 0.10% | 0.10% | 0.10% | 4 | ||||||||||
Net investment income | 6.23% | 4 | 5.92% | 6.76% | 6.66% | 4 | ||||||||||
Series portfolio turnover | 36% | 128% | 208% | 143% |
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts:
0.43% | 4 | 0.47% | 0.54% | 0.59% | 4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
12
High Yield Bond Series
Financial Highlights - Class Z
FOR THE | FOR THE YEAR ENDED | FOR THE | ||||||||||||||
SIX MONTHS ENDED 6/30/22 (UNAUDITED) | 12/31/21 | 12/31/20 | PERIOD 3/1/191 TO 12/31/19 | |||||||||||||
Per share data (for a share outstanding throughout each period): | ||||||||||||||||
Net asset value - Beginning of period | $8.65 | $8.62 | $8.64 | $8.67 | ||||||||||||
Income (loss) from investment operations: | ||||||||||||||||
Net investment income2 | 0.23 | 0.48 | 0.52 | 0.46 | ||||||||||||
Net realized and unrealized gain (loss) on investments | (1.09 | ) | 0.41 | 0.01 | 0.23 | |||||||||||
Total from investment operations | (0.86 | ) | 0.89 | 0.53 | 0.69 | |||||||||||
Less distributions to shareholders: | ||||||||||||||||
From net investment income | (0.19 | ) | (0.51 | ) | (0.55 | ) | (0.72 | ) | ||||||||
From net realized gain on investments | — | (0.35 | ) | — | — | |||||||||||
Total distributions to shareholders | (0.19 | ) | (0.86 | ) | (0.55 | ) | (0.72 | ) | ||||||||
Net asset value - End of period | $7.60 | $8.65 | $8.62 | $8.64 | ||||||||||||
Net assets - End of period (000’s omitted) | $2,758 | $9,813 | $1,931 | $1,627 | ||||||||||||
Total return3 | (9.99% | ) | 10.48% | 6.59% | 8.26% | |||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||
Expenses* | 0.50% | 4 | 0.50% | 0.50% | 0.50% | 4 | ||||||||||
Net investment income | 5.65% | 4 | 5.41% | 6.32% | 6.26% | 4 | ||||||||||
Series portfolio turnover | 36% | 128% | 208% | 143% |
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts:
0.03% | 4 | 0.07% | 0.14% | 0.19% | 4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
13
High Yield Bond Series
Notes to Financial Statements
(unaudited)
1. | Organization |
High Yield Bond 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 a high level of long-term total return by investing principally in non-investment grade fixed income securities that are issued by government and corporate entities.
The Series is authorized to issue four classes of shares (Class S, I, W, and Z). 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, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of June 30, 2022, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as High Yield Bond Series Class I common stock and High Yield Bond Series Class Z common stock, 125 million have been designated as High Yield Bond Series Class S common stock and 50 million have been designated as High Yield Bond Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market 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 Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Debt securities, including government bonds, foreign bonds, asset-backed securities, structured notes, supranational obligations, sovereign bonds, corporate bonds, loan assignments, and mortgage-backed securities will normally be valued on the basis of evaluated bid prices provided directly by an independent pricing service. The pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Certain investments in securities held by the Series may be valued on a basis of a price provided directly by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
The fair value of loan assignments is estimated using recently executed transactions, market price quotations, credit/market events, and cross-asset pricing. Inputs are generally observable market inputs obtained from independent sources. Loan assignments are generally categorized in Level 2 of the fair value hierarchy, unless key inputs are unobservable, in which case they would be categorized in Level 3.
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
14
High Yield Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as 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”). 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.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of June 30, 2022 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||
Assets: | |||||||||||||
Equity securities: | |||||||||||||
Energy | $ | 3,506,198 | $ | — | $ | — | $ | 3,506,198 | |||||
Preferred securities: | |||||||||||||
Health Care | 2,313,120 | 2,313,120 | — | — | |||||||||
Information Technology | 1,992,441 | 1,992,441 | — | — | |||||||||
Debt securities: | |||||||||||||
Loan Assignments | 11,714,368 | — | 11,714,368 | — | |||||||||
Corporate debt: | |||||||||||||
Communication Services | 15,326,017 | — | 15,326,017 | — | |||||||||
Consumer Discretionary | 17,301,985 | — | 17,301,985 | — | |||||||||
Consumer Staples | 3,759,296 | — | 3,759,296 | — | |||||||||
Energy | 26,049,665 | — | 26,049,665 | — | |||||||||
Financials | 54,853,499 | — | 54,853,499 | — | |||||||||
Health Care | 10,702,093 | — | 10,702,093 | — | |||||||||
Industrials | 51,504,238 | — | 51,504,238 | — | |||||||||
Information Technology | 3,599,929 | — | 3,599,929 | — | |||||||||
Materials | 17,998,415 | — | 17,998,415 | — | |||||||||
Real Estate | 15,477,839 | — | 15,477,839 | — | |||||||||
Utilities | 18,026,753 | — | 18,026,753 | — | |||||||||
Short-Term Investment | 12,449,109 | 12,449,109 | — | — | |||||||||
Total assets | $ | 266,574,965 | $ | 16,754,670 | $ | 246,314,097 | $ | 3,506,198 |
15
High Yield Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
The following table is a reconciliation Level 3 investments for which significant unobservable inputs were used to determine fair value:
LEVEL 3 RECONCILIATION | EQUITY SECURITY | |||
Balance as of December 31, 2021 (fair value) | $ | 4,083,813 | ||
Net realized gain (loss) | — | |||
Change in unrealized appreciation (depreciation)* | (577,615 | ) | ||
Purchases | — | |||
Sales | — | |||
Transfers in | — | |||
Transfers out | — | |||
Balance as of 30 June, 2022 (fair value) | $ | 3,506,198 |
* The change in unrealized appreciation (depreciation) attributable to securities owned on June 30, 2022 which were valued using significant unobservable inputs (Level 3) amounted to $(577,615).
The following table summarizes the quantitative inputs and assumptions used for items categorized in Level 3 of the fair value hierarchy as of June 30, 2022.
QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS | |||||
FAIR VALUE AT 6/30/2022 | VALUATION TECHNIQUE | UNOBSERVABLE INPUT | VALUATION IMPACT FROM AN INCREASE IN INPUT | AMOUNT OR RANGE/ WEIGHTED AVERAGE | |
|
|
| Discount multiplier based on being private Imputed Price Based on Public Equity Comps, M&A activity within sector. Re- Evaluated based on new information from company (ie earnings, distribution announcement, M&A) |
|
|
The significant unobservable inputs used in the fair value measurement of the Fund’s equity security are the potential of a partial sale transaction and assumptions made to calculate residual equity, converted into unit value and discounted to reflect the pending nature of the transaction.
LIBOR Transition Risk
The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”). Although many LIBOR rates will cease to be published or no longer will be representative of the underlying market they seek to measure after December 31, 2021, a selection of widely used USD LIBOR rates will continue to be published through June 2023 in order to assist with the transition. The Series may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process away from LIBOR might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against, instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the Series is uncertain.
16
High Yield Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
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 Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair 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 shareholder services fees), 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 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 fair value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized foreign currency gains and losses represent foreign currency gains and losses between trade date and settlement date on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.
Securities Purchased on a When-Issued Basis or Forward Commitment
The Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss. No such investments were held by the Series on June 30, 2022.
In connection with its ability to purchase or sell securities on a forward commitment basis, the Series may enter into forward roll transactions principally using To Be Announced (TBA) securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Series to receive inferior securities at redelivery as compared to the securities sold to the counterparty; counterparty credit risk; and the potential pay down speed variance between the mortgage-backed pools. During the roll period, the Series forgoes principal and interest paid on the securities. The Series accounts for such dollar rolls as purchases and sales. Information regarding securities purchased on a when-issued basis is included in the Series’ Investment Portfolio. No such investments were held by the Series on June 30, 2022.
Asset-Backed Securities
The Series may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets
17
High Yield Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Asset-Backed Securities (continued)
and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e. loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Series may subsequently have to reinvest the proceeds at lower interest rates. If the Series has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
Mortgage-Backed Securities
The Series may invest in mortgage-backed securities (“MBS” or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the Series to the periodic payments of principal and interest from those mortgages. MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. For MBS, there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury. Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Restricted Securities
Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of the Series’ Investment Portfolio.
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.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. At June 30, 2022, the Series has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.
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 December 31, 2018 through December 31, 2021. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
18
High Yield Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation 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 quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP 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 0.40% 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 plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
The Fund may enter into agreements with financial intermediaries pursuant to which the Fund may pay financial intermediaries for non-distribution related sub-transfer agency, administrative, sub-accounting, and other shareholder services in an annual amount not to exceed 0.15% of the average daily net assets of the Class I and Class S shares of the Series. Payments made pursuant to such agreements are generally based on the current assets and/or number of accounts of the Series attributable to the financial intermediary. Any payments made pursuant to such agreements may be in addition to, rather than in lieu of, any Distribution and Shareholder Services Fee payable under the Rule 12b-1 plan of the Fund. For the six months ended June 30, 2022, the sub-transfer agency expenses incurred by Class S and Class I were $37,326 and $61,153, respectively.
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 S shares pursuant to a distribution plan adopted under Rule 12b-1 of the 1940 Act, regardless of expenses actually incurred. Under the agreement, the Series pays distribution and service fees to the distributor at an annual rate of 0.25% of average daily net assets attributable to Class S shares. There are no distribution and service fees on the Class I, Class W or Class Z shares. The fees are accrued daily and paid monthly.
19
High Yield Bond Series
Notes to Financial Statements (continued)
(unaudited)
3. | Transactions with Affiliates (continued) |
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets; 0.0075% on the next $15 billion of average daily net assets; and 0.0065% of average daily net assets in excess of $40 billion; plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the shareholder services fee and/or distribution and service (12b-1) fees and waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.65% of the average daily net assets of the Class S and Class I shares, 0.10% of the average daily net assets of the Class W shares, and 0.50% of the average daily net assets of the Class Z shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $251,378 in management fees for Class W for the six months ended June 30, 2022. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $11,085, $5,608, $21,873 and $769 for Class S, Class I, Class W, and Class Z, respectively, for the six months ended June 30, 2022. These amounts are included as a reduction of expenses on the Statement of Operations.
As of June 30, 2022, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, | |||||||||||||||
2022 | 2023 | 2024 | 2025 | TOTAL | ||||||||||||
Class S | $ | 18,519 | $ | 13,633 | $ | 12,275 | $ | 11,085 | $ | 55,512 | ||||||
Class I | 22,088 | 17,756 | 7,047 | 5,608 | 52,499 | |||||||||||
Class W | 82,483 | 126,979 | 88,678 | 21,873 | 320,013 | |||||||||||
Class Z | 14,052 | 2,226 | 3,707 | 769 | 20,754 |
For the six months ended June 30, 2022, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
4. | Purchases and Sales of Securities |
For the six months ended June 30, 2022, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $137,505,852 and $91,603,089, respectively. There were no purchases or sales of U.S. Government securities.
20
High Yield Bond Series
Notes to Financial Statements (continued)
(unaudited)
5. | Capital Stock Transactions |
Transactions in Class S, Class I, Class W and Class Z shares of High Yield Bond Series were:
CLASS S | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | |||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||
Sold | 2,222,628 | $ | 22,358,893 | 5,744,521 | $ | 61,132,086 | |||||||
Reinvested | 68,136 | 647,572 | 215,066 | 2,231,231 | |||||||||
Repurchased | (2,432,598 | ) | (24,161,221 | ) | (2,418,892 | ) | (25,703,861 | ) | |||||
Total | (141,834 | ) | $ | (1,154,756 | ) | 3,540,695 | $ | 37,659,456 |
CLASS I | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | |||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||
Sold | 13,038,220 | $ | 108,277,932 | 8,127,738 | $ | 72,620,203 | |||||||
Reinvested | 303,984 | 2,394,115 | 638,351 | 5,534,045 | |||||||||
Repurchased | (6,303,021 | ) | (52,006,993 | ) | (3,532,642 | ) | (31,206,195 | ) | |||||
Total | 7,039,183 | $ | 58,665,054 | 5,233,447 | $ | 46,948,053 |
CLASS W | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | |||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||
Sold | 396,017 | $ | 3,934,485 | 1,256,616 | $ | 13,115,949 | |||||||
Reinvested | 265,920 | 2,530,450 | 1,035,395 | 10,750,624 | |||||||||
Repurchased | (1,258,648 | ) | (12,640,465 | ) | (840,081 | ) | (8,855,336 | ) | |||||
Total | (596,711 | ) | $ | (6,175,530 | ) | 1,451,930 | $ | 15,011,237 |
CLASS Z | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | |||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||
Sold | 1,154,488 | $ | 9,419,856 | 1,916,130 | $ | 16,799,932 | |||||||
Reinvested | 7,915 | 62,423 | 33,862 | 297,832 | |||||||||
Repurchased | (1,934,115 | ) | (15,849,308 | ) | (1,039,362 | ) | (9,415,411 | ) | |||||
Total | (771,712 | ) | $ | (6,367,029 | ) | 910,630 | $ | 7,682,353 |
Approximately 42% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in September 2022 unless extended or renewed. During the six months ended June 30, 2022, the Series did not borrow under the line of credit.
21
High Yield Bond Series
Notes to Financial Statements (continued)
(unaudited)
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of June 30, 2022.
