N-CSR 1 d467560dncsr.htm MANNING & NAPIER FUND, INC. <![CDATA[Manning & Napier Fund, Inc.]]>

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

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Manning & Napier Fund, Inc.

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(Exact name of registrant as specified in charter)

290 Woodcliff Drive, Fairport, NY 14450

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(Address of principal executive offices)(Zip Code)

B. Reuben Auspitz        290 Woodcliff Drive, Fairport, NY  14450

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(Name and address of agent for service)

Registrant’s telephone number, including area code:  585-325-6880

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Date of fiscal year end: December 31, 2012

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Date of reporting period: January 1, 2012 through December 31, 2012

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, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

ITEM 1.

REPORTS TO STOCKHOLDERS.

 

LOGO

 

        LIFE SCIENCES SERIES                          

 

 

 

 

www.manning-napier.com

       LOGO          

Life Sciences Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months. As investors in general continue to focus on safety, the Advisor remains focused on the Series’ objectives. As an active manager, we base our investment decisions on prevailing market conditions and fundamentals. Doing so allows us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. Although markets witnessed positive traction throughout the year and performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor believes may continue to weigh on global economic growth.

Despite uncertainties, U.S. equities, as measured by the S&P 500 Total Return Index, ended the year with strong, double-digit returns of 16.01%. With respect to the Fund, for the twelve months ending December 31, 2012, the Life Sciences Series materially outperformed the S&P 500 Health Care Index. In particular, the index returned 17.89% for the year, while the Series returned 25.89%.

With strong consideration to both top-down industry themes and an analysis of company-by-company fundamentals, the Advisor has positioned the portfolio with regard to the risks and opportunities presented by challenges in healthcare. For instance, we remain focused on companies working to improve the quality, safety, and efficiency of health care delivery. In particular, health care information technology is an area where we see long-term value. In this space, opportunities exist in companies that are improving their information technology infrastructure, which helps medical providers eliminate avoidable medical errors and enhance resource utilization. We also see opportunities in certain life sciences tools and diagnostic testing companies, and believe that new products from companies in these sub-sectors are likely to improve the quality and delivery of health care.

Throughout 2012, stock selection decisions were the primary driver of relative outperformance, with individual holdings within the Pharmaceuticals and Biotechnology industries being the largest positive contributors to results. Meanwhile, although all industries within the benchmark had positive absolute returns for the year, certain Series holdings in the Healthcare Technology industry detracted from portfolio returns. Where sector allocation decisions are concerned, an overweight to Life Sciences Tools and Services and an underweight to Pharmaceuticals aided the Series’ returns as compared to the benchmark, whereas an overweight to Health Care Equipment and Supplies slightly challenged returns on a relative basis.

In the Advisor’s view, slow growth remains the most likely path for the U.S. and many other global economies. However, in this challenging environment, many opportunities exist. The Advisor’s active and flexible investment approach is well-equipped to capture these opportunities. As has been the case for more than forty years, Manning & Napier remains committed to providing competitive absolute returns over full market cycles. Today, we feel the best way to do this is to seek attractively priced companies with positive long-term growth drivers that are trading at attractive valuations relative to their growth potential.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Life Sciences Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012
    

 ONE

 YEAR1                

  

 FIVE

 YEAR                 

  

 TEN

 YEAR                 

  

 SINCE

 INCEPTION2        

Manning & Napier Fund, Inc. - Life Sciences Series3

     25.89%    4.47%    8.96%    11.87%

S&P 500 Total Return Index4

     16.01%    1.68%    7.11%    2.20%

S&P 500 Health Care Index4

     17.89%    4.81%    6.16%    3.63%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Life Sciences Series for the ten years ended December 31, 2012 to the S&P 500 Total Return Index and the S&P 500 Health Care Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Indices are calculated from November 5, 1999, the Series’ current activation date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.16%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.16% for the year ended December 31, 2012.

4The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the Over-the-Counter market. The S&P 500 Health Care Index, a sub-index of the S&P 500 Total Return Index, includes the stocks of companies involved in the business of health care related products and services. Both Indices’ returns assume daily reinvestment of dividends and, unlike the Series returns, do not reflect any fees or expenses.

 

2

Life Sciences Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

   

 BEGINNING

 ACCOUNT VALUE                             

 7/1/12

  

 ENDING

 ACCOUNT VALUE                             

 12/31/12

  

 EXPENSES PAID

 DURING PERIOD*                             

 7/1/12-12/31/12

Actual

    $1,000.00    $1,068.60    $6.15

Hypothetical

(5% return before expenses)

    $1,000.00    $1,019.26    $6.01

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.18%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data.

 

3

Life Sciences Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

 

Top Ten Stock Holdings2

  

Strides Arcolab Ltd. (India)

      6.2%          

DexCom, Inc.

      4.3%   

Myriad Genetics, Inc.

      5.4%          

BioMerieux (France)

      4.0%   

Oxford Nanopore Technologies Ltd. (United Kingdom)

      5.2%          

Lupin Ltd. (India)

      3.9%   

Insulet Corp.

      4.5%          

Luminex Corp.

      3.7%   

Glenmark Pharmaceuticals Ltd. (India)

      4.4%          

Sirona Dental Systems, Inc.

      3.5%   

 

2As a percentage of total investments.

                       

 

4

Life Sciences Series

 

 

Investment Portfolio - December 31, 2012

 

                     SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS - 100.3%

          

Health Care - 100.3%

          

Biotechnology - 15.6%

          

Green Cross Corp. (South Korea)1

         60,500       $ 7,842,585     

Incyte Corp. Ltd.*

         436,560         7,251,262     

Myriad Genetics, Inc.*

         466,000         12,698,500     

Protalix BioTherapeutics, Inc.*

         812,000         4,214,280     

Seattle Genetics, Inc.*

         186,400         4,324,480     
       

 

 

    
          36,331,107     
       

 

 

    

Health Care Equipment & Supplies - 30.4%

          

Abaxis, Inc.

         150,000         5,565,000     

Alere, Inc.*2,3

         122,000         2,257,000     

Alere, Inc.

         77,190         1,428,015     

BioMerieux (France)1

         97,796         9,323,443     

DexCom, Inc.*

         735,000         10,003,350     

HeartWare International, Inc.*

         55,900         4,692,805     

Insulet Corp.*

         491,040         10,419,869     

MAKO Surgical Corp.*

         329,000         4,234,230     

Mindray Medical International Ltd. - ADR (China)

         137,000         4,479,900     

Sirona Dental Systems, Inc.*

         128,100         8,257,326     

Thoratec Corp.*

         148,000         5,552,960     

Volcano Corp.*

         185,000         4,367,850     
       

 

 

    
          70,581,748     
       

 

 

    

Health Care Providers & Services - 9.5%

          

Apollo Hospitals Enterprise Ltd. (India)1

         469,533         6,780,907     

HMS Holdings Corp.*

         171,000         4,432,320     

Qualicorp S.A. (Brazil)*

         445,000         4,609,743     

Sonic Healthcare Ltd. (Australia)1

         447,340         6,244,279     
       

 

 

    
          22,067,249     
       

 

 

    

Health Care Technology - 7.8%

          

Allscripts Healthcare Solutions, Inc.*

         370,000         3,485,400     

Cerner Corp.*

         53,200         4,130,448     

Computer Programs & Systems, Inc.

         104,000         5,235,360     

Greenway Medical Technologies, Inc.*

         346,500         5,322,240     
       

 

 

    
          18,173,448     
       

 

 

    

Life Sciences Tools & Services - 16.1%

          

Lonza Group AG (Switzerland)1

         126,200         6,838,296     

Luminex Corp.*

         522,000         8,748,720     

Oxford Nanopore Technologies Ltd. (United Kingdom)*3,4,5

         45,464         12,101,037     

QIAGEN N.V. - ADR (Netherlands)*

         273,000         4,954,950     

WuXi PharmaTech Cayman, Inc. - ADR (China)*

                 303,070               4,773,353     
       

 

 

    
          37,416,356     
       

 

 

    

The accompanying notes are an integral part of the financial statements.

 

5

Life Sciences Series

 

 

Investment Portfolio - December 31, 2012

 

                     SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS (continued)

          

Health Care (continued)

          

Pharmaceuticals - 20.9%

          

Glenmark Pharmaceuticals Ltd. (India)1

               1,063,000       $ 10,305,713     

Lupin Ltd. (India)1

         803,000         9,068,844     

Santen Pharmaceutical Co. Ltd. (Japan)1

         111,200         4,271,524     

Strides Arcolab Ltd. (India)1

         715,750         14,473,609     

UCB S.A. (Belgium)1

         105,000         6,015,314     

ViroPharma, Inc.*

         200,300               4,558,828     
       

 

 

    
          48,693,832     
       

 

 

    

Total Health Care

           233,263,740     
       

 

 

    

TOTAL COMMON STOCKS

          

(Identified Cost $199,360,613)

           233,263,740     
       

 

 

    
         

SHORT-TERM INVESTMENT - 0.0%**

          

Dreyfus Cash Management, Inc. - Institutional Shares6, 0.06%,

          

(Identified Cost $58,801)

         58,801         58,801     
       

 

 

    

TOTAL INVESTMENTS - 100.3%

          

(Identified Cost $199,419,414)

           233,322,541     

LIABILITIES, LESS OTHER ASSETS - (0.3%)

           (729,858 )   
       

 

 

    

NET ASSETS - 100%

         $ 232,592,683     
       

 

 

    

ADR - American Depository Receipt

*Non-income producing security

**Less than 0.1%

1A factor from a third party vendor was applied to determine the security’s fair value following the close of local trading.

2This security was acquired on February 3, 2006 at a cost of $2,978,020 ($24.41 per share) and has been determined to be liquid under guidelines established by the Board of Directors.

3Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. These securities amount to $14,358,037, or 6.2% of the Series’ net assets as of December 31, 2012 (see Note 2 to the financial statements).

4This security was acquired on April 26, 2011 at a cost of $6,149,543 ($150.34 per share) and on May 2, 2012 at a cost of $1,209,529 ($265.31 per share) and has been determined to be illiquid under guidelines established by the Board of Directors.

5Security has been valued at fair value as determined in good faith by the Advisor.

6Rate shown is the current yield as of December 31, 2012.

The accompanying notes are an integral part of the financial statements.

 

6

Life Sciences Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments, at value (identified cost $199,419,414) (Note 2)

    $ 233,322,541   

Foreign tax reclaims receivable

      43,608   

Receivable for fund shares sold

      668,914   

Dividends receivable

      107,001   
  

 

 

  

TOTAL ASSETS

      234,142,064   
  

 

 

  

LIABILITIES:

   

Accrued foreign capital gains tax (Note 2)

      967,388   

Accrued management fees (Note 3)

      197,384   

Accrued fund accounting and administration fees (Note 3)

      8,029   

Accrued transfer agent fees (Note 3)

      2,972   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      267,781   

Other payables and accrued expenses

      105,453   
  

 

 

  

TOTAL LIABILITIES

      1,549,381   
  

 

 

  

TOTAL NET ASSETS

    $ 232,592,683   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 180,655   

Additional paid-in-capital

      197,365,608   

Accumulated net realized gain on investments, foreign currency and translation of other assets and liabilities

      2,114,318   

Net unrealized appreciation on investments (net of foreign capital gains tax of $967,388), foreign currency and translation of other assets and liabilities

      32,932,102   
  

 

 

  

TOTAL NET ASSETS

    $ 232,592,683   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS A
($232,592,683/ 18,065,538 shares)

    $ 12.87   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

7

Life Sciences Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Dividends (net of foreign taxes withheld, $93,772)

    $ 1,258,065   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      2,251,907   

Fund accounting and administration fees (Note 3)

      56,664   

Transfer agent fees (Note 3)

      18,464   

Directors’ fees (Note 3)

      4,063   

Chief Compliance Officer service fees (Note 3)

      2,440   

Custodian fees

      163,104   

Miscellaneous

      105,108   
  

 

 

  

Total Expenses

      2,601,750   
  

 

 

  

NET INVESTMENT LOSS

      (1,343,685 ) 
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

   

Investments (net of India tax of $326,516)

      16,170,019   

Foreign currency and translation of other assets and liabilities

      (87,763 ) 
  

 

 

  
     16,082,256   
  

 

 

  

Net change in unrealized appreciation (depreciation) on-

   

Investments (net of increase in accrued foreign capital gains tax of $928,069)

      35,509,988   

Foreign currency and translation of other assets and liabilities

      (7,069 ) 
  

 

 

  
     35,502,919   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      51,585,175   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 50,241,490   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

8

Life Sciences Series

 

 

Statements of Changes in Net Assets

 

     FOR THE
YEAR ENDED
12/31/12		     FOR THE
YEAR ENDED
12/31/11		  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment loss

    $ (1,343,685 )    $ (1,512,051 ) 

Net realized gain (loss) on investments and foreign currency

      16,082,256        29,284,528   

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      35,502,919        (51,286,173 ) 
  

 

 

    

 

 

  

Net increase (decrease) from operations

      50,241,490        (23,513,696 ) 
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 9):

     

From net realized gain on investments

      (15,587,617 )      (5,663,104 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase (decrease) from capital share transactions (Note 5)

      1,388,522        (21,836,822 ) 
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      36,042,395        (51,013,622 ) 

NET ASSETS:

     

Beginning of year

      196,550,288        247,563,910   
  

 

 

    

 

 

  

End of year (including undistributed net investment income of $0 and $0, respectively)

    $ 232,592,683      $ 196,550,288   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

9

Life Sciences Series

 

 

Financial Highlights

 

     

 

FOR THE YEARS ENDED

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 10.95      $ 12.18      $ 10.61      $ 6.99      $ 11.54   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment loss

      (0.08 )1      (0.07 )1      (0.04 )1      (0.05 )1      (0.06 ) 

Net realized and unrealized gain (loss) on investments

      2.91        (0.84 )      1.61        3.67        (4.38 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      2.83        (0.91 )      1.57        3.62        (4.44 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net realized gain on investments

      (0.91 )      (0.32 )      —        —        (0.11 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 12.87      $ 10.95      $ 12.18      $ 10.61      $ 6.99   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 232,593      $ 196,550      $ 247,564      $ 272,944      $ 182,704   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return2

      25.89 %      (7.33 %)      14.80 %      51.79 %      (38.77 %) 

Ratios (to average net assets)/

Supplemental Data:

           

Expenses*

      1.16 %      1.11 %      1.09 %      1.11 %      1.12 % 

Net investment loss

      (0.60 %)      (0.60 %)      (0.41 %)      (0.55 %)      (0.65 %) 

Portfolio turnover

      75 %      84 %      67 %      95 %      94 % 
*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 Series, the expense ratio (to average net assets) would have increased by the following amount:    
     N/A        N/A        0.00 %3      0.01 %      N/A   

1Calculated based on average shares outstanding during the year.

2Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total returns would have been lower had certain expenses not been waived or reimbursed during certain years.

3Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

10

Life Sciences Series

 

 

Notes to Financial Statements

 

1. Organization

Life Sciences Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide long-term growth by investing principally in the common stocks of companies in the life sciences industry.

The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to advisory 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated as Life Sciences Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ 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 are 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”). The Fair Value Committee (the “Committee”) is responsible for carrying out the valuation procedures approved by the Board. The Committee consists of senior members from various groups within the Advisor’s organization, including operations, accounting, trading, and research/investments. The Committee meets at least annually to review and approve valuation matters, which may include data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the “Policies”). The Policies address, among other things, instances when market quotations are readily available, including recommendations of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee available at each of the Board’s regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier. For investments categorized as Level 3, the Committee monitors information similar to that described above, which may include: (i) data specific to the issuer or comparable issuers, (ii) general market or specific sector news and (iii) quoted prices and specific or similar security transactions. The Committee considers this data and any changes from prior periods in order to assess the reasonableness of observable and unobservable inputs, any assumptions used to value those securities and changes in fair value. This data is also used to corroborate, when available, information received from approved pricing vendors and brokers. Various factors impact the frequency of monitoring this

 

11

Life Sciences Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

information. However, the Committee may determine that changes to inputs and assumptions are not required as a result of the monitoring procedures performed. 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 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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Equity securities:

            

  Health Care

    $ 233,263,740       $ 139,998,189       $ 81,164,514       $ 12,101,037 * 

  Mutual fund

      58,801         58,801         —                             —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       233,322,541       $       140,056,990       $       81,164,514       $ 12,101,037   
  

 

 

     

 

 

     

 

 

     

 

 

  

Please see the Investment Portfolio for foreign securities where a factor from a third party vendor was applied to determine the security’s fair value following the close of local trading. Such securities are included in Level 2 in the table above.

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

 

LEVEL 3 RECONCILIATION    EQUITY
SECURITIES		  

  Balance as of December 31, 2011 (market value)

    $ 5,805,547   

  Net realized gain (loss)

      —   

  Change in unrealized appreciation (depreciation)

      5,085,961   

  Purchases

      1,209,529   

  Sales

                       —   

  Transfers in

      —   

  Transfers out

      —   
  

 

 

  

  Balance as of December 31, 2012 (market value)

    $ 12,101,037   
  

 

 

  

*Amount represents the Series’ investment in Oxford Nanopore Technologies Ltd. (“Oxford”). Oxford was initially valued at transaction price, which is considered the best initial estimate of fair value. On April 10, 2012, the Fund adjusted its valuation of

 

12

Life Sciences Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

the fair value holding to 163.85 GBP per share (from 91.39 GBP per share) as a result of a subsequent round of financing of the investee company. Subsequently, the Series uses, or will use, other methodologies and significant inputs to determine fair value. Such methodologies and significant inputs include: subsequent rounds of financing for Oxford; recent transactions in similar instruments; discounted cash flow techniques; third-party appraisals; industry multiples and public comparables; and Oxford’s current financial performance compared to projected performance.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

The following table summarizes the quantitative inputs and assumptions used for items categorized in Level 3 of the fair value hierarchy as of December 31, 2012.

 

QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS
    

 FAIR VALUE

 AT 12/31/12

     

 VALUATION

 TECHNIQUE(S)

   

 UNOBSERVABLE        

 INPUT

   

 RANGE

 (WEIGHTED        

 AVERAGE)

  Equity securities

    $       12,101,037       Acquisition cost      
adjusted for
premiums or
discounts		    Premium/
Discount		    0%-0%

The significant unobservable inputs used in the fair value measurement of the Fund’s equity securities are premiums and discounts to the acquisition cost. Significant increases in the premium (or discount) in isolation would result in a significantly higher (lower) fair value measurement.

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.

 

13

Life Sciences Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Restricted Securities

Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of the Series’ Investment Portfolio.

Illiquid Securities

A security may be considered illiquid if so deemed in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board. Securities that are illiquid are marked with the applicable footnote on the Investment Portfolio.

Federal Taxes

The Series’ policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series is not subject to federal income 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 December 31, 2012, 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, 2009 through December 31, 2012. 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. The Series is subject to a tax imposed on short term capital gains on securities of issuers domiciled in India. The Series records an estimated deferred tax liability for securities that have been held for less than a year at the end of the reporting period, assuming those positions were disposed of at the end of the period. This amount is reported in Accrued foreign capital gains tax in the accompanying Statement of Assets and Liabilities. Realized losses on the sale of securities of issuers domiciled in India can be carried forward for eight years to offset potential future short term realized capital gains.

Distributions of Income and Gains

Distributions to shareholders of net investment income and net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.

Indemnifications

The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

 

14

Life Sciences Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Other (continued)

 

the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series’ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $158,555,842 and $161,914,069 respectively. There were no purchases or sales of U.S. Government securities.

 

15

Life Sciences Series

 

 

Notes to Financial Statements (continued)

 

 

5. Capital Stock Transactions

Transactions in shares of Life Sciences Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE YEAR ENDED  12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

     910,690       $       11,481,196                  3,884,766       $       48,098,558   

Reinvested

               1,200,003        15,448,274        532,612        5,608,399   

Repurchased

     (1,988,833 )      (25,540,948 )      (6,803,872 )      (75,543,779 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     121,860       $ 1,388,522        (2,386,494 )     $ (21,836,822 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

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. Life Sciences Securities

The Series may focus its investments in certain related life sciences industries; hence, the Series may subject itself to a greater degree of risk than a series that is more diversified.

 

9. Federal Income Tax Information

The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including net operating losses and foreign currency gains and losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the fiscal year ended December 31, 2012, $1,343,685 was reclassified within the capital accounts from Accumulated Net Realized Gain on Investments to Undistributed Net Investment Income. The reclassification relates to foreign currency gains and losses and net operating losses. Any such reclassifications are not reflected in the financial highlights.

 

16

Life Sciences Series

 

 

Notes to Financial Statements (continued)

 

 

9. Federal Income Tax Information (continued)

 

The tax character of distributions paid were as follows:

 

    FOR THE YEAR  
ENDED 12/31/12		     FOR THE YEAR  
ENDED 12/31/11		       

Ordinary income

   $ 5,917,652          $ —          

Long-term capital gains

   $ 9,669,965          $ 5,663,104          

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 199,419,414   

Unrealized appreciation

      46,871,693   

Unrealized depreciation

      (12,968,566 ) 
  

 

 

  

Net unrealized appreciation

    $ 33,903,127   
  

 

 

  

Undistributed ordinary income

    $ 1,105,840   

Undistributed long-term gains

    $ 1,008,478   

 

 

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010, may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series did not have pre or post-enactment net capital loss carryforwards.

 

17

Life Sciences Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Life Sciences Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Life Sciences Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

18

Life Sciences Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal year $1,129,325 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal year is 6.41%, or if different, the maximum allowable under tax law.

 

19

Life Sciences Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

20

Life Sciences Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

21

Life Sciences Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

Address:

   

 

B. Reuben Auspitz*

290 Woodcliff Drive

Fairport, NY 14450

Age:    65

Current Position(s) Held with Fund:

Term of Office1 & Length of Time Served:

   

Principal Executive Officer, President, Chairman & Director

Indefinite - Director since 1984. Principal Executive Officer since 2002.

President since 2004. Vice President 1984 - 2003.

Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003-2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member

Term of Office & Length of Time Served:

Principal Occupation(s) During Past 5 Years:

   

Indefinite - Since 1996

Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995-2008 and Chairman (non-executive) 2004-2008 - Fannie Mae (mortgage)

Number of Portfolios Overseen within Fund Complex:

Other Directorships Held Outside Fund Complex:

   

41

Fannie Mae (1995-2008)

The Ashley Group (1995-2008)

Genesee Corporation (1987-2007)

Name:    Peter L. Faber
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995-2006 & 2013-present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Partnership for New York City, Inc. (non-profit)(1989-2010)
   New York Collegium (non-profit)(2004-2011))
     Boston Early Music Festival (non-profit)
Name:    Harris H. Rusitzky
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member

Term of Office & Length of Time Served:

Principal Occupation(s) During Past 5 Years:

   

Indefinite - Since 1985

President, The Greening Group (business consultants) since 1994;

   Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

22

Life Sciences Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)

 

Name:

Address:

   

 

Paul A. Brooke

290 Woodcliff Drive

Fairport, NY 14450

Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member

Term of Office & Length of Time Served:

Principal Occupation(s) During Past 5 Years:

   

Indefinite - Since 2007

Chairman & CEO (2005-2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Incyte Corp. (2000-present)

ViroPharma, Inc. (2000-present)

HLTH Corp. (2000-present)

Cheyne Capital International (2000-present)

MPM Bio-equities (2000-2009)

GMP Companies (2000-2012)

HoustonPharma (2000-2009)

Name:    Chester N. Watson
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member

Term of Office & Length of Time Served:

Principal Occupation(s) During Past 5 Years:

Number of Portfolios Overseen within Fund Complex:

Other Directorships Held Outside Fund Complex:

   

Indefinite - Since 2012

General Auditor (2003-2011) - General Motors Company (investments)

41

N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer

Term of Office1 & Length of Time Served:

Principal Occupation(s) During Past 5 Years:

   

Since 2011

Fund Reporting Manager since 2011 - Manning & Napier Advisors, LLC; Manager (2004-2011) - KPMG LLP

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served: Principal Occupation(s) During Past 5 Years:   

Since 2004

President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary

Term of Office1 & Length of Time Served:

Principal Occupation(s) During Past 5 Years:

   

Since 2011

Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

23

Life Sciences Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)

 

Name:

   

 

Christine Glavin

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

24

 

{This page intentionally left blank}

 

 

 

 

25

Life Sciences 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNLFS-12/12-AR

LOGO

 

        SMALL CAP SERIES                           

 

 

 

 

www.manning-napier.com

       LOGO          

Small Cap Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months. As investors in general continue to focus on safety, the Advisor remains focused on the Series’ objectives. As an active manager, we base our investment decisions on prevailing market conditions and fundamentals. Doing so allows us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. Although markets witnessed positive traction throughout the year and performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor believes may continue to weigh on global economic growth.

Indeed, major domestic equity indices earned positive double-digit returns for the year, with the S&P 500 Total Return Index finishing the year up 16.01% and the Russell 1000 finishing up 16.42%. Similarly, the Russell 2000 Index (which focuses on smaller capitalization companies) finished 2012 up 16.35%. The Small Cap Series experienced a 18.66% return and outperformed both the overall domestic equity market as well as the Russell 2000 Index.

For the full year, the Series’ relative outperformance was primarily a result of specific stock selections. In particular, certain holdings within the Industrials and Consumer Discretionary sectors aided results versus the Russell 2000 Index. Meanwhile, investments within the Information Technology and Energy sectors challenged relative performance. With the exception of the Energy sector, all sectors within the Russell 2000 Index produced positive absolute returns for the year. As they pertain to the Small Cap Series, sector allocation decisions had a muted overall impact on relative returns. More specifically, the negative impact of an underweight to Financials and an overweight to Energy were nearly offset by an underweight to Information Technology and an overweight to the Consumer Discretionary sector.

Given the Advisor’s focus on companies that can achieve growth, the Series continues to hold a relatively small exposure to the Utilities and Telecommunication Services sectors, as many of these companies are lacking well-defined growth drivers. Alternatively, the Series maintains a relatively high allocation (as compared to the benchmark) to the Consumer Discretionary sector, as the Advisor continues to identify companies with positive fundamentals that can drive growth.

In the Advisor’s view, slow growth remains the most likely path for the U.S. and many other global economies. However, in this challenging environment, many opportunities exist. The Advisor’s active and flexible investment approach is well-equipped to capture these opportunities. As has been the case for more than forty years, Manning & Napier remains committed to providing competitive absolute returns over full market cycles. Today, we feel the best way to do this is to seek attractively priced companies with positive long-term growth drivers that are trading at attractive valuations relative to their growth potential.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Small Cap Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2012
    

 ONE

 YEAR1                

  

 FIVE

 YEAR                 

  

 TEN

 YEAR                 

  

 SINCE

 INCEPTION2        

Manning & Napier Fund, Inc. - Small Cap Series3

     18.66%   -0.35%    7.08%    7.24%

S&P 500 Total Return Index4

     16.01%    1.68%    7.11%    8.31%

Russell 2000® Index4

     16.35%    3.56%    9.72%    8.84%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Small Cap Series for the ten years ended December 31, 2012 to the S&P 500 Total Return Index and the Russell 2000® Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Indices are calculated from April 30, 1992, the Series’ current activation date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.10%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.10% for the year ended December 31, 2012.

4The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the Over-the-Counter market. The Index returns assume daily reinvestment of dividends. The Russell 2000® Index is an unmanaged index that consists of 2,000 U.S. small-capitalization stocks. The Index returns are based on a market capitalization-weighted average of relative price changes of the component stocks plus dividends whose reinvestments are compounded daily. Both Indices’ returns, unlike the Series returns, do not reflect any fees or expenses.

 

2

Small Cap Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

   

 BEGINNING

 ACCOUNT VALUE                             
 7/1/12

  

 ENDING

 ACCOUNT VALUE                             
 12/31/12

  

 EXPENSES PAID

 DURING PERIOD*                             
 7/1/12-12/31/12

Actual

    $1,000.00    $1,075.90    $5.70

Hypothetical

(5% return before expenses)

    $1,000.00    $1,019.71    $5.55

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.09%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.

 

3

Small Cap Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

Market Capitalization          Top Ten Stock Holdings2
Average      $  1,885.21 Million          Spirit Airlines, Inc.    3.5%
Median      1,316.46 Million          AMC Networks, Inc. - Class A    3.1%
Weighted Average      1,721.11 Million          MarketAxess Holdings, Inc.    2.8%
                 JSE Ltd. (South Africa)    2.7%
         Wabash National Corp.    2.6%
         Infinera Corp.    2.4%
         C&C Group plc (Ireland)    2.4%
         Myriad Genetics, Inc.    2.2%
         Calfrac Well Services Ltd. (Canada)    2.1%
         Wirecard AG (Germany)    2.1%
        

 

2 As a percentage of total investments.

 

4

Small Cap Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS - 97.8%

      

Consumer Discretionary - 24.7%

      

Automobiles - 0.9%

      

Tesla Motors, Inc.*

     52,100      $ 1,764,627     
   

 

 

    

Distributors - 1.0%

      

Inchcape plc (United Kingdom)1

     300,081        2,132,558     
   

 

 

    

Hotels, Restaurants & Leisure - 2.8%

      

BJ’s Restaurants, Inc.*

     88,090        2,898,161     

Orient-Express Hotels Ltd. - ADR - Class A*

     238,080        2,783,155     
   

 

 

    
      5,681,316     
   

 

 

    

Internet & Catalog Retail - 4.6%

      

HomeAway, Inc.*

     136,820        3,010,040     

Ocado Group plc (United Kingdom)*1

           2,044,230        2,920,321     

Shutterfly, Inc.*

     112,800        3,369,336     
   

 

 

    
      9,299,697     
   

 

 

    

Media - 7.5%

      

AMC Networks, Inc. - Class A*

     127,420        6,307,290     

Imax Corp. (Canada)*

     170,490        3,832,615     

Valassis Communications, Inc.

     91,110        2,348,816     

Zon Multimedia Servicos de Telecomunicacoes e Multimedia SGPS S.A. (Portugal)1

     677,260        2,655,045     
   

 

 

    
            15,143,766     
   

 

 

    

Specialty Retail - 7.9%

      

Aeropostale, Inc.*

     216,810        2,820,698     

American Eagle Outfitters, Inc.

     111,430        2,285,429     

Chico’s FAS, Inc.

     102,870        1,898,980     

Dick’s Sporting Goods, Inc.

     40,780        1,855,082     

Group 1 Automotive, Inc.

     31,370        1,944,626     

Penske Automotive Group, Inc.

     63,570        1,912,821     

Select Comfort Corp.*

     45,602        1,193,404     

Sonic Automotive, Inc. - Class A

     105,400        2,201,806     
   

 

 

    
      16,112,846     
   

 

 

    

Total Consumer Discretionary

       50,134,810     
   

 

 

    

Consumer Staples - 4.4%

      

Beverages - 2.4%

      

C&C Group plc (Ireland)*1

     796,100        4,788,579     
   

 

 

    

Food & Staples Retailing - 0.5%

      

Distribuidora Internacional de Alimentacion S.A. (Spain)1

     160,700        1,026,742     
   

 

 

    

The accompanying notes are an integral part of the financial statements.

 

5

Small Cap Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS (continued)

      

Consumer Staples (continued)

      

Food Products - 1.5%

      

Flowers Foods, Inc.

     84,125      $ 1,957,589     

Tootsie Roll Industries, Inc.

     45,581        1,181,460     
   

 

 

    
      3,139,049     
   

 

 

    

Total Consumer Staples

       8,954,370     
   

 

 

    

Energy - 8.4%

      

Energy Equipment & Services - 6.1%

      

Calfrac Well Services Ltd. (Canada)

     171,080        4,308,388     

CARBO Ceramics, Inc.

     11,020        863,307     

Global Geophysical Services, Inc.*

     153,680        591,668     

ION Geophysical Corp.*

     303,010        1,972,595     

Key Energy Services, Inc.*

     133,470        927,617     

Petroleum Geo-Services ASA (Norway)1

     72,340        1,259,974     

Trican Well Service Ltd. (Canada)

     191,910        2,531,275     
   

 

 

    
      12,454,824     
   

 

 

    

Oil, Gas & Consumable Fuels - 2.3%

      

Cloud Peak Energy, Inc.*

     124,270        2,402,139     

Paladin Energy Ltd. (Australia)*2

           2,052,100        2,269,337     
   

 

 

    
      4,671,476     
   

 

 

    

Total Energy

       17,126,300     
   

 

 

    

Financials - 15.9%

      

Commercial Banks - 1.9%

      

Cathay General Bancorp

     107,590        2,098,005     

Glacier Bancorp, Inc.

     123,320        1,814,037     
   

 

 

    
      3,912,042     
   

 

 

    

Diversified Financial Services - 5.5%

      

JSE Ltd. (South Africa)1

     596,700        5,513,274     

MarketAxess Holdings, Inc.

     160,650        5,670,945     
   

 

 

    
            11,184,219     
   

 

 

    

Insurance - 1.6%

      

Brasil Insurance Participacoes e Administracao S.A. (Brazil)

     334,400        3,266,422     
   

 

 

    

Real Estate Investment Trusts (REITS) - 6.0%

      

AmREIT, Inc. - Class B

     64,000        1,097,600     

Associated Estates Realty Corp.

     46,300        746,356     

BioMed Realty Trust, Inc.

     46,230        893,626     

Corporate Office Properties Trust

     42,440        1,060,151     

DuPont Fabros Technology, Inc.

     48,180        1,164,029     

Education Realty Trust, Inc.

     140,020        1,489,813     

Healthcare Trust of America, Inc.

     49,210        487,179     

Home Properties, Inc.

     15,790        968,085     

The accompanying notes are an integral part of the financial statements.

 

6

Small Cap Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS (continued)

      

Financials (continued)

      

Real Estate Investment Trusts (REITS) (continued)

      

Mack-Cali Realty Corp.

     37,130      $ 969,464     

Mid-America Apartment Communities, Inc.

     11,280        730,380     

Pebblebrook Hotel Trust

     111,580        2,577,498     
   

 

 

    
      12,184,181     
   

 

 

    

Real Estate Management & Development - 0.9%

      

General Shopping Brasil S.A. (Brazil)*

     328,590        1,712,359     
   

 

 

    

Total Financials

             32,259,223     
   

 

 

    

Health Care - 13.8%

      

Biotechnology - 4.0%

      

Green Cross Corp. (South Korea)1

     27,210        3,527,219     

Myriad Genetics, Inc.*

     165,410        4,507,423     
   

 

 

    
      8,034,642     
   

 

 

    

Health Care Equipment & Supplies - 7.5%

      

Abaxis, Inc.

     50,850        1,886,535     

Alere, Inc.*

     122,586        2,267,841     

DexCom, Inc.*

     302,050        4,110,901     

HeartWare International, Inc.*

     24,150        2,027,392     

Insulet Corp.*

     146,910        3,117,430     

Thoratec Corp.*

     48,790        1,830,601     
   

 

 

    
      15,240,700     
   

 

 

    

Health Care Technology - 1.2%

      

Greenway Medical Technologies, Inc.*

     163,620        2,513,203     
   

 

 

    

Life Sciences Tools & Services - 1.1%

      

WuXi PharmaTech Cayman, Inc. - ADR (China)*

     138,950        2,188,463     
   

 

 

    

Total Health Care

       27,977,008     
   

 

 

    

Industrials - 16.7%

      

Airlines - 6.6%

      

Copa Holdings S.A. - ADR - Class A (Panama)

     23,540        2,341,053     

Spirit Airlines, Inc.*

     399,390        7,077,191     

US Airways Group, Inc.*

           302,600        4,085,100     
   

 

 

    
      13,503,344     
   

 

 

    

Building Products - 0.5%

      

A.O. Smith Corp.

     17,070        1,076,605     
   

 

 

    

Commercial Services & Supplies - 0.5%

      

Interface, Inc.

     61,360        986,669     
   

 

 

    

Construction & Engineering - 0.8%

      

MYR Group, Inc.*

     71,480        1,590,430     
   

 

 

    

The accompanying notes are an integral part of the financial statements.

 

7

Small Cap Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS (continued)

      

Industrials (continued)

      

Machinery - 6.8%

      

Astec Industries, Inc.

     13,370      $ 445,622     

Graham Corp.

     108,270        2,111,265     

Titan International, Inc.

     107,480        2,334,466     

Wabash National Corp.*

     584,640        5,244,221     

Westport Innovations, Inc. - ADR (Canada)*

     133,870        3,575,668     
   

 

 

    
            13,711,242     
   

 

 

    

Marine - 1.5%

      

Baltic Trading Ltd.