The Series may invest in a loan assignment of all or a portion of the loans. The Series has direct rights against the borrower on a loan when it purchases an assignment; however, the Series’ rights may be more limited than the lender from which it acquired the assignment and the Series may be able to enforce its rights only through an administrative agent. Loan assignments are vulnerable to market conditions and may become illiquid due to economic conditions or other events may reduce the demand for loan assignments and certain loan assignments which were liquid when purchased may become illiquid.
8. | Foreign Securities |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the U.S. 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 U.S. Government.
9. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The final determination of the tax character of current year distributions will be made at the conclusion of the fiscal year. The tax character of distributions paid for the year ended December 31, 2021 were as follows:
Ordinary income | $ | 19,495,758 | ||
Long-term capital gains | $ | 536,808 |
At June 30, 2022, the identified cost for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
Cost for federal income tax purposes | $ | 296,899,769 | ||
Unrealized appreciation | 3,186,255 | |||
Unrealized depreciation | (33,511,059 | ) | ||
Net unrealized depreciation | $ | (30,324,804 | ) |
10. | Market Event |
Significant disruptions and volatility in the global financial markets and economies, like the current conditions caused by the Russian invasion of Ukraine and the COVID-19 pandemic, could negatively impact the investment performance of the Series. The global market and economic climate may become increasingly uncertain due to numerous factors beyond our control, including but not limited to, the effectiveness and acceptance of vaccines to prevent COVID-19, impacts on business operations in the U.S.
22
High Yield Bond Series
Notes to Financial Statements (continued)
(unaudited)
10. | Market Event (continued) |
related to the COVID-19 pandemic, such as supply chain disruptions and inflation, concerns related to unpredictable global market and economic factors, uncertainty in U.S. federal fiscal, tax, trade or regulatory policy and the fiscal, tax, trade or regulatory policy of foreign governments, rising interest rates, inflation or deflation, the availability of credit, performance of financial markets, terrorism, natural or biological catastrophes, public health emergencies, or political uncertainty.
11. | Subsequent Event |
In preparing these financial statements, management of the Fund has evaluated events and transactions for potential recognition or disclosure and the following item was noted:
On March 31, 2022, Manning & Napier, Inc. (“the Company”), entered into a definitive agreement under which the Company will go private and be acquired by the Callodine Group, LLC (“Callodine”), a Boston-based asset management firm, in partnership with East Asset Management (the “Transaction”). The Company is the ultimate owner of the Advisor. The proposed Transaction is expected to close in the third quarter of 2022, contingent upon shareholder approval and other customary closing conditions. Following the close, the Company will become a wholly owned subsidiary of an affiliate of Callodine. Closing the Transaction results in a change in control of the Advisor under the 1940 Act and therefore the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides advisory services to the Series. In connection with the Transaction, on May 3, 2022, the Manning & Napier Fund, Inc. Board of Directors unanimously approved a new Investment Advisory Agreement between the Fund and the Advisor for each Series, that will become effective at the closing of the Transaction, subject to shareholder approval. As of the closing date of the Transaction, the Series’ investment objective and fee arrangements will remain unchanged.
23
High Yield Bond Series
Renewal of Investment Advisory Agreement
(unaudited)
At the Manning & Napier Fund, Inc. (the “Fund”) Board of Directors’ (the “Board”) meeting, held on May 19, 2022, the Investment Advisory Agreement (the “Agreement”) between the Fund and Manning & Napier Advisors, LLC (the “Advisor”) was considered for renewal by the Board, including all of the Directors who are not “interested persons” (“Independent Directors”), within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”). In connection with the decision whether to renew the Agreement, a variety of material was provided to the Board in advance of the meeting for their review and consideration. The Board also held a working session on May 3, 2022 to review and discuss information provided to the Board, and for the Board to request additional information.
Representatives of the Advisor attended a portion of the working session and attended the Board meeting. The Advisor provided supplemental information requested by the Board and presented additional oral information to the Board to assist the Board in its considerations. In addition to the information furnished by the Advisor, the Board was provided with a legal memorandum discussing its fiduciary duties related to its approval of the continuation of the Agreement. Legal counsel for the Fund discussed with the Board the applicable legal considerations. In addition, the Board received in-person presentations about the Fund throughout the year.
At the May 3, 2022 meeting, the Board also considered and approved a new investment advisory agreement (the “New Advisory Agreement”) for each Series between the Advisor and the Fund. The Board was asked to consider the New Advisory Agreement because of a transaction that will affect Manning & Napier, Inc. (“MN Inc.”), which is the ultimate parent company of the Advisor. On March 31, 2022, MN Inc. and Callodine Group, LLC (“Callodine”) entered into an agreement under which Callodine Merger Sub, an affiliate of Callodine, would acquire MN Inc. (the “Transaction”). The Transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2022. Following the closing, MN Inc. will become a wholly owned subsidiary of an affiliate of Callodine. The closing of the Transaction may be deemed to result in a change of control of the Advisor under the 1940 Act. As a result, the Transaction results in the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides investment advisory services to the Series (the “Current Advisory Agreement”). Shareholder approval of the New Advisory Agreement will enable the Advisor to continue to serve the Series following the closing of the Transaction.
The Independent Directors were advised by independent legal counsel with respect to these matters. The Independent Directors also met separately in executive sessions on April 13, April 27, May 3 and May 19, with their legal counsel without any representatives of the Advisor present.
The Directors’ determinations at the meeting were made on the basis of each Director’s business judgment after consideration of all the information presented. In deciding to recommend the renewal of the Current Agreement with respect to each Series of the Fund, the Independent Directors did not identify any single or particular piece of information that, in isolation, was sufficient to justify renewal. Each Independent Director may also have weighed information and factors differently. This summary describes the most important, but not all, of the factors considered by the Board and the Independent Directors.
• | The Board considered the nature and quality of services provided by the Advisor under the Current Agreement. The Advisor has provided those services for over 30 years, and they have included, among others: deciding what securities to purchase and sell for each Series; arranging for the purchase and sale of such securities by placing orders with broker-dealers; administering the affairs of the Fund (including the books and records of the Fund not maintained by third party service providers such as the custodian or transfer agent); arranging for the insurance coverage for the Fund; and supervising the preparation of tax returns, SEC filings (including registration statements) and reports to shareholders for the Fund. The Board considered the numerous services performed by the Advisor and its affiliates beyond those stated in the Current Agreement. The Board also considered the Advisor’s personnel who perform services to the Fund, changes in senior or key personnel, industry trends impacting the mutual fund industry, the strength of the Advisor’s compliance infrastructure, policies and procedures relating to compliance with securities regulations, reputation, expertise and resources. The Board discussed the quality of these services with representatives from the Advisor and concluded that the Advisor was performing its services to the Fund required under the Current Agreement in a reasonable manner. |
24
High Yield Bond Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the Advisor’s investment teams, including changes to the investment teams during the past year, investment team compensation structure and the investment process. The Board considered the performance of each Series since its inception, as well as over multiple time periods including: one year, three year, five year, ten year, and current market cycle. A market cycle includes periods of both rising and falling markets. Returns for established benchmark indices for each Series were provided. In addition, the Board considered (and considers on a quarterly basis) a number of other factors relevant to performance at the meeting including: a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives; the breadth of the Fund’s product offerings; and performance over reasonable time periods. Representatives of the Advisor provided information regarding and, as applicable, led discussions of factors impacting the Advisor’s performance for the Series, outlining current market conditions and explaining their expectations and strategies for the future. The Board also determined that it was appropriate to take into account its consideration of the Advisor’s performance at meetings held prior to the May 19th Board meeting. In doing so, the Board generally determined that the Advisor’s performance was satisfactory. Where the Advisor’s performance was materially below a Series’ benchmarks and or peer group, the Board requested an explanation for the underperformance and/or the steps taken by the Advisor in an effort to improve performance. In all instances, the Board was satisfied with the explanation provided. The Board plans to remain focused in future meetings to address any aberrational underperformance as necessary. After discussion, the Board concluded that the nature and quality of the investment management services provided by the Advisor to the Fund were considered adequate. |
• | The Board considered the fees and expenses of the various Series of the Fund. The Advisor presented the advisory fees and total expenses for each Series, including the advisory fee adjusted for any contractual expense waivers or reimbursements paid by the Advisor. |
• | The Board considered whether the Advisor had achieved economies of scale with respect to its services to the Fund. The Board acknowledged the expense caps incorporated in the Fund’s current fee structure, which requires the Advisor to subsidize the expenses of the Series operating above their expense cap, noting that 11 of 15 Series are currently receiving expense reimbursements from the Advisor. The Board concluded that the Fund would need to grow in assets before the Advisor would be able to achieve meaningful economies of scale. |
• | The Advisor provided the Board with information comparing each Series’ contractual management fees with the Advisor’s standard advisory fees for separate accounts and collective investment trusts. The Board considered that the range of services provided to the Series is more extensive than for the Advisor’s other clients due to additional infrastructure, administrative, operational and regulatory requirements related to operating a mutual fund, as well as associated risks. |
• | The current advisory fees, 12b-1 Distribution and Service Fees, other expenses (e.g. a combination of Shareholder Services Fees, intermediary sub-TA fees, routine operating expenses and Acquired Fund Fees and Expenses for fund-of-fund Series) and total expense ratios of each Series and share class were compared and ranked (on both a mean and median basis) against respective peer universes. Respective peer universes included funds of a similar size and with similar investment objectives and expense characteristics as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the comparisons and rankings of fees and net expense ratios for each Series of the Fund and the methodology behind the comparison. The Board considered the Advisor’s active portfolio management that results in portfolios that are more differentiated than the construction of their benchmarks. The Board will continue to monitor the fees and expenses of the Series compared to peer groups. Based on their review of the information provided, the Board concluded that the current fees and expenses of each Series of the Fund were reasonable on a comparative basis. |
25
High Yield Bond Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the costs of the Advisor’s services and the profits of the Advisor as they relate to the Advisor’s services to the Fund under the Current Agreement. The Board was provided with information on the Advisor’s financial condition and profitability by mutual fund agreement and by Series. Representatives of the Advisor discussed modest improvements in the Advisor’s profitability derived from the Fund. The Board discussed the Advisor’s revenues generated from the Fund and its expenses associated with providing the services under the Current Agreement. The Advisor presented the Board with information on firm wide investment management profitability to provide a comparison of the Advisor’s profitability from its Fund activities relative to its profitability from its other investment management business. In addition, the Board reviewed the Advisor’s expense allocation methodology used to calculate profitability since many of the Advisor’s resources and expenses are shared across the Advisor’s various investment management vehicles. The Board noted the Advisor’s explanation of the consistent approach taken in calculating profitability, compared to prior periods, including the allocation of expenses as part of that calculation. The Board considered the Advisor’s expenses associated with Fund activities outside of the Current Agreement (such as expense reimbursements pursuant to expense caps and payments made by the Advisor to third party platforms on which shares of the Fund are available for purchase). The Board noted the potential for the Transaction to add resources that have the potential to facilitate the growth of various series, which could improve economies of scale for those Series; however, they also noted that such potential may not be realized. After discussing the above costs and profits, the Board concluded that the Advisor’s profit margin relating to its services provided under the Current Agreement was reasonable. |
• | The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include participation in a joint insurance program, sharing of compensation expenses for certain shared personnel, relationships with large service providers, the utilization of Series within the Advisor’s separately managed accounts and certain research services provided by soft dollars. The Board concluded that these additional benefits to the Advisor were reasonable. |
Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of the Independent Directors, concluded that the compensation under the Current Agreement was fair and reasonable with respect to each Series in light of the services and expenses and such other matters as the Directors considered to be relevant in the exercise of their reasonable judgment, and that the renewal of the Current Agreement would be in the best interests of each Series and its shareholders. The Board did not indicate that any single factor was determinative of its decision to approve the Current Agreement, but indicated that the Board based its determination on the total mix of information available to it.
26
High Yield Bond Series
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-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling 1-(800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End
2. Fund Holdings - Quarter-End
3. Shareholder Report - Annual
4. Shareholder Report - Semi-Annual
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNHYB-06/22-SAR
27
www.manning-napier.com
Manning & Napier Fund, Inc.
Unconstrained Bond Series
Unconstrained Bond Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service 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 in each class at the beginning of the period and held for the entire period (January 1, 2022 to June 30, 2022).
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 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 each class in 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 a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested 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 sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. 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.
BEGINNING ACCOUNT VALUE 1/1/22 | ENDING ACCOUNT VALUE 6/30/22 | EXPENSES PAID DURING PERIOD* 1/1/22 - 6/30/22 | ANNUALIZED EXPENSE RATIO | ||||||
Class S | |||||||||
Actual | $1,000.00 | $933.30 | $3.36 | 0.70% | |||||
Hypothetical | |||||||||
(5% return before expenses) | $1,000.00 | $1,021.32 | $3.51 | 0.70% | |||||
Class I | |||||||||
Actual | $1,000.00 | $934.70 | $2.16 | 0.45% | |||||
Hypothetical | |||||||||
(5% return before expenses) | $1,000.00 | $1,022.56 | $2.26 | 0.45% | |||||
Class W | |||||||||
Actual | $1,000.00 | $935.60 | $0.24 | 0.05% | |||||
Hypothetical | |||||||||
(5% return before expenses) | $1,000.00 | $1,024.55 | $0.25 | 0.05% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
1
Unconstrained Bond Series
Portfolio Composition as of June 30, 2022
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
2A U.S. Treasury Note is an intermediate long-term obligation of the U.S. Treasury issued with a maturity period between one and ten years. |
2
Unconstrained Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
COMMON STOCKS - 0.6% | ||||||||
Energy - 0.6% | ||||||||
Oil, Gas & Consumable Fuels - 0.6% | ||||||||
Jonah Energy Parent LLC*2 | ||||||||
(Identified Cost $1,288,725) | 85,915 | $ | 4,610,199 | |||||
PREFERRED STOCKS - 1.0% | ||||||||
Health Care - 0.3% | ||||||||
Pharmaceuticals - 0.3% | ||||||||
Harrow Health, Inc., 8.625%, 4/30/2026 | 109,800 | 2,679,120 | ||||||
Information Technology - 0.7% | ||||||||
Software - 0.7% | ||||||||
Argo Blockchain plc (United Kingdom), 8.75%, 11/30/2026 | 75,000 | 1,287,000 | ||||||
Greenidge Generation Holdings, Inc., 8.50%, 10/31/2026 | 70,000 | 1,023,400 | ||||||
Synchronoss Technologies, Inc., 8.375%, 6/30/2026 | 152,955 | 2,910,734 | ||||||
TOTAL PREFERRED STOCKS | ||||||||
(Identified Cost $10,170,384) | 7,900,254 | |||||||
LOAN ASSIGNMENTS - 1.6% | ||||||||
American Axle & Manufacturing, Inc., Tranche B Term Loan, Term B, (1 mo. LIBOR US + 2.250%), 3.13%, 4/6/20243 | 6,526,019 | 6,313,923 | ||||||
Tutor Perini Corp., Term Loan, Term B, (1 mo. LIBOR US + 4.75%), 5.75%, 8/18/20273 | 6,897,348 | 6,440,399 | ||||||
TOTAL LOAN ASSIGNMENTS | ||||||||
(Identified Cost $13,344,864) | 12,754,322 | |||||||
CORPORATE BONDS - 33.6% | ||||||||
Non-Convertible Corporate Bonds- 33.6% | ||||||||
Communication Services - 5.2% | ||||||||
Diversified Telecommunication Services - 0.7% | ||||||||
Lumen Technologies, Inc., 7.50%, 4/1/2024 | 5,375,000 | 5,313,141 | ||||||
Entertainment - 2.4% | ||||||||
Magallanes, Inc., | ||||||||
(U.S. Secured Overnight Financing Index + 1.780%), 3.259%, 3/15/20243,4 | 7,500,000 | 7,474,970 | ||||||
4.054%, 3/15/20294 | 4,500,000 | 4,133,542 | ||||||
Media & Games Invest SE (Malta) (3 | ||||||||
mo. EURIBOR + 6.250%), 6.25%, | ||||||||
6/21/20263,4 | EUR | 8,000,000 | 8,113,645 | |||||
19,722,157 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Communication Services (continued) | ||||||||
Interactive Media & Services - 0.8% | ||||||||
Tencent Holdings Ltd. (China), 3.975%, 4/11/20294 | 6,650,000 | $ | 6,324,739 | |||||
Media - 0.9% | ||||||||
Quebecor Media, Inc. (Canada), 5.75%, | ||||||||
1/15/2023 | 7,450,000 | 7,459,958 | ||||||
Wireless Telecommunication Services - 0.4% | ||||||||
Sprint Communications, Inc., 6.00%, | ||||||||
11/15/2022 | 1,650,000 | 1,661,734 | ||||||
Sprint Corp., 7.875%, 9/15/2023 | 1,537,000 | 1,585,031 | ||||||
3,246,765 | ||||||||
Total Communication Services | 42,066,760 | |||||||
Consumer Discretionary - 3.7% | ||||||||
Automobiles - 1.1% | ||||||||
Ford Motor Credit Co. LLC, | ||||||||
2.979%, 8/3/2022 | 2,050,000 | 2,050,000 | ||||||
3.35%, 11/1/2022 | 3,518,000 | 3,514,203 | ||||||
3.087%, 1/9/2023 | 3,110,000 | 3,087,655 | ||||||
8,651,858 | ||||||||
Diversified Consumer Services - 0.2% | ||||||||
The ADT Security Corp., 4.125%, | ||||||||
6/15/2023 | 1,500,000 | 1,474,963 | ||||||
Hotels, Restaurants & Leisure - 1.2% | ||||||||
Expedia Group, Inc., 3.25%, 2/15/2030 | 3,400,000 | 2,828,713 | ||||||
MGM Resorts International, 6.00%, | ||||||||
3/15/2023 | 6,700,000 | 6,689,417 | ||||||
9,518,130 | ||||||||
Internet & Direct Marketing Retail - 1.2% | ||||||||
Alibaba Group Holding Ltd. (China), | ||||||||
4.00%, 12/6/2037 | 3,210,000 | 2,787,978 | ||||||
Amazon.com, Inc., 3.30%, 4/13/2027 | 4,000,000 | 3,930,566 | ||||||
Gaming Innovation Group plc (Malta) | ||||||||
(3 mo. STIB + 8.500%), 9.127%, | ||||||||
6/11/2024 (Acquired 01/26/2022, cost | ||||||||
$1,097,585)3,5 | SEK | 10,000,000 | 960,592 | |||||
North Investment Group AB (Sweden) | ||||||||
(3 mo. STIB + 9.000%), 9.419%, | ||||||||
5/5/2024 (Acquired 04/22/2021, cost | ||||||||
$2,818,941)3,5 | SEK | 23,750,000 | 2,280,967 | |||||
9,960,103 | ||||||||
Total Consumer Discretionary | 29,605,054 | |||||||
Consumer Staples - 0.8% | ||||||||
Food & Staples Retailing - 0.8% | ||||||||
Campbell Soup Co., 3.65%, 3/15/2023 | 4,680,000 | 4,679,373 | ||||||
Greenfood AB (Sweden) (3 mo. STIB + | ||||||||
7.000%), 7.376%, 11/4/2025 (Acquired | ||||||||
10/28/2021, cost $2,486,820)3,5 | SEK | 21,250,000 | 2,008,321 | |||||
Total Consumer Staples | 6,687,694 |
The accompanying notes are an integral part of the financial statements.
3
Unconstrained Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Energy - 4.7% | ||||||||
Energy Equipment & Services - 0.4% | ||||||||
Kent Global plc (United Kingdom), | ||||||||
10.00%, 6/28/2026 | 3,500,000 | $ | 3,411,303 | |||||
Oil, Gas & Consumable Fuels - 4.3% | ||||||||
Brooge Petroleum and Gas Investment | ||||||||
Co. FZE (United Arab Emirates), | ||||||||
8.50%, 9/24/20254 | 5,008,508 | 4,917,825 | ||||||
Cenovus Energy, Inc. (Canada), 6.75%, | ||||||||
11/15/2039 | 3,910,000 | 4,178,285 | ||||||
DCP Midstream Operating LP, 3.875%, | ||||||||
3/15/2023 | 5,000,000 | 4,955,350 | ||||||
Energy Transfer LP, 4.25%, 3/15/2023 | 4,000,000 | 3,994,461 | ||||||
Navigator Holdings Ltd., 8.00%, | ||||||||
9/10/20254 | 3,550,000 | 3,548,104 | ||||||
PetroTal Corp. (Peru), 12.00%, | ||||||||
2/16/2024 (Acquired 02/01/2021, cost | ||||||||
$2,584,000)5 | 2,720,000 | 2,764,648 | ||||||
Ping Petroleum UK Ltd. (Bermuda), | ||||||||
12.00%, 7/29/2024 (Acquired | ||||||||
07/14/2021-09/15/2021, cost | ||||||||
$2,664,463)5 | 2,715,000 | 2,627,336 | ||||||
Sabine Pass Liquefaction LLC, 5.75%, | ||||||||
5/15/2024 | 7,000,000 | 7,143,530 | ||||||
34,129,539 | ||||||||
Total Energy | 37,540,842 | |||||||
Financials - 7.3% | ||||||||
Banks - 1.3% | ||||||||
Bank of America Corp., (3 mo. LIBOR US + 0.760%), 2.589%, 9/15/20263 | 3,561,000 | 3,361,224 | ||||||
JPMorgan Chase & Co., 8.00%, 4/29/2027 | 3,000,000 | 3,449,122 | ||||||
Popular, Inc. (Puerto Rico), 6.125%, 9/14/2023 | 3,735,000 | 3,766,613 | ||||||
10,576,959 | ||||||||
Capital Markets - 2.3% | ||||||||
Blackstone Secured Lending Fund, 2.75%, 9/16/2026 | 1,850,000 | 1,623,329 | ||||||
Drawbridge Special Opportunities Fund LP - Drawbridge Special Opportunities Finance Corporation, 3.875%, 2/15/20264 | 2,850,000 | 2,629,497 | ||||||
Owl Rock Technology Finance Corp., 3.75%, 6/17/20264 | 3,000,000 | 2,716,769 | ||||||
StoneX Group, Inc., 8.625%, 6/15/20254 | 3,580,000 | 3,613,517 | ||||||
The Goldman Sachs Group, Inc., (U.S. Secured Overnight Financing Rate + 1.390%), 2.870%, 3/15/20243 | 7,500,000 | 7,503,620 | ||||||
18,086,732 | ||||||||
Consumer Finance - 2.3% | ||||||||
Navient Corp., | ||||||||
5.50%, 1/25/2023 | 7,750,000 | 7,681,153 | ||||||
6.75%, 6/25/2025 | 1,800,000 | 1,645,562 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Financials (continued) | ||||||||
Consumer Finance (continued) | ||||||||
OneMain Finance Corp., 5.625%, 3/15/2023 | 5,803,000 | $ | 5,748,134 | |||||
PRA Group, Inc., 7.375%, 9/1/20254 | 3,570,000 | 3,474,169 | ||||||
18,549,018 | ||||||||
Diversified Financial Services - 1.0% | ||||||||
Blackstone Private Credit Fund, 2.625%, | ||||||||
12/15/20264 | 1,785,000 | 1,494,525 | ||||||
FS Energy & Power Fund, 7.50%, | ||||||||
8/15/20234 | 3,235,000 | 3,263,225 | ||||||
Liberty Commercial Finance LLC, | ||||||||
6.00%, 6/30/2026 (Acquired | ||||||||
06/22/2021, cost $1,000,000)5 | 1,000,000 | 938,802 | ||||||
Novedo Holding AB (Sweden) (3 mo. | ||||||||
STIB + 6.500%), 7.005%, 11/26/2024 | ||||||||
(Acquired 11/15/2021-03/30/2022, | ||||||||
cost $2,935,885)3,5 | SEK | 26,250,000 | 2,511,678 | |||||
8,208,230 | ||||||||
Mortgage Real Estate Investment Trusts (REITS) - 0.4% | ||||||||
Arbor Realty Trust, Inc., 8.00%, | ||||||||
4/30/2023 (Acquired 05/10/2021, cost | ||||||||
$3,785,222)5 | 3,555,000 | 3,593,668 | ||||||
Total Financials | 59,014,607 | |||||||
Industrials - 5.8% | ||||||||
Airlines - 1.7% | ||||||||
Alaska Airlines Pass-Through Trust, | ||||||||
Series 2020-1, Class B, 8.00%, | ||||||||
8/15/20254 | 4,746,125 | 4,972,746 | ||||||
Southwest Airlines Co., 5.25%, 5/4/2025 | 3,000,000 | 3,062,913 | ||||||
United Airlines Pass-Through Trust, | ||||||||
Series 2019-2, Class B, 3.50%, | ||||||||
5/1/2028 | 3,597,793 | 3,079,611 | ||||||
United Airlines Pass-Through Trust, | ||||||||
Series 2018-1, Class B, 4.60%, | ||||||||
3/1/2026 | 2,925,901 | 2,598,548 | ||||||
13,713,818 | ||||||||
Building Products - 0.2% | ||||||||
Eco Material Technologies, Inc., 7.875%, | ||||||||
1/31/20274 | 1,835,000 | 1,633,598 | ||||||
Commercial Services & Supplies - 0.9% | ||||||||
Airswift Global AS (United Kingdom) (3 | ||||||||
mo. LIBOR US + 8.500%), 10.389%, | ||||||||
5/12/2025 (Acquired 05/03/2021, cost | ||||||||
$3,100,000)3,5 | 3,100,000 | 3,061,250 | ||||||
Cartiga LLC, 8.00%, 6/15/2026 | ||||||||
(Acquired 06/14/2021, cost | ||||||||
$4,000,000)5 | 4,000,000 | 3,922,813 | ||||||
6,984,063 |
The accompanying notes are an integral part of the financial statements.