     279,510        832,940     

D/S Norden A/S (Denmark)1

     44,790        1,298,524     

Sinotrans Shipping Ltd. (China)1

           3,579,000        877,717     
   

 

 

    
      3,009,181     
   

 

 

    

Total Industrials

       33,877,471     
   

 

 

    

Information Technology - 11.3%

      

Communications Equipment - 3.0%

      

Infinera Corp.*

     855,170        4,968,538     

Polycom, Inc.*

     117,490        1,228,945     
   

 

 

    
      6,197,483     
   

 

 

    

Computers & Peripherals - 0.6%

      

Fusion-io, Inc.*

     52,110        1,194,882     
   

 

 

    

Electronic Equipment, Instruments & Components - 1.0%

      

Rofin-Sinar Technologies, Inc.*

     93,090        2,018,191     
   

 

 

    

Internet Software & Services - 2.3%

      

LogMeIn, Inc.*

     99,390        2,227,330     

Velti plc - ADR (Ireland)*

     564,430        2,539,935     
   

 

 

    
      4,767,265     
   

 

 

    

IT Services - 3.3%

      

InterXion Holding NV - ADR (Netherlands)*

     21,650        514,404     

Sapient Corp.*

     179,610        1,896,682     

Wirecard AG (Germany)1

     172,090        4,248,486     
   

 

 

    
      6,659,572     
   

 

 

    

Software - 1.1%

      

RealPage, Inc.*

     101,660        2,192,806     
   

 

 

    

Total Information Technology

       23,030,199     
   

 

 

    

Materials - 0.6%

      

Chemicals - 0.6%

      

Flotek Industries, Inc.*

     106,690        1,301,618     
   

 

 

    

The accompanying notes are an integral part of the financial statements.

 

8

Small Cap Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS (continued)

      

Utilities - 2.0%

      

Independent Power Producers & Energy Traders - 2.0%

      

Dynegy, Inc.*

     212,890      $ 4,072,586     
   

 

 

    

TOTAL COMMON STOCKS

      

(Identified Cost $187,390,375)

             198,733,585     
   

 

 

    

SHORT-TERM INVESTMENT - 2.3%

      

Dreyfus Cash Management, Inc. - Institutional Shares3 , 0.06%

      

(Identified Cost $4,717,371)

           4,717,371        4,717,371     
   

 

 

    

TOTAL INVESTMENTS - 100.1%

      

(Identified Cost $192,107,746)

       203,450,956     

LIABILITIES, LESS OTHER ASSETS - (0.1%)

       (164,843 )   
   

 

 

    

NET ASSETS - 100%

     $ 203,286,113     
   

 

 

    

ADR - American Depository Receipt

*Non-income producing security

1A factor from a third party vendor was applied to determine the security’s fair value following the close of local trading.

2Traded on Toronto Stock Exchange.

3Rate shown is the current yield as of December 31, 2012.

The accompanying notes are an integral part of the financial statements.

 

9

Small Cap Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments (identified cost $192,107,746) (Note 2)

    $ 203,450,956   

Receivable for fund shares sold

      536,168   

Dividends receivable

      154,028   

Foreign tax reclaims receivable

      38,540   

Other receivable

      70   
  

 

 

  

TOTAL ASSETS

      204,179,762   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      168,885   

Accrued fund accounting and administration fees (Note 3)

      7,274   

Accrued transfer agent fees (Note 3)

      3,139   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      665,855   

Other payables and accrued expenses

      48,122   
  

 

 

  

TOTAL LIABILITIES

      893,649   
  

 

 

  

TOTAL NET ASSETS

    $ 203,286,113   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 204,880   

Additional paid-in-capital

      212,551,072   

Undistributed net investment income

      109,986   

Accumulated net realized loss on investments, foreign currency and translation of other assets and liabilities

      (20,922,581 ) 

Net unrealized appreciation on investments, foreign currency and translation of other assets and liabilities

      11,342,756   
  

 

 

  

TOTAL NET ASSETS

    $ 203,286,113   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS A ($203,286,113/20,487,988 shares)

   

$

9.92

  

  
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

10

Small Cap Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Dividends (net of foreign taxes withheld, $85,317)

    $ 2,326,408   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      1,980,678   

Fund accounting and administration fees (Note 3)

      53,074   

Transfer agent fees (Note 3)

      19,256   

Directors’ fees (Note 3)

      3,828   

Chief Compliance Officer service fees (Note 3)

      2,441   

Custodian fees

      28,864   

Miscellaneous

      83,774   
  

 

 

  

Total Expenses

      2,171,915   
  

 

 

  

NET INVESTMENT INCOME

      154,493   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

   

Investments

      17,740,227   

Foreign currency and translation of other assets and liabilities

      (43,009 ) 
  

 

 

  
     17,697,218   
  

 

 

  

Net change in unrealized appreciation on-

   

Investments

      15,042,119   

Foreign currency and translation of other assets and liabilities

      2,549   
  

 

 

  
     15,044,668   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      32,741,886   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 32,896,379   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

11

Small Cap Series

 

 

Statements of Changes in Net Assets

 

    

FOR THE

YEAR ENDED
12/31/12

    

FOR THE

YEAR ENDED
12/31/11

  

INCREASE IN NET ASSETS:

     

OPERATIONS:

     

Net investment income (loss)

    $ 154,493      $ (540,269 ) 

Net realized gain (loss) on investments and foreign currency

      17,697,218        26,221,402   

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      15,044,668        (45,814,942 ) 
  

 

 

    

 

 

  

Net increase (decrease) from operations

      32,896,379        (20,133,809 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net decrease from capital share transactions (Note 5)

      (8,935,366 )      (8,938,199 ) 
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      23,961,013        (29,072,008 ) 

NET ASSETS:

     

Beginning of year

      179,325,100        208,397,108   
  

 

 

    

 

 

  

End of year (including undistributed net investment income of $109,986 and accumulated net investment loss of $1,498, respectively)

    $ 203,286,113      $ 179,325,100   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

12

Small Cap Series

 

 

Financial Highlights

 

     

 

FOR THE YEARS ENDED

  
  

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 8.36      $ 9.29      $ 7.39      $ 4.98      $ 10.21   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment income (loss)

      0.01 1      (0.02 )1      (0.01 )1      (0.02 )1      (0.02 ) 

Net realized and unrealized gain (loss) on investments

      1.55        (0.91 )      1.91        2.43        (5.12 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      1.56        (0.93 )      1.90        2.41        (5.14 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net realized gain on investments

      —        —        —        —        (0.09 ) 

Net asset value - End of year

    $ 9.92      $ 8.36      $ 9.29      $ 7.39      $ 4.98   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 203,286      $ 179,325      $ 208,397      $ 171,910      $ 120,162   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return2

      18.66 %      (10.01 %)      25.71 %      48.39 %      (50.68 %) 

Ratios (to average net assets)/
Supplemental Data:

           

Expenses*

      1.10 %      1.11 %      1.12 %      1.15 %      1.15 % 

Net investment income (loss)

      0.08 %      (0.27 %)      (0.13 %)      (0.34 %)      (0.39 %) 

Portfolio turnover

      65 %      75 %      75 %      76 %      68 % 
* For certain years 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 Series, the expense ratio (to average net assets) would have increased by the following amounts:     
     N/A        N/A        0.00 %3      0.00 %3      N/A   

1Calculated based on average shares outstanding during the year.

2Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain years.

3Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

13

Small Cap Series

 

 

Notes to Financial Statements

 

1. Organization

Small Cap Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide long-term growth by investing principally in the common stocks of companies with small market capitalizations.

The Series is authorized to issue five classes of shares (Class A, B, D, E and Z). Currently, only Class A shares have been issued. Each class of shares is substantially the same, except that class-specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate.

The Fund’s advisor is Manning & Napier Advisors, 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 87.5 million have been designated as Small Cap Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, 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 are 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 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.

 

14

Small Cap Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Equity securities:

            

  Consumer Discretionary

    $ 50,134,810       $ 42,426,886       $ 7,707,924       $                     —   

  Consumer Staples

      8,954,370         3,139,049         5,815,321         —   

  Energy

      17,126,300         15,866,326         1,259,974         —   

  Financials

      32,259,223         26,745,949         5,513,274         —   

  Health Care

      27,977,008         24,449,789         3,527,219         —   

  Industrials

      33,877,471         31,701,230         2,176,241         —   

  Information Technology

      23,030,199         18,781,713         4,248,486         —   

  Materials

      1,301,618         1,301,618         —         —   

  Utilities

      4,072,586         4,072,586         —         —   

  Mutual fund

      4,717,371         4,717,371         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       203,450,956       $       173,202,517       $       30,248,439       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Please see the Investment Portfolio for foreign securities where a factor from a third party vendor was applied to determine the securities’ fair value following the close of local trading. Such securities are included in Level 2 in the table above.

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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 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.

 

15

Small Cap Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Transactions, Investment Income and Expenses (continued)

 

The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.

Foreign Currency Translation

The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series does not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the 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.

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 December 31, 2012, 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, 2009 through December 31, 2012. 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

 

16

Small Cap Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Other (continued)

 

the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series’ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees, by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $124,100,482 and $135,450,360 respectively. There were no purchases or sales of U.S. Government securities.

 

17

Small Cap Series

 

 

Notes to Financial Statements (continued)

 

 

5. Capital Stock Transactions

 

Transactions in Class A shares of Small Cap Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE YEAR ENDED  12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

               1,257,616       $       11,832,582                      1,738,475       $ 15,552,815   

Repurchased

     (2,207,178 )      (20,767,948 )      (2,723,450 )      (24,491,014 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     (949,562 )     $ (8,935,366 )      (984,975 )     $       (8,938,199 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Approximately 90% of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion. At December 31, 2012, the retirement plan of the Advisor and its affiliates owned 58,669 shares (0.29% of shares outstanding) valued at $582,000.

 

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 December 31, 2012.

 

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 accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses and qualified late-year losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the fiscal year ended December 31, 2012, $43,009 was reclassified within the capital accounts from Undistributed Net Investment Income to Accumulated Net Realized Gain on Investments. Any such reclassifications are not reflected in the financial highlights.

There were no distributions to shareholders for the year ended December 31, 2011 or the year ended December 31, 2012.

 

18

Small Cap Series

 

 

Notes to Financial Statements (continued)

 

 

8. Federal Income Tax Information (continued)

 

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on the identified cost of investments for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 192,107,746   

Unrealized appreciation

      25,534,190   

Unrealized depreciation

      (14,190,980 ) 
  

 

 

  

Net unrealized appreciation

    $ 11,343,210   
  

 

 

  

Undistributed ordinary income

      109,986   

Capital loss carryover

      19,830,385   

Qualified late-year losses1

      1,092,196   
 

 

1The Series has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010, may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series had the following pre-enactment net capital loss carryforwards, expiring during the year indicated, which are available to offset future realized gains to the extent allowed by the tax law:

 

LOSS CARRYOVER   EXPIRATION DATE    

$19,830,385

   December 31, 2017  

As of December 31, 2012, the Series did not have post-enactment net capital loss carryforwards.

The capital loss carryover utilized in the current year was $18,832,423.

 

19

Small Cap Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Small Cap Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Small Cap Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

20

Small Cap Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

21

Small Cap Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

22

Small Cap Series

 

 

Directors’ and Officers’ Information

(unaudited)

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 -
   Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc.
   Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Fannie Mae (1995-2008)
   The Ashley Group (1995-2008)
     Genesee Corporation (1987-2007)
Name:    Peter L. Faber
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Partnership for New York City, Inc. (non-profit)(1989 - 2010)
   New York Collegium (non-profit)(2004 - 2011))
     Boston Early Music Festival (non-profit)
Name:    Harris H. Rusitzky
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994;
   Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

23

Small Cap Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Incyte Corp. (2000-present)
   ViroPharma, Inc. (2000-present)
   HLTH Corp. (2000-present)
   Cheyne Capital International (2000-present)
   MPM Bio-equities (2000-2009)
   GMP Companies (2000-2012)
     HoustonPharma (2000-2009)
Name:    Chester N. Watson
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003-2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004-2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC
   Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

24

Small Cap Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

25

Small Cap 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNSCS-12/12-AR

 

LOGO

 

        TECHNOLOGY SERIES                           

 

 

 

 

www.manning-napier.com

       LOGO          

Technology Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months. As investors in general continue to focus on safety, the Advisor remains focused on the Series’ objectives. As an active manager, we base our investment decisions on prevailing market conditions and fundamentals. Doing so allows us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. Although markets witnessed positive traction throughout the year and performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor believes may continue to weigh on global economic growth.

Despite lingering uncertainties, U.S. equities as measured by the S&P 500 Total Return Index ended the year with positive absolute returns of 16.01%. For the twelve months ending December 31, 2012, the S&P 500 Information Technology Index also performed well, earning 14.82%. Although the Technology Series underperformed the benchmark, it posted strong double-digit absolute returns of 10.11% in 2012.

While short-term performance fell short of the index in 2012, the Advisor has found that measuring performance over market cycles better demonstrates a manager’s ability to add value through varying types of environments. That said, the S&P 500 Information Technology Index had an annualized return of 10.58% during the current market cycle (since October 1, 2002). The Series has handily outperformed over the current market cycle, with an annualized return of 16.01%.

As for 2012 relative results, stock selection was the key factor in the Series’ underperformance versus the benchmark for the year. In particular, individual holdings within the Communications Equipment and Internet Software & Services industries were the largest negative contributors to relative performance. In contrast, certain stocks within the IT Services and Internet & Catalog Retail industries aided relative returns for the year. While certain stock selections challenged performance compared to the S&P 500 Information Technology Index, sector allocation choices were positive in 2012. Specifically, an underweight to the Semiconductor and Semiconductor Equipment industry as compared with the S&P 500 Information Technology Index aided relative performance. The Series’ underweight in this area benefitted the portfolio during the year because the industry was only one of two that had negative total returns for the year.

In aggregate, the Advisor continues to believe the outlook for technological innovation and growth remains healthy within the context of a challenging economic growth environment. Further, the Advisor believes the Technology sector remains attractively valued given the growth profile. To that end, the Series continues to be exposed to various themes the Advisor uses as a roadmap for investing in companies with exceptional long-term secular growth and/or disruptive business models.

In the Advisor’s view, slow growth remains the most likely path for the U.S. and many other global economies. However, in this challenging environment, many opportunities exist. The Advisor’s active and flexible investment approach is well-equipped to capture these opportunities. As has been the case for more than forty years, Manning & Napier remains committed to providing competitive absolute returns over full market cycles. Today, we feel the best way to do this is to seek attractively priced companies with positive long-term growth drivers that are trading at attractive valuations relative to their growth potential.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Technology Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2012
      ONE    FIVE    TEN    SINCE
      YEAR1                    YEAR                    YEAR                    INCEPTION2        

Manning & Napier Fund, Inc. - Technology Series3

     10.11%    0.68%    13.47%    2.26%

S&P 500 Total Return Index4

     16.01%    1.68%    7.11%    1.61%

S&P 500 Information Technology Index4

     14.82%    3.58%    8.65%    -3.71%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Technology Series from its current activation1 (8/8/00) to present (12/31/12) to the S&P 500 Total Return Index and the S&P 500 Information Technology Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Indices are calculated from August 8, 2000, the Series’ current activation date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.12%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.12% for the year ended December 31, 2012.

4The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the Over-the-Counter market. The S&P 500 Information Technology Index, a sub-index of the S&P 500 Total Return Index, includes the stocks of companies involved in the business of technology related products and services. Both Indices’ returns assume daily reinvestment of dividends and, unlike the Series returns, do not reflect any fees or expenses.

 

2

Technology Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING    ENDING    EXPENSES PAID
     ACCOUNT  VALUE                                 ACCOUNT  VALUE                                 DURING  PERIOD*                             
     7/1/12    12/31/12    7/1/12-12/31/12

Actual

    $1,000.00    $1,027.50    $5.72

Hypothetical

(5% return before expenses)

    $1,000.00    $1,019.56    $5.70

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.12%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.

 

3

Technology Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

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Top Ten Stock Holdings2

  

Google, Inc. - Class A

      6.0%          

EMC Corp.

      3.9%   

Riverbed Technology, Inc.

      5.1%          

Juniper Networks, Inc.

      3.7%   

Monsanto Co.

      4.9%          

Amdocs Ltd. - ADR

      3.7%   

Apple, Inc.

      4.4%          

Cap Gemini S.A. (France)

      3.5%   

Autodesk, Inc.

      4.3%          

Amphenol Corp. - Class A

      3.5%   

 

2 As a percentage of total investments.

                       

 

4

Technology Series

 

 

Investment Portfolio - December 31, 2012

 

   

          SHARES

    

  VALUE

  (NOTE 2)

       

COMMON STOCKS - 92.6%

       

Consumer Discretionary - 13.5%

       

Automobiles - 1.4%

       

Tesla Motors, Inc.*

     61,000       $ 2,066,070      
   

 

 

     

Internet & Catalog Retail - 9.0%

       

Amazon.com, Inc.*

     19,000         4,771,660      

HomeAway, Inc.*

     178,000         3,916,000      

Shutterfly, Inc.*

     157,000         4,689,590      
   

 

 

     
            13,377,250      
   

 

 

     

Media - 3.1%

       

DIRECTV*

     92,000         4,614,720      
   

 

 

     

Total Consumer Discretionary

       20,058,040      
   

 

 

     

Health Care - 2.7%

       

Health Care Technology - 2.7%

       

Cerner Corp.*

     51,000         3,959,640      
   

 

 

     

Industrials - 2.6%

       

Electrical Equipment - 2.6%

       

Polypore International, Inc.*

     85,120         3,958,080      
   

 

 

     

Information Technology - 68.9%

       

Communications Equipment - 18.0%

       

Infinera Corp.*

     879,130         5,107,745      

Juniper Networks, Inc.*

     281,000         5,527,270      

Polycom, Inc.*

     360,000         3,765,600      

Qualcomm, Inc

     78,000         4,837,560      

Riverbed Technology, Inc.*

     383,500         7,562,620      
   

 

 

     
            26,800,795      
   

 

 

     

Computers & Peripherals - 8.2%

       

Apple, Inc.

     12,170         6,486,975      

EMC Corp.*

     228,000         5,768,400      
   

 

 

     
            12,255,375      
   

 

 

     

Electronic Equipment, Instruments & Components - 6.5%

       

Amphenol Corp. - Class A

     79,930         5,171,471      

Rofin-Sinar Technologies, Inc.*

     211,000         4,574,480      
   

 

 

     
      9,745,951      
   

 

 

     

Internet Software & Services - 14.5%

       

Google, Inc. - Class A*

     12,640         8,966,437      

LinkedIn Corp. - Class A*

     42,900         4,925,778      

Tencent Holdings Ltd. (China)1

     127,000         4,165,182      

Velti plc - ADR (Ireland)

           776,340         3,493,530      
   

 

 

     
            21,550,927      
   

 

 

     

The accompanying notes are an integral part of the financial statements.

 

5

Technology Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

    (NOTE 2)

       
                  

COMMON STOCKS (continued)

       

Information Technology (continued)

       

IT Services - 10.5%

       

Amdocs Ltd. - ADR*

     160,000      $ 5,438,400      

Cap Gemini S.A. (France)1

     120,000        5,247,330      

VeriFone Systems, Inc.*

     168,000        4,986,240      
   

 

 

     
      15,671,970      
   

 

 

     

Software - 11.2%

       

Autodesk, Inc.*

     182,000        6,433,700      

Electronic Arts, Inc.*

     352,200        5,117,466      

RealPage, Inc.*

     234,881        5,066,383      
   

 

 

     
      16,617,549      
   

 

 

     

Total Information Technology

       102,642,567      
   

 

 

     

Materials - 4.9%

       

Chemicals - 4.9%

       

Monsanto Co

     76,550        7,245,457      
   

 

 

     

TOTAL COMMON STOCKS

       

(Identified Cost $121,479,053)

             137,863,784      
   

 

 

     

SHORT-TERM INVESTMENT - 7.2%

       

Dreyfus Cash Management, Inc. - Institutional Shares2, 0.06%

       

(Identified Cost $10,736,836)

           10,736,836        10,736,836      
   

 

 

     

TOTAL INVESTMENTS - 99.8%

       

(Identified Cost $132,215,889)

       148,600,620      

OTHER ASSETS, LESS LIABILITIES - 0.2%

       295,328      
   

 

 

     

NET ASSETS - 100%

     $ 148,895,948      
   

 

 

     

ADR - American Depository Receipt

*Non-income producing security

1A factor from a third party vendor was applied to determine the security’s fair value following the close of local trading.

2Rate shown is the current yield as of December 31, 2012.

The accompanying notes are an integral part of the financial statements.

 

6

Technology Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments (identified cost $132,215,889) (Note 2)

    $ 148,600,620   

Receivable for fund shares sold

      542,686   

Dividends receivable

      29,873   

Foreign tax reclaims receivable

      8,963   
  

 

 

  

TOTAL ASSETS

      149,182,142   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      123,822   

Accrued fund accounting and administration fees (Note 3)

      6,003   

Accrued transfer agent fees (Note 3)

      2,629   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      121,699   

Audit fees payable

      31,045   

Other payables and accrued expenses

      622   
  

 

 

  

TOTAL LIABILITIES

      286,194   
  

 

 

  

TOTAL NET ASSETS

    $ 148,895,948   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 136,646   

Additional paid-in-capital

      139,790,600   

Accumulated net realized loss on investments, foreign currency and translation of other assets and liabilities

      (7,415,754 ) 

Net unrealized appreciation on investments, foreign currency and translation of other assets and liabilities

      16,384,456   
  

 

 

  

TOTAL NET ASSETS

    $ 148,895,948   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - CLASS A ($148,895,948/13,664,600 shares)

    $ 10.90   
  
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

7

Technology Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Dividends (net of foreign taxes withheld, $63,679)

    $ 672,913   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      1,512,872   

Fund accounting and administration fees (Note 3)

      46,036   

Transfer agent fees (Note 3)

      15,587   

Directors’ fees (Note 3)

      2,716   

Chief Compliance Officer service fees (Note 3)

      2,440   

Custodian fees

      15,929   

Miscellaneous

      92,425   
  

 

 

  

Total Expenses

      1,688,005   
  

 

 

  

NET INVESTMENT LOSS

      (1,015,092 ) 
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

Investments

      (2,932,757 ) 
  

Foreign currency and translation of other assets and liabilities

      707   
  

 

 

  
     (2,932,050 ) 
  

 

 

  

Net change in unrealized appreciation (depreciation) on-

Investments

      17,839,057   
  

Foreign currency and translation of other assets and liabilities

      191   
  

 

 

  
     17,839,248   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      14,907,198   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 13,892,106   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

8

Technology Series

 

 

Statements of Changes in Net Assets

 

     FOR THE
YEAR ENDED
12/31/12		     FOR THE
YEAR ENDED
12/31/11		  

INCREASE IN NET ASSETS:

     

OPERATIONS:

     

Net investment loss

    $ (1,015,092 )    $ (728,493 ) 

Net realized gain (loss) on investments and foreign currency

      (2,932,050 )      17,826,466   

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      17,839,248        (32,901,482 ) 
  

 

 

    

 

 

  

Net increase (decrease) from operations

      13,892,106        (15,803,509 ) 
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 9):

     

From net realized gain on investments

      (6,344,833 )      (1,324,698 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase (decrease) from capital share transactions (Note 5)

      2,703,467        (11,626,430 ) 
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      10,250,740        (28,754,637 ) 

NET ASSETS:

     

Beginning of year

      138,645,208        167,399,845   
  

 

 

    

 

 

  

End of year (including undistributed net investment income of $0 and $0, respectively)

    $ 148,895,948      $ 138,645,208   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

9

Technology Series

 

 

Financial Highlights

 

     

 

FOR THE YEARS ENDED

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 10.33      $ 11.63      $ 9.73      $ 6.01      $ 11.29   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment loss

      (0.08 )1      (0.05 )1      (0.06 )1      (0.05 )1      (0.05 ) 

Net realized and unrealized gain (loss) on investments

      1.13        (1.15 )      1.96        3.77        (5.09 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      1.05        (1.20 )      1.90        3.72        (5.14 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net realized gain on investments

      (0.48 )      (0.10 )      —        —        (0.14 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 10.90      $ 10.33      $ 11.63      $ 9.73      $ 6.01   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 148,896      $ 138,645      $ 167,400      $ 157,731      $ 123,112   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return2

      10.11 %      (10.31 %)      19.53 %      61.90 %      (45.86 %) 

Ratios (to average net assets)/

Supplemental Data:

           

Expenses*

      1.12 %      1.13 %      1.12 %      1.13 %      1.13 % 

Net investment loss

      (0.67 %)      (0.46 %)      (0.58 %)      (0.68 %)      (0.53 %) 

Portfolio turnover

      55 %      81 %      70 %      55 %      65 % 
*For certain years 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 Series, the expense ratio (to average net assets) would have increased by the following amounts:     
     N/A        N/A        0.00 %3      0.00 %3      N/A   

1Calculated based on average shares outstanding during the year.

2Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain years.

3Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

10

Technology Series

 

 

Notes to Financial Statements

 

1. Organization

Technology Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide long-term growth by investing principally in the common stocks of companies in technology-based industries.

The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to advisory 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated as Technology Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, 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 corporate bonds, will normally be valued on the basis of evaluated bid prices provided by an independent pricing service. 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.

Short-term investments that mature in sixty days or less are 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 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.

 

11

Technology Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Equity securities:

            

  Consumer Discretionary

    $ 20,058,040       $ 20,058,040       $ —       $                     —   

  Health Care

      3,959,640         3,959,640         —         —   

  Industrials

      3,958,080         3,958,080         —         —   

  Information Technology

      102,642,567         93,230,055         9,412,512         —   

  Materials

      7,245,457         7,245,457         —         —   

  Mutual fund

      10,736,836         10,736,836         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       148,600,620       $       139,188,108       $       9,412,512       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Please see the Investment Portfolio for foreign securities where a factor from a third party vendor was applied to determine the securities’ fair value following the close of local trading. Such securities are included in Level 2 in the table above.

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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

 

12

Technology Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Foreign Currency Translation (continued)

 

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 December 31, 2012, 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, 2009 through December 31, 2012. 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series’ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a

 

13

Technology Series

 

 

Notes to Financial Statements (continued)

 

 

3. Transactions with Affiliates (continued)

 

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.

The Advisor has contractually agreed, until at least April 30, 2014, to waive its management fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 1.20% of average daily net assets each year. The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $78,579,358 and $87,410,089 respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in shares of Technology Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE YEAR ENDED  12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

               1,038,900       $       11,671,657                  1,286,341       $       15,034,387   

Reinvested

     566,953        6,285,210        129,312        1,311,222   

Repurchased

     (1,364,916 )      (15,253,400 )      (2,384,668 )      (27,972,039 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     240,937       $ 2,703,467        (969,015 )     $ (11,626,430 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

14

Technology Series

 

 

Notes to Financial Statements (continued)

 

 

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 during the year ended December 31, 2012.

 

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. Technology Securities

The Series may focus its investments in certain related technology industries; hence, the Series may subject itself to a greater degree of risk than a series that is more diversified.

 

9. Federal Income Tax Information

The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including net operating losses, foreign currency gains and losses and qualified late-year losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the year ended December 31, 2012, amounts were reclassified within the capital accounts to reduce Additional Paid in Capital by $1,015,257, increase Undistributed Net Investment Income by $1,015,092 and increase Accumulated Net Realized Gain on Investments by $165. The reclassification relates to foreign currency gains and losses and net operating losses. Any such reclassifications are not reflected in the financial highlights.

The tax character of the distributions were as follows:

 

   

FOR THE YEAR  

ENDED 12/31/12

    

FOR THE YEAR  

ENDED 12/31/11

      

Long-term capital gains

   $ 6,344,833            1,324,698         

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on the identified cost of investments for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 132,215,889   

Unrealized appreciation

      23,093,671   

Unrealized depreciation

      (6,708,940 ) 
  

 

 

  

Net unrealized appreciation

    $ 16,384,731   
  

 

 

  

Qualified late-year losses1

    $ 7,415,754   
 

 

1The Series has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

 

15

Technology Series

 

 

Notes to Financial Statements (continued)

 

 

9. Federal Income Tax Information (continued)

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010, may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series did not have any pre-enactment or post-enactment net capital loss carryforwards.

 

16

Technology Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Technology Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Technology Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

17

Technology Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

18

Technology Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

19

Technology Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995-2008 and Chairman (non-executive) 2004-2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Fannie Mae (1995-2008)
   The Ashley Group (1995-2008)
     Genesee Corporation (1987-2007)
Name:    Peter L. Faber
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Partnership for New York City, Inc. (non-profit)(1989 - 2010)
   New York Collegium (non-profit)(2004 - 2011))
     Boston Early Music Festival (non-profit)
Name:    Harris H. Rusitzky
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994;
   Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

20

Technology Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Incyte Corp. (2000-present)
   ViroPharma, Inc. (2000-present)
   HLTH Corp. (2000-present)
   Cheyne Capital International (2000-present)
   MPM Bio-equities (2000-2009)
   GMP Companies (2000-2012)
     HoustonPharma (2000-2009)
Name:    Chester N. Watson
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC;
   Manager (2004-2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

21

Technology Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

22

Technology 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNTEC-12/12-AR

 

LOGO

 

        FINANCIAL SERVICES SERIES                          

 

 

 

 

www.manning-napier.com

       LOGO          

Financial Services Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months. As investors in general continue to focus on safety, the Advisor remains focused on the Series’ objectives. As an active manager, we base our investment decisions on prevailing market conditions and fundamentals. Doing so allows us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. Although markets witnessed positive traction throughout the year and performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor believes may continue to weigh on global economic growth.

Major domestic equity indices earned positive double-digit returns for the year, with the S&P 500 Total Return Index finishing the year up 16.01% and the Russell 1000 Index finishing up 16.42%. This strong performance was guided in large part by performance in the Financials sector, where the S&P 500 Financial Services Index gained 28.94% in 2012. Although the Financial Services Series trailed the S&P 500 Financial Services Index, it had a strong absolute return of 24.84% in 2012.

For calendar year 2012, the Series’ relative underperformance was primarily a result of specific stock selections. In particular, certain holdings within the Diversified Financial Services, Internet Software and Services, and Capital Markets sub-sectors hurt results versus the benchmark. In contrast, specific stocks within the Commercial Banks and Consumer Finance sub-sectors aided relative returns, offsetting some of the relative underperformance. Meanwhile, in terms of sector allocation decisions, overall choices aided relative returns for the year. More specifically, underweight allocations to the Real Estate Investment Trusts and Insurance sub-sectors helped performance as compared to the benchmark, whereas a relative overweight to the Consumer Finance sub-sector as well as an underweight to the Capital Markets sub-sector detracted from relative returns.

With performance broadly positive across the S&P 500 Financial Services Index in 2012, each sub-sector within the benchmark provided positive absolute returns. Collectively, the strongest performing sub-sector for the index for the year was the Diversified Financial Services sub-sector, which was driven by continued low delinquency rates, cost controls, and strong fee expansion. In aggregate, the Advisor has a guarded short-term outlook but favorable long-term outlook for the Financial Services sector and will continue combining a disciplined approach for finding individual companies alongside its outlook for the global financial industry.

In the Advisor’s view, slow growth remains the most likely path for the U.S. and many other global economies. However, in this challenging environment, many opportunities exist. The Advisor’s active and flexible investment approach is well-equipped to capture these opportunities. As has been the case for more than forty years, the Advisor remains committed to providing competitive absolute returns over full market cycles. Today, we feel the best way to do this is to seek attractively priced companies with positive long-term growth drivers that are trading at attractive valuations relative to their growth potential.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Financial Services Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012    
      ONE    FIVE    SINCE
      YEAR1                    YEAR                    INCEPTION2        

Manning & Napier Fund, Inc. - Financial Services Series3

     24.84%    -5.05%    -2.64%

S&P 500 Total Return Index4

     16.01%    1.68%    4.61%

S&P 500 Financial Services Index4

     28.94%    -8.82%    -5.24%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Financial Services Series from its inception2 (7/1/05) to present (12/31/12) to the S&P 500 Total Return Index and the S&P 500 Financial Services Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Indices are calculated from July 1, 2005, the Series’ inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.11%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.11% for the year ended December 31, 2012.

4The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the Over-the-Counter market. The S&P 500 Financial Services Index, a sub-index of the S&P 500 Total Return Index, includes the stocks of companies involved in the business of financial related products and services. Both Indices’ returns assume daily reinvestment of dividends and, unlike the Series returns, do not reflect any fees or expenses.

 

2

Financial Services Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING    ENDING    EXPENSES PAID
     ACCOUNT VALUE                                 ACCOUNT VALUE                                 DURING PERIOD*                             
     7/1/12    12/31/12    7/1/12-12/31/12

Actual

    $1,000.00    $1,144.40    $5.95

Hypothetical

(5% return before expenses)

    $1,000.00    $1,019.66    $5.60

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.10%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data.

 

3

Financial Services Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

 

Top Ten Stock Holdings2

  

MarketAxess Holdings, Inc.

      5.8%          

Discover Financial Services

      4.9%   

HSBC Holdings plc - ADR (United Kingdom)

      5.7%          

Wells Fargo & Co.

      4.6%   

JPMorgan Chase & Co.

      5.5%          

Moody’s Corp.

      4.4%   

The Western Union Co.

      5.2%          

JSE Ltd. (South Africa)

      4.2%   

Admiral Group plc (United Kingdom)

      5.0%          

Brasil Insurance Participacoes e

     
       

Administracao S.A. (Brazil)

      3.9%   

 

2 As a percentage of total investments.

                       

 

4

Financial Services Series

 

 

Investment Portfolio - December 31, 2012

 

          VALUE       
    SHARES     (NOTE 2)       

COMMON STOCKS - 90.6%

       

Consumer Discretionary - 2.8%

       

Media - 2.8%

       

The McGraw-Hill Companies, Inc.

     85,000      $ 4,646,950      
   

 

 

     

Financials - 73.7%

       

Capital Markets - 2.3%

       

Deutsche Bank AG (Germany)1

     88,820        3,907,639      
   

 

 

     

Commercial Banks - 29.5%

       

Barclays plc (United Kingdom)1

     934,260        4,058,427      

BNP Paribas S.A. (France)1

     83,000        4,725,219      

Cathay General Bancorp.

     175,200        3,416,400      

CIT Group, Inc.*

     116,500        4,501,560      

Glacier Bancorp, Inc.

     218,300        3,211,193      

HSBC Holdings plc - ADR (United Kingdom)

     177,000        9,393,390      

ICICI Bank Ltd. - ADR (India)

     131,000        5,712,910      

Standard Chartered plc (United Kingdom)1

     246,630        6,382,753      

Wells Fargo & Co.

     222,950        7,620,431      
   

 

 

     
      49,022,283      
   

 

 

     

Consumer Finance - 8.0%

       

American Express Co.

     90,000        5,173,200      

Discover Financial Services

     210,000        8,095,500      
   

 

 

     
      13,268,700      
   

 

 

     

Diversified Financial Services - 22.0%

       

JPMorgan Chase & Co.

     207,000        9,101,790      

JSE Ltd. (South Africa)1

     760,000        7,022,102      

MarketAxess Holdings, Inc.

     274,000        9,672,200      

Moody’s Corp.

     146,090        7,351,249      

The NASDAQ OMX Group, Inc.

     137,000        3,426,370      
   

 

 

     
      36,573,711      
   

 

 

     

Insurance - 11.9%

       

Admiral Group plc (United Kingdom)1

     433,000        8,248,063      

Brasil Insurance Participacoes e Administracao S.A. (Brazil)

     659,680        6,443,761      

Zurich Insurance Group AG (Switzerland)1

     18,700        5,010,815      
   

 

 

     
      19,702,639      
   

 

 

     

Total Financials

       122,474,972      
   

 

 

     

Information Technology - 14.1%

       

IT Services - 14.1%

       

Cielo S.A. (Brazil)

     194,000        5,399,785      

VeriFone Systems, Inc.*

     140,000        4,155,200      

The Western Union Co.

     630,000        8,574,300      

The accompanying notes are an integral part of the financial statements.

 

5

Financial Services Series

 

 

Investment Portfolio - December 31, 2012

 

          VALUE       
    SHARES     (NOTE 2)       

COMMON STOCKS (continued)

       

Information Technology (continued)

       

IT Services (continued)

       

Wirecard AG (Germany)1

     213,314      $ 5,266,206      
   

 

 

     

Total Information Technology

       23,395,491      
   

 

 

     
      

TOTAL COMMON STOCKS

       

(Identified Cost $136,540,780)

       150,517,413      
   

 

 

     
      

SHORT-TERM INVESTMENT - 9.2%

       

Dreyfus Cash Management, Inc. - Institutional Shares2 , 0.06%

       

(Identified Cost $15,349,154)

     15,349,154        15,349,154      
   

 

 

     

TOTAL INVESTMENTS - 99.8%

       

(Identified Cost $151,889,934)

       165,866,567      

OTHER ASSETS, LESS LIABILITIES - 0.2%

       375,346      
   

 

 

     

NET ASSETS - 100%

     $ 166,241,913      
   

 

 

     

ADR - American Depository Receipt

*Non-income producing security

1A factor from a third party vendor was applied to determine the security’s fair value following the close of local trading.

2Rate shown is the current yield as of December 31, 2012.

The accompanying notes are an integral part of the financial statements.