4
Unconstrained Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Industrials (continued) | ||||||||
Electrical Equipment - 0.3% | ||||||||
Joetul AS (Norway) (3 mo. NIBOR + | ||||||||
6.950%), 8.23%, 10/6/20243 | NOK | 23,000,000 | $ | 2,227,760 | ||||
Marine - 1.7% | ||||||||
American Tanker, Inc. (Norway), 7.75%, | ||||||||
7/2/2025 | 6,560,000 | 6,098,622 | ||||||
Seaspan Corp. (Hong Kong), 6.50%, | ||||||||
2/5/20244 | 7,600,000 | 7,507,345 | ||||||
13,605,967 | ||||||||
Road & Rail - 0.2% | ||||||||
BNSF Funding Trust I, (3 mo. LIBOR US | ||||||||
+ 2.350%), 6.613%, 12/15/20556 | 1,500,000 | 1,474,133 | ||||||
Trading Companies & Distributors - 0.8% | ||||||||
AerCap Ireland Capital DAC - AerCap | ||||||||
Global Aviation Trust (Ireland), 3.00%, | ||||||||
10/29/2028 | 1,970,000 | 1,659,973 | ||||||
Ashtead Capital, Inc. (United Kingdom), | ||||||||
4.00%, 5/1/20284 | 1,500,000 | 1,349,759 | ||||||
Avolon Holdings Funding Ltd. (Ireland), | ||||||||
3.25%, 2/15/20274 | 4,500,000 | 3,926,883 | ||||||
6,936,615 | ||||||||
Total Industrials | 46,575,954 | |||||||
Information Technology - 0.6% | ||||||||
Software - 0.6% | ||||||||
Cabonline Group Holding AB (Sweden) | ||||||||
(3 mo. STIB + 9.500%), 9.572%, | ||||||||
4/19/20263,4 | SEK | 17,500,000 | 1,708,987 | |||||
Extenda Retail Holding 1 AB (Sweden) | ||||||||
(3 mo. STIB + 6.750%), 7.553%, | ||||||||
3/30/2027 (Acquired 03/24/2022, cost | ||||||||
$3,620,906)3,5 | SEK | 34,000,000 | 3,181,687 | |||||
Total Information Technology | 4,890,674 | |||||||
Materials - 0.7% | ||||||||
Metals & Mining - 0.7% | ||||||||
Copper Mountain Mining Corp. | ||||||||
(Canada), 8.00%, 4/9/20264 | 2,572,000 | 2,409,408 | ||||||
Infrabuild Australia Pty Ltd. (Australia), | ||||||||
12.00%, 10/1/20244 | 1,415,000 | 1,357,544 | ||||||
Newcastle Coal Infrastructure Group Pty | ||||||||
Ltd. (Australia), 4.40%, 9/29/20274 | 1,750,000 | 1,549,856 | ||||||
Northwest Acquisitions ULC - Dominion | ||||||||
Finco, Inc., 7.125%, 11/1/2022 | ||||||||
(Acquired 10/06/2017-09/12/2019, | ||||||||
cost $4,353,936)5,7 | 5,870,000 | 587 | ||||||
Total Materials | 5,317,395 | |||||||
Real Estate - 3.2% | ||||||||
Equity Real Estate Investment Trusts (REITS) - 2.4% | ||||||||
Crown Castle International Corp., | ||||||||
3.10%, 11/15/2029 | 2,250,000 | 1,983,897 |
SHARES/ PRINCIPAL AMOUNT11 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Real Estate (continued) | ||||||||
Equity Real Estate Investment Trusts (REITS) (continued) | ||||||||
IIP Operating Partnership LP, 5.50%, | ||||||||
5/25/2026 | 3,950,000 | $ | 3,574,798 | |||||
Pelorus Fund REIT LLC, 7.00%, | ||||||||
9/30/2026 (Acquired 09/21/2021, cost | ||||||||
$3,500,000)5 | 3,500,000 | 3,169,508 | ||||||
SBA Tower Trust, | ||||||||
2.836%, 1/15/20254 | 3,500,000 | 3,380,846 | ||||||
1.884%, 1/15/20264 | 2,750,000 | 2,542,284 | ||||||
Simon Property Group LP, 2.65%, | ||||||||
2/1/2032 | 5,500,000 | 4,558,098 | ||||||
19,209,431 | ||||||||
Real Estate Management & Development - 0.8% | ||||||||
Carrington Holding Co. LLC, 8.00%, | ||||||||
1/1/20264 | 3,500,000 | 3,282,488 | ||||||
Trym AS (Norway) (3 mo. NIBOR + | ||||||||
7.750%), 9.10%, 9/10/2024 (Acquired | ||||||||
08/31/2021, cost $3,446,157)3,5 | NOK | 30,000,000 | 2,926,631 | |||||
6,209,119 | ||||||||
Total Real Estate | 25,418,550 | |||||||
Utilities - 1.6% | ||||||||
Electric Utilities - 1.2% | ||||||||
Alexander Funding Trust, 1.841%, | ||||||||
11/15/20234 | 10,000,000 | 9,551,993 | ||||||
Independent Power and Renewable Electricity Producers - 0.4% | ||||||||
Vistra Operations Co. LLC, 3.55%, | ||||||||
7/15/20244 | 3,500,000 | 3,380,735 | ||||||
Total Utilities | 12,932,728 | |||||||
TOTAL CORPORATE BONDS | ||||||||
(Identified Cost $291,300,853) | 270,050,258 | |||||||
ASSET-BACKED SECURITIES - 30.1% | ||||||||
Aligned Data Centers Issuer LLC, | ||||||||
Series 2021-1A, Class A2, 1.937%, | ||||||||
8/15/20464 | 4,500,000 | 3,989,032 | ||||||
Ally Auto Receivables Trust, Series | ||||||||
2022-1, Class A1, 1.355%, 5/15/2023 | 5,093,982 | 5,085,815 | ||||||
BRSP Ltd., Series 2021-FL1, Class A, | ||||||||
(1 mo. LIBOR US + 1.150%), 2.762%, | ||||||||
8/19/20383,4 | 3,000,000 | 2,879,795 | ||||||
Business Jet Securities LLC, Series | ||||||||
2021-1A, Class A, 2.162%, 4/15/20364 | 4,301,731 | 3,892,935 | ||||||
Carvana Auto Receivables Trust, | ||||||||
Series 2020-N1A, Class B, 2.01%, | ||||||||
3/17/20254 | 2,609,084 | 2,605,524 | ||||||
Series 2020-P1, Class A4, 0.61%, | ||||||||
10/8/2026 | 5,788,000 | 5,463,075 | ||||||
CF Hippolyta Issuer LLC, | ||||||||
Series 2020-1, Class A1, 1.69%, | ||||||||
7/15/20604 | 3,774,064 | 3,423,122 |
The accompanying notes are an integral part of the financial statements.
5
Unconstrained Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
CF Hippolyta Issuer LLC, (continued) | ||||||||
Series 2020-1, Class B1, 2.28%, | ||||||||
7/15/20604 | 1,841,007 | $ | 1,653,002 | |||||
CLI Funding VIII LLC, Series 2021-1A, | ||||||||
Class A, 1.64%, 2/18/20464 | 5,804,274 | 5,107,103 | ||||||
College Ave Student Loans LLC, Series | ||||||||
2021-A, Class A2, 1.60%, 7/25/20514 | 1,983,815 | 1,792,386 | ||||||
Commonbond Student Loan Trust, | ||||||||
Series 2019-AGS, Class A1, 2.54%, | ||||||||
1/25/20474 | 2,157,948 | 2,044,100 | ||||||
CoreVest American Finance Trust, | ||||||||
Series 2019-1, Class A, 3.324%, | ||||||||
3/15/20524 | 2,129,557 | 2,103,760 | ||||||
Series 2019-3, Class A, 2.705%, | ||||||||
10/15/20524 | 2,032,365 | 1,945,633 | ||||||
Series 2020-3, Class A, 1.358%, | ||||||||
8/15/20534 | 1,283,219 | 1,169,955 | ||||||
Series 2020-4, Class A, 1.174%, | ||||||||
12/15/20524 | 1,096,992 | 997,216 | ||||||
Credit Acceptance Auto Loan Trust, | ||||||||
Series 2020-3A, Class A, 1.24%, | ||||||||
10/15/20294 | 6,410,000 | 6,243,939 | ||||||
Series 2021-2A, Class C, 1.64%, | ||||||||
6/17/20304 | 3,800,000 | 3,433,233 | ||||||
Series 2021-3A, Class C, 1.63%, | ||||||||
9/16/20304 | 3,000,000 | 2,717,922 | ||||||
Series 2022-1A, Class A, 4.60%, | ||||||||
6/15/20324 | 7,400,000 | 7,417,512 | ||||||
DataBank Issuer, Series 2021-1A, Class | ||||||||
A2, 2.06%, 2/27/20514 | 5,200,000 | 4,704,859 | ||||||
Diamond Infrastructure Funding LLC, | ||||||||
Series 2021-1A, Class A, 1.76%, | ||||||||
4/15/20494 | 5,000,000 | 4,299,851 | ||||||
EDvestinU Private Education Loan Issue | ||||||||
No. 1 LLC, | ||||||||
Series 2019-A, Class A, 3.58%, | ||||||||
11/25/20384 | 1,829,970 | 1,754,808 | ||||||
Series 2021-A, Class A, 1.80%, | ||||||||
11/25/20454 | 2,040,591 | 1,814,129 | ||||||
Flagship Credit Auto Trust, Series 2019- | ||||||||
4, Class B, 2.53%, 11/17/20254 | 7,194,000 | 7,184,679 | ||||||
Flexential Issuer, Series 2021-1A, Class | ||||||||
A2, 3.25%, 11/27/20514 | 4,760,000 | 4,357,532 | ||||||
Ford Credit Auto Lease Trust, Series | ||||||||
2022-A, Class A1, 1.374%, 5/15/2023 | 3,320,054 | 3,315,363 | ||||||
FS RIALTO, Series 2021-FL2, Class A, | ||||||||
(Cayman Islands) (1 mo. LIBOR US + | ||||||||
1.220%), 2.729%, 5/16/20383,4 | 3,000,000 | 2,884,625 | ||||||
Goodgreen Trust, Series 2020-1A, Class | ||||||||
A, 2.63%, 4/15/20554 | 3,598,668 | 3,263,651 | ||||||
Hertz Vehicle Financing LLC, Series | ||||||||
2021-1A, Class B, 1.56%, 12/26/20254 | 3,000,000 | 2,793,906 | ||||||
Hotwire Funding LLC, Series 2021-1, | ||||||||
Class A2, 2.311%, 11/20/20514 | 3,500,000 | 3,108,878 | ||||||
HTS Fund I LLC, Series 2021-1, Class | ||||||||
A, 1.411%, 8/25/20364 | 1,750,000 | 1,714,000 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
Hyundai Auto Lease Securitization Trust, | ||||||||
Series 2020-B, Class A3, 0.51%, | ||||||||
9/15/20234 | 4,897,323 | $ | 4,876,376 | |||||
ITE Rail Fund Levered LP, Series 2021- | ||||||||
3A, Class A, 2.21%, 6/28/20514 | 5,717,552 | 5,134,115 | ||||||
KREF Ltd., Series 2021-FL2, Class AS, | ||||||||
(1 mo. LIBOR US + 1.300%), 2.823%, | ||||||||
2/15/20393,4 | 3,500,000 | 3,296,272 | ||||||
Laurel Road Prime Student Loan Trust, | ||||||||
Series 2019-A, Class A2FX, 2.73%, | ||||||||
10/25/20484 | 517,658 | 508,976 | ||||||
LCCM Trust, | ||||||||
Series 2021-FL2, Class AS, (1 mo. | ||||||||
LIBOR US + 1.550%), 2.874%, | ||||||||
12/13/20383,4 | 2,000,000 | 1,894,862 | ||||||
Series 2021-FL2, Class B, (1 mo. | ||||||||
LIBOR US + 1.900%), 3.224%, | ||||||||
12/13/20383,4 | 3,000,000 | 2,832,222 | ||||||
LFS LLC, Series 2022-A, Class | ||||||||
A, 5.25%, 5/15/2034 (Acquired | ||||||||
05/11/2022, cost $7,843,177)5 | 7,872,305 | 7,804,645 | ||||||
Libra Solutions LLC, Series 2022-1A, | ||||||||
Class A, 4.75%, 5/15/20344 | 3,873,889 | 3,833,832 | ||||||
Navient Private Education Loan Trust, | ||||||||
Series 2014-1, Class A3, (1 mo. | ||||||||
LIBOR US + 0.510%), 2.134%, | ||||||||
6/25/20313 | 4,346,900 | 4,152,390 | ||||||
Series 2015-BA, Class A3, (1 mo. | ||||||||
LIBOR US + 1.450%), 2.774%, | ||||||||
7/16/20403,4 | �� | 2,125,559 | 2,113,338 | |||||
Series 2017-2A, Class A, (1 mo. | ||||||||
LIBOR US + 1.050%), 2.674%, | ||||||||
12/27/20663,4 | 3,322,755 | 3,299,909 | ||||||
Series 2020-1A, Class A1B, (1 mo. | ||||||||
LIBOR US + 1.050%), 2.674%, | ||||||||
6/25/20693,4 | 2,493,663 | 2,450,214 | ||||||
Series 2020-GA, Class A, 1.17%, | ||||||||
9/16/20694 | 698,098 | 656,031 | ||||||
Series 2021-1A, Class A1A, 1.31%, | ||||||||
12/26/20694 | 5,942,278 | 5,100,292 | ||||||
Series 2021-A, Class A, 0.84%, | ||||||||
5/15/20694 | 1,051,836 | 963,216 | ||||||
Series 2022-A, Class A, 2.23%, | ||||||||
7/15/20704 | 3,810,795 | 3,587,710 | ||||||
Oxford Finance Funding LLC, | ||||||||
Series 2019-1A, Class A2, 4.459%, | ||||||||
2/15/20274 | 4,447,961 | 4,434,490 | ||||||
Series 2020-1A, Class A2, 3.101%, | ||||||||
2/15/20284 | 6,832,325 | 6,770,036 | ||||||
Series 2020-1A, Class B, 4.037%, | ||||||||
2/15/20284 | 2,794,289 | 2,690,949 | ||||||
Series 2022-1A, Class A2, 3.602%, | ||||||||
2/15/20304 | 4,650,000 | 4,382,572 | ||||||
PEAR LLC, Series 2021-1, Class | ||||||||
A, 2.60%, 1/15/2034 (Acquired | ||||||||
11/16/2021, cost $5,131,907)5 | 5,131,907 | 4,899,089 | ||||||
Progress Residential Trust, Series 2019- | ||||||||
SFR4, Class A, 2.687%, 10/17/20364 | 3,800,000 | 3,712,743 |
The accompanying notes are an integral part of the financial statements.
6
Unconstrained Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
Santander Drive Auto Receivables | ||||||||
Trust, Series 2020-2, Class C, 1.46%, | ||||||||
9/15/2025 | 6,614,834 | $ | 6,577,425 | |||||
Slam Ltd., Series 2021-1A, Class A, | ||||||||
(Cayman Islands), 2.434%, 6/15/20464 | 6,000,000 | 5,181,240 | ||||||
SMB Private Education Loan Trust, | ||||||||
Series 2014-A, Class A3, (1 mo. | ||||||||
LIBOR US + 1.500%), 2.824%, | ||||||||
4/15/20323,4 | 2,850,604 | 2,855,680 | ||||||
Series 2019-B, Class A2A, 2.84%, | ||||||||
6/15/20374 | 2,890,615 | 2,767,524 | ||||||
Series 2020-B, Class A1A, 1.29%, | ||||||||
7/15/20534 | 1,662,296 | 1,522,362 | ||||||
SoFi Professional Loan Program LLC, | ||||||||
Series 2016-C, Class A2B, 2.36%, | ||||||||
12/27/20324 | 14,742 | 14,713 | ||||||
Series 2017-F, Class A2FX, 2.84%, | ||||||||
1/25/20414 | 197,734 | 194,992 | ||||||
Stack Infrastructure Issuer LLC, | ||||||||
Series 2021-1A, Class A2, 1.877%, | ||||||||
3/26/20464 | 3,400,000 | 3,044,628 | ||||||
Stonepeak, Series 2021-1A, Class AA, | ||||||||
2.301%, 2/28/20334 | 1,065,426 | 993,510 | ||||||
Store Master Funding I-VII and XIV, | ||||||||
Series 2019-1, Class A1, 2.82%, | ||||||||
11/20/20494 | 2,389,794 | 2,224,400 | ||||||
Textainer Marine Containers VII Ltd., | ||||||||
Series 2021-1A, Class A, (China), | ||||||||
1.68%, 2/20/20464 | 5,896,000 | 5,148,390 | ||||||
Towd Point Mortgage Trust, | ||||||||
Series 2016-5, Class A1, 2.50%, | ||||||||
10/25/20564,8 | 234,253 | 232,458 | ||||||
Series 2017-1, Class A1, 2.75%, | ||||||||
10/25/20564,8 | 789,498 | 783,164 | ||||||
Series 2018-2, Class A1, 3.25%, | ||||||||
3/25/20584,8 | 652,432 | 638,979 | ||||||
Series 2019-HY1, Class A1, (1 mo. | ||||||||
LIBOR US + 1.000%), 2.624%, | ||||||||
10/25/20483,4 | 1,520,649 | 1,502,816 | ||||||
Tricon American Homes, Series 2020- | ||||||||
SFR1, Class C, 2.249%, 7/17/20384 | 2,500,000 | 2,264,881 | ||||||
Trinity Rail Leasing 2018 LLC, Series | ||||||||
2020-1A, Class A, 1.96%, 10/17/20504 | 2,432,764 | 2,218,982 | ||||||
Trinity Rail Leasing 2021 LLC, Series | ||||||||
2021-1A, Class A, 2.26%, 7/19/20514 | 1,924,157 | 1,682,720 | ||||||
Triton Container Finance VIII LLC, Series | ||||||||
2021-1A, Class A, (Bermuda), 1.86%, | ||||||||
3/20/20464 | 5,898,750 | 5,176,916 | ||||||
TRP LLC, Series 2021-1, Class A, | ||||||||
2.07%, 6/19/20514 | 2,950,849 | 2,604,787 | ||||||
Vantage Data Centers Issuer LLC, | ||||||||
Series 2020-1A, Class A2, 1.645%, | ||||||||
9/15/20454 | 6,500,000 | 5,896,668 | ||||||
Vertical Bridge Holdings LLC, Series | ||||||||
2020-2A, Class A, 2.636%, 9/15/20504 | 4,000,000 | 3,722,136 | ||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||
(Identified Cost $256,979,064) | 241,804,990 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES - 13.1% | ||||||||
BDS, Series 2021-FL8, Class B, | ||||||||
(Cayman Islands) (1 mo. LIBOR US + | ||||||||
1.350%), 2.962%, 1/18/20363,4 | 3,000,000 | $ | 2,860,008 | |||||
BRAVO Residential Funding Trust, | ||||||||
Series 2019-2, Class A3, 3.50%, | ||||||||
10/25/20444,8 | 3,941,165 | 3,804,980 | ||||||
Brean Asset Backed Securities Trust, | ||||||||
Series 2021-RM2, Class A, 1.75%, | ||||||||
10/25/20614,8 | 2,844,335 | 2,548,168 | ||||||
CIM Trust, Series 2019-INV1, Class A1, | ||||||||
4.00%, 2/25/20494,8 | 92,964 | 92,601 | ||||||
Credit Suisse Mortgage Capital Trust, | ||||||||
Series 2013-TH1, Class A1, 2.13%, | ||||||||
2/25/20434,8 | 121,858 | 109,922 | ||||||
Fannie Mae REMICS, Series 2018-31, | ||||||||
Class KP, 3.50%, 7/25/2047 | 115,600 | 115,462 | ||||||
Fontainebleau Miami Beach Trust, | ||||||||
Series 2019-FBLU, Class A, 3.144%, | ||||||||
12/10/20364 | 4,480,000 | 4,303,614 | ||||||
Freddie Mac Multifamily Structured | ||||||||
Pass-Through Certificates, | ||||||||
Series K030, Class X1 (IO), 0.259%, | ||||||||
4/25/20238 | 49,680,227 | 50,440 | ||||||
Series K032, Class X1 (IO), 0.181%, | ||||||||
5/25/20238 | 29,866,648 | 23,354 | ||||||
Series K106, Class X1 (IO), 1.477%, | ||||||||
1/25/20308 | 53,818,090 | 4,397,317 | ||||||
FREMF Mortgage Trust, | ||||||||
Series 2013-K28, Class X2A (IO), | ||||||||
0.10%, 6/25/20464 | 78,478,092 | 29,960 | ||||||
Series 2015-K42, Class B, 3.980%, | ||||||||
1/25/20484,8 | 1,900,000 | 1,863,323 | ||||||
Series 2015-K43, Class B, 3.859%, | ||||||||
2/25/20484,8 | 1,500,000 | 1,467,797 | ||||||
GCAT Trust, Series 2022-NQM3, Class | ||||||||
A1, 4.348%, 4/25/20674,8 | 9,844,302 | 9,735,557 | ||||||
GS Mortgage Securities Corp. Trust, | ||||||||
Series 2021-RENT, Class B, (1 mo. | ||||||||
LIBOR US + 1.100%), 2.712%, | ||||||||
11/21/20353,4 | 3,958,981 | 3,902,402 | ||||||
GS Mortgage-Backed Securities Trust, | ||||||||
Series 2021-GR3, Class A6, 2.50%, | ||||||||
4/25/20524,8 | 5,916,149 | 5,369,669 | ||||||
Series 2021-PJ9, Class A8, 2.50%, | ||||||||
2/26/20524,8 | 3,539,445 | 3,218,996 | ||||||
Series 2022-PJ1, Class A15, (U.S. | ||||||||
Secured Overnight Financing Rate | ||||||||
30 Day Average + 0.850%), 1.776%, | ||||||||
5/28/20523,4 | 4,748,231 | 4,409,677 | ||||||
Series 2022-PJ3, Class A24, 3.00%, | ||||||||
8/25/20524,8 | 9,742,872 | 9,064,660 | ||||||
Imperial Fund Mortgage Trust, | ||||||||
Series 2022-NQM2, Class A1, | ||||||||
3.638%, 3/25/20674,9 | 7,262,348 | 6,861,170 | ||||||
Series 2022-NQM3, Class A1, 4.38%, | ||||||||
5/25/20674,9 | 4,579,138 | 4,558,769 | ||||||
Series 2022-NQM4, Class A1, | ||||||||
4.767%, 6/25/20674,9 | 9,959,692 | 9,890,756 |
The accompanying notes are an integral part of the financial statements.
7
Unconstrained Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
J.P. Morgan Mortgage Trust, | ||||||||
Series 2014-2, Class 1A1, 3.00%, | ||||||||
6/25/20294,8 | 434,836 | $ | 417,433 | |||||
Series 2022-INV3, Class A4B, 3.00%, | ||||||||
9/25/20524,8 | 7,594,921 | 7,051,685 | ||||||
Metlife Securitization Trust, Series 2019- | ||||||||
1A, Class A, 3.75%, 4/25/20584,8 | 893,781 | 869,709 | ||||||
New Residential Mortgage Loan Trust, | ||||||||
Series 2014-3A, Class AFX3, 3.75%, | ||||||||
11/25/20544,8 | 285,283 | 276,226 | ||||||
Series 2015-2A, Class A1, 3.75%, | ||||||||
8/25/20554,8 | 400,972 | 387,308 | ||||||
Series 2019-2A, Class A1, 4.25%, | ||||||||
12/25/20574,8 | 1,978,260 | 1,951,064 | ||||||
NYMT Loan Trust, Series 2022-CP1, | ||||||||
Class A1, 2.042%, 7/25/20614 | 2,471,058 | 2,327,623 | ||||||
RCKT Mortgage Trust, Series 2021-6, | ||||||||
Class A5, 2.50%, 12/25/20514,8 | 5,640,001 | 5,124,329 | ||||||
RUN Trust, Series 2022-NQM1, Class | ||||||||
A1, 4.00%, 3/25/20674 | 3,420,563 | 3,338,837 | ||||||
Sequoia Mortgage Trust, | ||||||||
Series 2013-2, Class A, 1.874%, | ||||||||
2/25/20438 | 135,589 | 121,508 | ||||||
Series 2013-6, Class A2, 3.00%, | ||||||||
5/25/20438 | 1,394,015 | 1,302,493 | ||||||
Series 2013-7, Class A2, 3.00%, | ||||||||
6/25/20438 | 133,417 | 124,729 | ||||||
Series 2013-8, Class A1, 3.00%, | ||||||||
6/25/20438 | 158,096 | 148,126 | ||||||
Starwood Retail Property Trust, Series | ||||||||
2014-STAR, Class A, (1 mo. LIBOR | ||||||||
US + 1.470%), 2.795%, 11/15/20273,4 | 1,777,115 | 1,237,310 | ||||||
Sutherland Commercial Mortgage Trust, | ||||||||
Series 2019-SBC8, Class A, 2.86%, | ||||||||
4/25/20414,8 | 2,417,199 | 2,252,907 | ||||||
WinWater Mortgage Loan Trust, Series | ||||||||
2015-1, Class A1, 3.50%, 1/20/20454,8 | 79,492 | 76,794 | ||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES | ||||||||
(Identified Cost $108,800,445) | 105,686,683 | |||||||
FOREIGN GOVERNMENT BONDS - 0.7% | ||||||||
Mexico Government International Bond | ||||||||
(Mexico), 4.125%, 1/21/2026 | 1,800,000 | 1,800,204 | ||||||
Republic of Italy Government | ||||||||
International Bond (Italy), 2.375%, | ||||||||
10/17/2024 | 4,500,000 | 4,357,896 | ||||||
TOTAL FOREIGN GOVERNMENT BONDS | ||||||||
(Identified Cost $6,245,967) | 6,158,100 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS - 0.4% | ||||||||
Hawaii, Series GC, G.O. Bond, 2.632%, | ||||||||
10/1/2037 | ||||||||
(Identified Cost $4,060,712) | 3,905,000 | $ | 3,143,017 | |||||
U.S. TREASURY SECURITIES - 3.8% | ||||||||
U.S. Treasury Notes - 3.8% | ||||||||
U.S. Treasury Note | ||||||||
0.125%, 8/31/2023 | 21,400,000 | 20,712,023 | ||||||
0.375%, 8/15/2024 | 10,460,000 | 9,902,678 | ||||||
TOTAL U.S. TREASURY SECURITIES | ||||||||
(Identified Cost $31,836,347) | 30,614,701 | |||||||
U.S. GOVERNMENT AGENCIES - 0.2% | ||||||||
Mortgage-Backed Securities - 0.2% | ||||||||
Fannie Mae | ||||||||
Pool #888810, UMBS, 5.50%, | ||||||||
11/1/2022 | 39 | 39 | ||||||
Pool #AD0462, UMBS, 5.50%, | ||||||||
10/1/2024 | 2,943 | 3,004 | ||||||
Pool #MA0115, UMBS, 4.50%, | ||||||||
7/1/2029 | 31,491 | 32,479 | ||||||
Pool #MA1834, UMBS, 4.50%, | ||||||||
2/1/2034 | 132,510 | 135,903 | ||||||
Pool #995876, UMBS, 6.00%, | ||||||||
11/1/2038 | 224,416 | 245,277 | ||||||
Pool #AW5338, UMBS, 4.50%, | ||||||||
6/1/2044 | 485,814 | 493,396 | ||||||
Pool #AS3878, UMBS, 4.50%, | ||||||||
11/1/2044 | 382,463 | 392,888 | ||||||
Pool #BE7845, UMBS, 4.50%, | ||||||||
2/1/2047 | 97,536 | 99,517 | ||||||
Freddie Mac | ||||||||
Pool #G12988, 6.00%, 1/1/2023 | 196 | 196 | ||||||
Pool #G13078, 6.00%, 3/1/2023 | 309 | 309 | ||||||
Pool #G13331, 5.50%, 10/1/2023 | 482 | 487 | ||||||
Pool #C91359, 4.50%, 2/1/2031 | 86,915 | 89,713 | ||||||
Pool #D98711, 4.50%, 7/1/2031 | 246,491 | 254,443 | ||||||
Pool #C91746, 4.50%, 12/1/2033 | 187,494 | 192,477 | ||||||
Pool #G05900, 6.00%, 3/1/2040 | 39,320 | 43,225 | ||||||
TOTAL U.S. GOVERNMENT AGENCIES | ||||||||
(Identified Cost $2,017,418) | 1,983,353 |
The accompanying notes are an integral part of the financial statements.