 

6

Financial Services Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments, at value (identified cost $151,889,934) (Note 2)

    $ 165,866,567   

Dividends receivable

      30,085   

Foreign tax reclaims receivable

      79,724   

Receivable for fund shares sold

      605,965   
  

 

 

  

TOTAL ASSETS

      166,582,341   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      137,733   

Accrued fund accounting and administration fees (Note 3)

      6,376   

Accrued transfer agent fees (Note 3)

      2,586   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      146,894   

Audit fees payable

      31,032   

Other payables and accrued expenses

      15,433   
  

 

 

  

TOTAL LIABILITIES

      340,428   
  

 

 

  

TOTAL NET ASSETS

    $ 166,241,913   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 257,412   

Additional paid-in-capital

      251,555,477   

Undistributed net investment income

      45,510   

Accumulated net realized loss on investments, foreign currency and translation of other assets and liabilities

      (99,590,460 ) 

Net unrealized appreciation on investments, foreign currency and translation of other assets and liabilities

      13,973,974   
  

 

 

  

TOTAL NET ASSETS

    $ 166,241,913   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A ($166,241,913/25,741,174 shares)

    $ 6.46   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

7

Financial Services Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Dividends (net of foreign taxes withheld, $167,513)

    $ 5,099,295   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      1,549,718   

Fund accounting and administration fees (Note 3)

      46,965   

Transfer agent fees (Note 3)

      15,725   

Directors’ fees (Note 3)

      3,016   

Chief Compliance Officer service fees (Note 3)

      2,441   

Audit fees

      29,384   

Custodian fees

      22,521   

Miscellaneous

      54,145   
  

 

 

  

Total Expenses

      1,723,915   
  

 

 

  

NET INVESTMENT INCOME

      3,375,380   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

   

Investments

      6,071,628   

Foreign currency and translation of other assets and liabilities

      (55,163)   
  

 

 

  
     6,016,465   
  

 

 

  

Net change in unrealized appreciation (depreciation) on-

   

Investments

      24,523,579   

Foreign currency and translation of other assets and liabilities

      (2,835)   
  

 

 

  
     24,520,744   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      30,537,209   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 33,912,589   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

8

Financial Services Series

 

 

Statements of Changes in Net Assets

 

     FOR THE     FOR THE  
     YEAR ENDED     YEAR ENDED  
     12/31/12     12/31/11  

INCREASE IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 3,375,380      $ 2,309,104   

Net realized gain (loss) on investments and foreign currency

      6,016,465        1,994,673   

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      24,520,744        (16,424,652 ) 
  

 

 

    

 

 

  

Net increase (decrease) from operations

      33,912,589        (12,120,875 ) 
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 9):

     

From net investment income

      (3,252,430 )      (2,311,804 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase (decrease) from capital share transactions (Note 5)

      (1,388,626 )      7,223,607   
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      29,271,533        (7,209,072 ) 

NET ASSETS:

     

Beginning of year

      136,970,380        144,179,452   
  

 

 

    

 

 

  

End of year (including undistributed net investment income of $45,510 and $24,508, respectively)

    $ 166,241,913      $ 136,970,380   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

9

Financial Services Series

 

 

Financial Highlights

 

     

 

FOR THE YEARS ENDED

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 5.28      $ 5.84      $ 5.55      $ 5.14      $ 9.34   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment income

      0.13 1      0.09 1      0.07 1      0.10 1      0.17   

Net realized and unrealized gain (loss) on investments

      1.18        (0.56 )      0.29        0.44        (4.19 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      1.31        (0.47 )      0.36        0.54        (4.02 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net investment income

      (0.13 )      (0.09 )      (0.07 )      (0.13 )      (0.18 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 6.46      $ 5.28      $ 5.84      $ 5.55      $ 5.14   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 166,242      $ 136,970      $ 144,179      $ 130,415      $ 129,369   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return2

      24.84 %      (7.98 %)      6.56 %      10.54 %      (42.98 %) 

Ratios (to average net assets)/

Supplemental Data:

           

Expenses*

      1.11 %      1.13 %      1.14 %      1.14 %      1.12 % 

Net investment income

      2.18 %      1.58 %      1.31 %      2.01 %      2.34 % 

Portfolio turnover

      67 %      56 %      49 %      98 %      41 % 
*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 Series, the expense ratio (to average net assets) would have increased by the following amount:    
     N/A        N/A        0.00 %3      0.00 %3      N/A   

1Calculated based on average shares outstanding during the year.

2Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total returns would have been lower had certain expenses not been waived or reimbursed during certain years.

3Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

10

Financial Services Series

 

 

Notes to Financial Statements

 

1. Organization

Financial Services Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide long-term growth by investing principally in the common stocks of companies in the financial services 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 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated as Financial Services Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, 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 are 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 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

 

11

Financial Services Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Equity securities:

            

  Consumer Discretionary

    $         4,646,950       $         4,646,950       $ —       $                     —   

  Financials

      122,474,972         83,119,954         39,355,018         —   

  Information Technology

      23,395,491         18,129,285         5,266,206         —   

  Mutual fund

      15,349,154         15,349,154         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       165,866,567       $       121,245,343       $       44,621,224       $                     —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Please see the Investment Portfolio for foreign securities where a factor from a third party vendor was applied to determine the securities’ fair value following the close of local trading. Such securities are included in Level 2 in the table above.

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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.

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

 

12

Financial Services Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Federal Taxes (continued)

 

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 December 31, 2012, 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, 2009 through December 31, 2012. 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series’ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended.

 

13

Financial Services Series

 

 

Notes to Financial Statements (continued)

 

 

3. Transactions with Affiliates (continued)

 

The Advisor has contractually agreed, until at least April 30, 2014, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 1.20% of average daily net assets each year. The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $99,678,811 and $112,833,528 respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in shares of Financial Services Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE YEAR ENDED  12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

     1,924,809       $       11,441,290                  2,938,200       $ 16,894,131   

Reinvested

     498,438        3,150,126        441,059        2,236,169   

Repurchased

     (2,644,132 )      (15,980,042 )      (2,111,513 )      (11,906,693 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

               (220,885 )     $       (1,388,626 )      1,267,746       $       7,223,607   
 

 

 

    

 

 

    

 

 

    

 

 

  

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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

 

14

Financial Services Series

 

 

Notes to Financial Statements (continued)

 

 

6. Financial Instruments (continued)

 

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 December 31, 2012.

 

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. Financial Services Securities

The Series may focus its investments in certain related financial services industries; hence, the Series may subject itself to a greater degree of risk than a series that is more diversified.

 

9. Federal Income Tax Information

The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including investments in partnerships and foreign currency gains and losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the year ended December 31, 2012, amounts were reclassified within the capital accounts to increase Additional Paid in Capital by $27,351, reduce Undistributed Net Investment Income by $101,948 and increase Accumulated Net Realized Gain on Investments by $74,597. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR  
ENDED 12/31/12		     FOR THE YEAR  
ENDED 12/31/11		       

Ordinary income

   $ 3,252,430          $ 2,311,804          

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 151,889,934   

Unrealized appreciation

      17,054,138   

Unrealized depreciation

      (3,077,505 ) 
  

 

 

  

Net unrealized appreciation

    $ 13,976,633   
  

 

 

  

Undistributed ordinary income

    $ 45,510   

Capital loss carryover

    $ 99,590,460   
 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010 may get carried forward indefinitely and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

 

15

Financial Services Series

 

 

Notes to Financial Statements (continued)

 

 

9. Federal Income Tax Information (continued)

 

As of December 31, 2012, the Series had the following pre-enactment net capital loss carryforwards, expiring during the year indicated, which are available to offset future realized gains to the extent allowed by the tax law:

 

LOSS CARRYOVER     EXPIRATION DATE     
$ 42,735,333          December 31, 2016   
$ 51,187,679          December 31, 2017   
$ 5,667,448          December 31, 2018   

As of December 31, 2012, the Series did not have post-enactment net capital loss carryforwards.

The capital loss carryover utilized in the current year was $3,914,820.

 

16

Financial Services Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Financial Services Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Financial Services Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

17

Financial Services Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal year $3,252,430 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal year is 61.92%, or if different, the maximum allowable under tax law.

 

18

Financial Services Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

19

Financial Services Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

20

Financial Services Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

Address:

   

 

B. Reuben Auspitz*

290 Woodcliff Drive

Fairport, NY 14450

Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:   

Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc.

Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995 - 2008)

The Ashley Group (1995 - 2008)

Genesee Corporation (1987 - 2007)

Name:    Peter L. Faber
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Partnership for New York City, Inc. (non-profit)(1989 - 2010)

New York Collegium (non-profit)(2004 - 2011))

Boston Early Music Festival (non-profit)

Name:    Harris H. Rusitzky
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    78
Current Position(s) Held with Fund:   

Director, Audit Committee Member, Governance & Nominating Committee

Member

Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:   

President, The Greening Group (business consultants) since 1994;

Partner, The Restaurant Group (restaurants) since 2006

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

21

Financial Services Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee
   Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing
   Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Incyte Corp. (2000 - present)

ViroPharma, Inc. (2000 - present)

HLTH Corp. (2000 - present)

Cheyne Capital International (2000 - present)

MPM Bio-equities (2000 - 2009)

GMP Companies (2000 - 2012)

HoustonPharma (2000 - 2009)

Name:    Chester N. Watson
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee
   Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC;
   Manager (2004 - 2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC
   Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 – Manning & Napier
   Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

22

Financial Services Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering
   Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates
   since 1990 (title change in 2005 from Compliance Manager to Director of
   Compliance); Corporate Secretary, Manning & Napier Investor Services,
   Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds
   one or more of the following titles for various affiliates; Director or
   Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

23

 

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24

 

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25

Financial Services 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNFNS-12/12-AR

 

LOGO

 

        REAL ESTATE SERIES                                          

 

 

 

 

www.manning-napier.com

       LOGO          

Real Estate Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months. As investors in general continue to focus on safety, the Advisor remains focused on the Series’ objectives. As an active manager, the Advisor bases our investment decisions on prevailing market conditions and fundamentals. Doing so allows us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. Although markets witnessed positive traction throughout the year and performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor believes may continue to weigh on global economic growth.

For the twelve months ending December 31, 2012, the MSCI U.S. Real Estate Investment Trust (REIT) Index (the “MSCI U.S. REIT Index”) returned 17.77%, outpacing the S&P 500 Total Return Index, which earned 16.01%. The Class S shares of the Real Estate Series experienced positive absolute performance for the year of 21.93% and outperformed the overall domestic equity market as well as the MSCI U.S. REIT Index.

The Series’ outperformance relative to the MSCI U.S. REIT Index was a result of security selection. Over the last twelve months, specific selections within Homebuilding, Lodging REITs and Hotels, and Self Storage helped relative performance as did an underweight to Residential REITs as compared to the benchmark. In contrast, a lower allocation to Retail REITs than the benchmark challenged relative results, and the Series was also slightly negatively impacted by specific selections within the Office REITs sub-sector.

At the end of 2012, the Real Estate Series was predominately invested in REITs, with the remainder of its holdings in other real estate related investments. In terms of the breakdown by sector, 17.8% of the portfolio was invested in the retail property sector, 14.4% was invested in lodging, and 16% was invested in multi-family. In general, the Advisor continues to believe that low levels of available for sale housing inventory, recovering household formation, and much improved single family affordability has created attractive investment opportunities in public homebuilders. In light of the slow growth economic environment, the Advisor believes real estate sectors such as Lodging, Homebuilding, and niche sectors such as Data Centers, Student Housing, and Lab Space are positioned to continue to benefit from ongoing improvement in supply and demand dynamics. In contrast, other sectors such as Industrial and Suburban Office may require the support of a more substantial economic growth environment before the Advisor would seek to increase exposure to these areas.

In the Advisor’s view, slow growth remains the most likely path for the U.S. and many other global economies. However, in this challenging environment, many opportunities exist. The Advisor’s active and flexible investment approach is well-equipped to capture these opportunities. As has been the case for more than forty years, Manning & Napier remains committed to providing competitive absolute returns over full market cycles. Today, we feel the best way to do this is to seek attractively priced companies with positive long-term growth drivers that are trading at attractive valuations relative to their growth potential.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Real Estate Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012    
    

 ONE

 YEAR1                

  

 SINCE

 INCEPTION2        

Manning & Napier Fund, Inc. - Real Estate Series - Class S3

     21.93%    18.38%

Manning & Napier Fund, Inc. - Real Estate Series - Class I3,4

     22.03%    4.16%

S&P 500 Total Return Index5

     16.01%    11.17%

Morgan Stanley Capital International (MSCI) U.S. Real Estate Investment Trust (REIT) Index5,6

     17.77%    20.71%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Real Estate Series - Class S from its inception1 (11/10/09) to present (12/31/12) to the S&P 500 Total Return Index and the MSCI U.S. REIT Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Index are calculated from November 10, 2009, the Class S inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.10% for Class S and 0.87% for Class I (annualized). The annualized gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.10% for Class S and 0.87% for Class I (annualized) the year ended December 31, 2012.

4 For periods prior to the inception of Class I on August 1, 2012, the performance figures are hypothetical and reflect the performance of the Manning & Napier Fund, Inc. - Real Estate Series - Class S.

5The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the Over-the-Counter market. The Index returns assume daily reinvestment of dividends. The MSCI U.S. REIT Index is a free float-adjusted market capitalization weighted index that is comprised of equity REITs that are included in the MSCI U.S. Investable Market 2500 Index, with the exception of specialty equity REITs that do not generate a majority of their revenue and income from real estate rental and leasing operations. The Index represents approximately 85% of the U.S. REIT universe. Both Indices’ returns, unlike the Series returns, do not reflect any fees or expenses.

6The MSCI U.S. REIT Index returns are now assuming daily reinvestment of net dividends. Prior to December 31, 2010 the Index returns assumed daily reinvestment of gross dividends.

 

2

Real Estate Series

 

 

Shareholder Expense Example

(unaudited)

 

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

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 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 the class of the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the Hypothetical lines for each Class in the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING
ACCOUNT VALUE         
7/1/12*		    ENDING
ACCOUNT VALUE         
12/31/12		    EXPENSES PAID
DURING PERIOD**         
7/1/12-12/31/12		    ANNUALIZED
EXPENSE RATIO         

Class S

                    

Actual

     $1,000.00     $1,047.20     $5.68     1.10%

Hypothetical

(5% return before expenses)

     $1,000.00     $1,019.66     $5.60     1.10%

Class I

                    

Actual

     $1,000.00     $1,041.60     $3.72     0.87%

Hypothetical

(5% return before expenses)

     $1,000.00     $1,020.82     $4.43     0.87%

*Class I inception date was August 1, 2012.

**Expenses are equal to the Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period (except for the Series’ Class I Actual return information, which reflects the 153 day period ended December 31, 2012 due to its inception date of August 1, 2012). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Class’ total return would have been lower had certain expenses not been waived during the period.

 

3

Real Estate Series

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

Top Ten Stock Holdings2  

Simon Property Group, Inc.

      5.8%          

Health Care REIT, Inc.

      3.1%   

Accor S.A. (France)

      3.9%          

Digital Realty Trust, Inc.

      3.1%   

BioMed Realty Trust, Inc.

      3.5%          

Boston Properties, Inc.

      3.0%   

Pebblebrook Hotel Trust

      3.3%          

HCP, Inc.

      3.0%   

Host Hotels & Resorts, Inc.

      3.2%          

Sovran Self Storage, Inc.

      2.9%   

 

2 As a percentage of total investments.

                       

 

4

Real Estate Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

VALUE

(NOTE 2)

       

COMMON STOCKS - 98.8%

       

Consumer Discretionary - 14.8%

       

Hotels, Restaurants & Leisure - 7.9%

       

Accor S.A. (France)1

     217,000      $ 7,739,780      

Hyatt Hotels Corp. - Class A*

     45,000        1,735,650      

InterContinental Hotels Group plc (United Kingdom)1

     146,658        4,112,365      

Orient-Express Hotels Ltd. - ADR - Class A*

     168,190        1,966,141      
   

 

 

     
      15,553,936      
   

 

 

     

Household Durables - 6.9%

       

DR Horton, Inc.

     189,450        3,747,321      

Lennar Corp. - Class A

     109,846        4,247,745      

NVR, Inc.*

     2,131        1,960,520      

Toll Brothers, Inc.*

     112,662        3,642,362      
   

 

 

     
      13,597,948      
   

 

 

     

Total Consumer Discretionary

       29,151,884      
   

 

 

     

Financials - 83.0%

       

Real Estate Management & Development - 1.2%

       

General Shopping Brasil S.A. (Brazil)*

     291,000        1,516,469      

Thomas Properties Group, Inc.

     140,800        761,728      
   

 

 

     
      2,278,197      
   

 

 

     

REITS - Apartments - 16.0%

       

American Campus Communities, Inc.

     62,960        2,904,345      

Apartment Investment & Management Co. - Class A

     98,000        2,651,880      

Associated Estates Realty Corp.

     194,728        3,139,015      

AvalonBay Communities, Inc.

     25,150        3,410,089      

Camden Property Trust

     49,610        3,383,898      

Education Realty Trust, Inc.

     129,690        1,379,902      

Equity Residential

     60,250        3,414,368      

Home Properties, Inc.

     41,440        2,540,686      

Mid-America Apartment Communities, Inc.

     51,400        3,328,150      

UDR, Inc.

     227,730        5,415,419      
   

 

 

     
      31,567,752      
   

 

 

     

REITS - Diversified - 12.4%

       

American Assets Trust, Inc.

     75,950        2,121,284      

Coresite Realty Corp.

     185,170        5,121,802      

Digital Realty Trust, Inc.

     88,522        6,009,759      

DuPont Fabros Technology, Inc.

     210,102        5,076,064      

Land Securities Group plc (United Kingdom)1

     160,000        2,134,574      

Potlatch Corp.

     12,590        493,402      

Unibail-Rodamco SE (France)1

     10,825        2,625,110      

Vornado Realty Trust

     11,730        939,338      
   

 

 

     
      24,521,333      
   

 

 

     

The accompanying notes are an integral part of the financial statements.

 

5

Real Estate Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

VALUE

(NOTE 2)

       

COMMON STOCKS (continued)

       

Financials (continued)

       

REITS - Health Care - 8.6%

       

HCP, Inc.

     129,990      $ 5,872,948      

Health Care REIT, Inc.

     99,360        6,089,774      

Healthcare Realty Trust, Inc.

     61,320        1,472,293      

Healthcare Trust of America, Inc.

     161,530        1,599,147      

LTC Properties, Inc.

     54,900        1,931,931      
   

 

 

     
      16,966,093      
   

 

 

     

REITS - Hotels - 6.5%

       

Host Hotels & Resorts, Inc.

     405,000        6,346,350      

Pebblebrook Hotel Trust

     281,234        6,496,505      
   

 

 

     
      12,842,855      
   

 

 

     

REITS - Manufactured Homes - 1.3%

       

Equity Lifestyle Properties, Inc.

     39,030        2,626,329      
   

 

 

     

REITS - Office Property - 13.5%

       

Alexandria Real Estate Equities, Inc.

     75,920        5,262,774      

BioMed Realty Trust, Inc.

     353,337        6,830,004      

Boston Properties, Inc.

     56,150        5,941,232      

Corporate Office Properties Trust

     193,214        4,826,486      

Mack-Cali Realty Corp.

     147,420        3,849,136      
   

 

 

     
      26,709,632      
   

 

 

     

REITS - Regional Malls - 11.0%

       

General Growth Properties, Inc.

     226,800        4,501,980      

The Macerich Co.

     32,910        1,918,653      

Simon Property Group, Inc.

     72,010        11,384,061      

Tanger Factory Outlet Centers

     50,540        1,728,468      

Taubman Centers, Inc.

     26,740        2,104,973      
   

 

 

     
      21,638,135      
   

 

 

     

REITS - Shopping Centers - 3.2%

       

Cedar Realty Trust, Inc.

     279,728        1,476,964      

Equity One, Inc.

     141,000        2,962,410      

Kimco Realty Corp

     96,000        1,854,720      
   

 

 

     
      6,294,094      
   

 

 

     

REITS - Single Tenant - 3.6%

       

Agree Realty Corp.

     54,930        1,471,575      

National Retail Properties, Inc.

     118,710        3,703,752      

Realty Income Corp.

     48,690        1,957,825      
   

 

 

     
      7,133,152      
   

 

 

     

REITS - Storage - 5.7%

       

CubeSmart

     173,770        2,531,829      

Public Storage

     20,000        2,899,200      

 

The accompanying notes are an integral part of the financial statements.

 

6

Real Estate Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

VALUE

(NOTE 2)

       

COMMON STOCKS (continued)

       

Financials (continued)

       

REITS - Storage (continued)

       

Sovran Self Storage, Inc.

     93,141      $ 5,784,056      
   

 

 

     
      11,215,085      
   

 

 

     

Total Financials

       163,792,657      
   

 

 

     

Industrials - 1.0%

       

Transportation Infrastructure - 1.0%

       

Groupe Eurotunnel S.A. (France)1

     248,100        1,927,929      
   

 

 

     

Utilities - 0.0%

       

Electric Utilities - 0.0%

       

Prime AET&D Holdings No.1 Ltd (Australia)2

     125,000        —      
   

 

 

     
      

TOTAL COMMON STOCKS

       

(Identified Cost $149,251,085)

       194,872,470      
   

 

 

     

PREFERRED STOCKS - 0.5%

       

Financials - 0.5%

       

REITS - Office Property - 0.5%

       

MPG Office Trust, Inc., Series A, 7.625%*

       

(Identified Cost $952,530)

     47,920        1,010,633      
   

 

 

     
      

SHORT-TERM INVESTMENT - 0.6%

       

Dreyfus Cash Management, Inc. - Institutional Shares3 , 0.06%

       

(Identified Cost $1,150,421)

     1,150,421        1,150,421      
   

 

 

     

TOTAL INVESTMENTS - 99.9%

       

(Identified Cost $151,354,036)

       197,033,524      

OTHER ASSETS, LESS LIABILITIES - 0.1%

       260,462      
   

 

 

     

NET ASSETS - 100%

     $ 197,293,986      
   

 

 

     

No. - Number

ADR - American Depository Receipt

REITS - Real Estate Investment Trusts

*Non-income producing security

1A factor from a third party vendor was applied to determine the security’s fair value following the close of local trading.

2Security has been valued at fair value as determined in good faith by the Advisor.

3Rate shown is the current yield as of December 31, 2012.

 

The accompanying notes are an integral part of the financial statements.

 

7

Real Estate Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments (identified cost $151,354,036) (Note 2)

    $ 197,033,524   

Dividends receivable

      672,661   

Receivable for fund shares sold

      460,636   

Foreign tax reclaims receivable

      5,973   
  

 

 

  

TOTAL ASSETS

      198,172,794   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      122,973   

Accrued shareholder services fees (Class S)(Note 3)

      35,534   

Accrued fund accounting and administration fees (Note 3)

      8,023   

Accrued transfer agent fees (Note 3)

      2,792   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      707,214   

Other payables and accrued expenses

      1,898   
  

 

 

  

TOTAL LIABILITIES

      878,808   
  

 

 

  

TOTAL NET ASSETS

    $ 197,293,986   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 144,962   

Additional paid-in-capital

      149,489,259   

Distributions in excess of net investment income

      (933,809 ) 

Accumulated net realized gain on investments, foreign currency and translation of other assets and liabilities

      2,913,820   

Net unrealized appreciation on investments, foreign currency and translation of other assets and liabilities

      45,679,754   
  

 

 

  

TOTAL NET ASSETS

    $ 197,293,986   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S
($170,898,395/ 11,731,872 shares)

    $ 14.57   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I
($26,395,591/ 2,764,278 shares)

    $ 9.55   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

8

Real Estate Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Dividends (net of foreign taxes withheld, $75,346)

    $ 4,933,888   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      1,689,404   

Shareholder services fees (Class S) (Notes 3)

      176,427   

Fund accounting and administration fees (Note 3)

      53,946   

Transfer agent fees (Note 3)

      17,009   

Chief Compliance Officer service fees (Note 3)

      2,440   

Directors’ fees (Note 3)

      752   

Custodian fees

      17,787   

Miscellaneous

      102,969   
  

 

 

  

Total Expenses

      2,060,734   
  

 

 

  

NET INVESTMENT INCOME

      2,873,154   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

   

Investments

      9,633,313   

Foreign currency and translation of other assets and liabilities

      (2,995)   
  

 

 

  
     9,630,318   
  

 

 

  

Net change in unrealized appreciation on-

   

Investments

      24,018,719   

Foreign currency and translation of other assets and liabilities

      335   
  

 

 

  
     24,019,054   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      33,649,372   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 36,522,526   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

9

Real Estate Series

 

 

Statements of Changes in Net Assets

 

    

FOR THE

YEAR ENDED
12/31/12

    

FOR THE

YEAR ENDED
12/31/11

  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 2,873,154      $ 1,404,168   

Net realized gain (loss) on investments and foreign currency

      9,630,318        5,392,078   

Net change in unrealized appreciation on investments and foreign currency

      24,019,054        5,891,809   
  

 

 

    

 

 

  

Net increase from operations

      36,522,526        12,688,055   
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 9):

     

From net investment income (Class S)

      (3,293,301 )      (1,890,730 ) 

From net investment income (Class I)

      (782,269 )      —   

From net realized gain on investments (Class S)

      (6,086,539 )      (5,248,374 ) 

From net realized gain on investments (Class I)

      (1,381,511 )      —   
  

 

 

    

 

 

  

Total distributions to shareholders

      (11,543,620 )      (7,139,104 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      5,162,387        72,467,767   
  

 

 

    

 

 

  

Net increase in net assets

      30,141,293        78,016,718   

NET ASSETS:

     

Beginning of year

      167,152,693        89,135,975   
  

 

 

    

 

 

  

End of year (including distributions in excess of net investment income of $ 933,809 and $ 0, respectively)

    $ 197,293,986      $ 167,152,693   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

10

Real Estate Series

 

 

Financial Highlights - Class S*

 

     

 

FOR THE YEARS ENDED

    

FOR THE PERIOD
11/10/091 TO

12/31/09

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

Per share data (for a share outstanding throughout each period):

         

Net asset value - Beginning of period

    $ 12.65      $ 12.58      $ 10.61      $ 10.00   
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from investment operations:

         

Net investment income2

      0.21        0.15        0.12        0.02   

Net realized and unrealized gain on investments

      2.54        0.49        2.44        0.62   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      2.75        0.64        2.56        0.64   
  

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

         

From net investment income

      (0.29 )      (0.15 )      (0.12 )      (0.02 ) 

From net realized gain on investments

      (0.54 )      (0.42 )      (0.47 )      (0.01 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions to shareholders

      (0.83 )      (0.57 )      (0.59 )      (0.03 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of period

    $ 14.57      $ 12.65      $ 12.58      $ 10.61   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of period (000’s omitted)

    $ 170,898      $ 167,153      $ 89,136      $ 69,179   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total return3

      21.93 %      5.29 %      24.40 %      6.36 % 

Ratios (to average net assets)/

Supplemental Data:

         

Expenses**

      1.10 %      1.18 %      1.20 %      1.20 %4 

Net investment income

      1.49 %      1.21 %      1.02 %      1.43 %4 

Portfolio turnover

      14 %      34 %      34 %      3 % 

* Effective August 1, 2012, the shares of the Series have been designated as Class S.

** 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 Series, the expense ratio (to average net assets) would have increased by the following amounts:

  

    

     N/A        N/A        0.01 %      0.38 %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 certain periods. Periods less than one year are not annualized.

4Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

11

Real Estate Series

 

 

Financial Highlights - Class I

 

    

FOR THE PERIOD

8/1/121 TO

12/31/12

  

Per share data (for a share outstanding throughout the period):

  

Net asset value - Beginning of period

   $ 10.00   
 

 

 

  

Income (loss) from investment operations:

  

Net investment income2

     0.08   

Net realized and unrealized gain (loss) on investments

     0.32   
 

 

 

  

Total from investment operations

     0.40   
 

 

 

  

Less distributions to shareholders:

  

From net investment income

     (0.31 ) 

From net realized gain on investments

     (0.54 ) 
 

 

 

  

Total distributions to shareholders

     (0.85 ) 

Net asset value - End of period

   $ 9.55   
 

 

 

  

Net assets - End of period (000’s omitted)

   $ 26,396   
 

 

 

  

Total return3

     4.16 % 

Ratios (to average net assets)/

Supplemental Data:

  

Expenses

     0.87 %4 

Net investment income

     1.95 %4 

Portfolio turnover

     14 % 

1Commencement of operations.

2Calculated based on average shares outstanding during the period.

3Represents aggregate total return for the period 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.

 

12

Real Estate Series

 

 

Notes to Financial Statements

 

1. Organization

Real Estate 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 high current income and long-term capital appreciation by investing principally in the common stocks of 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 total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. Effective August 1, 2012, the Class A shares of the Series have been redesignated as Class S shares and the Series issued Class I shares. Each class of shares is substantially the same, except that Class S shares bear shareholder services fees. As of December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million shares have been designated as Real Estate Series Class S common stock and 100 million have been designated as Real Estate Series Class I common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ 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 are 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 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

 

13

Real Estate Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Equity securities:

            

  Consumer Discretionary

    $ 29,151,884       $ 17,299,739       $       11,852,145       $                     —   

  Financials

      163,792,657         159,032,973         4,759,684         —   

  Industrials

      1,927,929         —         1,927,929         —   

  Utilities

      —         —         —         — * 

  Preferred securities:

            

  Financials

      1,010,633         1,010,633         —         —   

  Mutual fund

      1,150,421         1,150,421         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       197,033,524       $       178,493,766       $ 18,539,758       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

*Prime AET&D Holdings No.1 Ltd. is a Level 3 security as of December 31, 2012. However, there is no cost or market value for this security reported in the financial statements. There was no activity in this security for the year ended December 31, 2012.

Please see the Investment Portfolio for foreign securities where a factor from a third party vendor was applied to determine the securities’ fair value following the close of local trading. Such securities are included in Level 2 in the table above.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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 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.

 

14

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 December 31, 2012, 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, 2009 and the years ended December 31, 2010 through December 31, 2012. 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

15

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 0.75% of the Series’ average daily net assets. Prior to August 1, 2012, this rate was 1.00% of the Series’ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended.

The Class S shares of the Series are subject to a shareholder service fee in accordance with a shareholder service plan adopted by the Fund’s Board. The shareholder service fee is intended to compensate financial intermediaries, including affiliates of the Fund, in connection with the provision of direct client service, personal services, maintenance of shareholder accounts and reporting services. For these services, Class S of the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.25% of the average daily net assets of Class S. The Fund has a Shareholder Services Agreement with the Advisor, for which the Advisor receives the shareholder services fee as stated above.

Effective August 1, 2012, the Advisor has contractually agreed, until at least April 30, 2014, to waive its management fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series, exclusive of shareholder service fees, at no more than 0.95% of average daily net assets. Prior to August 1, 2012, this amount was 1.20%. The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a Series are allocated based on each Series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $27,054,842 and $29,382,273 respectively. There were no purchases or sales of U.S. Government securities.

 

16

Real Estate Series

 

 

Notes to Financial Statements (continued)

 

 

5. Capital Stock Transactions

Transactions in shares of Class S and I shares of Real Estate Series were:

 

CLASS S   FOR THE YEAR ENDED 12/31/12     FOR THE YEAR ENDED 12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

     942,190       $       13,440,671                  6,612,390       $ 78,849,308   

Reinvested

     641,521        9,205,525        580,212        7,029,084   

Repurchased

     (3,067,077 )      (45,004,040 )      (1,065,703 )      (13,410,625 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     (1,483,366 )     $ (22,357,844 )      6,126,899       $       72,467,767   
 

 

 

    

 

 

    

 

 

    

 

 

  
       
CLASS I   FOR THE PERIOD 8/1/12
(COMMENCEMENT OF
OPERATIONS) TO 12/31/12		              
    SHARES     AMOUNT              

Sold

     2,540,161      $ 25,408,795       

Reinvested

     225,474        2,125,283       

Repurchased

     (1,357 )      (13,847 )     
 

 

 

    

 

 

      

Total

               2,764,278       $       27,520,231       
 

 

 

    

 

 

      

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

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. 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.

 

9. Federal Income Tax Information

The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses, losses deferred due to wash sales and investments in passive foreign investment companies (PFICs). The Series may periodically make reclassifications among its capital accounts to reflect

 

17

Real Estate Series

 

 

Notes to Financial Statements (continued)

 

 

9. Federal Income Tax Information (continued)

 

income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the year ended December 31, 2012, $268,607 was reclassified within the capital accounts to decrease Distributions in excess of Net Investment Income and decrease Accumulated Net Realized Gain on Investments. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR
ENDED 12/31/12		     FOR THE YEAR
ENDED 12/31/11		       

Ordinary income

   $ 5,584,073      $ 2,396,679      

Long-term capital gains

     5,959,547        4,742,425      

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on the identified cost of investments for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 152,358,304   

Unrealized appreciation

      46,232,583   

Unrealized depreciation

      (1,557,363 ) 
  

 

 

  

Net unrealized appreciation

    $ 44,675,220   
  

 

 

  

Undistributed ordinary income

      206,500   

Undistributed long-term gains

      2,777,779   
 

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010 may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series did not have pre or post-enactment net capital loss carryforwards.

 

18

Real Estate Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Real Estate Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Real Estate Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

19

Real Estate Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal year $804,630 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal year is 1.72%, or if different, the maximum allowable under tax law.

 

20

Real Estate Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro- Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

21

Real Estate Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

22

Real Estate Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

Address:

   

 

B. Reuben Auspitz*

290 Woodcliff Drive

Fairport, NY 14450

Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:   

Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc.

Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee
   Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995 - 2008)

The Ashley Group (1995 - 2008)

Genesee Corporation (1987 - 2007)

Name:    Peter L. Faber
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Partnership for New York City, Inc. (non-profit)(1989 - 2010)

New York Collegium (non-profit)(2004 - 2011))

Boston Early Music Festival (non-profit)

Name:    Harris H. Rusitzky
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:   

President, The Greening Group (business consultants) since 1994;

Partner, The Restaurant Group (restaurants) since 2006

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

23

Real Estate Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)     

 

Name:

   

 

Paul A. Brooke

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Incyte Corp. (2000 - present)

ViroPharma, Inc. (2000 - present)

HLTH Corp. (2000 - present)

Cheyne Capital International (2000 - present)

MPM Bio-equities (2000 - 2009)

GMP Companies (2000 - 2012)

HoustonPharma (2000 - 2009)

Name:    Chester N. Watson
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004 - 2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:   

President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC

Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

24

Real Estate Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

25

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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNRES-12/12-AR

 

LOGO

 

        INTERNATIONAL SERIES                          

 

 

 

 

www.manning-napier.com

       LOGO          

International Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months. As investors in general continue to focus on safety, the Advisor remains focused on the Series’ objectives. As an active manager, we base our its investment decisions on prevailing market conditions and fundamentals. Doing so allows us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. Although markets witnessed positive traction throughout the year and performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor believes may continue to weigh on global economic growth.

Despite the prevailing sense of uncertainty amongst investors, most global equity markets experienced strong positive absolute performance during 2012. For the twelve-month period ended December 31, 2012, the MSCI All Country World Index excluding the U.S.A. (ACWIxUSA) rose by 16.83%. Meanwhile, although the Class S shares of the International Series underperformed the benchmark, they provided strong positive absolute returns for the year of 15.93%.

Manning & Napier believes that measuring performance over market cycles better captures a manager’s ability to add value across varied market conditions. In addition to the positive absolute performance during the past year, the International Series continues to provide positive absolute returns over the current international stock market cycle and has outperformed the MSCI ACWIxUS Index benchmark since the cycle began on April 1, 2003.

For the year, the Series’ moderate underperformance was driven by its equity holdings rather than regional, country, and sector allocations, all of which aided relative returns. Equity holdings in countries including Switzerland, France, and Canada detracted from relative performance. This was partially offset by holdings in Emerging Market countries, including Brazil and India, which generated strong returns and contributed positively to relative performance during the twelve-month period. The Series’ largest portfolio positions continue to be in Europe and the Middle East, where a notable overweight compared to the benchmark aided relative returns. Within the regions, the Advisor continues to seek out fundamentally-strong companies that are well-positioned for growth but whose equity prices have been held down by ongoing stresses in the market. A notable underweight to the Pacific region versus the benchmark also aided relative returns, as the Advisor maintained limited holdings in Japan in light of the adverse macroeconomic conditions that existed in the country throughout much of the year.

In the Advisor’s view, slow growth remains the most likely path for the U.S. and many other global economies. However, in this challenging environment, many opportunities exist. The Advisor’s active and flexible investment approach is well-equipped to capture these opportunities. As has been the case for more than forty years, Manning & Napier remains committed to providing competitive absolute returns over full market cycles. Today, we believe the best way to do this is to seek attractively priced companies with positive long-term growth drivers that are trading at attractive valuations relative to their growth potential.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

International Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

     AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2012
     ONE
YEAR1                		   FIVE
YEAR                 		  TEN
YEAR                 		  SINCE
INCEPTION2        

Manning & Napier Fund, Inc. - International Series - Class S3

     15.93%    0.26%    10.28%    8.39%

Manning & Napier Fund, Inc. - International Series - Class I3,4

     16.18%    0.31%    10.31%    5.88%

S&P 500 Total Return Index5

     16.01%    1.68%    7.11%    8.40%

MSCI All Country World Index ex U.S.A.5

     16.83%    -2.89%    9.74%    6.47%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - International Series - Class S for the ten years ended December 31, 2012 to the S&P 500 Total Return Index and the MSCI All Country World Index ex U.S.A.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and the S&P 500 Total Return Index are calculated from August 27, 1992, the Class S inception date. Prior to 2001, the MSCI All Country World Index ex U.S.A. only published month-end numbers; therefore, performance numbers for the Index are calculated from August 31, 1992.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.10% for Class S and 0.85% for Class I (annualized). The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.17% for Class S and 0.94% for Class I (annualized) for the year ended December 31, 2012.

4For periods prior to the inception of Class I on March 15, 2012, the performance figures are hypothetical and reflect the performance of the Manning & Napier Fund, Inc. -International Series - Class S.

5The S&P 500 Total Return Index is an unmanaged capitalization-weighted measure of 500 widely held common stocks listed on the New York Stock Exchange, American Stock Exchange and the Over-the-Counter market. The Index returns assume daily reinvestment of dividends. The MSCI All Country World Index ex U.S.A. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series (see Note 1 above) through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). Both Indices’ returns, unlike the Series returns, do not reflect any fees or expenses.

 

2

International Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested in each class at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

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 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 the class of the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the Hypothetical lines for each Class in the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING
 ACCOUNT VALUE             
 7/1/12		  

 ENDING

 ACCOUNT VALUE             
 12/31/12

    EXPENSES PAID
 DURING PERIOD*            
 7/1/12-12/31/12		    ANNUALIZED
 EXPENSE RATIO             

Class S

                

Actual

    $1,000.00    $1,145.70    $5.95    1.10%

Hypothetical

(5% return before expenses)

    $1,000.00    $1,019.66    $5.60    1.10%

Class I

                

Actual

    $1,000.00    $1,147.10    $4.60    0.85%

Hypothetical

(5% return before expenses)

    $1,000.00    $1,020.92    $4.33    0.85%

*Expenses are equal to the Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which is based on one-year data for Class S and 292 days for Class I (commencement of operations was March 15, 2012). The Class’ total return would have been lower had certain expenses not been waived during the period.

 

3

International Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

4

International Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

       

COMMON STOCKS - 91.1%

       

Consumer Discretionary - 14.4%

       

Auto Components - 1.0%

       

Hankook Tire Co. Ltd. (South Korea)*1

     145,591       $ 6,391,684      
   

 

 

     

Automobiles - 1.3%

       

Hero Motocorp Ltd. (India)1

     42,450         1,485,583      

Maruti Suzuki India Ltd. (India)1

     44,940         1,231,443      

Yamaha Motor Co. Ltd. (Japan)1

     566,900         6,279,965      
   

 

 

     
      8,996,991      
   

 

 

     

Hotels, Restaurants & Leisure - 0.9%

       

Indian Hotels Co. Ltd. (India)1

           5,361,450         6,201,599      
   

 

 

     

Household Durables - 1.1%

       

LG Electronics, Inc. (South Korea)1

     74,000         5,135,863      

Rodobens Negocios Imobiliarios S.A. (Brazil)

     367,000         2,267,424      
   

 

 

     
      7,403,287      
   

 

 

     

Media - 4.8%

       

Mediaset Espana Comunicacion S.A. (Spain)1

           2,208,600               15,008,212      

Reed Elsevier plc - ADR (United Kingdom)

     60,311         2,535,474      

Societe Television Francaise 1 (France)1

     327,530         3,853,359      

Wolters Kluwer N.V. (Netherlands)1

     322,347         6,621,588      

Zon Multimedia Servicos de Telecomunicacoes e Multimedia SGPS S.A. (Portugal)1

     945,000         3,704,659      
   

 

 

     
            31,723,292      
   

 

 

     

Multiline Retail - 0.9%

       

PPR (France)1

     31,130         5,846,580      
   

 

 

     

Specialty Retail - 2.1%

       

Belle International Holdings Ltd. (Hong Kong)1

           3,390,000         7,497,240      

Hennes & Mauritz AB - Class B (Sweden)1

     129,000         4,470,759      

Komeri Co. Ltd. (Japan)1

     67,000         1,692,607      
   

 

 

     
            13,660,606      
   

 

 

     

Textiles, Apparel & Luxury Goods - 2.3%

       

Burberry Group plc (United Kingdom)1

     184,000         3,698,690      

Daphne International Holdings Ltd. (China)1

           4,548,000         6,331,478      

Hugo Boss AG (Germany)*1

     47,000         4,994,964      
   

 

 

     
      15,025,132      
   

 

 

     

Total Consumer Discretionary

             95,249,171      
   

 

 

     

Consumer Staples - 17.9%

       

Beverages - 4.9%

       

Carlsberg A/S - Class B (Denmark)1

     80,000         7,881,315      

Diageo plc (United Kingdom)1

     322,810         9,402,413      

Kirin Holdings Co. Ltd. (Japan)1

     600,000         7,059,599      

The accompanying notes are an integral part of the financial statements.

 

5

International Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

       

COMMON STOCKS (continued)

       

Consumer Staples (continued)

       

Beverages (continued)

       

Tsingtao Brewery Co. Ltd. - Class H (China)1

           1,300,000       $ 7,748,376      
   

 

 

     
      32,091,703      
   

 

 

     

Food & Staples Retailing - 2.4%

       

Carrefour S.A. (France)1

     165,082         4,250,445      

Casino Guichard-Perrachon S.A. (France)1

     34,170         3,272,905      

President Chain Store Corp. (Taiwan)1

     352,320         1,890,322      

Tesco plc (United Kingdom)1

           1,217,410         6,706,231      
   

 

 

     
      16,119,903      
   

 

 

     

Food Products - 7.9%

       

Barry Callebaut AG (Switzerland)1

     4,400         4,256,733      

BRF - Brasil Foods S.A. (Brazil)

     315,000         6,490,769      

Charoen Pokphand Foods PCL (Thailand)1

           3,841,800         4,258,002      

Danone S.A. (France)1

     107,012         7,049,147      

Grupo Bimbo S.A.B. de C.V. - Class A (Mexico)

           2,604,000         6,742,523      

Nestle S.A. (Switzerland)1

     105,220         6,864,918      

Unilever plc - ADR (United Kingdom)

     420,230         16,271,306      
   

 

 

     
      51,933,398      
   

 

 

     

Household Products - 1.9%

       

Hindustan Unilever Ltd. (India)1

     250,540         2,413,540      

Reckitt Benckiser Group plc (United Kingdom)1

     164,270         10,427,845      
   

 

 

     
      12,841,385      
   

 

 

     

Personal Products - 0.2%

       

Kao Corp. (Japan)1

     47,000         1,224,705      
   

 

 

     

Tobacco - 0.6%

       

Gudang Garam Tbk PT (Indonesia)1

     730,000         4,277,344      
   

 

 

     

Total Consumer Staples

             118,488,438      
   

 

 

     

Energy - 3.0%

       

Oil, Gas & Consumable Fuels - 3.0%

       

Petroleo Brasileiro S.A. - ADR (Brazil)

     240,000         4,632,000      

Royal Dutch Shell plc - Class B (Netherlands)1

     88,430         3,154,873      

Royal Dutch Shell plc - Class B - ADR (Netherlands)

     87,780         6,222,724      

Statoil ASA (Norway)1

     237,000         5,973,496      
   

 

 

     

Total Energy

       19,983,093      
   

 

 

     

Financials - 6.4%

       

Capital Markets - 0.1%

       

OSK Holdings Berhad (Malaysia)1

           2,141,737         1,012,936      
   

 

 

     

Commercial Banks - 1.0%

       

Hong Leong Financial Group Berhad (Malaysia)1

           1,462,800         6,335,291      
   

 

 

     

The accompanying notes are an integral part of the financial statements.

 

6

International Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

       

COMMON STOCKS (continued)

       

Financials (continued)

       

Insurance - 3.8%

       

Allianz SE (Germany)1

     40,870       $ 5,697,184      

AXA S.A. (France)1

     211,372         3,795,371      

Mapfre S.A. (Spain)1

           1,877,000         5,783,323      

Muenchener Rueckversicherungs AG (MunichRe) (Germany)1

     40,610         7,331,271      

Zurich Insurance Group AG (Switzerland)1

     10,500         2,813,559      
   

 

 

     
            25,420,708      
   

 

 

     

Real Estate Investment Trusts (REITS) - 1.1%

       

Alstria Office REIT AG (Germany)1

     595,480         7,271,364      
   

 

 

     

Thrifts & Mortgage Finance - 0.4%

       

Aareal Bank AG (Germany)*1

     115,790         2,424,785      
   

 

 

     

Total Financials

             42,465,084      
   

 

 

     

Health Care - 11.1%

       

Health Care Equipment & Supplies - 1.5%

       

Carl Zeiss Meditec AG (Germany)1

     232,000         6,688,666      

Straumann Holding AG (Switzerland)1

     25,776         3,165,192      
   

 

 

     
      9,853,858      
   

 

 

     

Health Care Providers & Services - 2.3%

       

Fresenius Medical Care AG & Co. KGaA - ADR (Germany)

     50,000         1,715,000      

Odontoprev S.A. (Brazil)

           1,476,000         7,735,033      

Qualicorp S.A. (Brazil)*

     529,000         5,479,897      
   

 

 

     
            14,929,930      
   

 

 

     

Life Sciences Tools & Services - 1.1%

       

Gerresheimer AG (Germany)1

     141,000         7,492,069      
   

 

 

     

Pharmaceuticals - 6.2%

       

AstraZeneca plc (United Kingdom)1

     27,960         1,325,023      

AstraZeneca plc - ADR (United Kingdom)

     229,150               10,831,921      

Bayer AG (Germany)1

     100,000         9,536,233      

GlaxoSmithKline plc (United Kingdom)1

     172,980         3,766,192      

Novartis AG - ADR (Switzerland)

     49,000         3,101,700      

Shire plc (Ireland)1

     195,160         6,003,370      

Takeda Pharmaceutical Co. Ltd. (Japan)1

     34,900         1,559,856      

Teva Pharmaceutical Industries Ltd. - ADR (Israel)

     140,000         5,227,600      
   

 

 

     
            41,351,895      
   

 

 

     

Total Health Care

             73,627,752      
   

 

 

     

Industrials - 16.6%

       

Commercial Services & Supplies - 1.2%

       

Taiwan Secom Co. Ltd. (Taiwan)1

     777,210         1,736,277      

Tomra Systems ASA (Norway)1

     689,080         6,270,122      
   

 

 

     
      8,006,399      
   

 

 

     

The accompanying notes are an integral part of the financial statements.

 

7

International Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

       

COMMON STOCKS (continued)

       

Industrials (continued)

       

Construction & Engineering - 0.9%

       

Larsen & Toubro Ltd. (India)1

     206,270       $ 6,124,645      
   

 

 

     

Electrical Equipment - 4.2%

       

ABB Ltd. (Asea Brown Boveri) - ADR (Switzerland)

     342,000         7,110,180      

Alstom S.A. (France)1

     295,560         11,906,382      

Bharat Heavy Electricals Ltd. (India)1

     150,400         635,651      

Schneider Electric S.A. (France)1

     66,000         4,833,916      

Teco Electric and Machinery Co. Ltd. (Taiwan)1

           4,084,000         3,142,693      
   

 

 

     
      27,628,822      
   

 

 

     

Industrial Conglomerates - 3.9%

       

Siemens AG (Germany)1

     237,600         25,981,841      
   

 

 

     

Machinery - 2.5%

       

FANUC Corp. (Japan)1

     71,000         13,209,522      

Jain Irrigation Systems Ltd. (India)1

           2,125,900         2,944,174      

Jain Irrigation Systems Ltd. - DVR (India)1

     44,872         30,589      
   

 

 

     
      16,184,285      
   

 

 

     

Professional Services - 1.0%

       

Experian plc (United Kingdom)1

     405,980         6,543,183      
   

 

 

     

Trading Companies & Distributors - 1.3%

       

Mills Estruturas e Servicos de Engenharia S.A. (Brazil)

     519,400         8,624,957      
   

 

 

     

Transportation Infrastructure - 1.6%

       

Malaysia Airports Holdings Berhad (Malaysia)1

           6,083,700         10,364,970      
   

 

 

     

Total Industrials

             109,459,102      
   

 

 

     

Information Technology - 11.2%

       

Communications Equipment - 0.8%

       

Alcatel-Lucent - ADR (France)*

           4,100,000         5,699,000      
   

 

 

     

Electronic Equipment, Instruments & Components - 2.8%

       

Hitachi Ltd. (Japan)1

           2,158,000         12,698,769      

Keyence Corp. (Japan)1

     17,209         4,772,480      

Yageo Corp. (Taiwan)*1

           2,931,000         934,193      
   

 

 

     
      18,405,442      
   

 

 

     

Internet Software & Services - 0.8%

       

NHN Corp. (South Korea)1

     23,950         5,087,525      
   

 

 

     

IT Services - 1.3%

       

Cap Gemini S.A. (France)1

     202,320         8,846,998      
   

 

 

     

Semiconductors & Semiconductor Equipment - 2.0%

       

Samsung Electronics Co. Ltd. (South Korea)1

     9,260         13,304,767      
   

 

 

     

Software - 3.5%

       

Aveva Group plc (United Kingdom)1

     103,000         3,696,214      

The accompanying notes are an integral part of the financial statements.

 

8

International Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

       

COMMON STOCKS (continued)

       

Information Technology (continued)

       

Software (continued)

       

SAP AG (Germany)1

           239,440       $ 19,254,112      
   

 

 

     
      22,950,326      
   

 

 

     

Total Information Technology

       74,294,058      
   

 

 

     

Materials - 4.7%

       

Chemicals - 4.7%

       

BASF SE (Germany)1

           159,100         15,044,565      

Linde AG (Germany)1

     92,500         16,182,809      
   

 

 

     

Total Materials

       31,227,374      
   

 

 

     

Telecommunication Services - 5.0%

       

Diversified Telecommunication Services - 3.8%

       

Swisscom AG - ADR (Switzerland)2

           106,400         4,601,800      

Telefonica S.A. - ADR (Spain)

           707,000         9,537,430      

Telenor ASA - ADR (Norway)2

           184,380         11,199,241      
   

 

 

     
      25,338,471      
   

 

 

     

Wireless Telecommunication Services - 1.2%

       

SK Telecom Co. Ltd. - ADR (South Korea)

           489,190         7,743,878      
   

 

 

     

Total Telecommunication Services

       33,082,349      
   

 

 

     

Utilities - 0.8%

       

Multi-Utilities - 0.2%

       

GDF Suez (France)1

     51,850         1,067,912      
   

 

 

     

Water Utilities - 0.6%

       

Cia de Saneamento de Minas Gerais - Copasa MG (Brazil)

           182,000         3,888,889      
   

 

 

     

Total Utilities

       4,956,801      
   

 

 

     
      

TOTAL COMMON STOCKS

       

(Identified Cost $556,778,935)

             602,833,222      
   

 

 

     

The accompanying notes are an integral part of the financial statements.

 

9

International Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES    

  VALUE

  (NOTE 2)

       
      

SHORT-TERM INVESTMENT - 8.8%

       
      

Dreyfus Cash Management, Inc. - Institutional Shares3, 0.06%,

(Identified Cost $ 57,984,578)

           57,984,578       $       57,984,578      
   

 

 

     

TOTAL INVESTMENTS - 99.9%

       

(Identified Cost $ 614,763,513)

       660,817,800      

OTHER ASSETS, LESS LIABILITIES - 0.1%

       716,240      
   

 

 

     

NET ASSETS - 100%

     $ 661,534,040      
   

 

 

     

ADR - American Depository Receipt

DVR - Differential Voting Rights

*Non-income producing security

1A factor from a third party vendor was applied to determine the security’s fair value following the close of local trading.

2Latest quoted sales price is not available and the latest quoted bid price was used to value the security.

3Rate shown is the current yield as of December 31, 2012.

The Series’ portfolio holds, as a percentage of net assets, greater than 10% in the following countries:

Germany 19.6%; United Kingdom 11.4%.

The accompanying notes are an integral part of the financial statements.

 

10

International Series

 

 

Statement of Assets & Liabilities

December 31, 2012

 

ASSETS:

   

Investments, at value (identified cost $614,763,513) (Note 2)

    $ 660,817,800   

Foreign currency (identified cost $3,291,943)

      3,293,219   

Receivable for fund shares sold

      2,361,479   

Foreign tax reclaims receivable

      904,359   

Dividends receivable

      756,911   
  

 

 

  

TOTAL ASSETS

      668,133,768   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      340,695   

Accrued shareholder services fees (Class S) (Note 3)

      118,010   

Accrued foreign capital gains tax (Note 2)

      88,432   

Accrued transfer agent fees (Note 3)

      44,083   

Accrued fund accounting and administration fees (Note 3)

      18,752   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for securities purchased

      3,293,219   

Payable for fund shares repurchased

      2,502,968   

Other payables and accrued expenses

      193,195   
  

 

 

  

TOTAL LIABILITIES

      6,599,728   
  

 

 

  

TOTAL NET ASSETS

    $ 661,534,040   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 742,094   

Additional paid-in-capital

      620,152,306   

Distributions in excess of net investment income

      (79,897 ) 

Accumulated net realized loss on investments, foreign currency and translation of other assets and liabilities

      (5,231,144 ) 

Net unrealized appreciation on investments (net of foreign capital gains tax of $88,432), foreign currency and translation of other assets and liabilities

      45,950,681   
  

 

 

  

TOTAL NET ASSETS

    $ 661,534,040   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S ($565,609,356/65,045,964 shares)

    $ 8.70   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I ($95,924,684/9,163,482 shares)

    $ 10.47   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

11

International Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Dividends (net of foreign taxes withheld, $1,772,397)

    $ 14,726,203   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      4,582,474   

Shareholder services fees (Class S)(Note 3)

      1,377,019   

Transfer agent fees (Note 3)

      269,820   

Fund accounting and administration fees (Note 3)

      116,252   

Directors’ fees (Note 3)

      12,261   

Chief Compliance Officer service fees (Note 3)

      2,441   

Custodian fees

      394,028   

Miscellaneous

      257,145   
  

 

 

  

Total Expenses

      7,011,440   

Less reduction of expenses (Note 3)

      (440,950 ) 
  

 

 

  

Net Expenses

      6,570,490   
  

 

 

  

NET INVESTMENT INCOME

      8,155,713   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

Investments (net of India tax of $379,384)

      (1,326,721 ) 

Foreign currency and translation of other assets and liabilities

      (74,336 ) 
  

 

 

  
     (1,401,057 ) 
  

 

 

  

Net change in unrealized appreciation (depreciation) on-

Investments (net of increase in accrued foreign capital gains tax of $88,065)

      79,567,690   

Foreign currency and translation of other assets and liabilities

      888   
  

 

 

  
     79,568,578   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      78,167,521   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 86,323,234   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

12

International Series

 

 

Statements of Changes in Net Assets

 

     FOR THE
YEAR ENDED
12/31/12		     FOR THE
YEAR ENDED
12/31/11		  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 8,155,713      $ 6,388,364   

Net realized gain (loss) on investments and foreign currency

      (1,401,057 )      (2,233,797 ) 

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      79,568,578        (79,628,812 ) 
  

 

 

    

 

 

  

Net increase (decrease) from operations

      86,323,234        (75,474,245 ) 
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 8):

     

From net investment income (Class S)

      (6,468,512 )      (6,221,472 ) 

From net investment income (Class I)

      (965,618 )      —   

From return of capital (Class S)

      (577,095 )      —   

From return of capital (Class I)

      (86,357 )      —   

From net realized gain on investments (Class S)

      —        (447,449 ) 
  

 

 

    

 

 

  

Total distributions to shareholders

      (8,097,582 )      (6,668,921 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      70,041,655        278,211,397   
  

 

 

    

 

 

  

Net increase in net assets

      148,267,307        196,068,231   

NET ASSETS:

     

Beginning of year

      513,266,733        317,198,502   
  

 

 

    

 

 

  

End of year (including distributions in excess of net investment income of $79,897 and $2,580,966, respectively)

    $ 661,534,040      $ 513,266,733   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

13

International Series

 

 

Financial Highlights - Class S

 

     

 

FOR THE YEARS ENDED

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 7.61      $ 8.85      $ 8.39      $ 6.57      $ 10.87   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment income

      0.10 1      0.13 1      0.14 1      0.14 1      0.22   

Net realized and unrealized gain (loss) on investments

      1.10        (1.26 )      0.86        2.10        (3.82 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      1.20        (1.13 )      1.00        2.24        (3.60 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net investment income

      (0.10 )      (0.10 )      (0.19 )      (0.16 )      (0.21 ) 

From return of capital

      (0.01 )      —        —        —        —   

From net realized gain on investments

      —        (0.01 )      (0.35 )      (0.26 )      (0.49 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions to shareholders

      (0.11 )      (0.11 )      (0.54 )      (0.42 )      (0.70 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 8.70      $ 7.61      $ 8.85      $ 8.39      $ 6.57   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 565,609      $ 513,267      $ 317,199      $ 267,100      $ 182,273   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return2

      15.78 %      (12.82 %)      12.04 %      34.23 %      (33.25 %) 

Ratios (to average net assets)/

Supplemental Data:

           

Expenses*

      1.10 %      1.16 %      1.15 %      1.15 %      1.15 % 

Net investment income

      1.30 %      1.49 %      1.68 %      1.90 %      2.49 % 

Portfolio turnover

      22 %      7 %      13 %      17 %      9 % 
*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 amount:    
     0.07 %      N/A        0.00 %3      0.00 %3      N/A   

1Calculated based on average shares outstanding during the year.

2Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total returns would have been lower had certain expenses not been waived or reimbursed during certain years.

3Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

14

International Series

 

 

Financial Highlights - Class I

 

    

FOR THE

PERIOD
3/15/121 TO 12/31/12

  

Per share data (for a share outstanding throughout the period):

   

Net asset value - Beginning of period

    $ 10.00   
  

 

 

  

Income (loss) from investment operations:

   

Net investment income2

      0.13   

Net realized and unrealized gain (loss) on investments

      0.46   
  

 

 

  

Total from investment operations

      0.59   
  

 

 

  

Less distributions to shareholders:

   

From net investment income

      (0.11 ) 

From return of capital

      (0.01 ) 
  

 

 

  

Total distributions to shareholders

      (0.12 ) 
  

 

 

  

Net asset value - End of period

    $ 10.47   
  

 

 

  

Net assets - End of period (000’s omitted)

    $ 95,925   
  

 

 

  

Total return3

      5.88 % 

Ratios (to average net assets)/

Supplemental Data:

   

Expenses*

      0.85 %4 

Net investment income

      1.67 %4 

Portfolio turnover

      22 % 
*The investment advisor did not impose all or a portion of its management and/or other fees during the period, 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 amount:     
     0.09 %4 

1Commencement of operations.

2Calculated based on average shares outstanding during the period.

3Represents aggregate total return for the period indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during the period. Periods less than one year are not annualized.

4Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

15

International Series

 

 

Notes to Financial Statements

 

1. Organization

International Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide long-term growth by investing principally in the common stocks of companies located outside the United States.

The Fund’s advisor is Manning & Napier Advisors, 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 two classes of shares (Class S and Class I). Class I shares of the Series were issued on March 15, 2012. Each class of shares is substantially the same, except that Class S shares bear shareholder services fees. 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 250 million have been designated as International Series Class S common stock and 100 million have been designated as International Series Class I common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ 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 are 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 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

 

16

International Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Equity securities:

            

  Consumer Discretionary

    $ 95,249,171       $ 4,802,898       $ 90,446,273       $                     —   

  Consumer Staples

            118,488,438         29,504,598         88,983,840                             —   

  Energy

      19,983,093         10,854,724         9,128,369                             —   

  Financials

      42,465,084         —         42,465,084                             —   

  Health Care

      73,627,752         34,091,151         39,536,601                             —   

  Industrials

            109,459,102         15,735,137         93,723,965                             —   

  Information Technology

      74,294,058         5,699,000         68,595,058                             —   

  Materials

      31,227,374         —         31,227,374                             —   

  Telecommunication Services

      33,082,349         17,281,308         15,801,041                             —   

  Utilities

      4,956,801         3,888,889         1,067,912                             —   

  Mutual fund

      57,984,578         57,984,578         —                             —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       660,817,800       $       179,842,283       $       480,975,517       $                     —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Please see the Investment Portfolio for foreign securities where a factor from a third party vendor was applied to determine the security’s fair value following close of local trading. Such securities are included in Level 2 in the table above.

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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

 

17

International Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Foreign Currency Translation (continued)

 

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.

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.

As of December 31, 2012, no investments in forward foreign currency exchange contracts were held by the Series.

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 December 31, 2012, 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, 2009 through December 31, 2012. 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. The Series is subject to a tax imposed on short term capital gains on securities of issuers domiciled in India. The Series records an estimated deferred tax liability for securities that have been held for less than a year at the end of the reporting period, assuming those positions were disposed of at the end of the period. This amount is reported in Accrued foreign capital gains tax in the accompanying Statement of Assets and Liabilities. Realized losses on the sale of securities of issuers domiciled in India can be carried forward for eight years to offset potential future short term realized capital gains.

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.

 

18

International Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Indemnifications

The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.75% 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.

The Class S shares of the Series are subject to a shareholder services fee in accordance with a shareholder services plan adopted by the Board. The shareholder service fee is intended to compensate financial intermediaries, including affiliates of the Fund, in connection with the provision of direct client service, personal services, maintenance of shareholder accounts and reporting services. For these services, Class S of the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.25% of the average daily net assets of Class S. The Fund has a Shareholder Services Agreement with the Advisor, for which the Advisor receives the shareholder services fee as stated above.

The Advisor has contractually agreed, until at least April 30, 2014, to waive its management fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series, exclusive of each share class’s shareholder service fee, at no more than 0.85% of average daily net assets. Accordingly, the Advisor waived fees of $440,950 for the year ended December 31, 2012, which is included as a reduction of expenses on the Statement of Operations. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program,

 

19

International Series

 

 

Notes to Financial Statements (continued)

 

 

3. Transactions with Affiliates (continued)

 

are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $214,348,013 and $123,053,983 respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in shares of Class S and I shares of International Series were:

 

CLASS S

   FOR THE YEAR ENDED 12/31/12     FOR THE YEAR ENDED 12/31/11  
  SHARES     AMOUNT     SHARES     AMOUNT  

Sold

               26,541,777       $       213,267,622                  39,738,147       $       345,262,813   

Reinvested

     763,100        6,598,467        858,309        6,430,759   

Repurchased

     (29,704,876 )      (240,426,328 )      (8,992,251 )      (73,482,175 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     (2,399,999 )     $ (20,560,239 )                31,604,205       $       278,211,397   
 

 

 

    

 

 

    

 

 

    

 

 

  
       
CLASS I   FOR THE PERIOD 3/15/12
(COMMENCEMENT OF
OPERATIONS) TO 12/31/12		              
  SHARES     AMOUNT              

Sold

               9,564,837       $       94,375,423       

Reinvested

     101,087        1,051,975       

Repurchased

     (502,442 )      (4,825,504 )     
 

 

 

    

 

 

      

Total

               9,163,482       $       90,601,894       
 

 

 

    

 

 

      

Approximately 48% of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

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

 

20

International Series

 

 

Notes to Financial Statements (continued)

 

 

7. Foreign Securities (continued)

 

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 accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses, qualified late-year losses and investments in passive foreign investment companies (PFICs). 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. For the year ended December 31, 2012, amounts were reclassified within the capital accounts to reduce Accumulated Net Realized Loss on Investments by $1,779,486 and increase Distributions in Excess of Net Investment Income by $1,779,486. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR  
ENDED 12/31/12		     FOR THE YEAR  
ENDED 12/31/11		       

Ordinary income

   $ 7,434,130          $ 6,668,921          

Return of capital

     663,452            —          

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on the identified cost of investments for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 617,031,745   

Unrealized appreciation

      97,237,287   

Unrealized depreciation

      (53,451,232 ) 
  

 

 

  

Net unrealized appreciation

    $ 43,786,055   
  

 

 

  

Capital loss carryover

    $ 2,997,938   

Qualified late-year losses1

    $ 44,871   
 

 

1The Series has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010, may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series had no pre-enactment net capital losses and had post-enactment net short-term capital loss carryforward of $2,997,938.

 

21

International Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of International Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the International Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

22

International Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal year $9,068,261 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

The Series has elected to pass through to its shareholders the foreign taxes paid for the year ended December 31, 2012. The Series had $16,048,999 in foreign source income and paid foreign taxes of $1,634,131.

 

23

International Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory

Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

24

International Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

25

International Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002.
   President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995-2008)

The Ashley Group (1995-2008)

Genesee Corporation (1987-2007)

Name:    Peter L. Faber
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Partnership for New York City, Inc. (non-profit)(1989 - 2010)

New York Collegium (non-profit)(2004 - 2011))

Boston Early Music Festival (non-profit)

Name:    Harris H. Rusitzky
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994; Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

26

International Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005-2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Incyte Corp. (2000-present)
   ViroPharma, Inc. (2000-present)
   HLTH Corp. (2000-present)
   Cheyne Capital International (2000-present)
   MPM Bio-equities (2000-2009)
   GMP Companies (2000-2012)
     HoustonPharma (2000-2009)
Name:    Chester N. Watson
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003-2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004-2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

27

International Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

28

 

{This page intentionally left blank}

 

 

 

 

29

International 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNINT-12/12-AR

 

LOGO

 

 

        WORLD OPPORTUNITIES SERIES                           

 

 

 

 

www.manning-napier.com

       LOGO          

World Opportunities Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months. As investors in general continue to focus on safety, the Advisor remains focused on the Series’ objectives. As an active manager, we base our investment decisions on prevailing market conditions and fundamentals. Doing so allows us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. Although markets witnessed positive traction throughout the year and performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor believes may continue to weigh on global economic growth.

Despite the prevailing sense of uncertainty amongst investors, most global equity markets experienced strong positive absolute performance during 2012. For the twelve-month period ended December 31, 2012, the MSCI All Country World Index excluding the USA (ACWIxUSA) rose by 16.83%. The World Opportunities Series increased by 18.81% during the same time period, earning strong positive absolute returns and outperforming the benchmark for the year.

Manning & Napier believes that measuring performance over market cycles better captures a manager’s ability to add value across varied market conditions. In addition to the positive performance during the past year, both on an absolute and relative basis, the World Opportunities Series continues to provide positive absolute returns over the current international stock market cycle and has outperformed the MSCI ACWIxUSA Index benchmark since the cycle began on April 1, 2003.

For the year, outperformance was driven by specific stock selections. Certain investments in the Consumer Discretionary, Industrials, and Materials sectors contributed positively to relative performance. Many of the investments that delivered strong returns during the twelve-month period were identified as fitting the Advisor’s Strategic Profile strategy. Companies that fit the Strategic Profile strategy must display a variety of attractive fundamental characteristics. Some of these key traits include, but are not limited to, a leading and/ or growing share of the business’ target market, a strong position in an expanding industry, differentiated product/service offerings, a sustainable competitive advantage, and pricing power. Throughout the year, as investors increased their appetite for risk, many of these companies enjoyed solid gains. However, specific holdings in the Financials, Health Care, and Energy sectors detracted from relative returns during the year. Similarly, overall sector positioning challenged relative performance. In particular, an underweight allocation to Financials as compared to the benchmark detracted from relative returns, although this was partially offset by an underweight allocation to Telecommunication Services and a lack of exposure to Utilities, each of which aided relative returns.

From a country standpoint, specific holdings in the United Kingdom, Brazil, Ireland, and China contributed positively to relative performance. However, an overweight allocation to Spain relative to the benchmark challenged returns. Overall, the Series is most heavily weighted to Europe and the Middle East, where it is significantly overweight as compared to the benchmark; conversely, the Series is underweight relative to the benchmark to Emerging Markets and the Pacific Region. In Europe, the Advisor continues to seek strong, multinational companies that have clear growth drivers, but whose equity prices are being pulled down by the ongoing stresses related to the sovereign debt crisis.

In the Advisor’s view, slow growth remains the most likely path for the U.S. and many other global economies. However, in this challenging environment, many opportunities exist. The Advisor’s active and flexible investment approach is well-equipped to capture these opportunities. As has been the case for more than forty years, Manning & Napier remains committed to providing competitive absolute returns over full market cycles. Today, we feel the best way to do this is to seek attractively priced companies with positive long-term growth drivers that are trading at attractive valuations relative to their growth potential.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

World Opportunities Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2012
      ONE
 YEAR1                		    FIVE
 YEAR                 		    TEN
 YEAR                 		    SINCE
 INCEPTION2        

Manning & Napier Fund, Inc. - World Opportunities Series3

     18.81%    -1.93%    9.83%    8.48%

MSCI All Country World Index ex U.S.A.4

     16.83%    -2.89%    9.74%    5.17%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - World Opportunities Series for the ten years ended December 31, 2012 to the MSCI All Country World Index ex U.S.A.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series are calculated from September 6, 1996, the Series’ inception date. Prior to 2001, the MSCI All Country World Index ex U.S.A. only published month-end numbers; therefore, performance numbers for the Index are calculated from September 30, 1996.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.08%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.08% for the year ended December 31, 2012.

4The MSCI All Country World Index ex U.S.A. is a free float-adjusted market capitalization weighted index that is designed to measure equity market performance in the global developed and emerging markets and consists of 47 developed and emerging market country indices outside the United States. The Index is denominated in U.S. Dollars. The Index returns assume daily reinvestment of gross dividends (which do not account for foreign dividend taxation) from the inception of the Series (see Note 1 above) through December 31, 1998, as net returns were not available. Subsequent to December 31, 1998, the Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). Unlike the Series returns, the Index returns do not reflect any fees or expenses.

 

2

World Opportunities Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

   

 BEGINNING

 ACCOUNT VALUE                             

 7/1/12

  

 ENDING

 ACCOUNT VALUE                             

 12/31/12

  

 EXPENSES PAID

 DURING PERIOD*                             

 7/1/12-12/31/12

Actual

    $1,000.00    $1,131.80    $5.70

Hypothetical

(5% return before expenses)

    $1,000.00    $1,019.86    $5.40

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.06%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.

 

3

World Opportunities Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

4

World Opportunities Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

VALUE

(NOTE 2)

       

COMMON STOCKS - 97.7%

       

Consumer Discretionary - 15.8%

       

Automobiles - 4.0%

       

Suzuki Motor Corp. (Japan)1

     3,120,100      $ 81,647,769      

Toyota Motor Corp. (Japan)1

     4,180,100        195,194,559      
   

 

 

     
      276,842,328      
   

 

 

     

Diversified Consumer Services - 0.5%

       

Anhanguera Educacional Participacoes S.A. (Brazil)

     2,129,900        35,961,242      
   

 

 

     

Hotels, Restaurants & Leisure - 2.3%

       

Accor S.A. (France)1

     4,402,960        157,041,216      
   

 

 

     

Internet & Catalog Retail - 0.3%

       

Ocado Group plc (United Kingdom)*1

     13,726,990        19,609,937      
   

 

 

     

Media - 5.8%

       

British Sky Broadcasting Group plc (United Kingdom)1

     9,011,350        113,655,372      

Societe Television Francaise 1 (France)1,2

     10,709,300        125,993,897      

Virgin Media, Inc. - ADR (United Kingdom)

     4,392,860        161,437,605      
   

 

 

     
      401,086,874      
   

 

 

     

Multiline Retail - 1.1%

       

Marks & Spencer Group plc (United Kingdom)1

     11,668,470        73,297,310      
   

 

 

     

Textiles, Apparel & Luxury Goods - 1.8%

       

Adidas AG (Germany)1

     1,003,550        89,566,537      

Burberry Group plc (United Kingdom)1

     1,847,910        37,145,903      
   

 

 

     
      126,712,440      
   

 

 

     

Total Consumer Discretionary

       1,090,551,347      
   

 

 

     

Consumer Staples - 18.8%

       

Beverages - 3.2%

       

Anheuser-Busch InBev N.V. (Belgium)1

     804,960        70,099,994      

Carlsberg A/S - Class B (Denmark)1

     767,750        75,635,995      

SABMiller plc (United Kingdom)1

     1,605,600        74,518,071      
   

 

 

     
      220,254,060      
   

 

 

     

Food & Staples Retailing - 6.6%

       

Carrefour S.A. (France)1

     6,126,580        157,743,965      

Distribuidora Internacional de Alimentacion S.A. (Spain)1

     4,013,930        25,645,738      

Koninklijke Ahold N.V. (Netherlands)1

     5,610,610        75,233,118      

Tesco plc (United Kingdom)1

     36,235,270        199,605,801      
   

 

 

     
      458,228,622      
   

 

 

     

Food Products - 6.8%

       

Charoen Pokphand Foods PCL (Thailand)1

     49,958,730        55,371,014      

Danone S.A. (France)1

     3,072,160        202,370,835      

Nestle S.A. (Switzerland)1

     2,187,530        142,722,051      

The accompanying notes are an integral part of the financial statements.