8
Unconstrained Bond Series
Investment Portfolio - June 30, 2022
(unaudited)
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
SHORT-TERM INVESTMENT - 11.2% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 1.35%10 (Identified Cost $89,880,190) | 89,880,190 | $ | 89,880,190 | |||||
TOTAL INVESTMENTS - 96.3% | ||||||||
(Identified Cost $815,924,969) | 774,586,067 | |||||||
OTHER ASSETS, LESS LIABILITIES - | ||||||||
OTHER ASSETS, LESS LIABILITIES - 3.7% | 29,523,332 | |||||||
NET ASSETS - 100% | $ | 804,109,399 |
EUR - Euro
EURIBOR - Euro Interbank Offered Rate
G.O. Bond - General Obligation Bond
IO - Interest only
LIBOR - London Interbank Offered Rate
NIBOR - Norwegian Interbank Offered Rate
No. - Number
NOK - Norwegian Krone
REMICS - Real Estate Mortgage Investment Conduits
SEK - Swedish Krona
STIB - Stockholm Interbank Offered Rate
UMBS - Uniform Mortgage-Backed Securities
*Non-income producing security. |
1Amount is stated in USD unless otherwise noted. |
2Security has been valued using significant unobservable inputs. |
3Floating rate security. Rate shown is the rate in effect as of June 30, 2022. |
4Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be liquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at June 30, 2022 was $404,169,441, which represented 50.3% of the Series’ Net Assets. |
5Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of such securities at June 30, 2022 was $46,652,222, or 5.8% of the Series’ Net Assets. |
6Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of June 30, 2022. |
7Issuer filed for bankruptcy and/or is in default of interest payments. |
8Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of June 30, 2022. |
9Represents a step-up bond that pays initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown reflects the current coupon as of June 30, 2022. |
10Rate shown is the current yield as of June 30, 2022. |
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
9
Unconstrained Bond Series
Statement of Assets and Liabilities
June 30, 2022 (unaudited)
ASSETS: | ||||
Investments in securities, at value (identified cost $815,924,969) (Note 2) | $ | 774,586,067 | ||
Foreign currency, at value (identified cost $9,052,451) | 8,921,906 | |||
Receivable for securities sold | 12,135,805 | |||
Deposits at broker for futures contracts | 4,296,772 | |||
Interest receivable | 4,199,225 | |||
Receivable for fund shares sold | 1,912,510 | |||
Dividends receivable | 67,940 | |||
Prepaid expenses | 35,976 | |||
TOTAL ASSETS | 806,156,201 | |||
LIABILITIES: | ||||
Due to custodian | 63,390 | |||
Accrued management fees (Note 3) | 31,437 | |||
Accrued fund accounting and administration fees (Note 3) | 30,725 | |||
Accrued sub-transfer agent fees (Note 3) | 26,802 | |||
Accrued distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 4,636 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 714 | |||
Payable for fund shares repurchased | 1,833,021 | |||
Other payables and accrued expenses | 56,077 | |||
TOTAL LIABILITIES | 2,046,802 | |||
TOTAL NET ASSETS | $ | 804,109,399 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 845,050 | ||
Additional paid-in-capital | 865,044,593 | |||
Total distributable earnings (loss) | (61,780,244 | ) | ||
TOTAL NET ASSETS | $ | 804,109,399 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S | ||||
($22,973,316/2,342,935 shares) | $ | 9.81 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I | ||||
($156,948,756/18,302,523 shares) | $ | 8.58 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W | ||||
($624,187,327/63,859,570 shares) | $ | 9.77 |
The accompanying notes are an integral part of the financial statements.
10
Unconstrained Bond Series
Statement of Operations
For the Six Months Ended June 30, 2022 (unaudited)
INVESTMENT INCOME: | ||||
Interest | $ | 11,999,188 | ||
Dividends | 317,198 | |||
Total Investment Income | 12,316,386 | |||
EXPENSES: | ||||
Management fees (Note 3) | 1,121,748 | |||
Fund accounting and administration fees (Note 3) | 73,951 | |||
Accrued sub-transfer agent fees (Note 3) | 41,448 | |||
Directors’ fees (Note 3) | 41,245 | |||
Distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 25,048 | |||
Chief Compliance Officer service fees (Note 3) | 3,510 | |||
Custodian fees | 19,629 | |||
Miscellaneous | 119,892 | |||
Total Expenses | 1,446,471 | |||
Less reduction of expenses (Note 3) | (1,030,807 | ) | ||
Net Expenses | 415,664 | |||
NET INVESTMENT INCOME | 11,900,722 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: | ||||
Net realized gain (loss) on- | ||||
Investments | (12,096,598 | ) | ||
Futures contracts | (13,118,066 | ) | ||
Foreign currency and translation of other assets and liabilities | 149,663 | |||
(25,065,001 | ) | |||
Net change in unrealized appreciation (depreciation) on- | ||||
Investments | (39,125,641 | ) | ||
Futures contracts | 2,970,549 | |||
Foreign currency and translation of other assets and liabilities | (191,398 | ) | ||
(36,346,490 | ) | |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY | (61,411,491 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (49,510,769 | ) |
The accompanying notes are an integral part of the financial statements.
11
Unconstrained Bond Series
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED 12/31/21 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 11,900,722 | $ | 23,728,961 | ||||
Net realized gain (loss) on investments and foreign currency | (25,065,001 | ) | 22,037,924 | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (36,346,490 | ) | (24,025,171 | ) | ||||
Net increase (decrease) from operations | (49,510,769 | ) | 21,741,714 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | ||||||||
Class S | (198,303 | ) | (1,000,768 | ) | ||||
Class I | (1,191,462 | ) | (2,012,290 | ) | ||||
Class W | (7,685,585 | ) | (40,773,813 | ) | ||||
Total distributions to shareholders | (9,075,350 | ) | (43,786,871 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | 134,472,523 | 76,085,887 | ||||||
Net increase (decrease) in net assets | 75,886,404 | 54,040,730 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 728,222,995 | 674,182,265 | ||||||
End of period | $ | 804,109,399 | $ | 728,222,995 |
The accompanying notes are an integral part of the financial statements.
12
Unconstrained Bond Series
Financial Highlights - Class S
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED | ||||||||||||||||||
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||||
Per share data (for a share outstanding | |||||||||||||||||||
throughout each period): | |||||||||||||||||||
Net asset value - Beginning of period | $10.61 | $10.93 | $10.44 | $10.18 | $10.42 | $10.33 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.13 | 0.30 | 0.29 | 0.28 | 0.26 | 0.22 | |||||||||||||
Net realized and unrealized gain (loss) on investments | (0.84 | ) | (0.02 | ) | 0.48 | 0.23 | (0.24 | ) | 0.11 | ||||||||||
Total from investment operations | (0.71 | ) | 0.28 | 0.77 | 0.51 | 0.02 | 0.33 | ||||||||||||
Less distributions to shareholders: | |||||||||||||||||||
From net investment income | (0.09 | ) | (0.30 | ) | (0.28 | ) | (0.25 | ) | (0.25 | ) | (0.23 | ) | |||||||
From net realized gain on investments | — | (0.30 | ) | (0.00 | )2 | — | (0.01 | ) | (0.01 | ) | |||||||||
Total distributions to shareholders | (0.09 | ) | (0.60 | ) | (0.28 | ) | (0.25 | ) | (0.26 | ) | (0.24 | ) | |||||||
Net asset value - End of period | $9.81 | $10.61 | $10.93 | $10.44 | $10.18 | $10.42 | |||||||||||||
Net assets - End of period (000’s omitted) | $22,973 | $17,776 | $20,925 | $22,884 | $685,649 | $770,824 | |||||||||||||
Total return3 | (6.67% | ) | 2.59% | 7.54% | 5.01% | 0.20% | 3.19% | ||||||||||||
Ratios (to average net assets)/ | |||||||||||||||||||
Supplemental Data: | |||||||||||||||||||
Expenses* | 0.70% | 4 | 0.73% | 0.73% | 0.75% | 0.75% | 0.75% | ||||||||||||
Net investment income | 2.60% | 4 | 2.71% | 2.74% | 2.80% | 2.56% | 2.08% | ||||||||||||
Series portfolio turnover | 33% | 69% | 96% | 75% | 58% | 62% | |||||||||||||
*For certain periods presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some periods may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | |||||||||||||||||||
N/A | N/A | N/A | 0.01% | 0.01% | 0.00% | 5 |
1Calculated based on average shares outstanding during the periods. |
2Less than $(0.01). |
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain periods. Periods less than one year are not annualized. |
4Annualized. |
5Less than 0.01%. |
The accompanying notes are an integral part of the financial statements.
13
Unconstrained Bond Series
Financial Highlights - Class I
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED | ||||||||||||||||||
12/31/21 | 12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | |||||||||||||||
Per share data (for a share outstanding | |||||||||||||||||||
throughout each period): | |||||||||||||||||||
Net asset value - Beginning of period | $9.29 | $9.65 | $9.26 | $9.09 | $9.34 | $9.28 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||
Net investment income1 | 0.13 | 0.29 | 0.28 | 0.28 | 0.26 | 0.22 | |||||||||||||
Net realized and unrealized gain (loss) on investments | (0.74 | ) | (0.02 | ) | 0.42 | 0.20 | (0.22 | ) | 0.11 | ||||||||||
Total from investment operations | (0.61 | ) | 0.27 | 0.70 | 0.48 | 0.04 | 0.33 | ||||||||||||
Less distributions to shareholders: | |||||||||||||||||||
From net investment income | (0.10 | ) | (0.33 | ) | (0.31 | ) | (0.31 | ) | (0.28 | ) | (0.26 | ) | |||||||
From net realized gain on investments | — | (0.30 | ) | (0.00 | )2 | — | (0.01 | ) | (0.01 | ) | |||||||||
Total distributions to shareholders | (0.10 | ) | (0.63 | ) | (0.31 | ) | (0.31 | ) | (0.29 | ) | (0.27 | ) | |||||||
Net asset value - End of period | $8.58 | $9.29 | $9.65 | $9.26 | $9.09 | $9.34 | |||||||||||||
Net assets - End of period (000’s omitted) | $156,949 | $36,639 | $21,687 | $19,039 | $28,499 | $66,543 | |||||||||||||
Total return3 | (6.53% | ) | 2.81% | 7.74% | 5.37% | 0.40% | 3.52% | ||||||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||||||
Expenses* | 0.45% | 4 | 0.49% | 0.49% | 0.48% | 0.50% | 0.50% | ||||||||||||
Net investment income | 2.87% | 4 | 2.97% | 2.96% | 3.01% | 2.75% | 2.33% | ||||||||||||
Series portfolio turnover | 33% | 69% | 96% | 75% | 58% | 62% | |||||||||||||
*For certain periods presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some periods may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | |||||||||||||||||||
N/A | N/A | N/A | 0.01% | 0.01% | 0.00% | 5 |
1Calculated based on average shares outstanding during the periods.
2Less than $(0.01).
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain periods. Periods less than one year are not annualized.
4Annualized.
5Less than 0.01%.
The accompanying notes are an integral part of the financial statements.
14
Unconstrained Bond Series
Financial Highlights - Class W
FOR THE SIX MONTHS ENDED 6/30/22 (UNAUDITED) | FOR THE YEAR ENDED | FOR THE PERIOD 3/1/191 TO 12/31/19 | |||||||||||
12/31/21 | 12/31/20 | ||||||||||||
Per share data (for a share outstanding throughout each period): | |||||||||||||
Net asset value - Beginning of period | $10.57 | $10.90 | $10.41 | $10.34 | |||||||||
Income (loss) from investment operations: | |||||||||||||
Net investment income2 | 0.16 | 0.37 | 0.36 | 0.30 | |||||||||
Net realized and unrealized gain (loss) on investments | (0.84 | ) | (0.03 | ) | 0.49 | 0.12 | |||||||
Total from investment operations | (0.68 | ) | 0.34 | 0.85 | 0.42 | ||||||||
Less distributions to shareholders: | |||||||||||||
From net investment income | (0.12 | ) | (0.37 | ) | (0.36 | ) | (0.35 | ) | |||||
From net realized gain on investments | — | (0.30 | ) | (0.00 | )3 | — | |||||||
Total distributions to shareholders | (0.12 | ) | (0.67 | ) | (0.36 | ) | (0.35 | ) | |||||
Net asset value - End of period | $9.77 | $10.57 | $10.90 | $10.41 | |||||||||
Net assets - End of period (000’s omitted) | $624,187 | $673,807 | $631,570 | $859,888 | |||||||||
Total return4 | (6.44% | ) | 3.19% | 8.29% | 4.10% | 5 | |||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||
Expenses* | 0.05% | 6 | 0.05% | 0.05% | 0.05% | 6 | |||||||
Net investment income | 3.24% | 6 | 3.40% | 3.40% | 3.44% | 6 | |||||||
Series portfolio turnover | 33% | 69% | 96% | 75% | |||||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | |||||||||||||
0.32% | 6 | 0.32% | 0.32% | 0.31% | 6 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Less than $(0.01).
4Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
5Includes litigation proceeds. Excluding this amount, the Class’ total return is 4.00%.
6Annualized.
The accompanying notes are an integral part of the financial statements.
15
Unconstrained Bond Series
Notes to Financial Statements
(unaudited)
1. | Organization |
Unconstrained Bond 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 total return, and its secondary objective is to provide preservation of capital.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The Series is authorized to issue four classes of shares (Class S, I, W, and Z). 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 total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of June 30, 2022, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Unconstrained Bond Series Class I common stock and Unconstrained Bond Series Class Z common stock, 125 million have been designated as Unconstrained Bond Series Class S common stock and 150 million have been designated as Unconstrained Bond Series Class W common stock. Class Z common stock is not currently offered for sale.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market 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 Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Debt securities, including government bonds, foreign bonds, asset-backed securities, structured notes, supranational obligations, sovereign bonds, corporate bonds, loan assignments, and mortgage-backed securities will normally be valued on the basis of evaluated bid prices provided directly by an independent pricing service (the “Service”). The pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Certain investments in securities held by the Series may be valued on a basis of a price provided directly by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
The fair value of loan assignments is estimated using recently executed transactions, market price quotations, credit/market events, and cross-asset pricing. Inputs are generally observable market inputs obtained from independent sources. Loan assignments are generally categorized in Level 2 of the fair value hierarchy, unless key inputs are unobservable, in which case they would be categorized in Level 3.
Municipal securities will normally be valued on the basis of market valuations provided by the Service. The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
16
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as 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”). 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.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of June 30, 2022 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||
Assets: | |||||||||||||
Equity securities: | |||||||||||||
Energy | $ | 4,610,199 | $ | — | $ | — | $ | 4,610,199 | |||||
Preferred securities: | |||||||||||||
Health Care | 2,679,120 | 2,679,120 | — | — | |||||||||
Information Technology | 5,221,134 | 5,221,134 | — | — | |||||||||
Debt securities: | |||||||||||||
Loan Assignments | 12,754,322 | — | 12,754,322 | — | |||||||||
U.S. Treasury and other U.S. Government agencies | 32,598,054 | — | 32,598,054 | — | |||||||||
States and political subdivisions (municipals) | 3,143,017 | — | 3,143,017 | — | |||||||||
Corporate debt: | |||||||||||||
Communication Services | 42,066,760 | — | 42,066,760 | — | |||||||||
Consumer Discretionary | 29,605,054 | — | 29,605,054 | — | |||||||||
Consumer Staples | 6,687,694 | — | 6,687,694 | — | |||||||||
Energy | 37,540,842 | — | 37,540,842 | — | |||||||||
Financials | 59,014,607 | — | 59,014,607 | — | |||||||||
Industrials | 46,575,954 | — | 46,575,954 | — | |||||||||
Information Technology | 4,890,674 | — | 4,890,674 | — | |||||||||
Materials | 5,317,395 | — | 5,317,395 | — |
17
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||||
Real Estate | $ | 25,418,550 | $ | — | $ | 25,418,550 | $ | — | |||||
Utilities | 12,932,728 | — | 12,932,728 | — | |||||||||
Asset-backed securities | 241,804,990 | — | 241,804,990 | — | |||||||||
Commercial mortgage-backed securities | 105,686,683 | — | 105,686,683 | — | |||||||||
Foreign government bonds | 6,158,100 | — | 6,158,100 | — | |||||||||
Short-Term Investment | 89,880,190 | 89,880,190 | — | — | |||||||||
Total assets | $ | 774,586,067 | $ | 97,780,444 | $ | 672,195,424 | $ | 4,610,199 |
LIBOR Transition Risk
The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”). Although many LIBOR rates will cease to be published or no longer will be representative of the underlying market they seek to measure after December 31, 2021, a selection of widely used USD LIBOR rates will continue to be published through June 2023 in order to assist with the transition. The Series may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The transition process away from LIBOR might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of new hedges placed against, instruments whose terms currently include LIBOR. The ultimate effect of the LIBOR transition process on the Series is uncertain.
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 Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair 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 shareholder services fees), and realized and unrealized gains and losses are prorated among the classes based on the relative net assets of each class. Class specific examples are directly charged to that Class.
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 fair 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.
18
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Forward Foreign Currency Exchange Contracts (continued)
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.
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. The Series’ forward foreign currency exchange contracts are not subject to master netting arrangements (the right to close out all transactions traded with a counterparty, and net amounts owed or due across transactions). No such investments were held by the Series on June 30, 2022.
Futures
The Series may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Series to make or take delivery of a financial instrument or the cash value of a security index at a specified future date at a specified price. The Series may use futures contracts to manage exposure to the bond market or changes in interest rates and currency values, or for gaining exposure to markets. Risks of entering into futures contracts include the possibility that there may be an illiquid market at the time the Advisor to the Series may be attempting to sell some or all the Series’ holdings or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, a Series is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Series, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Series recognize a realized gain or loss when the contract is closed or expires.
Futures transactions involve minimal counterparty risk since futures contracts are guaranteed against default by the exchange on which they trade. The Series’ futures contracts are not subject to master netting arrangements (the right to close out all transactions traded with a counterparty, and net amounts owed or due across transactions).
Option Contracts
The Series may write (sell) or buy call or put options on securities and other financial instruments. When the Series writes a call, the Series gives the purchaser the right to buy the underlying security from the Series at the price specified in the option contract (the “exercise price”) at any time during the option period. When the Series writes a put option, the Series gives the purchaser the right to sell to the Series the underlying security at the exercise price at any time during the option period. The Series will only write options on a “covered basis.” This means that the Series will own the underlying security when the Series writes a call or the Series will put aside cash, U.S. Government securities, or other liquid assets in an amount not less than the exercise price at all times the put option is outstanding.
When the Series writes an option, an amount equal to the premium received is reflected as a liability and is subsequently marked-to-market to reflect the current market value of the option. The Series, as a writer of an option, has no control over whether the underlying security or financial instrument may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the security or financial instrument underlying the written option. There is a risk that the Series may not be able to enter into a closing transaction because of an illiquid market.
The Series may also purchase options in an attempt to hedge against fluctuations in the value of its portfolio and to protect against declines in the value of the securities. The premium paid by the Series for the purchase of an option is reflected as an investment and subsequently marked-to-market to reflect the current market value of the option. The risk associated with purchasing options is limited to the premium paid.
19
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Option Contracts (continued)
When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premium received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received).
The measurement of the risks associated with option contracts is meaningful only when all related and offsetting transactions are considered. No such investments were held by the Series on June 30, 2022.
The following table presents the effect of derivative instruments on the Statement of Operations:
STATEMENT OF OPERATIONS | |||||||
Derivative | Location of Gain or (Loss) on Derivatives | Realized Gain (Loss) on Derivatives | |||||
Credit contracts | Net realized gain (loss) on futures contracts | $ | 338,927 | ||||
Foreign currency exchange contracts | Net realized gain (loss) on futures contracts | $ | (216,939 | ) | |||
Interest rate contracts | Net realized gain (loss) on futures contracts | $ | (13,240,054 | ) | |||
Derivative | Location of Appreciation (Depreciation) on Derivatives | Unrealized Appreciation (Depreciation) on Derivatives | |||||
Credit contracts | Net change in unrealized appreciation(depreciation) on futures contracts | $ | 28,642 | ||||
Interest rate contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | 2,941,907 |
The average month-end balances for the six months ended June 30, 2022 were as follows:
Futures Contracts: | ||||
Average number of contracts purchased | 4,370 | |||
Average number of contracts sold | 3,174 | |||
Average notional value of contracts purchased | $1,066,223,000 | |||
Average notional value of contracts sold | $739,261,598 |
Asset-Backed Securities
The Series may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e. loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Series may subsequently have to reinvest the proceeds at lower interest rates. If the Series has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
20
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Mortgage-Backed Securities
The Series may invest in mortgage-backed securities (“MBS” or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the Series to the periodic payments of principal and interest from those mortgages. MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. For MBS there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury. Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Inflation-Indexed Bonds
The Series may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation-indexed bonds will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
Securities Purchased on a When-Issued Basis or Forward Commitment
The Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss. No such investments were held by the Series on June 30, 2022.
In connection with its ability to purchase or sell securities on a forward commitment basis, the Series may enter into forward roll transactions principally using To Be Announced (TBA) securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Series to receive inferior securities at redelivery as compared to the securities sold to the counterparty; counterparty credit risk; and the potential pay down speed variance between the mortgage-backed pools. During the roll period, the Series forgoes principal and interest paid on the securities. The Series accounts for such dollar rolls as purchases and sales. Information regarding securities purchased on a when-issued basis is included in the Series’ Investment Portfolio. No such investments were held by the Series on June 30, 2022.
Restricted Securities
Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of the Series’ Investment Portfolio.
21
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
2. | Significant Accounting Policies (continued) |
Federal Taxes
The Series’ policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series is not subject to federal income 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.
Management evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax liabilities in the financial statements. Recognition of tax benefits of an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. At June 30, 2022, the Series has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.
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 December 31, 2018 through December 31, 2021. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation 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 quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP 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 0.30% 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
22
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
3. | Transactions with Affiliates (continued) |
all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
The Fund may enter into agreements with financial intermediaries pursuant to which the Fund may pay financial intermediaries for non-distribution related sub-transfer agency, administrative, sub-accounting, and other shareholder services in an annual amount not to exceed 0.15% of the average daily net assets of the Class I and Class S shares of the Series. Payments made pursuant to such agreements are generally based on the current assets and/or number of accounts of the Series attributable to the financial intermediary. Any payments made pursuant to such agreements may be in addition to, rather than in lieu of, any Distribution and Shareholder Services Fee payable under the Rule 12b-1 plan of the Fund. For the six months ended June 30, 2022, the sub-transfer agency expenses incurred by Class S and Class I were $8,253 and $33,195, respectively.
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 S shares pursuant to a distribution plan adopted under Rule 12b-1 of the 1940 Act, regardless of expenses actually incurred. Under the agreement, the Series pays distribution and service fees to the distributor at an annual rate of 0.25% of average daily net assets attributable to Class S shares. There are no distribution and service fees on the Class I, Class W or Class Z shares. The fees are accrued daily and paid monthly.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets; 0.0075% on the next $15 billion of average daily net assets; and 0.0065% of average daily net assets in excess of $40 billion; plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the shareholder services fee and/or distribution and service (12b-1) fees and waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.50% of the average daily net assets of the Class S and Class I shares, 0.05% of the average daily net assets of the Class W shares, and 0.35% of the average daily net assets of the Class Z shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $969,026 in management fees for Class W for the six months ended June 30, 2022. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $61,781 for Class W shares for the six months ended June 30, 2022. These amounts are included as a reduction of expenses on the Statement of Operations.
23
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
3. | Transactions with Affiliates (continued) |
As of June 30, 2022, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, | |||||||||||||||
2022 | 2023 | 2024 | 2025 | TOTAL | ||||||||||||
Class W | $ | 84,567 | $ | 147,864 | $ | 147,021 | $ | 61,781 | $ | 441,233 |
For the six months ended June 30, 2022, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
4. | Purchases and Sales of Securities |
For the six months ended June 30, 2022, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $217,277,493 and $230,705,914, respectively. Sales of U.S. Government securities, other than short-term securities, were $1,769,103. There were no purchases of U.S. Government securities.
5. | Capital Stock Transactions |
Transactions in Class S, Class I, and Class W shares of Unconstrained Bond Series were:
CLASS S | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 1,114,277 | $ | 11,324,742 | 884,856 | $ | 9,734,861 | ||||||||||
Reinvested | 17,350 | 171,441 | 80,186 | 858,877 | ||||||||||||
Repurchased | (464,246 | ) | (4,727,034 | ) | (1,203,389 | ) | (13,288,062 | ) | ||||||||
Total | 667,381 | $ | 6,769,149 | (238,347 | ) | $ | (2,694,324 | ) |
CLASS I | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 16,028,736 | $ | 141,071,673 | 4,537,446 | $ | 43,948,757 | ||||||||||
Reinvested | 126,985 | 1,088,251 | 161,691 | 1,513,399 | ||||||||||||
Repurchased | (1,796,817 | ) | (15,824,966 | ) | (3,002,075 | ) | (29,035,743 | ) | ||||||||
Total | 14,358,904 | $ | 126,334,958 | 1,697,062 | $ | 16,426,413 |
CLASS W | FOR THE SIX MONTHS ENDED 6/30/22 | FOR THE YEAR ENDED 12/31/21 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 2,395,755 | $ | 24,520,283 | 5,873,439 | $ | 64,391,385 | ||||||||||
Reinvested | 742,041 | 7,327,166 | 3,676,779 | 39,259,780 | ||||||||||||
Repurchased | (3,025,326 | ) | (30,479,033 | ) | (3,770,657 | ) | (41,297,367 | ) | ||||||||
Total | 112,470 | $ | 1,368,416 | 5,779,561 | $ | 62,353,798 |
Approximately 77% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
24
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in September 2022 unless extended or renewed. During the six months ended June 30, 2022, the Series did not borrow under the line of credit.
7. | Financial Instruments and Loan Assignments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. During the six months ended June 30,2022, the Series invested in futures contracts (credit and interest rate risk). No such investments were held by the Series as of June 30, 2022.