 

5

World Opportunities Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

VALUE

(NOTE 2)

       

COMMON STOCKS (continued)

       

Consumer Staples (continued)

       

Food Products (continued)

       

Unilever plc - ADR (United Kingdom)

     1,833,250      $ 70,983,440      
   

 

 

     
      471,447,340      
   

 

 

     

Household Products - 0.9%

       

Reckitt Benckiser Group plc (United Kingdom)1

     943,630        59,901,546      
   

 

 

     

Personal Products - 1.3%

       

Beiersdorf AG (Germany)1

     1,130,180        92,540,411      
   

 

 

     

Total Consumer Staples

       1,302,371,979      
   

 

 

     

Energy - 16.8%

       

Energy Equipment & Services - 7.6%

       

Cie Generale de Geophysique - Veritas (CGG - Veritas) (France)*1

     3,970,420        120,647,150      

Petroleum Geo-Services ASA (Norway)1

     2,414,580        42,055,671      

Schlumberger Ltd. (United States)

     4,187,500        290,151,875      

Trican Well Service Ltd. (Canada)

     5,492,310        72,443,055      
   

 

 

     
      525,297,751      
   

 

 

     

Oil, Gas & Consumable Fuels - 9.2%

       

Cameco Corp. (Canada)

     6,450,070        127,195,380      

Encana Corp. (Canada)

     8,165,620        161,352,651      

Petroleo Brasileiro S.A. - ADR (Brazil)

     7,771,850        149,996,705      

Talisman Energy, Inc. (Canada)

     17,790,020        201,204,107      
   

 

 

     
      639,748,843      
   

 

 

     

Total Energy

       1,165,046,594      
   

 

 

     

Financials - 3.9%

       

Commercial Banks - 1.6%

       

HSBC Holdings plc (United Kingdom)1

     10,619,200        112,529,807      
   

 

 

     

Insurance - 1.4%

       

Admiral Group plc (United Kingdom)1

     4,921,290        93,743,897      
   

 

 

     

Real Estate Investment Trusts (REITS) - 0.9%

       

Land Securities Group plc (United Kingdom)1

     4,864,580        64,898,778      
   

 

 

     

Total Financials

       271,172,482      
   

 

 

     

Health Care - 9.5%

       

Health Care Equipment & Supplies - 1.9%

       

BioMerieux (France)1

     217,419        20,727,778      

GN Store Nord A/S (Denmark)1

     1,832,180        26,627,051      

Mindray Medical International Ltd. - ADR (China)

     2,641,800        86,386,860      
   

 

 

     
      133,741,689      
   

 

 

     

Health Care Providers & Services - 2.9%

       

Life Healthcare Group Holdings Ltd. (South Africa)1

     11,016,850        44,184,359      

The accompanying notes are an integral part of the financial statements.

 

6

World Opportunities Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

VALUE

(NOTE 2)

       

COMMON STOCKS (continued)

       

Health Care (continued)

       

Health Care Providers & Services (continued)

       

Sonic Healthcare Ltd. (Australia)1

     11,081,960      $ 154,689,621      
   

 

 

     
      198,873,980      
   

 

 

     

Life Sciences Tools & Services - 2.6%

       

Lonza Group AG (Switzerland)1,2

     1,999,721        108,357,252      

QIAGEN N.V. (Netherlands)*1

     3,950,010        71,737,072      
   

 

 

     
      180,094,324      
   

 

 

     

Pharmaceuticals - 2.1%

       

Novo Nordisk A/S - Class B (Denmark)1

     677,180        110,269,727      

Santen Pharmaceutical Co. Ltd. (Japan)1

     849,000        32,612,624      
   

 

 

     
      142,882,351      
   

 

 

     

Total Health Care

       655,592,344      
   

 

 

     

Industrials - 13.3%

       

Airlines - 3.1%

       

Ryanair Holdings plc - ADR (Ireland)

     6,233,320        213,678,210      
   

 

 

     

Commercial Services & Supplies - 0.5%

       

Edenred (France)1

     1,077,759        33,333,468      
   

 

 

     

Electrical Equipment - 1.4%

       

Nexans S.A. (France)1

     1,217,530        54,485,001      

Prysmian S.p.A. (Italy)1

     2,048,430        40,888,904      
   

 

 

     
      95,373,905      
   

 

 

     

Industrial Conglomerates - 1.2%

       

Siemens AG (Germany)1

     743,340        81,285,108      
   

 

 

     

Machinery - 1.9%

       

FANUC Corp. (Japan)1

     526,300        97,917,909      

Westport Innovations, Inc. - ADR (Canada)*

     1,393,190        37,212,105      
   

 

 

     
      135,130,014      
   

 

 

     

Marine - 1.9%

       

D/S Norden A/S (Denmark)1

     594,660        17,240,020      

Diana Shipping, Inc. - ADR (Greece)*

     2,209,670        16,130,591      

Mitsui OSK Lines Ltd. (Japan)1

     13,648,000        40,656,724      

Nippon Yusen Kabushiki Kaisha (Japan)1

     16,642,000        39,172,455      

Pacific Basin Shipping Ltd. (Hong Kong)1,3

     34,197,086        19,499,692      
   

 

 

     
      132,699,482      
   

 

 

     

Professional Services - 2.0%

       

Adecco S.A. (Switzerland)1

     1,437,350        76,119,560      

Randstad Holding N.V. (Netherlands)1

     1,665,340        61,812,967      
   

 

 

     
      137,932,527      
   

 

 

     

 

The accompanying notes are an integral part of the financial statements.

 

7

World Opportunities Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

VALUE

(NOTE 2)

       

COMMON STOCKS (continued)

       

Industrials (continued)

       

Trading Companies & Distributors - 0.8%

       

Brenntag AG (Germany)1

     413,320      $ 54,453,283      
   

 

 

     

Transportation Infrastructure - 0.5%

       

Groupe Eurotunnel S.A. (France)1

     4,854,990        37,727,034      
   

 

 

     

Total Industrials

       921,613,031      
   

 

 

     

Information Technology - 7.9%

       

Internet Software & Services - 1.0%

       

Tencent Holdings Ltd. (China)1

     2,160,000        70,840,887      
   

 

 

     

IT Services - 4.7%

       

Amdocs Ltd. - ADR (United States)*

     5,707,690        194,004,383      

Cap Gemini S.A. (France)1

     2,157,440        94,339,990      

Wirecard AG (Germany)1

     1,363,800        33,668,920      
   

 

 

     
      322,013,293      
   

 

 

     

Semiconductors & Semiconductor Equipment - 2.2%

       

Sumco Corp. (Japan)*1

     4,238,900        41,695,650      

Tokyo Electron Ltd. (Japan)1

     2,392,200        110,331,281      
   

 

 

     
      152,026,931      
   

 

 

     

Total Information Technology

       544,881,111      
   

 

 

     

Materials - 9.4%

       

Chemicals - 4.3%

       

Johnson Matthey plc (United Kingdom)1

     2,868,330        112,677,527      

Shin-Etsu Chemical Co. Ltd. (Japan)1

     666,800        40,694,847      

Syngenta AG (Switzerland)1

     360,160        145,499,723      
   

 

 

     
      298,872,097      
   

 

 

     

Construction Materials - 3.2%

       

CRH plc (Ireland)1

     5,872,560        121,321,689      

Holcim Ltd. (Switzerland)1

     1,317,510        97,041,307      
   

 

 

     
      218,362,996      
   

 

 

     

Metals & Mining - 1.9%

       

Alumina Ltd. (Australia)1

     67,685,850        64,960,973      

Norsk Hydro ASA (Norway)1

     6,256,726        31,756,210      

Umicore S.A. (Belgium)1

     679,010        37,599,036      
   

 

 

     
      134,316,219      
   

 

 

     

Total Materials

       651,551,312      
   

 

 

     

Telecommunication Services - 2.3%

       

Diversified Telecommunication Services - 2.3%

       

Telenor ASA (Norway)1

     7,824,920        159,329,694      
   

 

 

     
      

TOTAL COMMON STOCKS

       

(Identified Cost $6,546,240,449)

       6,762,109,894      
   

 

 

     

 

The accompanying notes are an integral part of the financial statements.

 

8

World Opportunities Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

VALUE

(NOTE 2)

       
      

SHORT-TERM INVESTMENT - 2.2%

       

Dreyfus Cash Management, Inc. - Institutional Shares4 , 0.06%,

       

(Identified Cost $ 154,368,116)

     154,368,116      $ 154,368,116      
   

 

 

     

TOTAL INVESTMENTS - 99.9%

       

(Identified Cost $ 6,700,608,565)

       6,916,478,010      

OTHER ASSETS, LESS LIABILITIES - 0.1%

       9,299,907      
   

 

 

     

NET ASSETS - 100%

     $ 6,925,777,917      
   

 

 

     

ADR - American Depository Receipt

*Non-income producing security

1A factor from a third party vendor was applied to determine the security’s fair value following the close of local trading.

2Affiliated company as defined by the Investment Company Act of 1940.

3Traded on Hong Kong Stock Exchange.

4Rate shown is the current yield as of December 31, 2012.

The Series’ portfolio holds, as a percentage of net assets, greater than 10% in the following countries: United Kingdom - 17.2%; France - 14.5%.

 

The accompanying notes are an integral part of the financial statements.

 

9

World Opportunities Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments (including investments in affiliates with a market value of $234,351,149) (identified cost $6,700,608,565 including $314,216,805 in affiliates) (Note 2)

    $ 6,916,478,010   

Foreign currency (identified cost $9,398,510)

      9,396,777   

Cash

      1,792,451   

Receivable for fund shares sold

      15,433,325   

Foreign tax reclaims receivable

      13,045,026   

Dividends receivable

      5,780,611   
  

 

 

  

TOTAL ASSETS

      6,961,926,200   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      5,852,824   

Accrued transfer agent fees (Note 3)

      342,545   

Accrued fund accounting and administration fees (Note 3)

      152,287   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      19,431,599   

Payable for securities purchased

      9,767,164   

Other payables and accrued expenses

      601,490   
  

 

 

  

TOTAL LIABILITIES

      36,148,283   
  

 

 

  

TOTAL NET ASSETS

    $ 6,925,777,917   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 8,932,915   

Additional paid-in-capital

      7,183,727,095   

Distributions in excess of net investment income

      (7,051,898 ) 

Accumulated net realized loss on investments, foreign currency and translation of other assets and liabilities

      (476,048,748 ) 

Net unrealized appreciation on investments, foreign currency and translation of other assets and liabilities

      216,218,553   
  

 

 

  

TOTAL NET ASSETS

    $ 6,925,777,917   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A ($6,925,777,917/893,291,512 shares)

    $ 7.75   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

10

World Opportunities Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Dividends (including $17,546,094 from affiliates) (net of foreign taxes withheld, $16,936,531) (Note 2)

    $ 176,358,816   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      64,920,012   

Transfer agent fees (Note 3)

      1,809,000   

Fund accounting and administration fees (Note 3)

      862,674   

Directors’ fees (Note 3)

      123,188   

Chief Compliance Officer service fees (Note 3)

      2,440   

Custodian fees

      1,309,360   

Miscellaneous

      945,851   
  

 

 

  

Total Expenses

      69,972,525   
  

 

 

  

NET INVESTMENT INCOME

      106,386,291   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

   

Investments (including net realized loss of $96,348,268 from affiliates) (Note 2)

      (345,008,913)   

Foreign currency and translation of other assets and liabilities

      (3,968,479)   
  

 

 

  
     (348,977,392 ) 
  

 

 

  

Net change in unrealized appreciation on-

   

Investments (including a net unrealized gain of $114,516,327 from affiliates) (Note 2)

      1,366,144,613   

Foreign currency and translation of other assets and liabilities

      368,073   
  

 

 

  
     1,366,512,686   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      1,017,535,294   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 1,123,921,585   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

11

World Opportunities Series

 

 

Statements of Changes in Net Assets

 

    

FOR THE

YEAR ENDED
12/31/12

    

FOR THE

YEAR ENDED
12/31/11

  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 106,386,291      $ 210,541,375   

Net realized gain (loss) on investments and foreign currency

      (348,977,392 )      166,635,236   

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      1,366,512,686        (1,794,613,741 ) 
  

 

 

    

 

 

  

Net increase (decrease) from operations

      1,123,921,585        (1,417,437,130 ) 
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 9):

     

From net investment income

      (112,268,392 )      (211,565,406 ) 

From net realized gain on investments

      —        (300,648,970 ) 
  

 

 

    

 

 

  

Total distributions to shareholders

      (112,268,392 )      (512,214,376 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase (decrease) from capital share transactions (Note 5)

      (52,904,127 )      1,441,254,223   
  

 

 

    

 

 

  

Net increase (decrease) in net assets

      958,749,066        (488,397,283 ) 

NET ASSETS:

     

Beginning of year

      5,967,028,851        6,455,426,134   
  

 

 

    

 

 

  

End of year (including distributions in excess of net investment income of $(7,051,898) and undistributed net investment income of $2,798,682, respectively)

    $ 6,925,777,917      $ 5,967,028,851   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

12

World Opportunities Series

 

 

Financial Highlights

 

     

 

FOR THE YEARS ENDED

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 6.63      $ 8.61      $ 8.12      $ 5.88      $ 10.07   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment income

      0.12 1      0.24 1,2      0.07 1      0.04 1      0.10   

Net realized and unrealized gain (loss) on investments

      1.13        (1.64 )      0.67        2.26        (4.08 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      1.25        (1.40 )      0.74        2.30        (3.98 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net investment income

      (0.13 )      (0.24 )      (0.07 )      (0.06 )      (0.03 ) 

From net realized gain on investments

      —        (0.34 )      (0.18 )      —        (0.18 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions to shareholders

      (0.13 )      (0.58 )      (0.25 )      (0.06 )      (0.21 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 7.75      $ 6.63      $ 8.61      $ 8.12      $ 5.88   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 6,925,778      $ 5,967,029      $ 6,455,426      $ 4,917,459      $ 1,340,057   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return3

      18.81 %      (16.14 %)      9.23 %      39.12 %      (40.07 %) 

Ratios (to average net assets)/

Supplemental Data:

           

Expenses*

      1.08 %      1.09 %      1.11 %      1.17 %      1.16 % 

Net investment income

      1.64 %      2.84 %2      0.92 %      0.60 %      2.17 % 

Portfolio turnover

      45 %      52 %      39 %      42 %      34 % 
*For certain years 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 Series, the expense ratio (to average net assets) would have increased by the following amounts:     
     N/A        N/A        0.00 %4      0.00 %4      N/A   

1Calculated based on average shares outstanding during the year.

2Includes a special dividend paid by one of the Series’ securities during the year. Without the special dividend, the Series’ net investment income per share, total return and net investment income ratio would have been $0.11, (17.71%) and 1.30%, respectively.

3Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain years.

4Less than 0.01%.

The accompanying notes are an integral part of the financial statements.

 

13

World Opportunities Series

 

 

Notes to Financial Statements

 

1. Organization

World Opportunities Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as an open-end management investment company.

The Series’ investment objective is to provide long-term growth by investing principally in the common stocks of companies located around the world.

The Series is authorized to issue five classes of shares (Class A, B, D, E and Z). Currently, only Class A shares have been issued. Each class of shares is substantially the same, except that class-specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate.

The Fund’s advisor is Manning & Napier Advisors, 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 2.5 billion have been designated as World Opportunities Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ 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 are 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 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.

 

14

World Opportunities Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

Assets:

            

Equity securities:

            

Consumer Discretionary

    $ 1,090,551,347       $ 197,398,847       $       893,152,500       $                     —   

Consumer Staples

      1,302,371,979         70,983,440         1,231,388,539         —   

Energy

      1,165,046,594         1,002,343,773         162,702,821         —   

Financials

      271,172,482         —         271,172,482         —   

Health Care

      655,592,344         86,386,860         569,205,484         —   

Industrials

      921,613,031         267,020,906         654,592,125         —   

Information Technology

      544,881,111         194,004,383         350,876,728         —   

Materials

      651,551,312         —         651,551,312         —   

Telecommunication Services

      159,329,694         —         159,329,694         —   

Mutual fund

      154,368,116         154,368,116         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total assets

    $       6,916,478,010       $       1,972,506,325       $ 4,943,971,685       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Please see the Investment Portfolio for foreign securities where a factor from a third party vendor was applied to determine the securities’ fair value following the close of local trading. Such securities are included in Level 2 in the table above.

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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

 

15

World Opportunities Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Foreign Currency Translation (continued)

 

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 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.

Affiliated Companies

The 1940 Act defines “affiliated companies” to include securities in which a series owns 5% or more of the outstanding voting securities of the issuer. The following transactions were effected in securities of affiliated companies for the year ended December 31, 2012:

 

NAME OF ISSUER   VALUE AT  
12/31/11  		     PURCHASE  
COST  		     SALES  
PROCEEDS  		     VALUE AT  
12/31/12  		     SHARES
HELD AT
12/31/12		     DIVIDEND  
INCOME  
1/1/12  
THROUGH  
12/31/12  		     NET
REALIZED
GAIN (LOSS)
1/1/12
THROUGH
12/31/12		  

Lonza Group AG (Switzerland)

   $ 246,370,022      $ —      $ 105,961,724      $ 108,357,252        1,999,721      $ 8,629,007      $ (104,475,927)   

Mindray Medical International Ltd. - ADR (China)*

   $ 131,720,116      $ 8,688,576      $ 82,427,760      $ 86,386,860        2,641,800      $ 1,124,796      $ 8,127,659   

Societe Television Francaise 1 (France)

   $ 104,173,664      $ —      $ —      $ 125,993,897        10,709,300      $ 7,792,291      $ —   

* Security was an affiliated company for the period June 27, 2011 - January 18, 2012. Amounts in the table include the entire year ended December 31, 2012.

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 December 31, 2012, 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, 2009 through December 31, 2012. 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.

 

16

World Opportunities Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Indemnifications

The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series’ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $2,819,364,944 and $2,892,369,455 respectively. There were no purchases or sales of U.S. Government securities.

 

17

World Opportunities Series

 

 

Notes to Financial Statements (continued)

 

 

5. Capital Stock Transactions

Transactions in Class A shares of World Opportunities Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE YEAR ENDED  12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

     251,477,784       $       1,826,327,603                429,725,249       $ 3,613,514,759   

Reinvested

     12,218,471        93,720,261        63,389,852        412,740,391   

Repurchased

     (270,735,953 )      (1,972,951,991 )      (342,840,413 )      (2,585,000,927 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

               (7,039,698 )     $ (52,904,127 )            150,274,688       $       1,441,254,223   
 

 

 

    

 

 

    

 

 

    

 

 

  

Approximately 2% of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion. In addition, one shareholder owned 106,570,526 shares (11.9% of shares outstanding) valued at $825,921,578. Investment activities of this shareholder may have a material effect on the Series.

 

6. Line of Credit

The Series has entered into a $50 million credit facility (the “line of credit”) with Bank of New York Mellon. The Series may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Series pays an annual commitment fee on the unused portion of the line of credit which amounted to $49,167 for the year ended December 31, 2012, which is included in miscellaneous expenses in the Statement of Operations. Interest on the used portion is charged to the Series based on rates determined pursuant to the terms of the agreement at the time of borrowing. During the year ended December 31, 2012, the Series did not borrow under the line of credit. The line of credit has a termination date of June 7, 2013 and may be renewed annually.

 

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 on December 31, 2012.

 

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 accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses, investments in passive foreign investment companies (PFICs), foreign currency contracts, losses deferred due to wash sales, late-year ordinary losses and post-October losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or

 

18

World Opportunities Series

 

 

Notes to Financial Statements (continued)

 

 

9. Federal Income Tax Information (continued)

 

available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the fiscal year ended December 31, 2012, $3,968,479 was reclassified within the capital accounts from Distribution in Excess of Net Investment Income to Accumulated Net Realized Loss on Investments, Foreign Currency and Translation of Other Assets and Liabilities. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR  
ENDED 12/31/12		     FOR THE YEAR  
ENDED 12/31/11		       

Ordinary income    

   $ 112,268,392          $ 239,945,364          

Long-term capital gains

     —            272,269,012          

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on the identified cost of investments for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 6,728,281,760   

Unrealized appreciation

      651,193,199   

Unrealized depreciation

      (462,996,949 ) 
  

 

 

  

Net unrealized appreciation

    $ 188,196,250   
  

 

 

  

Undistributed ordinary income

      1,675,497   

Capital loss carryover

      407,580,035   

Qualified late-year losses1

      49,522,913   
 

 

1 The Series has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010, may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series had no pre-enactment net capital losses and had post-enactment net short-term capital loss carryforwards of $175,264,492 and net long-term capital loss carryforwards of $232,315,543 respectively.

 

19

World Opportunities Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of World Opportunities Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the World Opportunities Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

20

World Opportunities Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal year $122,457,098 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal year is 0.56%.

The Series has elected to pass through to its shareholders the foreign taxes paid for the year ended December 31, 2012. The Series had $192,365,172 in foreign source income and paid foreign taxes of $10,188,706.

 

21

World Opportunities Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro- Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

22

World Opportunities Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

23

World Opportunities Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:   

Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc.

Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Fannie Mae (1995 - 2008)
   The Ashley Group (1995 - 2008)
     Genesee Corporation (1987 - 2007)
Name:    Peter L. Faber
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Partnership for New York City, Inc. (non-profit)(1989 - 2010)
   New York Collegium (non-profit)(2004 - 2011))
     Boston Early Music Festival (non-profit)
Name:    Harris H. Rusitzky
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994;
   Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

24

World Opportunities Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Incyte Corp. (2000 - present)
   ViroPharma, Inc. (2000 - present)
   HLTH Corp. (2000 - present)
   Cheyne Capital International (2000 - present)
   MPM Bio-equities (2000 - 2009)
   GMP Companies (2000 - 2012)
     HoustonPharma (2000 - 2009)

 

Name:

   

 

Chester N. Watson

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004 - 2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Name:

   

 

Jeffrey S. Coons, Ph.D., CFA

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC
   Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Name:

   

 

Elizabeth Craig

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

25

World Opportunities Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Name:

   

 

Jodi L. Hedberg

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Name:

   

 

Richard Yates

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

26

World Opportunities 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNWOP-12/12-AR

 

LOGO

 

        OHIO TAX EXEMPT SERIES                      

 

 

 

 

www.manning-napier.com

       LOGO          

Ohio Tax Exempt Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months.

Even with the myriad of looming uncertainties, a number of issues pushed forward toward more clarity and resolution as the year progressed. For example, during the fourth quarter, progress was made with respect to “fiscal cliff” headwinds in the U.S. Also, the Federal Open Market Committee (FOMC) stated it expects to keep its highly accommodative monetary policy stance in place at least until unemployment falls below 6.5%, provided that near-term inflation remains within 0.5% of its 2% goal and longer-term inflation remains “well anchored.” Additionally, European Central Bank President Mario Draghi’s commitment earlier in the year to do “whatever it takes” to preserve the Euro, along with positive developments in Greece in the fourth quarter, also aided wavering investor concerns as the year came to a close. Given this backdrop, although equity and fixed income markets generally performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor feels are going to continue to weigh on global economic growth.

Overall, each of the major sectors of the fixed income market experienced positive absolute performance. This strong performance was led by corporate bonds, where high yield bonds were the top performer in 2012, followed by their investment grade counterparts. Beyond corporate bonds, Treasury Inflation Protected Securities (TIPS) and municipal bonds also performed well in 2012. In contrast, although Treasuries and mortgages ended the year with positive performance, they generally trailed other sectors in 2012.

For the year, the Bank of America Merrill Lynch 1-12 Year Municipal Bond Index returned 3.40%. However, while the Ohio Tax Exempt Series slightly underperformed its benchmark, it provided a positive absolute return of 3.09% in 2012.

Similar to 2011, municipal bonds continued into 2012 with positive absolute performance. Indeed, in light of the low yield environment and concerns about higher marginal tax rates, investor demand remained strong and new issuance picked up last year. Additionally, municipal bond yields did not match last year’s yield declines in the Treasury market, meaning their relative value has increased, and yields for the sector remain attractive relative to U.S. Treasuries.

Generally, the Advisor has spread the Series’ municipal bond investments in higher quality issues across the entire maturity spectrum. However, the Advisor has begun to take advantage of opportunities in both middle tier credits and the revenue sector. A middle tier credit refers to the credit quality of specific municipal bonds (below the highest rating, but above the lowest) and revenue bonds are municipal bonds that are typically used to finance income-producing projects. While the Series’ higher quality bias leads to slightly lower relative yields when compared to the overall municipal market, the Advisor believes the safety and liquidity of such issues justifies the bias. This positioning aided the Series’ results in 2012.

Managing to an index can prove limiting and present challenges to reaching investors’ objectives. As an active fixed income manager, the Advisor’s investment decisions are based on prevailing market conditions and fundamentals, which allow us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. This philosophy has guided the Advisor’s choices in selectively choosing the Series’ investments. Through our security selection process, we feel we have the ability to manage risks, while simultaneously providing compelling income and total return potential to help the Series’ investors reach their goals.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Ohio Tax Exempt Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012
    

 ONE

 YEAR1                

  

 FIVE

 YEAR                 

  

 TEN

 YEAR                 

    SINCE
 INCEPTION2        

Manning & Napier Fund, Inc. - Ohio Tax Exempt Series3

     3.09%    4.50%    3.93%    4.45%

Bank of America (BofA) Merrill Lynch 1-12 Year Municipal Bond Index4

     3.40%    5.15%    4.46%    5.18%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Ohio Tax Exempt Series for the ten years ended December 31, 2012 to the BofA Merrill Lynch 1-12 Year Municipal Bond Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Index are calculated from February 14, 1994, the Series’ inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 0.76%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.76% for the year ended December 31, 2012.

4The BofA Merrill Lynch 1-12 Year Municipal Bond Index (formerly a Merrill Lynch Index) is an unmanaged, market weighted index comprised of investment-grade, fixed rate, coupon bearing municipal bonds with maturities greater than one year but less than twelve years. The Index returns assume reinvestment of coupons and, unlike the Series returns, do not reflect any fees or expenses.

 

2

Ohio Tax Exempt Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

   

 BEGINNING

 ACCOUNT VALUE                             
 7/1/12

  

 ENDING

 ACCOUNT VALUE                             
 12/31/12

  

 EXPENSES PAID

 DURING PERIOD*                             

 7/1/12-12/31/12

Actual

    $1,000.00    $1,014.00    $3.76

Hypothetical

(5% return before expenses)

    $1,000.00    $1,021.48    $3.77

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.74%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which is based on one-year data.

 

3

Ohio Tax Exempt Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

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4

Ohio Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

OHIO MUNICIPAL SECURITIES - 95.6%

             

Akron, Recreational Facilities Impt., Prerefunded Balance, G.O. Bond

     6.500%         11/1/2015         Aa3           $ 300,000       $ 350,760      

Akron, Various Purposes Impt., G.O. Bond

     4.250%         12/1/2028         AA2             200,000         211,438      

Akron, Various Purposes Impt., Series B, G.O. Bond

     5.000%         12/1/2031         AA2             300,000         334,836      

Allen East Local School District, Prerefunded Balance, G.O. Bond, AMBAC

     4.300%         12/1/2017         WR3             285,000         306,580      

American Municipal Power, Inc., Prairie State Energy Campus Project, Series A, Revenue Bond, AGC

     4.375%         2/15/2020         Aa3             100,000         114,209      

Batavia Local School District, G.O. Bond, NATL

     5.625%         12/1/2022         A1             200,000         234,520      

Beaver Local School District, G.O. Bond

     4.000%         12/1/2029         Aa2             230,000         248,349      

Bedford Heights, Series A, G.O. Bond, AMBAC

     5.650%         12/1/2014         Aa3             10,000         10,641      

Brunswick, Limited Tax, Capital Impt., G.O. Bond

     4.000%         12/1/2025         Aa2             100,000         109,627      

Butler County, Water & Sewer, G.O. Bond

     2.500%         12/1/2014         Aa1             100,000         103,706      

Canal Winchester Local School District, G.O. Bond, AGM

     4.250%         12/1/2027         Aa3             500,000         529,505      

Canal Winchester Local School District, Prerefunded Balance, Series B, G.O. Bond, NATL

     5.000%         12/1/2025         A1             1,355,000         1,500,703      

Cincinnati City School District, Construction & Impt., G.O. Bond, FGRNA

     5.250%         12/1/2025         Aa2             600,000         791,550      

Cincinnati City School District, Prerefunded Balance, G.O. Bond, AGM

     5.000%         12/1/2020         Aa2             315,000         328,381      

Cincinnati City School District, Prerefunded Balance, G.O. Bond, AGM

     5.000%         12/1/2024         Aa2             500,000         521,240      

Cincinnati City School District, Prerefunded Balance, G.O. Bond, AGM

     5.000%         12/1/2031         Aa2                 1,170,000               1,219,702      

Cincinnati Water Systems, Series A, Revenue Bond

     5.000%         12/1/2014         Aaa             200,000         217,332      

Cincinnati Water Systems, Series A, Revenue Bond

     4.250%         12/1/2019         Aaa             200,000         238,806      

Cincinnati Water Systems, Series A, Revenue Bond

     5.000%         12/1/2036         Aaa             400,000         462,512      

Cincinnati Water Systems, Water Utility Impt., Series A, Revenue Bond

     5.000%         12/1/2037         Aaa             400,000         462,852      

Cincinnati, Series B, G.O. Bond

     1.500%         12/1/2014         Aa1             360,000         367,528      

Cincinnati, Various Purposes Impt., Series A, G.O. Bond

     2.000%         12/1/2014         Aa1             250,000         257,613      

Cincinnati, Various Purposes Impt., Series B, G.O. Bond

     4.250%         12/1/2026         Aa1             170,000         189,785      

Cleveland Department of Public Utilities Division of Water, Series W, Revenue Bond

     4.000%         1/1/2014         Aa1             500,000         518,305      

Columbus City School District, Facilities Construction & Impt., G.O. Bond

     4.500%         12/1/2029         Aa2             500,000         552,070      

Columbus City School District, Facilities Construction & Impt., G.O. Bond, AGM

     4.250%         12/1/2032         Aa2             500,000         521,230      

Columbus City School District, Facilities Construction & Impt., Prerefunded Balance, G.O. Bond, AGM

     5.250%         12/1/2026         Aa2             250,000         273,210      

Columbus City School District, Facilities Construction & Impt., Prerefunded Balance, G.O. Bond, AGM

     5.000%         12/1/2032         Aa2             300,000         326,421      

The accompanying notes are an integral part of the financial statements.

 

5

Ohio Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

OHIO MUNICIPAL SECURITIES (continued)

  

           

Columbus, Limited Tax, Prerefunded Balance, Series 2, G.O. Bond

     5.000%         7/1/2017         Aaa           $ 250,000       $ 267,573      

Columbus, Public Impt., Prerefunded Balance, Series 2, G.O. Bond

     5.000%         7/1/2019         Aaa             895,000         957,910      

Columbus, Public Impt., Series A, G.O. Bond

     4.000%         6/1/2013         Aaa             500,000         507,875      

Columbus, Public Impt., Series D, G.O. Bond

     5.000%         12/15/2013         Aaa             100,000         104,542      

Columbus, Series A, G.O. Bond

     5.000%         6/15/2013         Aaa             200,000         204,352      

Columbus, Various Purposes Impt., Series B, G.O. Bond

     5.000%         9/1/2014         Aaa             400,000         430,972      

Cuyahoga County, Limited Tax, Various Purposes Impt., Series A, G.O. Bond

     4.000%         12/1/2018         Aa1                      400,000         466,016      

Delaware County, Public Impt., Series A, G.O. Bond

     4.000%         12/1/2015         Aa1             250,000         275,175      

Delaware County, Series B, G.O. Bond

     4.000%         12/1/2015         Aa1             200,000         220,140      

Eaton Community City School District, G.O. Bond, FGRNA

     4.125%         12/1/2026         Aa2             500,000         529,650      

Fairfield City School District, G.O. Bond

     5.000%         12/1/2020         Aa2             200,000         248,604      

Fairview Park City School District, G.O. Bond, NATL

     5.000%         12/1/2029         Aa2             315,000         349,193      

Franklin County, Various Purposes Impt., G.O. Bond

     5.000%         12/1/2027         Aaa             500,000         575,825      

Gahanna, Public Impt., G.O. Bond, NATL

     4.250%         12/1/2014         Aa1             100,000         107,117      

Green, G.O. Bond

     2.000%         12/1/2014         AA2             285,000         292,738      

Greene County Water System, Revenue Bond

     3.500%         12/1/2026         Aa2             300,000         312,885      

Greene County Water System, Series A, Revenue Bond, NATL

     5.250%         12/1/2020         Aa2             100,000         124,720      

Greene County, Limited Tax, G.O. Bond

     4.500%         12/1/2035         Aa2             415,000         460,111      

Hamilton County, Sewer Impt., Series A, Revenue Bond

     3.750%         12/1/2015         Aa2             200,000         218,602      

Hamilton County, Sewer Impt., Series A, Revenue Bond

     5.000%         12/1/2020         Aa2             500,000                  625,220      

Hamilton County, Sewer Impt., Series A, Revenue Bond

     5.000%         12/1/2032         Aa2             100,000         111,881      

Hamilton Waterworks System, Series A, Revenue Bond, AGC

     4.625%         10/15/2029         Aa3             100,000         110,233      

Hamilton, Series A, Revenue Bond, AGC

     4.125%         10/15/2023         Aa3             120,000         133,745      

Hancock County, Various Purposes Impt., G.O. Bond, NATL

     4.000%         12/1/2016         Aa2             200,000         218,412      

Harrison, Various Purposes Impt., G.O. Bond, AGM

     5.250%         12/1/2038         Aa3             275,000         319,533      

Huber Heights City School District, School Impt., G.O. Bond

     5.000%         12/1/2036         Aa3             450,000         513,369      

Ironton City School District, G.O. Bond, NATL

     4.250%         12/1/2028         Baa2             500,000         514,710      

Lakewood City School District, Prerefunded Balance, G.O. Bond, AGM

     5.250%         12/1/2015         Aa2             225,000         246,026      

Lakewood City School District, Prerefunded Balance, G.O. Bond, AGM

     5.250%         12/1/2019         Aa2             705,000         770,882      

Lakewood, Water System, Revenue Bond, AMBAC

     4.500%         7/1/2028         WR3             500,000         519,680      

 

The accompanying notes are an integral part of the financial statements.

 

6

Ohio Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		  

OHIO MUNICIPAL SECURITIES (continued)

          

Licking Heights Local School District, Prerefunded Balance, G.O. Bond, FGIC

     5.250%         12/1/2023         Aa2           $ 1,140,000       $ 1,219,401   

Lima, Revenue Bond, AGM

     4.300%         12/1/2029         Aa3             200,000         222,512   

Lorain County, Sewer System Impt., G.O. Bond

     5.000%         12/1/2039         Aa2             200,000         227,086   

Loveland City School District, G.O. Bond, AGM

     5.000%         12/1/2015         Aa2             300,000         336,930   

Lucas County, Sewer & Water District Impt., G.O. Bond

     4.100%         12/1/2027         AA2             100,000         110,706   

Mahoning County, Various Purposes Impt., Series B, G.O. Bond, AGC

     4.375%         12/1/2035         Aa3             300,000         325,143   

Mahoning Valley Sanitary District, Revenue Bond

     2.125%         12/1/2015         Aa3             100,000         103,983   

Marion, Limited Tax, Various Purposes Impt., Series A, G.O. Bond, AGM

     4.300%         12/1/2030         Aa3             100,000         111,712   

Marysville, Sewer & Wastewater, Revenue Bond, AGC, XLCA

     4.750%         12/1/2046         Aa3             180,000         190,156   

Marysville, Various Purposes Impt., G.O. Bond

     2.000%         12/1/2013         Aa3             155,000         156,964   

Mason, Limited Tax, Various Purposes Impt., G.O. Bond

     4.250%         12/1/2027         Aaa             925,000               1,004,596   

Maumee City School District, G.O. Bond, AGM

     4.600%         12/1/2031         Aa3             260,000         264,129   

Mentor City, Public Impt., G.O. Bond

     2.000%         12/1/2014         Aa1             200,000         204,844   

Miami County, Various Purposes Impt., G.O. Bond

     2.000%         12/1/2013         Aa2             300,000         303,318   

Miamisburg City School District, G.O. Bond

     5.000%         12/1/2033         Aa2             250,000         284,760   

Middletown, Public Impt., G.O. Bond, AGM

     5.000%         12/1/2021         Aa2             230,000         270,905   

Middletown, Various Purposes Impt., G.O. Bond, AGM

     4.500%         12/1/2018         Aa2             100,000         117,599   

Mount Healthy City School District, G.O. Bond, AGM

     5.000%         12/1/2031         Aa3             200,000         223,780   

Muskingum County, Limited Tax, Various Purposes Impt., G.O. Bond, AGC

     4.300%         12/1/2028         Aa3             145,000         160,703   

North Royalton, Various Purposes Impt., G.O. Bond

     5.250%         12/1/2028         Aa2                   1,025,000         1,191,973   

Ohio State Water Development Authority, Fresh Water, Prerefunded Balance, Revenue Bond

     5.250%         12/1/2017         AAA2             270,000         288,687   

Ohio State Water Development Authority, Pollution Control, Revenue Bond

     5.250%         12/1/2015         Aaa             200,000         227,180   

Ohio State Water Development Authority, Pure Water, Prerefunded Balance, Series I, Revenue Bond, AMBAC

     6.000%         12/1/2016         Aaa             25,000         27,501   

Ohio State Water Development Authority, Revenue Bond

     5.500%         12/1/2018         Aaa             100,000         125,462   

Ohio State Water Development Authority, Revenue Bond

     5.500%         12/1/2021         Aaa             125,000         164,910   

Ohio State Water Development Authority, Series A, Revenue Bond

     5.000%         6/1/2018         Aaa             100,000         120,922   

Ohio State Water Development Authority, Series C, Revenue Bond

     3.000%         12/1/2021         Aaa             300,000         331,176   

Ohio State Water Development Authority, Water Utility Impt., Prerefunded Balance, Revenue Bond

     5.000%         12/1/2023         AAA2             575,000         637,715   

 

The accompanying notes are an integral part of the financial statements.

 

7

Ohio Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

OHIO MUNICIPAL SECURITIES (continued)

  

           

Ohio State Water Development Authority, Water Utility Impt., Prerefunded Balance, Revenue Bond, NATL

     5.000%         12/1/2030         Aa1           $ 180,000       $ 187,817      

Ohio State, Conservation Project, Series A, G.O. Bond

     5.000%         9/1/2013         Aa1             350,000         361,049      

Ohio State, Public Impt., Series A, G.O. Bond

     5.000%         2/1/2014         Aa1             250,000         262,580      

Ohio State, School Impt., Prerefunded Balance, Series A, G.O. Bond

     5.000%         6/15/2015         Aa1             300,000         320,466      

Ohio State, Series A, G.O. Bond

     5.000%         9/15/2021         Aa1             500,000         633,305      

Olentangy Local School District, Series A, G.O. Bond, AGM

     4.500%         12/1/2032         Aa1                      800,000         853,160      

Otsego Local School District, Prerefunded Balance, G.O. Bond, AGM

     4.300%         12/1/2016         Aa3             100,000         107,572      

Pickerington Local School District, G.O. Bond, NATL

     4.250%         12/1/2034         Aa2             230,000         232,229      

Princeton City School District, Prerefunded Balance, G.O. Bond, NATL

     5.000%         12/1/2030         AA2             200,000         208,686      

South Range Local School District, G.O. Bond, XLCA

     4.500%         12/1/2035         A2             225,000         234,864      

Springboro, Limited Tax, Public Impt., G.O. Bond

     3.250%         12/1/2014         Aa1             100,000         105,212      

Springboro, Limited Tax, Public Impt., G.O. Bond

     5.000%         12/1/2019         Aa1             100,000         120,697      

Summit County, Various Purposes Impt., Series R, G.O. Bond, FGRNA

     5.500%         12/1/2019         Aa1             100,000         126,497      

Sylvania City School District, G.O. Bond, AGC

     5.000%         12/1/2025         Aa2             270,000         306,199      

Sylvania, Public Impt., G.O. Bond

     2.000%         12/1/2014         AA2             300,000         307,614      

Symmes Township, Limited Tax, Parkland Acquisition & Impt., G.O. Bond

     5.250%         12/1/2037         Aa1             100,000         118,221      

Talawanda School District, Prerefunded Balance, G.O. Bond, AMBAC

     5.000%         12/1/2021         Aa2             200,000                  213,372      

Tallmadge, G.O. Bond

     4.250%         12/1/2030         Aa2             180,000         199,913      

Toledo, Limited Tax, Capital Impt., G.O. Bond

     3.375%         12/1/2028         A2             200,000         199,346      

Twinsburg City School District, G.O. Bond, FGRNA

     5.000%         12/1/2018         Aa2             100,000         108,004      

Vandalia, G.O. Bond, AMBAC

     5.000%         12/1/2015         Aa2             235,000         253,574      

Wadsworth City School District, G.O. Bond, AGC

     5.000%         12/1/2037         AA2             180,000         197,460      

Warren, Limited Tax, G.O. Bond, AGM

     3.250%         12/1/2032         Aa3             285,000         289,058      

West Chester Township, Public Impt., G.O. Bond, NATL

     4.000%         12/1/2013         Aaa             100,000         103,387      

Wood County, G.O. Bond

     5.400%         12/1/2013         Aa2             5,000         5,018      
         

 

 

     

TOTAL MUNICIPAL BONDS

             

(Identified Cost $35,494,882)

             37,051,155      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

8

Ohio Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

             SHARES       VALUE
  (NOTE 2)		       
      

SHORT-TERM INVESTMENT - 4.0%

       

Dreyfus AMT - Free Municipal Reserves - Class R

       

(Identified Cost $ 1,534,558)

           1,534,558       $       1,534,558      
   

 

 

     

TOTAL INVESTMENTS - 99.6%

       

(Identified Cost $ 37,029,440)

       38,585,713      

OTHER ASSETS, LESS LIABILITIES - 0.4%

       163,240      
   

 

 

     

NET ASSETS - 100%

     $ 38,748,953      
   

 

 

     

KEY:

G.O. Bond - General Obligation

Bond Impt. - Improvement

Scheduled principal and interest payments are guaranteed by:

AGC (Assured Guaranty Corp.)

AGM (Assurance Guaranty Municipal Corp.)

AMBAC (AMBAC Assurance Corp.)

FGIC (Financial Guaranty Insurance Co.)

FGRNA (FGIC reinsured by NATL)

NATL (National Public Finance Guarantee Corp.)

XLCA (XL Capital Assurance)

The insurance does not guarantee the market value of the municipal bonds.

1Credit ratings from Moody’s (unaudited).

2Credit ratings from S&P (unaudited).

3Credit rating has been withdrawn. As of December 31, 2012, there is no rating available (unaudited).

The Series’ portfolio holds, as a percentage of net assets, greater than 10% in bonds insured by the following companies: AGM - 20.3%; NATL - 13.8%.

The accompanying notes are an integral part of the financial statements.

 

9

Ohio Tax Exempt Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments (identified cost $37,029,440) (Note 2)

    $ 38,585,713   

Interest receivable

      194,598   

Receivable for fund shares sold

      25,532   

Dividends receivable

      3   
  

 

 

  

TOTAL ASSETS

      38,805,846   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      16,548   

Accrued fund accounting and administration fees (Note 3)

      6,977   

Accrued transfer agent fees (Note 3)

      460   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Audit fees payable

      29,398   

Other payables and accrued expenses

      3,136   
  

 

 

  

TOTAL LIABILITIES

      56,893   
  

 

 

  

TOTAL NET ASSETS

    $ 38,748,953   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 35,445   

Additional paid-in-capital

      37,143,928   

Undistributed net investment income

      13,129   

Accumulated net realized gain on investments

      178   

Net unrealized appreciation on investments

      1,556,273   
  

 

 

  

TOTAL NET ASSETS

    $ 38,748,953   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A ($38,748,953/3,544,513 shares)

    $ 10.93   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

10

Ohio Tax Exempt Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Interest

    $ 855,337   

Dividends

      3   
  

 

 

  

Total Investment Income

      855,340   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      193,689   

Fund accounting and administration fees (Note 3)

      49,635   

Transfer agent fees (Note 3)

      2,733   

Chief Compliance Officer service fees (Note 3)

      2,440   

Directors’ fees (Note 3)

      601   

Audit fees

      27,928   

Custodian fees

      1,682   

Miscellaneous

      15,992   
  

 

 

  

Total Expenses

      294,700   
  

 

 

  

NET INVESTMENT INCOME

      560,640   
  

 

 

  

UNREALIZED GAIN (LOSS) ON INVESTMENTS:

   

Net realized gain (loss) on investments

      6,693   

Net change in unrealized appreciation (depreciation) on investments

      605,489   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

      612,182   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 1,172,822   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

11

Ohio Tax Exempt Series

 

 

Statements of Changes in Net Assets

 

     FOR THE
YEAR ENDED
12/31/12		     FOR THE
YEAR ENDED
12/31/11		  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 560,640      $ 910,494   

Net realized gain on investments

      6,693        557,776   

Net change in unrealized appreciation on investments

      605,489        1,718,313   
  

 

 

    

 

 

  

Net increase from operations

      1,172,822        3,186,583   
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 8):

     

From net investment income

      (605,183 )      (885,902 ) 

From net realized gain on investments

      (5,319 )      (562,422 ) 
  

 

 

    

 

 

  

Total distributions to shareholders

      (610,502 )      (1,448,324 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      510,706        1,567,913   
  

 

 

    

 

 

  

Net increase in net assets

      1,073,026        3,306,172   

NET ASSETS:

     

Beginning of year

      37,675,927        34,369,755   
  

 

 

    

 

 

  

End of year (including undistributed net investment income of $ 13,129 and $ 57,710, respectively)

    $ 38,748,953      $ 37,675,927   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

12

Ohio Tax Exempt Series

 

 

Financial Highlights

 

     

 

FOR THE YEARS ENDED

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 10.77      $ 10.30      $ 10.62      $ 9.82      $ 10.43   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment income

      0.16 1      0.26 1      0.35 1      0.36 1      0.38   

Net realized and unrealized gain (loss) on investments

      0.17        0.62        (0.33 )      0.91        (0.57 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      0.33        0.88        0.02        1.27        (0.19 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net investment income

      (0.17 )      (0.25 )      (0.34 )      (0.37 )      (0.36 ) 

From net realized gain on investments

      — 2      (0.16 )      —        (0.10 )      (0.06 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions to shareholders

      (0.17 )      (0.41 )      (0.34 )      (0.47 )      (0.42 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 10.93      $ 10.77      $ 10.30      $ 10.62      $ 9.82   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 38,749      $ 37,676      $ 34,370      $ 24,875      $ 20,844   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return3

      3.09 %      8.65 %      0.14 %      13.09 %      (1.74 %) 

Ratios (to average net assets)/

           

Supplemental Data:

           

Expenses*

      0.76 %      0.80 %      0.85 %      0.85 %      0.85 % 

Net investment income

      1.45 %      2.41 %      3.25 %      3.39 %      3.58 % 

Portfolio turnover

      9 %      60 %      0 %4      11 %      15 % 
*For certain years 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 Series, the expense ratio (to average net assets) would have increased by the following amounts:     
     N/A        N/A        0.00 %5      0.03 %      0.01 % 

1Calculated based on average shares outstanding during the year.

2Less than $0.01 per share.

3Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain years.

4Less than 1%.

5Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

13

Ohio Tax Exempt Series

 

 

Notes to Financial Statements

 

1. Organization

Ohio Tax Exempt Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide as high a level of current income exempt from federal income tax and Ohio State personal income tax as the Advisor believes is consistent with the preservation of capital.

The Fund’s advisor is Manning & Napier Advisors, 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated as Ohio Tax Exempt Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).

Short-term investments that mature in sixty days or less are 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 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.

 

14

Ohio Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

The following is a summary of the valuation levels used for major security types as of December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Debt securities:

            

  States and political subdivisions (municipals)

    $ 37,051,155       $ —       $       37,051,155       $                     —   

  Mutual fund

      1,534,558         1,534,558         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       38,585,713       $       1,534,558       $ 37,051,155       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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 December 31, 2012, 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 and various states, 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, 2009 through December 31, 2012. 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.

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.

 

15

Ohio Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Indemnifications

The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 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.

The Advisor has contractually agreed, until at least April 30, 2014, to waive its management fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.85% of average daily net assets each year. The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

16

Ohio Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $4,374,402 and $3,243,000 respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in shares of Ohio Tax Exempt Series were:

 

    FOR THE YEAR ENDED 12/31/12     FOR THE YEAR ENDED 12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

               391,877       $         4,283,787                  518,985       $ 5,420,978   

Reinvested

     54,363        592,114        131,225        1,404,385   

Repurchased

     (399,797 )      (4,365,195 )      (487,962 )      (5,257,450 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     46,443       $ 510,706        162,248       $         1,567,913   
 

 

 

    

 

 

    

 

 

    

 

 

  

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

7. Concentration of Credit

The Series primarily invests in debt obligations issued by the State of Ohio and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Series is more susceptible to factors adversely affecting issues of Ohio municipal securities than is a municipal bond fund that is not concentrated in these issues to the same extent.

 

8. Federal Income Tax Information

The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to book and tax treatments in the timing of the recognition of net investment income or gains and losses, including market discount. 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. For the fiscal year ended December 31, 2012, $38 was reclassified within the capital accounts from Undistributed Net Investment Income to Accumulated Net Realized Gain on Investments. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR  
ENDED 12/31/12		     FOR THE YEAR  
ENDED 12/31/11		       

Ordinary income

   $ 5,319          $ 83,848          

Tax exempt income

     605,183            885,554          

Long-term capital gains

     —            478,922          

 

17

Ohio Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

8. Federal Income Tax Information (continued)

 

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on the identified cost of investments for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 37,025,581   

Unrealized appreciation

      1,599,831   

Unrealized depreciation

      (39,699 ) 
  

 

 

  

Net unrealized appreciation

    $ 1,560,132   
  

 

 

  

Undistributed tax exempt income

      9,270   

Undistributed ordinary income

      178   
 

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010, may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series did not have pre or post-enactment net capital loss carryforwards.

 

18

Ohio Tax Exempt Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Ohio Tax Exempt Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Ohio Tax Exempt Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

19

Ohio Tax Exempt Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

The Series hereby reports $605,183 as tax exempt dividends for the year ended December 31, 2012. It is the intention of the Series to designate the maximum allowable under tax law.

 

20

Ohio Tax Exempt Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

21

Ohio Tax Exempt Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

22

Ohio Tax Exempt Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

Address:

   

 

B. Reuben Auspitz*

290 Woodcliff Drive

Fairport, NY 14450

Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

 

   
Name:    Stephen B. Ashley
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995 - 2008)

The Ashley Group (1995 - 2008)

Genesee Corporation (1987 - 2007)

Name:    Peter L. Faber
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Partnership for New York City, Inc. (non-profit)(1989 - 2010)

New York Collegium (non-profit)(2004 - 2011))

Boston Early Music Festival (non-profit)

Name:    Harris H. Rusitzky
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    78

Current Position(s) Held with Fund:

    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:   

President, The Greening Group (business consultants) since 1994;

Partner, The Restaurant Group (restaurants) since 2006

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

23

Ohio Tax Exempt Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Incyte Corp. (2000 - present)

ViroPharma, Inc. (2000 - present)

HLTH Corp. (2000 - present)

Cheyne Capital International (2000 - present)

MPM Bio-equities (2000 - 2009)

GMP Companies (2000 - 2012)

HoustonPharma (2000 - 2009)

Name:    Chester N. Watson
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

 

   
Name:    Ryan Albano
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:   

Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC;

Manager (2004 - 2011) – KPMG LLP

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

24

Ohio Tax Exempt Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)

 

   
Name:    Christine Glavin
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

25

Ohio 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNOTE-12/12-AR

 

LOGO

 

        DIVERSIFIED TAX EXEMPT SERIES                          

 

 

 

 

www.manning-napier.com

       LOGO          

Diversified Tax Exempt Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months.

Even with the myriad of looming uncertainties, a number of issues pushed forward toward more clarity and resolution as the year progressed. For example, during the fourth quarter, progress was made with respect to “fiscal cliff” headwinds in the U.S. Also, the Federal Open Market Committee (FOMC) stated it expects to keep its highly accommodative monetary policy stance in place at least until unemployment falls below 6.5%, provided that near-term inflation remains within 0.5% of its 2% goal and longer-term inflation remains “well anchored.” Additionally, European Central Bank President Mario Draghi’s commitment earlier in the year to do “whatever it takes” to preserve the Euro, along with positive developments in Greece in the fourth quarter, also aided wavering investor concerns as the year came to a close. Given this backdrop, although equity and fixed income markets generally performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor feels are going to continue to weigh on global economic growth.

Overall, each of the major sectors of the fixed income market experienced positive absolute performance. This strong performance was led by corporate bonds, where high yield bonds were the top performer in 2012, followed by their investment grade counterparts. Beyond corporate bonds, Treasury Inflation Protected Securities (TIPS) and municipal bonds also performed well in 2012. In contrast, although Treasuries and mortgages ended the year with positive performance, they generally trailed other sectors in 2012.

For the year, the Bank of America Merrill Lynch 1-12 Year Municipal Bond Index returned 3.40%. However, while the Diversified Tax Exempt Series slightly underperformed its benchmark, it provided a positive absolute return of 3.01% in 2012.

Similar to 2011, municipal bonds continued into 2012 with positive absolute performance. Indeed, in light of the low yield environment and concerns about higher marginal tax rates, investor demand remained strong and new issuance picked up last year. Additionally, municipal bond yields did not match last year’s yield declines in the Treasury market, meaning their relative value has increased, and yields for the sector remain attractive relative to U.S. Treasuries.

Generally, the Advisor has spread the Series’ municipal bond investments in higher quality issues across the entire maturity spectrum. However, the Advisor has begun to take advantage of opportunities in both middle tier credits and the revenue sector. A middle tier credit refers to the credit quality of specific municipal bonds (below the highest rating, but above the lowest) and revenue bonds are municipal bonds that are typically used to finance income-producing projects. While the Series’ higher quality bias leads to slightly lower relative yields when compared to the overall municipal market, the Advisor believes the safety and liquidity of such issues justifies the bias. This positioning aided the Series’ results in 2012.

Managing to an index can prove limiting and present challenges to reaching investors’ objectives. As an active fixed income manager, the Advisor’s investment decisions are based on prevailing market conditions and fundamentals, which allow us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. This philosophy has guided the Advisor’s choices in selectively choosing the Series’ investments. Through our security selection process, we feel we have the ability to manage risks, while simultaneously providing compelling income and total return potential to help the Series’ investors reach their goals.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Diversified Tax Exempt Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012
      ONE
 YEAR1                		    FIVE
 YEAR                 		    TEN
 YEAR                 		    SINCE
 INCEPTION2        

Manning & Napier Fund, Inc. - Diversified Tax Exempt Series3

     3.01%    4.39%    4.01%    4.60%

Bank of America (BofA) Merrill Lynch 1-12 Year Municipal Bond Index4

     3.40%    5.15%    4.46%    5.18%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Diversified Tax Exempt Series for the ten years ended December 31, 2012 to the BofA Merrill Lynch 1-12 Year Municipal Bond Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Index are calculated from February 14, 1994, the Series’ inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 0.57%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.57% for the year ended December 31, 2012.

4The BofA Merrill Lynch 1-12 Year Municipal Bond Index (formerly a Merrill Lynch Index) is an unmanaged, market weighted index comprised of investment-grade, fixed rate, coupon bearing municipal bonds with maturities greater than one year but less than twelve years. The Index returns assume reinvestment of coupons and, unlike the Series returns, do not reflect any fees or expenses.

 

2

Diversified Tax Exempt Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING
 ACCOUNT VALUE                             
 7/1/12		    ENDING
 ACCOUNT VALUE                             
 12/31/12		    EXPENSES PAID
 DURING  PERIOD*                            
 7/1/12-12/31/12

Actual

    $1,000.00    $1,013.00    $2.89

Hypothetical

(5% return before expenses)

    $1,000.00    $1,022.33    $2.91

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.57%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data.

 

3

Diversified Tax Exempt Series

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

 

Credit Quality Ratings2,3

 

      

Top Ten States4

 

Aaa

   29.6%        

Texas

   6.4%

Aa

   53.3%        

Massachusetts

   5.6%

A

   9.2%        

North Carolina

   5.5%

Baa

   2.7%        

Georgia

   5.2%

Unrated investments

   0.5%        

Virginia

   5.2%

Cash, short-term investment, and other assets, less liabilities

   4.7%        

Tennessee

Utah

   4.8% 4.5%
           

Indiana

   4.4%
           

Florida

   4.0%
           

Maryland

   3.9%
     

2As a percentage of net assets.

3Based on ratings from Moody’s, or the S&P equivalent. The Series may use different ratings provided by other rating agencies for purposes of determining compliance with the Series’ investment policies.

 

      

4As a percentage of total investments.

 

    

 

4

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

MUNICIPAL BONDS - 95.3%

             

ALABAMA - 0.2%

             

Fort Payne Waterworks Board, Revenue Bond, AMBAC

     3.500%         7/1/2015         WR2           $ 665,000       $ 673,140      
         

 

 

     

ALASKA - 0.2%

             

Alaska Municipal Bond Bank Authority, Series 2, Revenue Bond

     5.000%         9/1/2022         Aa2             500,000         621,415      
         

 

 

     

ARIZONA - 1.3%

             

Mesa, G.O. Bond, FGRNA

     4.125%         7/1/2027         Aa2             2,215,000         2,345,508      

Salt River Project Agricultural Impt. & Power District, Series A, Revenue Bond

     5.000%         1/1/2035         Aa1             1,700,000               1,850,382      
         

 

 

     
            4,195,890      
         

 

 

     

ARKANSAS - 1.3%

             

Arkansas State, G.O. Bond

     4.000%         8/1/2014         Aa1                   2,340,000         2,474,222      

Bentonville School District No. 6, Series A, G.O. Bond

     4.500%         6/1/2040         Aa2             1,000,000         1,091,560      

El Dorado Water & Sewer Revenue, Water Utility Impt., Revenue Bond

     3.000%         10/1/2030         A1             870,000         868,077      
         

 

 

     
            4,433,859      
         

 

 

     

CALIFORNIA - 0.7%

             

Los Angeles Unified School District, Series B, G.O. Bond, AMBAC

     4.500%         7/1/2027         Aa2             840,000         930,905      

Oak Valley Hospital District, G.O. Bond, FGRNA

     4.500%         7/1/2025         A1             1,395,000         1,445,694      
         

 

 

     
            2,376,599      
         

 

 

     

COLORADO - 2.0%

             

Boulder Water & Sewer, Revenue Bond

     5.000%         12/1/2019         Aa1             1,500,000         1,884,390      

Colorado Water Resources & Power Development Authority, Water Resource, Series D, Revenue Bond, AGM

     4.375%         8/1/2035         Aa2             1,420,000         1,461,379      

Commerce City, Certificate of Participation, AMBAC

     4.750%         12/15/2032         A3             1,000,000         1,049,180      

Denver Wastewater Management Division Department of Public Works, Revenue Bond

     4.000%         11/1/2020         Aa2             1,500,000         1,784,235      

Southlands Metropolitan District No. 1, Water Utility Impt., Prerefunded Balance, G.O. Bond

     7.125%         12/1/2034         AA3             500,000         563,895      
         

 

 

     
            6,743,079      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

5

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

MUNICIPAL BONDS (continued)

             

CONNECTICUT - 0.6%

             

Bridgeport, Public Impt., Series A, G.O. Bond

     5.000%         2/15/2024         A1           $ 500,000       $ 582,965      

Hamden, G.O. Bond

     5.000%         8/15/2027         A2             585,000         673,165      

New Haven, Public Impt., Series A, G.O. Bond, AGM.

     5.000%         3/1/2027         Aa3             500,000         580,185      
         

 

 

     
            1,836,315      
         

 

 

     

DELAWARE - 2.3%

             

Delaware State, Public Impt., G.O. Bond

     5.000%         3/1/2013         Aaa             450,000         453,623      

Delaware State, Public Impt., G.O. Bond

     5.000%         3/1/2014         Aaa             1,000,000         1,055,300      

Delaware State, Public Impt., G.O. Bond

     5.000%         3/1/2015         Aaa             1,710,000         1,879,666      

Delaware State, Public Impt., Series B, G.O. Bond

     5.000%         2/1/2013         Aaa                   2,720,000               2,730,962      

New Castle County, Public Impt., Series A, G.O. Bond

     4.250%         7/15/2026         Aaa             1,265,000         1,385,124      
         

 

 

     
            7,504,675      
         

 

 

     

DISTRICT OF COLUMBIA - 1.3%

             

District of Columbia Water & Sewer Authority, Water Utility Impt., Revenue Bond, AGM

     6.000%         10/1/2014         Aa2             1,500,000         1,644,660      

District of Columbia, Public Impt., Prerefunded Balance, Series A, G.O. Bond, AMBAC

     5.000%         6/1/2017         Aa2             2,000,000         2,213,020      

District of Columbia, Public Impt., Prerefunded Balance, Series A, G.O. Bond, AMBAC

     5.000%         6/1/2022         Aa2             500,000         509,905      
         

 

 

     
            4,367,585      
         

 

 

     

FLORIDA - 3.9%

             

Cape Coral, Water Utility Impt., Special Assessment, NATL

     4.500%         7/1/2021         A2             1,805,000         1,950,194      

Florida State Board of Education, Capital Outlay, Public Education, Series D, G.O. Bond

     5.000%         6/1/2016         Aa1             2,000,000         2,234,080      

Florida State Department of Transportation, Public Impt., Series A, G.O. Bond

     4.000%         7/1/2015         Aa1             1,350,000         1,465,479      

Florida State Department of Transportation, Series B, G.O. Bond

     6.375%         7/1/2014         Aa1             1,000,000         1,088,710      

Fort Lauderdale, Water & Sewer, Revenue Bond

     5.000%         9/1/2020         Aa1             1,545,000         1,926,723      

Orlando Utilities Commission, Prerefunded Balance, Revenue Bond

     5.250%         10/1/2014         Aa2             650,000         705,874      

Palm Beach County, FPL Reclaimed Water Project, Revenue Bond

     5.000%         10/1/2040         Aaa             1,020,000         1,157,098      

Panama City Beach, Water Utility Impt., Revenue Bond, AGC

     5.000%         6/1/2039         AA3             1,000,000         1,104,250      

Tampa Bay Water Utility System, Revenue Bond

     5.000%         10/1/2038         Aa2             1,000,000         1,135,380      

The accompanying notes are an integral part of the financial statements.

 

6

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

MUNICIPAL BONDS (continued)

             

FLORIDA (continued)

             

Winter Park, Water Utility Impt., Revenue Bond

     5.000%         12/1/2034         Aa2           $ 250,000       $ 278,703      
         

 

 

     
            13,046,491      
         

 

 

     

GEORGIA - 5.2%

             

Atlanta, Water & Wastewater, Revenue Bond, AGM

     5.000%         11/1/2043         Aa3             1,500,000         1,579,680      

Augusta Water & Sewer, Water Utility Impt., Revenue Bond

     4.000%         10/1/2028         A1             1,000,000         1,098,150      

Catoosa County School District, School Impt., G.O. Bond

     4.000%         8/1/2014         AA3             1,000,000         1,057,470      

Cobb County, Water Utility Impt., Revenue Bond

     4.250%         7/1/2028         Aaa             1,000,000         1,131,940      

DeKalb County, Special Transportation Parks & Greenspace, G.O. Bond

     4.375%         12/1/2030         Aa3             1,000,000         1,024,450      

DeKalb County, Water & Sewer, Series A, Revenue Bond

     5.000%         10/1/2035         Aa2             1,000,000         1,025,890      

Forsyth County, Public Impt., Series B, G.O. Bond

     5.000%         3/1/2013         Aaa             670,000         675,407      

Fulton County Water & Sewer, Revenue Bond

     5.000%         1/1/2019         Aa3             1,200,000         1,460,124      

Fulton County, Water Utility Impt., Revenue Bond, FGRNA

     5.000%         1/1/2035         Aa3             1,000,000         1,034,410      

Georgia State, Public Impt., Series D, G.O. Bond

     5.000%         7/1/2013         Aaa             1,100,000         1,126,433      

Georgia State, School Impt., Series C-1, G.O. Bond

     5.000%         10/1/2014         Aaa             1,415,000         1,530,719      

Georgia State, Series B, G.O. Bond

     5.000%         7/1/2015         Aaa                   2,000,000         2,226,500      

Gwinnett County Water & Sewerage Authority, Water Utility Impt., Series A, Revenue Bond

     4.000%         8/1/2028         Aaa             1,000,000         1,098,800      

Madison, Water & Sewer, Revenue Bond, AMBAC

     4.625%         7/1/2030         WR2             1,000,000         1,036,100      
         

 

 

     
                  17,106,073      
         

 

 

     

HAWAII - 1.9%

             

Hawaii State, Series DB, G.O. Bond, NATL

     5.250%         9/1/2013         Aa2             875,000         904,260      

Hawaii State, Series DG, G.O. Bond, AMBAC

     5.000%         7/1/2014         Aa2             500,000         534,675      

Hawaii State, Series DT, G.O. Bond

     5.000%         11/1/2014         Aa2             550,000         596,305      

Honolulu County, Series B, G.O. Bond

     5.000%         8/1/2020         Aa1             1,500,000         1,876,995      

Honolulu County, Series B, Revenue Bond

     3.000%         7/1/2024         Aa2             1,000,000         1,052,450      

Honolulu County, Sewer Impt., Series A, Revenue Bond, FGRNA

     5.000%         7/1/2035         Aa2             500,000         540,090      

Honolulu County, Water Utility Impt., Prerefunded Balance, G.O. Bond, FGIC

     6.000%         12/1/2014         Aa1             750,000         829,597      
         

 

 

     
            6,334,372      
         

 

 

     

ILLINOIS - 0.8%

             

Chicago, Prerefunded Balance, Series A, G.O. Bond, NATL

     5.000%         1/1/2034         Aa3             170,000         170,000      

The accompanying notes are an integral part of the financial statements.

 

7

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

MUNICIPAL BONDS (continued)

             

ILLINOIS (continued)

             

Chicago, Unrefunded Balance, Series A, G.O. Bond, NATL

     5.000%         1/1/2034         Aa3           $ 350,000       $ 350,987      

Springfield Metropolitan Sanitation District, Series A, G.O. Bond

     4.750%         1/1/2034         AA3             1,115,000         1,211,838      

Springfield, Electric Light & Power Impt., Revenue Bond, NATL

     5.000%         3/1/2035         A3             1,000,000         1,039,370      
         

 

 

     
            2,772,195      
         

 

 

     

INDIANA - 4.3%

             

Avon Community School Building Corp., Revenue Bond, AMBAC

     4.250%         7/15/2018         A3             1,450,000         1,615,619      

Avon Community School Building Corp., Revenue Bond, AMBAC

     4.750%         1/15/2032         A3             1,015,000         1,084,893      

Fort Wayne Sewage Works, Sewer Impt., Series B, Revenue Bond

     2.000%         8/1/2022         Aa3             1,125,000         1,107,574      

Fort Wayne Waterworks, Water Utility Impt., Revenue Bond

     2.000%         12/1/2020         Aa3             745,000         742,996      

Indiana Municipal Power Agency, Series A, Revenue Bond, NATL

     5.000%         1/1/2042         A1             1,000,000         1,095,000      

Indiana Transportation Finance Authority, Highway Impt., Prerefunded Balance, Series A, Revenue Bond, FGIC

     5.250%         6/1/2021         Aa1             2,000,000         2,139,300      

Indiana Transportation Finance Authority, Highway Impt., Prerefunded Balance, Series A, Revenue Bond, FGIC

     5.250%         6/1/2026         Aa1             1,380,000         1,476,117      

Indianapolis Local Public Impt. Bond Bank, Waterworks Project, Series A, Revenue Bond, AGC

     5.500%         1/1/2038         Aa3             1,000,000         1,133,410      

Plainfield Sewage Works, Series A, Revenue Bond

     4.650%         1/1/2027         AA3             645,000         706,707      

Shelbyville Central Renovation School Building Corp., Revenue Bond, NATL

     5.000%         7/15/2018         Baa2                   3,000,000         3,286,050      
         

 

 

     
                  14,387,666      
         

 

 

     

IOWA - 3.1%

             

Ankeny, Series B, G.O. Bond

     4.000%         6/1/2013         Aa2             1,550,000         1,574,041      

Cedar Rapids, Series E, G.O. Bond

     3.000%         6/1/2014         Aaa             1,000,000         1,037,270      

Des Moines Waterworks Board, Series B, Revenue Bond

     3.000%         12/1/2025         Aa1             1,000,000         1,052,270      

Des Moines, Public Impt., Series A, G.O. Bond

     2.000%         6/1/2013         Aa1             1,000,000         1,007,550      

Dubuque City, Series D, Revenue Bond

     4.000%         6/1/2030         Aa2             470,000         491,479      

Indianola Community School District, G.O. Bond, FGRNA

     5.200%         6/1/2021         A1             425,000         433,024      

The accompanying notes are an integral part of the financial statements.

 

8

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

MUNICIPAL BONDS (continued)

             

IOWA (continued)

             

Iowa City Community School District, G.O. Bond, AGM

     4.000%         6/1/2018         Aaa           $ 425,000       $ 430,457      

Linn-Mar Community School District, School Impt., Revenue Bond

     4.625%         7/1/2029         A2             1,000,000         1,158,540      

Polk County, Series C, G.O. Bond

     4.000%         6/1/2017         Aaa             995,000         1,038,671      

Sioux City, Public Impt., Series A, G.O. Bond

     2.000%         6/1/2014         Aa1             940,000         959,120      

West Des Moines, Series B, G.O. Bond

     2.000%         6/1/2014         AAA3             1,000,000         1,023,920      
         

 

 

     
                  10,206,342      
         

 

 

     

KANSAS - 2.1%

             

Johnson County Water District No. 1, Revenue Bond.

     3.250%         12/1/2030         Aaa             1,000,000         1,018,210      

Miami County Unified School District No. 416 Louisburg, G.O Bond, NATL

     5.000%         9/1/2018         Baa2                   2,000,000         2,243,800      

Reno County Unified School District No. 313, Buhler, Series A, G.O. Bond

     4.000%         9/1/2023         A2             500,000         545,615      

Scott County, G.O. Bond

     4.750%         4/1/2040         A3             1,000,000         1,123,620      

Seward County, G.O. Bond, AGM

     5.000%         8/1/2040         Aa3             1,000,000         1,155,260      

Topeka Combined Utility Revenue, Series A, Revenue Bond

     4.000%         8/1/2019         Aa3             845,000         979,059      
         

 

 

     
            7,065,564      
         

 

 

     

LOUISIANA - 0.6%

             

Caddo Parish Parishwide School District, G.O. Bond, NATL

     4.350%         3/1/2026         Aa2             660,000         700,174      

Caddo Parish Parishwide School District, G.O. Bond, NATL

     4.375%         3/1/2027         Aa2             1,090,000         1,144,838      
         

 

 

     
            1,845,012      
         

 

 

     

MAINE - 0.5%

             

Falmouth, School Impt., G.O. Bond

     2.000%         11/15/2014         Aa1             1,000,000         1,027,920      

Maine Municipal Bond Bank, Various Purposes Impt., Series E, Revenue Bond

     4.000%         11/1/2021         Aa2             570,000         670,776      
         

 

 

     
            1,698,696      
         

 

 

     

MARYLAND - 3.8%

             

Anne Arundel County, Water & Sewer, G.O. Bond

     4.200%         3/1/2025         Aa1             1,770,000         1,885,245      

Baltimore County, Public Impt., G.O. Bond

     5.000%         2/1/2014         Aaa             2,250,000         2,365,538      

Frederick County, Series C, G.O. Bond

     4.000%         12/1/2014         Aa1             1,410,000         1,507,473      

Maryland State, Public Impt., First Series, G.O. Bond

     5.000%         3/15/2013         Aaa             1,000,000         1,009,900      

The accompanying notes are an integral part of the financial statements.