The Series may invest in a loan assignment of all or a portion of the loans. The Series has direct rights against the borrower on a loan when it purchases an assignment; however, the Series’ rights may be more limited than the lender from which it acquired the assignment and the Series may be able to enforce its rights only through an administrative agent. Loan assignments are vulnerable to market conditions and may become illiquid due to economic conditions or other events may reduce the demand for loan assignments and certain loan assignments which were liquid when purchased may become illiquid.
8. | Foreign Securities |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the U.S. 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 U.S. Government.
9. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The final determination of the tax character of current year distributions will be made at the conclusion of the fiscal year. The tax character of distributions paid for the year ended December 31, 2021 were as follows:
Ordinary income | $ | 37,118,952 | ||
Long-term capital gains | $ | 6,667,919 |
25
Unconstrained Bond Series
Notes to Financial Statements (continued)
(unaudited)
9. | Federal Income Tax Information (continued) |
At June 30, 2022, the identified cost for federal income tax purposes, the resulting gross unrealized appreciation and depreciation, and the net unrealized depreciation were as follows:
Cost for federal income tax purposes | $ | 815,925,223 | ||
Unrealized appreciation | 6,058,925 | |||
Unrealized depreciation | (47,398,081) | |||
Net unrealized depreciation | $ | (41,339,156) | ||
Post October long-term deferred losses | $ | 1,310,055 |
10. | Market Event |
Significant disruptions and volatility in the global financial markets and economies, like the current conditions caused by the Russian invasion of Ukraine and the COVID-19 pandemic, could negatively impact the investment performance of the Series. The global market and economic climate may become increasingly uncertain due to numerous factors beyond our control, including but not limited to, the effectiveness and acceptance of vaccines to prevent COVID-19, impacts on business operations in the U.S. related to the COVID-19 pandemic, such as supply chain disruptions and inflation, concerns related to unpredictable global market and economic factors, uncertainty in U.S. federal fiscal, tax, trade or regulatory policy and the fiscal, tax, trade or regulatory policy of foreign governments, rising interest rates, inflation or deflation, the availability of credit, performance of financial markets, terrorism, natural or biological catastrophes, public health emergencies, or political uncertainty.
11. | Subsequent Event |
In preparing these financial statements, management of the Fund has evaluated events and transactions for potential recognition or disclosure and the following item was noted:
On March 31, 2022, Manning & Napier, Inc. (“the Company”), entered into a definitive agreement under which the Company will go private and be acquired by the Callodine Group, LLC (“Callodine”), a Boston-based asset management firm, in partnership with East Asset Management (the “Transaction”). The Company is the ultimate owner of the Advisor. The proposed Transaction is expected to close in the third quarter of 2022, contingent upon shareholder approval and other customary closing conditions. Following the close, the Company will become a wholly owned subsidiary of an affiliate of Callodine. Closing the Transaction results in a change in control of the Advisor under the 1940 Act and therefore the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides advisory services to the Series. In connection with the Transaction, on May 3, 2022, the Manning & Napier Fund, Inc. Board of Directors unanimously approved a new Investment Advisory Agreement between the Fund and the Advisor for each Series, that will become effective at the closing of the Transaction, subject to shareholder approval. As of the closing date of the Transaction, the Series’ investment objective and fee arrangements will remain unchanged.
26
Unconstrained Bond Series
Renewal of Investment Advisory Agreement
(unaudited)
At the Manning & Napier Fund, Inc. (the “Fund”) Board of Directors’ (the “Board”) meeting, held on May 19, 2022, the Investment Advisory Agreement (the “Agreement”) between the Fund and Manning & Napier Advisors, LLC (the “Advisor”) was considered for renewal by the Board, including all of the Directors who are not “interested persons” (“Independent Directors”), within the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”). In connection with the decision whether to renew the Agreement, a variety of material was provided to the Board in advance of the meeting for their review and consideration. The Board also held a working session on May 3, 2022 to review and discuss information provided to the Board, and for the Board to request additional information.
Representatives of the Advisor attended a portion of the working session and attended the Board meeting. The Advisor provided supplemental information requested by the Board and presented additional oral information to the Board to assist the Board in its considerations. In addition to the information furnished by the Advisor, the Board was provided with a legal memorandum discussing its fiduciary duties related to its approval of the continuation of the Agreement. Legal counsel for the Fund discussed with the Board the applicable legal considerations. In addition, the Board received in-person presentations about the Fund throughout the year.
At the May 3, 2022 meeting, the Board also considered and approved a new investment advisory agreement (the “New Advisory Agreement”) for each Series between the Advisor and the Fund. The Board was asked to consider the New Advisory Agreement because of a transaction that will affect Manning & Napier, Inc. (“MN Inc.”), which is the ultimate parent company of the Advisor. On March 31, 2022, MN Inc. and Callodine Group, LLC (“Callodine”) entered into an agreement under which Callodine Merger Sub, an affiliate of Callodine, would acquire MN Inc. (the “Transaction”). The Transaction, which is subject to customary closing conditions, is expected to close in the third quarter of 2022. Following the closing, MN Inc. will become a wholly owned subsidiary of an affiliate of Callodine. The closing of the Transaction may be deemed to result in a change of control of the Advisor under the 1940 Act. As a result, the Transaction results in the assignment and automatic termination of the investment advisory agreement pursuant to which the Advisor provides investment advisory services to the Series (the “Current Advisory Agreement”). Shareholder approval of the New Advisory Agreement will enable the Advisor to continue to serve the Series following the closing of the Transaction.
The Independent Directors were advised by independent legal counsel with respect to these matters. The Independent Directors also met separately in executive sessions on April 13, April 27, May 3 and May 19, with their legal counsel without any representatives of the Advisor present.
The Directors’ determinations at the meeting were made on the basis of each Director’s business judgment after consideration of all the information presented. In deciding to recommend the renewal of the Current Agreement with respect to each Series of the Fund, the Independent Directors did not identify any single or particular piece of information that, in isolation, was sufficient to justify renewal. Each Independent Director may also have weighed information and factors differently. This summary describes the most important, but not all, of the factors considered by the Board and the Independent Directors.
• | The Board considered the nature and quality of services provided by the Advisor under the Current Agreement. The Advisor has provided those services for over 30 years, and they have included, among others: deciding what securities to purchase and sell for each Series; arranging for the purchase and sale of such securities by placing orders with broker-dealers; administering the affairs of the Fund (including the books and records of the Fund not maintained by third party service providers such as the custodian or transfer agent); arranging for the insurance coverage for the Fund; and supervising the preparation of tax returns, SEC filings (including registration statements) and reports to shareholders for the Fund. The Board considered the numerous services performed by the Advisor and its affiliates beyond those stated in the Current Agreement. The Board also considered the Advisor’s personnel who perform services to the Fund, changes in senior or key personnel, industry trends impacting the mutual fund industry, the strength of the Advisor’s compliance infrastructure, policies and procedures relating to compliance with securities regulations, reputation, expertise and resources. The Board discussed the quality of these services with representatives from the Advisor and concluded that the Advisor was performing its services to the Fund required under the Current Agreement in a reasonable manner. |
27
Unconstrained Bond Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the Advisor’s investment teams, including changes to the investment teams during the past year, investment team compensation structure and the investment process. The Board considered the performance of each Series since its inception, as well as over multiple time periods including: one year, three year, five year, ten year, and current market cycle. A market cycle includes periods of both rising and falling markets. Returns for established benchmark indices for each Series were provided. In addition, the Board considered (and considers on a quarterly basis) a number of other factors relevant to performance at the meeting including: a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives; the breadth of the Fund’s product offerings; and performance over reasonable time periods. Representatives of the Advisor provided information regarding and, as applicable, led discussions of factors impacting the Advisor’s performance for the Series, outlining current market conditions and explaining their expectations and strategies for the future. The Board also determined that it was appropriate to take into account its consideration of the Advisor’s performance at meetings held prior to the May 19th Board meeting. In doing so, the Board generally determined that the Advisor’s performance was satisfactory. Where the Advisor’s performance was materially below a Series’ benchmarks and or peer group, the Board requested an explanation for the underperformance and/or the steps taken by the Advisor in an effort to improve performance. In all instances, the Board was satisfied with the explanation provided. The Board plans to remain focused in future meetings to address any aberrational underperformance as necessary. After discussion, the Board concluded that the nature and quality of the investment management services provided by the Advisor to the Fund were considered adequate. |
• | The Board considered the fees and expenses of the various Series of the Fund. The Advisor presented the advisory fees and total expenses for each Series, including the advisory fee adjusted for any contractual expense waivers or reimbursements paid by the Advisor. |
• | The Board considered whether the Advisor had achieved economies of scale with respect to its services to the Fund. The Board acknowledged the expense caps incorporated in the Fund’s current fee structure, which requires the Advisor to subsidize the expenses of the Series operating above their expense cap, noting that 11 of 15 Series are currently receiving expense reimbursements from the Advisor. The Board concluded that the Fund would need to grow in assets before the Advisor would be able to achieve meaningful economies of scale. |
• | The Advisor provided the Board with information comparing each Series’ contractual management fees with the Advisor’s standard advisory fees for separate accounts and collective investment trusts. The Board considered that the range of services provided to the Series is more extensive than for the Advisor’s other clients due to additional infrastructure, administrative, operational and regulatory requirements related to operating a mutual fund, as well as associated risks. |
• | The current advisory fees, 12b-1 Distribution and Service Fees, other expenses (e.g. a combination of Shareholder Services Fees, intermediary sub-TA fees, routine operating expenses and Acquired Fund Fees and Expenses for fund-of-fund Series) and total expense ratios of each Series and share class were compared and ranked (on both a mean and median basis) against respective peer universes. Respective peer universes included funds of a similar size and with similar investment objectives and expense characteristics as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the comparisons and rankings of fees and net expense ratios for each Series of the Fund and the methodology behind the comparison. The Board considered the Advisor’s active portfolio management that results in portfolios that are more differentiated than the construction of their benchmarks. The Board will continue to monitor the fees and expenses of the Series compared to peer groups. Based on their review of the information provided, the Board concluded that the current fees and expenses of each Series of the Fund were reasonable on a comparative basis. |
28
Unconstrained Bond Series
Renewal of Investment Advisory Agreement
(unaudited)
• | The Board considered the costs of the Advisor’s services and the profits of the Advisor as they relate to the Advisor’s services to the Fund under the Current Agreement. The Board was provided with information on the Advisor’s financial condition and profitability by mutual fund agreement and by Series. Representatives of the Advisor discussed modest improvements in the Advisor’s profitability derived from the Fund. The Board discussed the Advisor’s revenues generated from the Fund and its expenses associated with providing the services under the Current Agreement. The Advisor presented the Board with information on firm wide investment management profitability to provide a comparison of the Advisor’s profitability from its Fund activities relative to its profitability from its other investment management business. In addition, the Board reviewed the Advisor’s expense allocation methodology used to calculate profitability since many of the Advisor’s resources and expenses are shared across the Advisor’s various investment management vehicles. The Board noted the Advisor’s explanation of the consistent approach taken in calculating profitability, compared to prior periods, including the allocation of expenses as part of that calculation. The Board considered the Advisor’s expenses associated with Fund activities outside of the Current Agreement (such as expense reimbursements pursuant to expense caps and payments made by the Advisor to third party platforms on which shares of the Fund are available for purchase). The Board noted the potential for the Transaction to add resources that have the potential to facilitate the growth of various series, which could improve economies of scale for those Series; however, they also noted that such potential may not be realized. After discussing the above costs and profits, the Board concluded that the Advisor’s profit margin relating to its services provided under the Current Agreement was reasonable. |
• | The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include participation in a joint insurance program, sharing of compensation expenses for certain shared personnel, relationships with large service providers, the utilization of Series within the Advisor’s separately managed accounts and certain research services provided by soft dollars. The Board concluded that these additional benefits to the Advisor were reasonable. |
Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of the Independent Directors, concluded that the compensation under the Current Agreement was fair and reasonable with respect to each Series in light of the services and expenses and such other matters as the Directors considered to be relevant in the exercise of their reasonable judgment, and that the renewal of the Current Agreement would be in the best interests of each Series and its shareholders. The Board did not indicate that any single factor was determinative of its decision to approve the Current Agreement, but indicated that the Board based its determination on the total mix of information available to it.
29
Unconstrained Bond Series
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-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling 1-(800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End
2. Fund Holdings - Quarter-End
3. Shareholder Report - Annual
4. Shareholder Report - Semi-Annual
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNCPB-06/22-SAR
30
(b) | Not applicable. |
ITEM 2: CODE OF ETHICS
Not applicable for Semi-Annual Reports.
ITEM 3: AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable for Semi-Annual Reports.
Item 4: Principal Accountant Fees and Services
Not applicable for Semi-Annual Reports.
Item 5: Audit Committee of Listed registrants
Not applicable.
Item 6: Investments
(a) | See Investment Portfolios under Item 1 on this Form N-CSR. |
(b) | Not applicable. |
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 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: Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13: Exhibits
(a)(1) | Not applicable for Semi-Annual Reports. |
(a)(2) | Separate certifications for the Registrant’s principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX-99.CERT. |
(a)(2)(1) | Not applicable. |
(a)(2)(2) | 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-99.906 CERT. 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/ Paul J. Battaglia
Paul J. Battaglia
President & Principal Executive Officer
Manning & Napier Fund, Inc.
Date: 8/25/2022
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/ Paul J. Battaglia
Paul J. Battaglia
President & Principal Executive Officer
Manning & Napier Fund, Inc.
Date: 8/25/2022
/s/ Troy M. Statczar
Troy M. Statczar
Treasurer and Principal Financial Officer
Manning & Napier Fund, Inc.
Date: 8/25/2022