 

9

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

MUNICIPAL BONDS (continued)

             

MARYLAND (continued)

             

Maryland State, Public Impt., Prerefunded Balance, Second Series, G.O. Bond

     5.000%         8/1/2015         Aaa           $ 1,000,000       $ 1,027,770      

Maryland State, Public Impt., Second Series, G.O. Bond

     5.000%         7/15/2014         Aaa             1,000,000         1,072,080      

Maryland State, Public Impt., Series A, G.O. Bond

     4.000%         8/1/2015         Aaa             500,000         545,580      

Maryland State, Public Impt., Series B, G.O. Bond

     3.000%         3/15/2015         Aaa             1,000,000         1,056,800      

Ocean City, Public Impt., G.O. Bond

     4.000%         10/1/2022         Aa2             1,000,000         1,189,020      

Prince George’s County, Public Impt., Series A, G.O. Bond

     4.000%         9/15/2014         Aaa             550,000         584,513      

Prince George’s County, School Impt., G.O. Bond

     5.500%         10/1/2013         Aaa             400,000         415,880      
         

 

 

     
            12,659,799      
         

 

 

     

MASSACHUSETTS - 5.5%

             

Barnstable, G.O. Bond

     3.000%         6/15/2013         AAA3             670,000         678,328      

Boston Water & Sewer Commission, Series A, Revenue Bond

     5.000%         11/1/2031         Aa1             1,000,000         1,173,250      

Boston, Public Impt., Series A, G.O. Bond

     5.000%         1/1/2015         Aaa             500,000         545,875      

Cambridge, Public Impt., G.O. Bond

     2.000%         2/15/2014         Aaa             1,195,000         1,218,075      

Commonwealth of Massachusetts, Prerefunded Balance, Series D, G.O. Bond, AGM

     5.000%         12/1/2023         Aa1             1,000,000         1,087,070      

Commonwealth of Massachusetts, Public Impt., Prerefunded Balance, Series A, G.O. Bond, AGM

     5.000%         3/1/2021         Aa1             500,000         548,805      

Commonwealth of Massachusetts, Public Impt., Series C, G.O. Bond

     5.000%         9/1/2013         Aa1                   1,790,000               1,846,994      

Commonwealth of Massachusetts, Public Impt., Series D, G.O. Bond, NATL

     6.000%         11/1/2013         Aa1             520,000         544,814      

Commonwealth of Massachusetts, Public Impt., Series E, G.O. Bond

     4.000%         12/1/2021         Aa1             1,500,000         1,730,910      

Commonwealth of Massachusetts, Series B, G.O. Bond

     4.000%         7/1/2013         Aa1             590,000         601,169      

Commonwealth of Massachusetts, Series B, G.O. Bond

     3.000%         7/1/2013         Aa1             500,000         506,970      

Commonwealth of Massachusetts, Series D, G.O. Bond

     5.250%         10/1/2014         Aa1             1,000,000         1,084,670      

Franklin, School Impt., Municipal Purpose Loan, G.O. Bond

     4.000%         11/15/2021         AA3             725,000         857,863      

Hanover, Public Impt., G.O. Bond

     3.000%         5/15/2015         Aa2             910,000         960,823      

Massachusetts Bay Transportation Authority, Prerefunded Balance, Series A, Revenue Bond

     5.000%         7/1/2034         Aa1             1,000,000         1,070,290      

Massachusetts Water Resources Authority, Series A, Revenue Bond, AGM

     4.375%         8/1/2032         Aa1             2,000,000         2,131,060      

Natick, School Impt., G.O. Bond

     3.000%         6/15/2013         AAA3             1,000,000         1,012,570      

The accompanying notes are an integral part of the financial statements.

 

10

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
  DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

MUNICIPAL BONDS (continued)

             

MASSACHUSETTS (continued)

             

Northampton, Public Impt., G.O. Bond

     4.000%         12/1/2019         Aa2           $ 665,000       $ 784,993      
         

 

 

     
            18,384,529      
         

 

 

     

MICHIGAN - 0.8%

             

Detroit City School District, Prerefunded Balance, Series B, G.O. Bond, FGIC

     5.000%         5/1/2033         Aa2             750,000         761,835      

Saginaw City School District, G.O. Bond, AGM

     4.500%         5/1/2031         Aa2             1,695,000         1,771,733      
         

 

 

     
            2,533,568      
         

 

 

     

MINNESOTA - 1.3%

             

Hennepin County, Series B, G.O. Bond

     4.000%         12/1/2014         Aaa             1,000,000         1,070,320      

Minnesota State, Public Impt., Prerefunded Balance, G.O. Bond

     5.000%         8/1/2013         Aa1             2,000,000         2,055,300      

Minnesota State, Series C, G.O. Bond

     5.000%         8/1/2014         Aa1             1,000,000         1,074,130      

Western Minnesota Municipal Power Agency, Prerefunded Balance, Revenue Bond

     6.625%         1/1/2016         Aaa             125,000         136,664      
         

 

 

     
            4,336,414      
         

 

 

     

MISSOURI - 2.0%

             

Columbia, Electric Light & Power Impt., Series A, Revenue Bond

     5.000%         10/1/2013         AA3             1,000,000         1,034,870      

Columbia, Water Utility Impt., Series A, Revenue Bond

     4.125%         10/1/2033         Aaa             995,000         1,094,828      

Jackson County School District No. R-IV Blue Springs, Series A, G.O. Bond

     2.750%         3/1/2013         AA3             1,340,000         1,345,722      

Metropolitan St. Louis Sewer District, Series B, Revenue Bond

     5.000%         5/1/2033         Aa1             940,000         1,122,416      

Missouri State, Series A, G.O. Bond

     5.000%         10/1/2014         Aaa             830,000         897,877      

Springfield, Electric Light & Power Impt., Revenue Bond, FGRNA

     4.750%         8/1/2031         Aa3             1,015,000         1,106,045      
         

 

 

     
            6,601,758      
         

 

 

     

NEBRASKA - 1.9%

             

Lancaster County School District No. 1, G.O. Bond

     5.000%         1/15/2013         Aaa             400,000         400,744      

Nebraska Public Power District, Series B, Revenue Bond

     5.000%         1/1/2020         A1             1,000,000         1,218,390      

Omaha Metropolitan Utilities District, Series A, Revenue Bond, AGM

     4.375%         12/1/2031         Aa3                   2,640,000               2,766,166      

The accompanying notes are an integral part of the financial statements.

 

11

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

MUNICIPAL BONDS (continued)

             

NEBRASKA (continued)

             

Omaha Public Power District, Series AA, Revenue Bond, FGRNA

     4.500%         2/1/2034         Aa2           $ 1,950,000       $ 2,050,191      
         

 

 

     
            6,435,491      
         

 

 

     

NEVADA - 0.8%

             

Clark County, G.O. Bond, AGM

     4.750%         6/1/2027         Aa1                   1,000,000         1,089,680      

Las Vegas Valley Water District, Water Utility Impt., Series A, G.O. Bond, AGM

     4.750%         6/1/2033         Aa2             1,500,000         1,636,380      
         

 

 

     
            2,726,060      
         

 

 

     

NEW HAMPSHIRE - 2.4%

             

Manchester, Series F, G.O. Bond

     3.750%         12/1/2025         Aa1             1,005,000         1,100,254      

New Hampshire State, Public Impt., Series B, G.O. Bond

     5.000%         2/1/2015         Aa1             2,000,000         2,189,420      

New Hampshire State, Series A, G.O. Bond

     5.000%         7/1/2019         Aa1             600,000         747,270      

New Hampshire State, Series A, G.O. Bond, NATL

     5.000%         10/15/2014         Aa1             1,500,000         1,624,500      

Portsmouth City, Public Impt., G.O. Bond

     2.500%         5/15/2015         Aa1             820,000         854,670      

Portsmouth City, School Impt., G.O. Bond

     4.000%         12/1/2019         Aa1             1,165,000         1,386,268      
         

 

 

     
                  7,902,382      
         

 

 

     

NEW JERSEY - 0.3%

             

Sparta Township Board of Education, G.O. Bond, AGM

     4.300%         2/15/2030         Aa2             1,000,000         1,052,790      
         

 

 

     

NEW MEXICO - 0.3%

             

New Mexico Finance Authority, Public Project Revolving Fund, Series A-1, Revenue Bond, NATL

     3.250%         6/1/2013         Aa1             175,000         177,189      

Santa Fe County, Public Impt., G.O. Bond

     2.500%         7/1/2013         Aaa             915,000         925,468      
         

 

 

     
            1,102,657      
         

 

 

     

NEW YORK - 2.9%

             

Hampton Bays Union Free School District, G.O. Bond, AGM

     4.375%         9/15/2029         Aa3             2,225,000         2,350,668      

New York City Municipal Water Finance Authority, Water & Sewer Systems, Series A, Revenue Bond

     5.750%         6/15/2040         Aa1             2,590,000         3,092,564      

New York State Power Authority, Series A, Revenue Bond, NATL

     4.500%         11/15/2047         Aa2             1,000,000         1,054,820      

Sachem Central School District of Holbrook, G.O. Bond, FGRNA

     4.375%         10/15/2030         AA3             2,000,000         2,122,780      

The accompanying notes are an integral part of the financial statements.

 

12

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

MUNICIPAL BONDS (continued)

             

NEW YORK (continued)

             

Saratoga County, Sewer Impt., Series B, G.O. Bond

     4.375%         7/15/2040         AA3           $ 855,000       $ 898,596      
         

 

 

     
            9,519,428      
         

 

 

     

NORTH CAROLINA - 5.4%

             

Charlotte, G.O. Bond

     5.000%         8/1/2014         Aaa             750,000         805,597      

Charlotte, Series B, G.O. Bond

     5.000%         6/1/2015         Aaa                   1,010,000         1,120,797      

Charlotte, Series B, Revenue Bond

     4.625%         7/1/2039         Aaa             1,000,000         1,119,100      

Charlotte, Water & Sewer, Revenue Bond

     5.000%         7/1/2038         Aaa             1,000,000         1,152,700      

Forsyth County, G.O. Bond

     3.000%         3/1/2015         Aaa             1,000,000         1,055,890      

Gaston County, School Impt., G.O. Bond, AGM

     5.000%         4/1/2014         Aa2             1,000,000         1,057,690      

Johnston County, School Impt., G.O. Bond, AGM

     5.000%         2/1/2013         Aa2             1,500,000         1,506,045      

North Carolina Municipal Power Agency No. 1 Catawba, Series A, Revenue Bond

     5.000%         1/1/2030         A2             1,000,000         1,130,160      

North Carolina State, Series A, G.O. Bond

     5.000%         3/1/2015         Aaa             2,000,000         2,197,980      

North Carolina State, Series B, G.O. Bond

     5.000%         4/1/2014         Aaa             1,000,000         1,058,980      

North Carolina State, Series B, G.O. Bond

     5.000%         6/1/2014         Aaa             1,390,000         1,482,491      

North Carolina State, Series B, G.O. Bond

     5.000%         6/1/2015         Aaa             2,000,000         2,219,400      

Wake County, School Impt., G.O. Bond

     5.000%         3/1/2015         Aaa             890,000         978,101      

Wake County, Series C, G.O. Bond

     5.000%         3/1/2014         Aaa             940,000         991,869      
         

 

 

     
                  17,876,800      
         

 

 

     

NORTH DAKOTA - 0.2%

             

Fargo City, Public Impt., Series C, G.O. Bond

     3.000%         5/1/2025         Aa1             710,000         740,991      
         

 

 

     

OHIO - 1.3%

             

Brookville Local School District, G.O. Bond, AGM

     4.125%         12/1/2026         Aa3             660,000         701,818      

Columbus City School District, G.O. Bond, AGM

     4.375%         12/1/2032         Aa2             1,000,000         1,049,300      

Columbus, Limited Tax, Prerefunded Balance, Series 2, G.O. Bond

     5.000%         7/1/2017         Aaa             1,000,000         1,070,290      

Ohio State, Conservation Project, Prerefunded Balance, Series A, G.O. Bond

     5.000%         3/1/2015         Aa1             1,000,000         1,054,770      

Warren City School District, G.O. Bond

     4.000%         12/1/2025         Aa2             460,000         502,449      
         

 

 

     
            4,378,627      
         

 

 

     

OKLAHOMA - 1.0%

             

Oklahoma City Water Utilities Trust, Series B, Revenue Bond

     3.000%         7/1/2013         Aa1             500,000         506,815      

Oklahoma State, Series A, G.O. Bond

     4.000%         7/15/2015         Aa2             1,000,000         1,087,880      

Tulsa, Public Impt., G.O. Bond

     4.000%         12/1/2013         Aa1             1,700,000         1,758,225      
         

 

 

     
            3,352,920      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

13

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE   

(NOTE 2)

       

MUNICIPAL BONDS (continued)

             

OREGON - 1.6%

             

Clackamas County School District No. 12 North Clackamas, Series A, G.O. Bond, AGM

     4.750%         6/15/2031         Aa1           $ 870,000       $ 959,558      

Portland, Water Utility Impt., Series A, Revenue Bond

     5.000%         5/1/2034         Aaa                   1,000,000         1,174,650      

Portland, Water Utility Impt., Series A, Revenue Bond, NATL

     4.500%         10/1/2031         Aa1             550,000         588,307      

Salem, Water & Sewer, Prerefunded Balance, Revenue Bond, AGM

     5.000%         5/1/2014         Aa3             1,120,000         1,188,488      

Washington County Clean Water Services, Sewer Impt., Series B, Revenue Bond

     5.000%         10/1/2021         Aa2             1,015,000         1,284,340      
         

 

 

     
                  5,195,343      
         

 

 

     

PENNSYLVANIA - 0.5%

             

Allegheny County, Public Impt., Series C-62B, G.O. Bond

     5.000%         11/1/2029         A1             750,000         835,163      

Philadelphia, Water & Wastewater, Prerefunded Balance, Revenue Bond, NATL

     5.600%         8/1/2018         BBB3             20,000         24,346      

Plum Boro School District, Series A, G.O. Bond, FGRNA

     4.500%         9/15/2030         A3             855,000         870,570      
         

 

 

     
            1,730,079      
         

 

 

     

RHODE ISLAND - 0.6%

             

Narragansett Bay Commission, Sewer Impt., Series A, Revenue Bond, NATL

     5.000%         8/1/2035         Baa2             1,000,000         1,075,410      

Rhode Island Clean Water Finance Agency, Series A, Revenue Bond, NATL

     5.000%         10/1/2035         Baa2             1,000,000         1,009,690      
         

 

 

     
            2,085,100      
         

 

 

     

SOUTH CAROLINA - 3.4%

             

Anderson, Water & Sewer Revenue Bond, AGM

     5.000%         7/1/2026         Aa3             1,715,000         2,073,967      

Charleston County, Transportation Sales Tax, Prerefunded Balance, G.O. Bond

     5.000%         11/1/2017         Aaa             1,000,000         1,126,430      

Charleston, Water Utility & Capital Impt., Revenue Bond

     5.000%         1/1/2022         Aa1             530,000         663,905      

Chesterfield County School District, G.O. Bond

     5.000%         3/1/2024         Aa1             500,000         608,685      

South Carolina State Public Service Authority, Public Impt., Prerefunded Balance, Series A, Revenue Bond, AGM

     5.000%         1/1/2017         Aa3             1,000,000         1,047,000      

South Carolina Transportation Infrastructure Bank, Series B, Revenue Bond, AMBAC

     4.250%         10/1/2027         A1             2,000,000         2,107,760      

South Carolina, State Institutional - South Carolina State University, Series B, G.O. Bond

     5.250%         4/1/2014         Aaa             1,000,000         1,061,970      

The accompanying notes are an integral part of the financial statements.

 

14

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE   

(NOTE 2)

       

MUNICIPAL BONDS (continued)

             

SOUTH CAROLINA (continued)

             

Spartanburg Sanitation Sewer District, Series B, Revenue Bond, NATL

     5.000%         3/1/2032         A1           $ 1,500,000       $ 1,556,235      

Sumter, Water Utility Impt., Revenue Bond, XLCA

     4.500%         12/1/2032         A1             1,000,000         1,062,500      
         

 

 

     
            11,308,452      
         

 

 

     

SOUTH DAKOTA - 0.2%

             

Rapid City, Water Utility Impt., Revenue Bond

     5.250%         11/1/2039         Aa3             450,000         513,311      
         

 

 

     

TENNESSEE - 4.7%

             

Chattanooga, Series B, G.O. Bond

     2.000%         2/1/2013         AA3             425,000         425,659      

Claiborne County, Public Impt., Series A, G.O. Bond

     4.125%         4/1/2030         A3             750,000         812,977      

Franklin, G.O. Bond

     5.000%         4/1/2014         Aaa             1,000,000         1,058,850      

Hamilton County, Public Impt., G.O. Bond

     3.000%         3/1/2014         Aaa             1,135,000         1,171,207      

Memphis, G.O. Bond, AGC

     4.000%         4/1/2014         Aa2             2,000,000         2,092,260      

Metropolitan Government of Nashville & Davidson County, Series B, G.O. Bond

     5.000%         1/1/2014         Aa1             1,000,000         1,047,820      

Montgomery County, G.O. Bond

     4.000%         4/1/2015         AA3             1,000,000         1,076,450      

Montgomery County, School Impt., G.O. Bond

     2.000%         4/1/2014         AA3             500,000         509,965      

Morristown, Sewer Impt., G.O. Bond

     4.000%         10/1/2024         A1             500,000         557,765      

Rutherford County, G.O. Bond

     5.000%         4/1/2014         Aa1             500,000         528,715      

Rutherford County, School Impt., G.O. Bond

     4.000%         4/1/2013         Aa1             1,200,000         1,211,268      

Rutherford County, School Impt., G.O. Bond

     3.000%         4/1/2013         Aa1             1,000,000         1,006,890      

Sumner County, G.O. Bond

     5.000%         6/1/2015         Aa2                   1,500,000         1,660,785      

Tennessee State, Series A, G.O. Bond

     4.000%         5/1/2013         Aaa             425,000         430,402      

Tennessee State, Series C, G.O. Bond

     5.250%         9/1/2013         Aaa             1,500,000         1,550,475      

Williamson County, Series A, G.O. Bond

     3.000%         3/1/2015         Aaa             550,000         580,492      
         

 

 

     
                  15,721,980      
         

 

 

     

TEXAS - 6.3%

             

Alvin Independent School District, Prerefunded Balance, Series A, G.O. Bond

     5.000%         2/15/2022         Aaa             500,000         526,350      

Clear Creek Independent School District, G.O. Bond, AGM

     4.000%         2/15/2029         Aa2             2,340,000         2,401,308      

Collin County, Public Impt., G.O. Bond

     2.000%         2/15/2014         Aaa             545,000         554,875      

Collin County, Public Impt., G.O. Bond

     5.000%         2/15/2015         Aaa             500,000         546,740      

Dallas, Public Impt., G.O. Bond

     5.000%         2/15/2013         Aa1             1,315,000         1,322,732      

Fort Bend County, Public Impt., G.O. Bond, NATL

     4.750%         3/1/2031         Aa1             1,000,000         1,097,780      

Fort Worth, Water Utility Impt., Series C, Revenue Bond

     5.000%         2/15/2014         Aa1             1,595,000         1,678,179      

Frisco, Public Impt., G.O. Bond, AGM

     5.000%         2/15/2015         Aa1             520,000         568,698      

The accompanying notes are an integral part of the financial statements.

 

15

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

MUNICIPAL BONDS (continued)

             

TEXAS (continued)

             

Harris County Flood Control District, Public Impt., Prerefunded Balance, Series A, G.O. Bond

     5.250%         10/1/2018         Aaa           $ 600,000       $ 649,974      

Harris County, Series B, G.O. Bond

     4.000%         10/1/2013         AAA3             1,000,000         1,028,310      

Houston, Public Impt., Series A, G.O. Bond

     5.000%         3/1/2015         AA3             1,000,000         1,095,490      

Lower Colorado River Authority, Series B, Revenue Bond

     4.000%         5/15/2018         A1             1,250,000         1,412,738      

North East Independent School District, School Impt., Prerefunded Balance, G.O. Bond

     5.000%         8/1/2022         AAA3             550,000         589,842      

San Antonio, Water System, Revenue Bond, FGRNA

     4.375%         5/15/2029         Aa1             1,400,000         1,501,444      

San Marcos Consolidated Independent School District, School Impt., Prerefunded Balance, G.O. Bond

     5.625%         8/1/2026         Aaa             475,000         514,724      

Texas State, Public Impt., G.O. Bond

     5.000%         10/1/2014         Aaa             500,000         540,340      

Texas State, Series A, G.O. Bond

     5.000%         8/1/2014         Aaa             700,000         751,268      

Texas State, Series A, G.O. Bond

     5.000%         8/1/2015         Aaa             800,000         891,768      

Texas Water Development Board, Series B, Prerefunded Balance, Revenue Bond

     5.625%         7/15/2014         AAA3                   2,000,000         2,163,320      

University of Texas, Financing System, Series F, Revenue Bond

     4.750%         8/15/2028         Aaa             1,000,000         1,116,420      
         

 

 

     
                  20,952,300      
         

 

 

     

UTAH - 4.5%

             

Alpine School District, G.O. Bond

     5.000%         3/15/2013         Aaa             2,000,000         2,019,720      

Mountain Regional Water Special Service District, Revenue Bond, NATL

     5.000%         12/15/2030         Baa2             1,240,000         1,295,031      

North Davis County Sewer District, Sewer Impt., Series B, Revenue Bond

     2.000%         3/1/2023         AA3             1,030,000         1,005,507      

North Davis County Sewer District, Sewer Impt., Series B, Revenue Bond

     2.125%         3/1/2025         AA3             500,000         479,585      

Ogden City School District, G.O. Bond

     4.250%         6/15/2025         Aaa             1,500,000         1,605,975      

Provo City School District, Series B, G.O. Bond

     4.000%         6/15/2014         Aaa             1,100,000         1,157,035      

Salt Lake City, Water Utility Impt., Revenue Bond

     3.250%         2/1/2015         Aa1             400,000         421,924      

Salt Lake County, Public Impt., Series A, G.O. Bond

     4.000%         12/15/2014         Aaa             400,000         428,688      

Utah State, Highway Impt., Series A, G.O. Bond

     5.000%         7/1/2014         Aaa             1,000,000         1,070,290      

Utah State, Highway Impt., Series A, G.O. Bond

     5.000%         7/1/2014         Aaa             460,000         492,333      

Utah State, Highway Impt., Series A, G.O. Bond

     5.000%         7/1/2015         Aaa             2,500,000         2,783,125      

Utah State, Highway Impt., Series A, G.O. Bond

     3.000%         7/1/2015         Aaa             500,000         531,790      

Utah State, Public Impt., Series B, G.O. Bond

     4.000%         7/1/2013         Aaa             450,000         458,563      

Utah State, Public Impt., Series B, G.O. Bond

     4.000%         7/1/2015         Aaa             595,000         647,610      

Utah State, Series A, G.O. Bond

     5.000%         7/1/2014         Aaa             415,000         444,170      
         

 

 

     
            14,841,346      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

16

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

MUNICIPAL BONDS (continued)

             

VIRGINIA - 5.1%

             

Arlington County, Public Impt., Series B, G.O. Bond

     4.000%         8/15/2014         Aaa           $       1,000,000       $ 1,059,750      

Chesterfield County, Public Impt., G.O. Bond

     3.500%         1/1/2015         Aaa             1,000,000         1,061,900      

Commonwealth of Virginia, School Impt., Series A, G.O. Bond

     5.000%         6/1/2014         Aaa             2,450,000         2,613,023      

Commonwealth of Virginia, Series B, G.O. Bond

     5.000%         6/1/2013         Aaa             1,410,000         1,438,256      

Fairfax County Water Authority, Revenue Bond

     5.000%         4/1/2024         Aaa             1,000,000         1,261,320      

Fairfax County Water Authority, Series B, Revenue Bond

     4.000%         4/1/2032         Aaa             1,000,000         1,087,800      

Fairfax County, Public Impt., Series A, G.O. Bond

     5.000%         4/1/2014         Aaa             400,000         423,592      

Fairfax County, Public Impt., Series A, G.O. Bond

     4.000%         4/1/2017         Aaa             2,000,000         2,146,720      

Fairfax County, Public Impt., Series A, G.O. Bond

     4.250%         4/1/2027         Aaa             1,500,000         1,566,345      

Norfolk, Water Utility Impt., Revenue Bond

     3.750%         11/1/2040         Aa2             1,000,000         1,033,600      

Prince William County, Public Impt., Series A, G.O. Bond

     3.000%         8/1/2014         Aaa             1,060,000         1,105,114      

Richmond, Public Impt., Series B, G.O. Bond, AGM

     5.000%         7/15/2014         Aa2             670,000         717,630      

Rivanna Water & Sewer Authority, Water Utility Impt., Series B, Revenue Bond

     4.000%         10/1/2023         Aa2             755,000         880,134      

Upper Occoquan Sewage Authority, Series B, Revenue Bond

     4.500%         7/1/2038         Aa1             470,000         504,385      
         

 

 

     
                  16,899,569      
         

 

 

     

WASHINGTON - 2.8%

             

King County School District No. 411 Issaquah, Series A, G.O. Bond, AGM

     5.250%         12/1/2018         Aaa             2,420,000         2,633,420      

King County, Sewer Impt., Revenue Bond

     5.000%         1/1/2038         Aa2             2,155,000         2,433,771      

Pierce County, Sewer Impt., Revenue Bond

     3.250%         8/1/2032         Aa3             1,000,000         1,000,310      

Pierce County, Sewer Impt., Revenue Bond

     4.000%         8/1/2037         Aa3             1,700,000         1,792,752      

Tacoma, Sewer Impt., Revenue Bond, FGRNA

     5.125%         12/1/2036         Aa2             1,275,000         1,405,152      
         

 

 

     
            9,265,405      
         

 

 

     

WISCONSIN - 3.2%

             

Central Brown County Water Authority, Water Systems, Revenue Bond, AMBAC

     5.000%         12/1/2035         A3             1,500,000         1,624,635      

Eau Claire, Series B, G.O. Bond, NATL

     4.000%         4/1/2015         Aa1             1,195,000         1,287,899      

Madison, Water Utility Impt., Series A, Revenue Bond

     4.250%         1/1/2030         Aa1             1,000,000         1,084,310      

Milwaukee Sewer System, Sewer Impt., Series S1, Revenue Bond

     5.000%         6/1/2021         Aa2             470,000         588,788      

Northland Pines School District, Prerefunded Balance, G.O. Bond, AGM

     5.250%         4/1/2018         Aa3             850,000         902,283      

Wilmot Union High School District, Prerefunded Balance, G.O. Bond, AGM

     5.500%         3/1/2019         Aa2             500,000         530,295      

The accompanying notes are an integral part of the financial statements.

 

17

Diversified Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT/
         SHARES		    

  VALUE

  (NOTE 2)

       

MUNICIPAL BONDS (continued)

             

WISCONSIN (continued)

             

Wilmot Union High School District, Prerefunded Balance, G.O. Bond, AGM

     5.500%         3/1/2021         Aa2           $       1,020,000       $ 1,081,802      

Wisconsin Public Power, Inc., Series A, Revenue Bond, AMBAC

     5.000%         7/1/2035         A1             870,000         945,559      

Wisconsin State, Public Impt., Prerefunded Balance, Series E, G.O. Bond, FGIC

     5.000%         5/1/2019         Aa2             1,000,000               1,105,410      

Wisconsin State, Public Impt., Series C, G.O. Bond

     5.000%         5/1/2026         Aa2             1,150,000         1,356,965      
         

 

 

     
            10,507,946      
         

 

 

     

WYOMING - 0.2%

             

Wyoming Municipal Power Agency, Inc., Series A, Revenue Bond

     5.375%         1/1/2042         A2             710,000         796,861      
         

 

 

     
            

TOTAL MUNICIPAL BONDS

             

(Identified Cost $305,249,483)

             316,636,874      
         

 

 

     
            

SHORT-TERM INVESTMENT - 3.4%

             

Dreyfus AMT - Free Municipal Reserves - Class R

             

(Identified Cost $11,351,435)

           11,351,435         11,351,435      
         

 

 

     

TOTAL INVESTMENTS - 98.7%

             

(Identified Cost $316,600,918)

             327,988,309      

OTHER ASSETS, LESS LIABILITIES - 1.3%

             4,240,031      
         

 

 

     

NET ASSETS - 100%

           $ 332,228,340      
         

 

 

     
            

KEY:

G.O. Bond - General Obligation Bond

Impt. - Improvement

No. - Number

Scheduled principal and interest payments are guaranteed by:

AGC (Assurance Guaranty Corp.)

AGM (Assurance Guaranty Municipal Corp.)

AMBAC (AMBAC Assurance Corp.)

FGIC (Financial Guaranty Insurance Co.)

FGRNA (FGIC reinsured by NATL)

NATL (National Public Finance Guarantee Corp.)

XLCA (XL Capital Assurance)

The insurance does not guarantee the market value of the municipal bonds.

1Credit ratings from Moody’s (unaudited).

2Credit rating has been withdrawn. As of December 31, 2012, there is no rating available (unaudited).

3Credit ratings from S&P (unaudited).

The Series’ portfolio holds, as a percentage of net assets, greater than 10% in bonds insured by the following companies: AGM - 12.0%; NATL - 11.8%.

The accompanying notes are an integral part of the financial statements.

 

18

Diversified Tax Exempt Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments (identified cost $316,600,918) (Note 2)

    $ 327,988,309   

Interest receivable

      3,864,146   

Receivable for fund shares sold

      1,789,195   

Dividends receivable

      18   
  

 

 

  

TOTAL ASSETS

      333,641,668   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      140,593   

Accrued fund accounting and administration fees (Note 3)

      18,119   

Accrued transfer agent fees (Note 3)

      782   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      1,207,327   

Other payables and accrued expenses

      46,133   
  

 

 

  

TOTAL LIABILITIES

      1,413,328   
  

 

 

  

TOTAL NET ASSETS

    $ 332,228,340   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 291,593   

Additional paid-in-capital

      319,320,276   

Undistributed net investment income

      308,506   

Accumulated net realized gain on investments

      920,574   

Net unrealized appreciation on investments

      11,387,391   
  

 

 

  

TOTAL NET ASSETS

    $ 332,228,340   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A ($332,228,340/29,159,286 shares)

    $ 11.39   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

19

Diversified Tax Exempt Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Interest

    $ 7,504,111   

Dividends

      19   
  

 

 

  

Total Investment Income

      7,504,130   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      1,642,010   

Fund accounting and administration fees (Note 3)

      113,625   

Directors’ fees (Note 3)

      6,599   

Transfer agent fees (Note 3)

      4,665   

Chief Compliance Officer service fees (Note 3)

      2,441   

Custodian fees

      16,621   

Miscellaneous

      86,648   
  

 

 

  

Total Expenses

      1,872,609   
  

 

 

  

NET INVESTMENT INCOME

      5,631,521   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

   

Net realized gain (loss) on investments

      1,705,195   

Net change in unrealized appreciation (depreciation) on investments

      2,363,150   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

      4,068,345   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 9,699,866   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

20

Diversified Tax Exempt Series

 

 

Statement of Changes in Net Assets

 

    

FOR THE

YEAR ENDED
12/31/12

    

FOR THE

YEAR ENDED
12/31/11

  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 5,631,521      $ 7,926,301   

Net realized gain (loss) on investments

      1,705,195        2,077,298   

Net change in unrealized appreciation (depreciation) on investments

      2,363,150        13,734,023   
  

 

 

    

 

 

  

Net increase from operations

      9,699,866        23,737,622   
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 7):

     

From net investment income

      (5,736,636 )      (7,784,873 ) 

From net realized gain on investments

      (787,467 )      (2,073,766 ) 
  

 

 

    

 

 

  

Total distributions to shareholders

      (6,524,103 )      (9,858,639 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      22,612,484        15,591,274   
  

 

 

    

 

 

  

Net increase in net assets

      25,788,247        29,470,257   

NET ASSETS:

     

Beginning of year

      306,440,093        276,969,836   
  

 

 

    

 

 

  

End of year (including undistributed net investment income of $308,506 and $413,950, respectively)

    $ 332,228,340      $ 306,440,093   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

21

Diversified Tax Exempt Series

 

 

Financial Highlights

 

     

 

FOR THE YEARS ENDED

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 11.28      $ 10.77      $ 11.17      $ 10.34      $ 10.92   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment income

      0.20 1      0.30 1      0.40 1      0.40 1      0.42   

Net realized and unrealized gain (loss) on investments

      0.14        0.58        (0.35 )      0.90        (0.62 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      0.34        0.88        0.05        1.30        (0.20 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net investment income

      (0.20 )      (0.29 )      (0.45 )      (0.44 )      (0.36 ) 

From net realized gain on investments

      (0.03 )      (0.08 )      – 2      (0.03 )      (0.02 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions to shareholders

      (0.23 )      (0.37 )      (0.45 )      (0.47 )      (0.38 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 11.39      $ 11.28      $ 10.77      $ 11.17      $ 10.34   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 332,228      $ 306,440      $ 276,970      $ 234,486      $ 197,736   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return3

      3.01 %      8.25 %      0.41 %      12.75 %      (1.79 %) 

Ratios (to average net assets)/

Supplemental Data:

           

Expenses*

      0.57 %      0.58 %      0.58 %      0.60 %      0.61 % 

Net investment income

      1.71 %      2.67 %      3.51 %      3.65 %      3.75 % 

Portfolio turnover

      9 %      53 %      3 %      8 %      7 % 
*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 Series, the expense ratio (to average net assets) would have increased by the following amount:    
     N/A        N/A        0.00 %4      0.01 %      N/A   

1Calculated based on average shares outstanding during the year.

2Less than $0.01 per share.

3Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total returns would have been lower had certain expenses not been waived or reimbursed during certain years.

4Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

22

Diversified Tax Exempt Series

 

 

Notes to Financial Statements

 

1. Organization

Diversified Tax Exempt Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide as high a level of current income exempt from federal income tax as the Advisor believes is consistent with the preservation of capital.

The Fund’s advisor is Manning & Napier Advisors, 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated as Diversified Tax Exempt Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).

Short-term investments that mature in sixty days or less are 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 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.

 

23

Diversified Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

The following is a summary of the valuation levels used for major security types as of December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Debt securities:

            

  States and political subdivisions (municipals)

    $ 316,636,874       $ —       $       316,636,874       $                     —   

  Mutual fund

      11,351,435         11,351,435         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       327,988,309       $       11,351,435       $ 316,636,874       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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 December 31, 2012, 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 and various states, 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, 2009 through December 31, 2012. 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.

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.

 

 

24

Diversified Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Indemnifications

The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 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.

The Advisor has contractually agreed, until at least April 30, 2014, to waive its management fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.85% of average daily net assets each year. The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

25

Diversified Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

4. Purchases and Sales of Securities

 

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $54,782,661 and $27,738,544 respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in shares of Diversified Tax Exempt Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE YEAR ENDED  12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

     5,266,396       $       59,994,173                  4,576,583       $ 50,695,861   

Reinvested

     538,349        6,128,831        832,125        9,289,473   

Repurchased

     (3,805,220 )      (43,510,520 )      (3,964,864 )      (44,394,060 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

               1,999,525       $       22,612,484                  1,443,844       $       15,591,274   
 

 

 

    

 

 

    

 

 

    

 

 

  

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

7. Federal Income Tax Information

The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including market discount. 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. For the fiscal year ended December 31, 2012, $329 was reclassified within the capital accounts from Undistributed Net Investment Income to Accumulated Net Realized Gain on Investments. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR
ENDED 12/31/12  		     FOR THE YEAR
ENDED 12/31/11  		      

Ordinary income

   $ 45,983          $ 46,644         

Tax exempt income

     5,736,636            7,738,229         

Long-term capital gains

     741,484            2,073,766         

 

26

Diversified Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

7. Federal Income Tax Information (continued)

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 316,534,159   

Unrealized appreciation

      11,681,269   

Unrealized depreciation

      (227,119 ) 
  

 

 

  

Net unrealized appreciation

    $ 11,454,150   
  

 

 

  

Undistributed tax exempt income

    $ 241,747   

Undistributed ordinary income

    $ 101,865   

Undistributed long-term gains

    $ 818,709   
 

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010 may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series did not have pre or post-enactment net capital loss carryforwards.

 

27

Diversified Tax Exempt Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Diversified Tax Exempt Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Diversified Tax Exempt Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

28

Diversified Tax Exempt Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report, and accordingly are subject to change.

The Series hereby reports $741,484 as capital gains for its taxable year ended December 31, 2012. In addition, the Series hereby reports $5,736,636 as tax exempt dividends for the year ended December 31, 2012. For each item it is the intention of the Series to designate the maximum allowable under tax law.

 

29

Diversified Tax Exempt Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

30

Diversified Tax Exempt Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

31

Diversified Tax Exempt Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

Address:

   

 

B. Reuben Auspitz*

290 Woodcliff Drive

Fairport, NY 14450

  
  
Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
  
Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

 

   
Name:    Stephen B. Ashley
Address:   

290 Woodcliff Drive

Fairport, NY 14450

  
Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee
   Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group
   (property management and investment). Director 1995 - 2008 and
   Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995 - 2008)

The Ashley Group (1995 - 2008)

Genesee Corporation (1987 - 2007)

Name:    Peter L. Faber
Address:   

290 Woodcliff Drive

Fairport, NY 14450

  
Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) -
   McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Partnership for New York City, Inc. (non-profit)(1989 - 2010)

New York Collegium (non-profit)(2004 - 2011))

Boston Early Music Festival (non-profit)

Name:    Harris H. Rusitzky
Address:   

290 Woodcliff Drive

Fairport, NY 14450

  
Age:    78

Current Position(s) Held with Fund:

    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:   

President, The Greening Group (business consultants) since 1994;

Partner, The Restaurant Group (restaurants) since 2006

  
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

32

Diversified Tax Exempt Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)

 

Name:

   

 

Paul A. Brooke

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Incyte Corp. (2000 - present)

ViroPharma, Inc. (2000 - present)

HLTH Corp. (2000 - present)

Cheyne Capital International (2000 - present)

MPM Bio-equities (2000 - 2009)

GMP Companies (2000 - 2012)

HoustonPharma (2000 - 2009)

Name:    Chester N. Watson
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

 

   
Name:    Ryan Albano
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004 - 2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

33

Diversified Tax Exempt Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)     

 

Name:

Address:

   

 

Christine Glavin

290 Woodcliff Drive

Fairport, NY 14450

Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

Name:

Address:

   

Jodi L. Hedberg

290 Woodcliff Drive

Fairport, NY 14450

Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

Name:

Address:

   

Richard Yates

290 Woodcliff Drive

Fairport, NY 14450

Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

34

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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNDTE-12/12-AR

 

LOGO

 

        NEW YORK TAX EXEMPT SERIES                          

 

 

 

 

www.manning-napier.com

      

LOGO          

New York Tax Exempt Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months.

Even with the myriad of looming uncertainties, a number of issues pushed forward toward more clarity and resolution as the year progressed. For example, during the fourth quarter, progress was made with respect to “fiscal cliff” headwinds in the U.S. Also, the Federal Open Market Committee (FOMC) stated it expects to keep its highly accommodative monetary policy stance in place at least until unemployment falls below 6.5%, provided that near-term inflation remains within 0.5% of its 2% goal and longer-term inflation remains “well anchored.” Additionally, European Central Bank President Mario Draghi’s commitment earlier in the year to do “whatever it takes” to preserve the Euro, along with positive developments in Greece in the fourth quarter, also aided wavering investor concerns as the year came to a close. Given this backdrop, although equity and fixed income markets generally performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor feels are going to continue to weigh on global economic growth.

Overall, each of the major sectors of the fixed income market experienced positive absolute performance. This strong performance was led by corporate bonds, where high yield bonds were the top performer in 2012, followed by their investment grade counterparts. Beyond corporate bonds, Treasury Inflation Protected Securities (TIPS) and municipal bonds also performed well in 2012. In contrast, although Treasuries and mortgages ended the year with positive performance, they generally trailed other sectors in 2012.

For the year, the Bank of America Merrill Lynch 1-12 Year Municipal Bond Index returned 3.40%. However, while the New York Tax Exempt Series slightly underperformed its benchmark, it provided a positive absolute return of 3.31% in 2012.

Similar to 2011, municipal bonds continued into 2012 with positive absolute performance. Indeed, in light of the low yield environment and concerns about higher marginal tax rates, investor demand remained strong and new issuance picked up last year. Additionally, municipal bond yields did not match last year’s yield declines in the Treasury market, meaning their relative value has increased, and yields for the sector remain attractive relative to U.S. Treasuries.

Generally, the Advisor has spread the Series’ municipal bond investments in higher quality issues across the entire maturity spectrum. However, the Advisor has begun to take advantage of opportunities in both middle tier credits and the revenue sector. A middle tier credit refers to the credit quality of specific municipal bonds (below the highest rating, but above the lowest) and revenue bonds are municipal bonds that are typically used to finance income-producing projects. While the Series’ higher quality bias leads to slightly lower relative yields when compared to the overall municipal market, the Advisor believes the safety and liquidity of such issues justifies the bias. This positioning aided the Series’ results in 2012.

Managing to an index can prove limiting and present challenges to reaching investors’ objectives. As an active fixed income manager, the Advisor’s investment decisions are based on prevailing market conditions and fundamentals, which allow us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. This philosophy has guided the Advisor’s choices in selectively choosing the Series’ investments. Through our security selection process, we feel we have the ability to manage risks, while simultaneously providing compelling income and total return potential to help the Series’ investors reach their goals.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

New York Tax Exempt Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012
    

 ONE

 YEAR1                

    FIVE
 YEAR                 		    TEN
 YEAR                 		    SINCE
 INCEPTION2        

Manning & Napier Fund, Inc. - New York Tax Exempt Series3

     3.31%    4.28%    3.74%    4.45%

Bank of America (BofA) Merrill Lynch 1-12 Year Municipal Bond Index4

     3.40%    5.15%    4.46%    5.17%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - New York Tax Exempt Series for the ten years ended December 31, 2012 to the BofA Merrill Lynch 1-12 Year Municipal Bond Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Index are calculated from January 17, 1994, the Series’ inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 0.60%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.60% for the year ended December 31, 2012.

4The BofA Merrill Lynch 1-12 Year Municipal Bond Index (formerly a Merrill Lynch Index) is an unmanaged, market weighted index comprised of investment-grade, fixed rate, coupon bearing municipal bonds with maturities greater than one year but less than twelve years. The Index returns assume reinvestment of coupons and, unlike the Series returns, do not reflect any fees or expenses.

 

2

New York Tax Exempt Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING
 ACCOUNT  VALUE                             
 7/1/12		    ENDING
 ACCOUNT VALUE                             
 12/31/12		    EXPENSES PAID
 DURING  PERIOD*                            
 7/1/12-12/31/12

Actual

    $1,000.00    $1,015.90    $3.00

Hypothetical

(5% return before expenses)

    $1,000.00    $1,022.23    $3.01

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.59%, multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period. Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which is based on one-year data.

 

3

New York Tax Exempt Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

4

New York Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

NEW YORK MUNICIPAL BONDS - 96.5%

             

Albany County, Public Impt., G.O. Bond

     4.000%         6/1/2026         Aa3           $ 500,000       $ 539,765      

Amherst Central School District, G.O. Bond

     2.000%         8/1/2014         Aa3             500,000         511,745      

Arlington Central School District, G.O. Bond

     4.000%         12/15/2021         Aa2             300,000         355,560      

Bay Shore Union Free School District, G.O. Bond

     4.000%         8/15/2014         Aa2             510,000         536,867      

Beacon, Public Impt., Series A, G.O. Bond

     4.000%         8/15/2014         Aa3             400,000         420,072      

Bedford Central School District, G.O. Bond

     2.000%         10/15/2021         Aa1             500,000         509,015      

Bedford, Public Impt., G.O. Bond

     2.000%         6/15/2014         AAA2             350,000         358,974      

Bedford, Public Impt., G.O. Bond

     2.000%         6/15/2015         AAA2             275,000         285,909      

Bethlehem, Public Impt., G.O. Bond

     4.500%         12/1/2033         AA2             335,000         374,366      

Bethlehem, Public Impt., G.O. Bond

     4.500%         12/1/2035         AA2             425,000         473,947      

Binghamton, Public Impt., G.O. Bond

     4.000%         9/15/2024         A1             505,000         559,873      

Briarcliff Manor, Public Impt., Series A, G.O. Bond

     2.000%         9/1/2014         Aa2             260,000         266,565      

Brookhaven, G.O. Bond, AMBAC

     5.000%         6/1/2014         Aa2             200,000         213,470      

Brookhaven, Public Impt., G.O. Bond

     3.000%         3/15/2013         Aa2                 1,050,000               1,056,101      

Buffalo Fiscal Stability Authority, Sales Tax & State Aid, Series B, Revenue Bond, NATL

     5.000%         9/1/2016         Aa1             525,000         580,503      

Buffalo, Public Impt., Series A, G.O. Bond

     3.000%         4/1/2023         A1             400,000         409,340      

Cattaraugus County, Highway Impt., G.O. Bond

     2.000%         4/15/2019         A1             405,000         420,641      

Cayuga County, Public Impt., G.O. Bond, AGM

     3.250%         4/1/2026         Aa3             670,000         698,381      

Chappaqua Central School District, G.O. Bond

     3.000%         1/15/2013         Aaa             300,000         300,306      

Chautauqua County, Public Impt., G.O. Bond

     4.250%         1/15/2027         A2             665,000         728,288      

Chenango Valley Central School District, G.O. Bond, AGM

     2.125%         6/15/2021         Aa3             500,000         496,375      

Clarence Central School District, G.O. Bond

     4.000%         5/15/2021         Aa2             250,000         291,653      

Clarkstown Central School District, G.O. Bond

     4.000%         10/15/2021         Aa2             500,000         581,140      

Clarkstown, Public Impt., G.O. Bond

     2.000%         10/15/2014         AAA2             675,000         694,703      

Cleveland Hill Union Free School District, G.O. Bond, AGM

     3.750%         6/15/2025         Aa3             475,000         524,058      

Clifton Park Water Authority, Revenue Bond

     4.250%         10/1/2029         AA2             250,000         276,030      

Connetquot Central School District of Islip, G.O. Bond

     4.000%         7/15/2014         Aa2             390,000         411,431      

Copiague Union Free School District, G.O. Bond

     2.000%         5/1/2015         Aa3             500,000         515,725      

Cortland County, Public Impt., G.O. Bond, AGM

     3.000%         8/15/2030         AA2             215,000         217,838      

Dutchess County, Public Impt., G.O. Bond

     5.000%         10/1/2014         Aa1             235,000         253,896      

Dutchess County, Public Impt., G.O. Bond

     5.000%         10/1/2015         Aa1             250,000         280,027      

Dutchess County, Public Impt., Prerefunded Balance, G.O. Bond, NATL

     4.000%         12/15/2016         Aa1             315,000         337,538      

Dutchess County, Public Impt., Unrefunded Balance, G.O. Bond, NATL

     4.000%         12/15/2016         Aa1             360,000         382,568      

East Irondequoit Central School District, G.O. Bond

     2.250%         6/15/2014         Aa2             580,000         592,870      

East Islip Union Free School District, Series A, G.O. Bond

     4.000%         6/15/2015         AA2             345,000         371,824      

Erie County Water Authority, Revenue Bond

     5.000%         12/1/2013         Aa2             400,000         416,828      

Erie County Water Authority, Revenue Bond, NATL

     5.000%         12/1/2037         Aa2             625,000         680,537      

Erie County, Public Impt., Series A, G.O. Bond

     5.000%         4/1/2025         A2             200,000         236,034      

The accompanying notes are an integral part of the financial statements.

 

5

New York Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

NEW YORK MUNICIPAL BONDS (continued)

  

           

Erie County, Public Impt., Series A, G.O. Bond

     5.000%         4/1/2026         A2           $ 215,000       $ 252,872      

Essex County, Public Impt., G.O. Bond

     5.000%         5/1/2020         AA2             500,000         606,135      

Fairport Village, Public Impt., G.O. Bond

     2.625%         5/15/2013         AA2             265,000         266,836      

Gananda Central School District, G.O. Bond

     3.000%         6/15/2019         AA2             250,000         270,485      

Gates Chili Central School District, G.O. Bond

     1.000%         6/15/2014         Aa3             460,000         462,213      

Greece Central School District, G.O. Bond, AGM

     5.000%         6/15/2015         Aa3             500,000         554,685      

Greece Central School District, G.O. Bond, AGM

     4.000%         6/15/2019         Aa3             2,675,000         2,992,041      

Greenburgh, G.O. Bond

     4.750%         5/15/2014         Aaa             250,000         264,993      

Greene County, Public Impt., G.O. Bond

     1.500%         3/15/2014         Aa3             505,000         510,060      

Greene County, Public Impt., G.O. Bond

     3.000%         12/15/2014         Aa3             595,000         620,377      

Hauppauge Union Free School District, G.O. Bond

     3.000%         12/1/2014         Aa2             585,000         613,993      

Haverstraw-Stony Point Central School District, G.O. Bond, AGM

     4.500%         10/15/2032         Aa2             2,000,000         2,147,600      

Hempstead, Public Impt., G.O. Bond

     3.000%         8/15/2032         A2             465,000         463,075      

Hempstead, Public Impt., Series B, G.O. Bond

     2.500%         8/1/2013         Aaa             225,000         228,065      

Hempstead, Public Impt., Series B, G.O. Bond

     2.500%         8/1/2014         Aaa             280,000         290,136      

Hewlett-Woodmere Union Free School District, G.O. Bond

     3.000%         6/15/2013         Aa1             255,000         258,228      

Horseheads Central School District, G.O. Bond

     2.000%         6/15/2015         Aa3             540,000         552,992      

Huntington, G.O. Bond, AMBAC

     5.500%         4/15/2014         Aaa             415,000         442,776      

Huntington, Public Impt., G.O. Bond

     2.000%         6/15/2014         Aaa             570,000         582,779      

Huntington, Public Impt., G.O. Bond

     3.000%         7/15/2015         Aaa             925,000         980,056      

Iroquois Central School District, School Impt., G.O. Bond

     2.000%         6/15/2021         Aa2             500,000         510,430      

Ithaca City School District, G.O. Bond

     3.000%         7/1/2014         AA2             675,000         700,184      

Ithaca City School District, G.O. Bond, AGC

     3.000%         7/1/2014         Aa3             330,000         342,312      

Jamestown City School District, G.O. Bond

     3.000%         4/1/2019         A1             200,000         214,248      

Johnson City Central School District, Prerefunded Balance, G.O. Bond, FGRNA

     4.375%         6/15/2028         A2             1,000,000               1,059,000      

Katonah-Lewisboro Union Free School District, Series C, G.O. Bond, FGRNA

     5.000%         11/1/2014         Aa2                   1,000,000         1,086,370      

Lockport City School District, G.O. Bond, AGM

     2.000%         8/1/2019         Aa3             450,000         464,436      

Long Beach City School District, G.O. Bond

     3.000%         5/1/2014         Aa2             500,000         513,525      

Long Island Power Authority, Electric Systems, Prerefunded Balance, Series C, Revenue Bond, CIFG

     5.000%         9/1/2015         Aaa             250,000         257,955      

Long Island Power Authority, Electric Systems, Series A, Revenue Bond

     5.750%         4/1/2039         A3             675,000         801,711      

Long Island Power Authority, Electric Systems, Series F, Revenue Bond, NATL

     4.500%         5/1/2028         A3             1,880,000         2,013,668      

Mahopac Central School District, Series A, G.O. Bond

     4.000%         6/1/2014         Aa2             945,000         990,190      

Mamaroneck Union Free School District, G.O. Bond

     3.500%         6/15/2025         Aaa             1,000,000         1,094,980      

Manhasset Union Free School District, G.O. Bond

     4.000%         9/15/2014         Aaa             655,000         695,839      

Marlboro Central School District, G.O. Bond, AGC

     4.000%         12/15/2026         AA2             500,000         542,615      

The accompanying notes are an integral part of the financial statements.

 

6

New York Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

NEW YORK MUNICIPAL BONDS (continued)

  

           

Metropolitan Transportation Authority, Dedicated Tax Fund, Series B, Revenue Bond

     5.000%         11/15/2034         AA2           $ 1,000,000       $ 1,129,300      

Metropolitan Transportation Authority, Series B, Revenue Bond, AGM

     4.500%         11/15/2032         Aa3             500,000         533,320      

Miller Place Union Free School District, G.O. Bond

     4.000%         2/15/2027         Aa2             265,000         283,598      

Minisink Valley Central School District, G.O. Bond

     2.500%         4/15/2013         AA2             335,000         336,883      

Minisink Valley Central School District, G.O. Bond

     2.500%         4/15/2014         AA2             225,000         230,634      

Minisink Valley Central School District, G.O. Bond

     2.500%         4/15/2015         AA2             200,000         207,080      

Monroe County Water Authority, Revenue Bond

     3.250%         8/1/2013         Aa2             510,000         518,629      

Monroe County Water Authority, Revenue Bond

     4.250%         8/1/2030         Aa2             405,000         448,951      

Monroe County Water Authority, Revenue Bond

     4.500%         8/1/2035         Aa2             275,000         303,573      

Monroe County, Public Impt., G.O. Bond, AGM

     3.000%         6/1/2022         Aa3             500,000         507,295      

Nassau County, Public Impt., Series C, G.O. Bond

     4.000%         10/1/2026         A2             1,000,000         1,071,520      

Nassau County, Public Impt., Series C, G.O. Bond, AGC

     5.000%         10/1/2028         Aa3             1,000,000         1,136,390      

New Rochelle City School District, G.O. Bond

     4.000%         12/15/2014         Aa2             600,000         641,964      

New York City Municipal Water Finance Authority, Series BB, Revenue Bond

     5.000%         6/15/2013         Aa2             410,000         418,901      

New York City Municipal Water Finance Authority, Series BB, Revenue Bond

     3.000%         6/15/2013         Aa2             350,000         354,413      

New York City Municipal Water Finance Authority, Series C, Revenue Bond

     5.000%         6/15/2014         Aa1             250,000         266,990      

New York City Municipal Water Finance Authority, Water & Sewer Systems, Series A, Revenue Bond

     4.250%         6/15/2033         Aa1                   1,250,000               1,317,900      

New York City Municipal Water Finance Authority, Water & Sewer Systems, Series A, Revenue Bond

     4.500%         6/15/2037         Aa1             1,000,000         1,064,260      

New York City Municipal Water Finance Authority, Water & Sewer Systems, Series A, Revenue Bond

     5.750%         6/15/2040         Aa1             1,000,000         1,194,040      

New York City Municipal Water Finance Authority, Water & Sewer Systems, Series D, Revenue Bond, AMBAC

     4.500%         6/15/2036         Aa1             500,000         527,055      

New York City Municipal Water Finance Authority, Water Utility Impt., Series EE, Revenue Bond

     2.500%         6/15/2014         Aa2             450,000         463,991      

New York City Transitional Finance Authority, Prerefunded Balance, Future Tax Secured, Public Impt., Revenue Bond, NATL

     5.250%         2/1/2021         Aaa             1,000,000         1,004,200      

New York City Transitional Finance Authority, Prerefunded Balance, Future Tax Secured, Public Impt., Series C, Revenue Bond

     5.250%         2/1/2014         WR3             730,000         766,909      

New York City Transitional Finance Authority, Prerefunded Balance, Future Tax Secured, Public Impt., Series C, Revenue Bond

     5.250%         2/1/2017         WR3             1,390,000         1,464,170      

New York City Transitional Finance Authority, Prerefunded Balance, Future Tax Secured, Public Impt., Series C, Revenue Bond, XLCA

     5.000%         2/1/2019         Aaa             1,705,000         1,791,375      

The accompanying notes are an integral part of the financial statements.

 

7

New York Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

NEW YORK MUNICIPAL BONDS (continued)

  

           

New York City Transitional Finance Authority, Prerefunded Balance, Future Tax Secured, Series B, Revenue Bond

     5.250%         8/1/2019         WR3           $ 2,705,000       $ 2,783,715      

New York City, G.O. Bond, XLCA

     5.000%         9/1/2019         Aa2             500,000         556,370      

New York City, Prerefunded Balance, Series C, G.O. Bond

     5.500%         9/15/2019         Aa3             600,000         622,242      

New York City, Prerefunded Balance, Subseries J-1, G.O. Bond

     5.000%         8/1/2013         WR3             25,000         25,679      

New York City, Public Impt., Prerefunded Balance, Series D, G.O. Bond

     5.250%         10/15/2017         Aa2             1,950,000         2,026,889      

New York City, Public Impt., Prerefunded Balance, Series I, G.O. Bond

     5.750%         3/1/2016         Aa2             1,000,000         1,009,220      

New York City, Public Impt., Prerefunded Balance, Series J, G.O. Bond

     5.500%         6/1/2016         AA2             500,000         510,980      

New York City, Public Impt., Prerefunded Balance, Series J, G.O. Bond

     5.250%         6/1/2028         Aa2             1,600,000         1,633,472      

New York City, Public Impt., Series A, G.O. Bond

     5.000%         8/1/2013         Aa2             1,000,000         1,027,140      

New York City, Public Impt., Series I, G.O. Bond, NATL

     5.000%         8/1/2013         Aa2             500,000         513,570      

New York City, Public Impt., Subseries A, G.O. Bond

     5.000%         3/1/2015         Aa2             1,000,000         1,093,360      

New York City, Series A, G.O. Bond, AGM

     5.000%         8/1/2015         Aa2             205,000         228,105      

New York City, Series B, G.O. Bond

     4.000%         8/1/2013         Aa2             865,000         883,442      

New York City, Series D, G.O. Bond

     5.250%         8/1/2014         Aa2                   1,390,000               1,494,111      

New York City, Unrefunded Balance, Subseries J-1, G.O. Bond

     5.000%         8/1/2013         Aa2             175,000         179,749      

New York Local Government Assistance Corp., Series A, Revenue Bond

     5.000%         4/1/2015         AAA2             1,000,000         1,103,770      

New York State Dormitory Authority, Columbia University, Revenue Bond

     5.000%         7/1/2038         Aaa             900,000         1,021,383      

New York State Dormitory Authority, Cornell University, Series C, Revenue Bond

     5.000%         7/1/2037         Aa1             1,000,000         1,147,900      

New York State Dormitory Authority, New York University, Series A, Revenue Bond

     5.000%         7/1/2039         Aa3             1,000,000         1,157,080      

New York State Dormitory Authority, Series A, Revenue Bond, AGM

     4.000%         10/1/2025         Aa3             1,500,000         1,622,130      

New York State Dormitory Authority, Series A, Revenue Bond, AGM

     4.375%         10/1/2030         Aa3             1,500,000         1,631,880      

New York State Dormitory Authority, Series B, Revenue Bond, AGM

     4.400%         10/1/2030         Aa3             140,000         152,568      

New York State Dormitory Authority, Series B, Revenue Bond, AGM

     4.750%         10/1/2040         Aa3             1,360,000         1,490,900      

New York State Dormitory Authority, University of Rochester, Series A, Revenue Bond

     5.125%         7/1/2039         Aa3             1,000,000         1,122,140      

New York State Environmental Facilities Corp., Clean Water & Drinking, Series A, Revenue Bond

     4.500%         6/15/2036         Aaa             1,000,000         1,072,270      

The accompanying notes are an integral part of the financial statements.

 

8

New York Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

NEW YORK MUNICIPAL BONDS (continued)

  

           

New York State Environmental Facilities Corp., Clean Water & Drinking, Series B, Revenue Bond

     4.500%         6/15/2036         Aaa           $ 1,500,000       $ 1,608,405      

New York State Environmental Facilities Corp., Pollution Control, Unrefunded Balance, Series B, Revenue Bond

     5.200%         5/15/2014         Aaa             160,000         164,110      

New York State Municipal Bond Bank Agency, Subseries A1, Revenue Bond

     4.000%         12/15/2014         AA2             250,000         266,573      

New York State Municipal Bond Bank Agency, Subseries B1, Revenue Bond

     4.125%         12/15/2029         A2             420,000         451,370      

New York State Municipal Bond Bank Agency, Subseries B1, Revenue Bond

     4.500%         12/15/2034         A2             215,000         232,720      

New York State Power Authority, Series A, Revenue Bond, NATL

     4.500%         11/15/2047         Aa2                   2,000,000               2,109,640      

New York State Thruway Authority, Highway & Bridge, Prerefunded Balance, Series A, Revenue Bond, NATL

     5.250%         4/1/2015         AA2             300,000         303,783      

New York State Thruway Authority, Highway Impt., Prerefunded Balance, Series A, Revenue Bond, AMBAC

     5.000%         3/15/2017         Aa2             260,000         280,740      

New York State Thruway Authority, Personal Income Tax, Prerefunded Balance, Series A, Revenue Bond, AGM

     5.000%         3/15/2014         Aa2             500,000         504,930      

New York State Thruway Authority, Personal Income Tax, Prerefunded Balance, Series A, Revenue Bond, NATL

     5.000%         3/15/2016         AAA2             825,000         833,135      

New York State Thruway Authority, Series A, Revenue Bond

     5.000%         3/15/2015         AAA2             500,000         549,680      

New York State Thruway Authority, Series A, Revenue Bond

     5.000%         3/15/2015         AAA2             500,000         549,680      

New York State Urban Development Corp., Correctional Capital Facilities, Series A, Revenue Bond, AGM

     5.250%         1/1/2014         Aa3             345,000         352,172      

New York State, Pollution Control, Series A, G.O. Bond

     5.000%         2/15/2039         Aa2             1,500,000         1,749,735      

New York State, Series C, G.O. Bond

     5.000%         4/15/2014         Aa2             645,000         685,003      

New York State, Series C, G.O. Bond

     5.000%         9/1/2014         Aa2             1,000,000         1,079,940      

New York State, Series C, G.O. Bond

     4.000%         2/1/2027         Aa2             600,000         665,898      

New York State, Transit Impt., Series A, G.O. Bond

     4.500%         3/1/2040         Aa2             1,500,000         1,618,950      

New York State, Water Utility Impt., Series A, G.O. Bond

     2.000%         3/1/2013         Aa2             350,000         351,078      

Niagara County, Water Utility Impt., G.O. Bond

     2.000%         2/1/2020         Aa3             500,000         512,435      

Niagara-Wheatfield Central School District, G.O. Bond, FGRNA

     4.125%         2/15/2019         A2             610,000         679,461      

Niagara-Wheatfield Central School District, G.O. Bond, FGRNA

     4.125%         2/15/2020         A2             850,000         937,788      

North Colonie Central School District, G.O. Bond

     4.000%         7/15/2020         AA2             400,000         470,624      

The accompanying notes are an integral part of the financial statements.

 

9

New York Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

NEW YORK MUNICIPAL BONDS (continued)

  

           

North Hempstead, G.O. Bond

     3.000%         5/1/2015         Aa1           $ 375,000       $ 395,914      

Olean, Public Impt., G.O. Bond

     3.000%         8/1/2030         A1             460,000         469,439      

Oneida County, Public Impt., G.O. Bond, AGM

     3.000%         5/1/2020         Aa3             400,000         425,564      

Onondaga County, Public Impt., Prerefunded Balance, Series A, G.O. Bond

     5.000%         3/15/2013         Aa1             290,000         292,859      

Onondaga County, Public Impt., Series A, G.O. Bond

     3.000%         3/1/2015         Aa1             1,000,000         1,052,710      

Onondaga County, Public Impt., Series A, G.O. Bond

     4.500%         3/1/2028         Aa1             365,000         407,574      

Ontario County, Public Impt., G.O. Bond

     3.000%         4/15/2015         Aa1             200,000         210,038      

Orange County, Public Impt., Series A, G.O. Bond

     2.000%         3/1/2013         Aaa                   1,460,000               1,464,161      

Orange County, Series A, G.O. Bond

     5.000%         7/15/2014         Aaa             550,000         589,380      

Orange County, Series A, G.O. Bond

     5.000%         7/15/2015         Aaa             500,000         557,055      

Orangetown, Public Impt., G.O. Bond

     3.000%         9/15/2026         Aa2             580,000         619,504      

Otsego County, G.O. Bond

     4.000%         11/15/2027         Aa3             790,000         883,165      

Perinton, Public Impt., G.O. Bond

     4.250%         12/15/2031         AA2             175,000         195,269      

Pittsford Central School District, G.O. Bond

     4.000%         10/1/2021         Aa1             350,000         413,392      

Pittsford Central School District, G.O. Bond

     4.000%         10/1/2022         Aa1             600,000         709,158      

Pleasantville Union Free School District, G.O. Bond

     4.000%         5/1/2015         Aa2             530,000         570,921      

Pleasantville Union Free School District, G.O. Bond

     4.250%         5/1/2038         Aa2             500,000         526,635      

Pleasantville Union Free School District, G.O. Bond

     4.375%         5/1/2039         Aa2             500,000         529,885      

Port Authority of New York & New Jersey, Airport & Marina Impt., Series 175, Revenue Bond

     4.000%         12/1/2026         Aa3             1,000,000         1,125,390      

Port Authority of New York & New Jersey, Revenue Bond

     4.750%         7/15/2030         Aa3             495,000         550,103      

Port Authority of New York & New Jersey, Revenue Bond

     4.500%         10/15/2037         Aa3             400,000         432,504      

Port Washington Union Free School District, G.O. Bond

     3.000%         12/1/2014         Aa1             500,000         526,160      

Putnam County, Public Impt., G.O. Bond

     2.000%         11/15/2014         Aa2             255,000         262,130      

Queensbury Union Free School District, G.O. Bond

     4.000%         12/15/2014         Aa2             300,000         320,250      

Ramapo, Public Impt., Series B, G.O. Bond, NATL

     4.375%         5/1/2031         A1             435,000         460,343      

Ramapo, Public Impt., Series B, G.O. Bond, NATL

     4.375%         5/1/2032         A1             510,000         538,208      

Ramapo, Public Impt., Series B, G.O. Bond, NATL

     4.500%         5/1/2033         A1             410,000         433,362      

Ravena Coeymans Selkirk Central School District, Prerefunded Balance, G.O. Bond, AGM

     4.250%         6/15/2014         Aa3             1,180,000         1,213,347      

Rochester City, Series A, G.O. Bond, AMBAC

     5.000%         8/15/2022         Aa3             95,000         117,759      

Sachem Central School District of Holbrook, G.O. Bond, FGRNA

     4.375%         10/15/2030         AA2             1,000,000         1,061,390      

Sachem Central School District of Holbrook, Prerefunded Balance, G.O. Bond, NATL

     5.000%         6/15/2027         Aa2             1,000,000         1,021,770      

Saratoga County Water Authority, Water Utility Impt., Revenue Bond

     5.000%         9/1/2038         AA2             950,000         1,042,065      

Saratoga County, Public Impt., Series A, G.O. Bond

     4.750%         7/15/2036         Aa1             820,000         901,943      

Saratoga County, Sewer Impt., Series B, G.O. Bond

     4.200%         7/15/2032         AA2             425,000         448,927      

The accompanying notes are an integral part of the financial statements.

 

10

New York Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

NEW YORK MUNICIPAL BONDS (continued)

  

           

Saratoga County, Sewer Impt., Series B, G.O. Bond

     4.250%         7/15/2035         AA2           $ 700,000       $ 734,601      

Saratoga Springs City School District, G.O. Bond

     4.000%         6/15/2015         AA2             500,000         542,755      

Saratoga Springs City School District, Prerefunded Balance, G.O. Bond, AGM

     5.000%         6/15/2020         Aa2             200,000         204,354      

Scarsdale Union Free School District, G.O. Bond

     4.000%         6/1/2015         Aaa             270,000         292,513      

Schenectady County, Series A, G.O. Bond

     3.000%         7/15/2013         Aa1             485,000         492,120      

Schenectady County, Series A, G.O. Bond

     2.000%         7/15/2014         Aa1             475,000         486,742      

Schroon Lake Central School District, G.O. Bond, AGM

     4.000%         6/15/2027         Aa3             490,000         546,767      

Shenendehowa Central School District, G.O. Bond

     2.500%         6/15/2014         AA2             280,000         287,008      

Shenendehowa Central School District, G.O. Bond

     4.000%         7/15/2020         AA2             475,000         553,347      

Skaneateles Central School District, G.O. Bond

     2.000%         6/15/2015         AA2             660,000         676,843      

Skaneateles Central School District, G.O. Bond

     4.000%         6/15/2015         AA2             280,000         301,414      

Smithtown Central School District, G.O. Bond

     3.000%         8/1/2013         Aa2             255,000         258,945      

South Country Central School District at Brookhaven, G.O. Bond, AGM

     4.000%         7/15/2027         AA2             750,000         793,897      

South Glens Falls Central School District, Unrefunded Balance, G.O. Bond, FGRNA

     5.375%         6/15/2018         A1             95,000         97,063      

South Huntington Union Free School District, G.O. Bond

     2.250%         3/15/2015         Aa1             250,000         259,493      

South Orangetown Central School District, G.O. Bond

     3.000%         8/1/2015         Aa2             230,000         241,962      

Southampton Union Free School District, G.O. Bond

     2.500%         6/1/2015         Aaa             950,000         995,781      

Southampton, Public Impt., G.O. Bond

     2.500%         4/15/2013         Aa1             255,000         256,647      

Southampton, Public Impt., G.O. Bond

     3.000%         4/15/2014         Aa1             525,000         542,845      

Southold, Public Impt., G.O. Bond

     2.000%         8/15/2013         Aa2             580,000         585,945      

Spencerport Fire District, Public Impt., G.O. Bond, AGC

     4.500%         11/15/2031         AA2             290,000         326,798      

Spencerport Fire District, Public Impt., G.O. Bond, AGC

     4.500%         11/15/2032         AA2             250,000         281,553      

St. Lawrence County, Public Impt., G.O. Bond, FGRNA

     4.500%         5/15/2031         A2             1,185,000               1,269,526      

St. Lawrence County, Public Impt., G.O. Bond, FGRNA

     4.500%         5/15/2032         A2             1,000,000         1,065,530      

Suffolk County Water Authority, Revenue Bond

     4.000%         6/1/2024         AA2             450,000         515,677      

Suffolk County Water Authority, Revenue Bond, NATL

     4.500%         6/1/2027         Baa2             1,160,000         1,216,005      

Suffolk County Water Authority, Series A, Revenue Bond

     4.500%         6/1/2030         AA2             640,000         710,227      

Suffolk County Water Authority, Series A, Revenue Bond, NATL

     4.500%         6/1/2032         Baa2             1,000,000         1,067,140      

Suffolk County, Public Impt., Series B, G.O. Bond

     3.000%         10/15/2014         A1                   2,000,000         2,067,280      

Syracuse, Public Impt., Series A, G.O. Bond, FGRNA

     4.250%         12/1/2028         A1             600,000         630,540      

The accompanying notes are an integral part of the financial statements.

 

11

New York Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

    COUPON
RATE		         MATURITY
    DATE		     CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

NEW YORK MUNICIPAL BONDS (continued)

  

           

Syracuse, Public Impt., Series A, G.O. Bond, FGRNA

     4.250%         12/1/2029         A1           $ 600,000       $ 631,146      

Tarrytowns Union Free School District, G.O. Bond, AMBAC

     4.250%         1/15/2030         Aa2             215,000         225,234      

Tarrytowns Union Free School District, G.O. Bond, AMBAC

     4.375%         1/15/2032         Aa2             1,090,000         1,140,641      

Three Village Central School District Brookhaven & Smithtown, G.O. Bond

     3.500%         5/1/2015         Aa2             1,000,000         1,067,340      

Tompkins County, Public Impt., G.O. Bond

     4.250%         12/15/2032         Aa1             300,000         310,887      

Tompkins County, Series A, G.O. Bond, NATL

     5.250%         2/15/2015         Aa1             315,000         332,152      

Triborough Bridge & Tunnel Authority, General Purposes, Prerefunded Balance, Series A, Revenue Bond, NATL

     4.750%         1/1/2019         AA2             300,000         336,771      

Triborough Bridge & Tunnel Authority, General Purposes, Prerefunded Balance, Series B, Revenue Bond

     5.000%         1/1/2014         AA2             900,000         940,995      

Triborough Bridge & Tunnel Authority, Series B, Revenue Bond

     5.000%         11/15/2022         Aa3             1,000,000         1,255,190      

Triborough Bridge & Tunnel Authority, Series C, Revenue Bond

     5.000%         11/15/2038         Aa3             900,000         1,044,000      

Union Endicott Central School District, G.O. Bond, FGRNA

     4.125%         6/15/2014         A2             605,000         635,389      

Union Endicott Central School District, G.O. Bond, FGRNA

     4.125%         6/15/2015         A2             865,000         934,433      

Victor Central School District, G.O. Bond

     4.000%         6/15/2014         Aa2             290,000         303,761      

Voorheesville Central School District, G.O. Bond

     5.000%         6/15/2021         AA2             500,000         634,855      

Warren County, Public Impt., G.O. Bond, AGM

     4.000%         7/15/2020         AA2            500,000         565,180      

Wayne County, Public Impt., G.O. Bond

     3.000%         6/1/2021         Aa2             295,000         321,391      

Webster Central School District, Series A, G.O. Bond

     2.000%         10/15/2014         AA2             325,000         332,569      

Webster Central School District, Series B, G.O. Bond

     2.000%         10/15/2014         AA2             410,000         419,549      

Westchester County, Public Impt., Prerefunded Balance, Series B, G.O. Bond

     3.700%         12/15/2015         Aaa                   1,000,000               1,033,140      

Westchester County, Public Impt., Series A, G.O. Bond

     3.000%         1/15/2015         Aaa             500,000         526,645      

Westchester County, Series C, G.O. Bond

     5.000%         11/1/2013         Aaa             200,000         208,018      

White Plains City School District, Series B, G.O. Bond

     4.650%         5/15/2031         Aa2             685,000         770,467      

White Plains City, Public Impt., Series A, G.O. Bond

     2.750%         9/15/2023         Aa1             330,000         350,401      

William Floyd Union Free School District of the Mastics-Moriches-Shirley, G.O. Bond

     2.250%         12/15/2014         AA2             400,000         412,452      

Yorktown Central School District, G.O. Bond

     4.000%         3/1/2025         AA2             370,000         407,159      
         

 

 

     
            

TOTAL MUNICIPAL BONDS

             

(Identified Cost $150,505,377)

             157,069,236      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

12

New York Tax Exempt Series

 

 

Investment Portfolio - December 31, 2012

 

                         SHARES    

  VALUE

  (NOTE 2)

       
            

SHORT-TERM INVESTMENT - 1.5%

             

Dreyfus Basic New York Municipal Money Market Fund

             

(Identified Cost $ 2,478,312)

                 2,478,312       $       2,478,312      
         

 

 

     

TOTAL INVESTMENTS - 98.0%

             

(Identified Cost $ 152,983,689)

             159,547,548      

OTHER ASSETS, LESS LIABILITIES - 2.0%

             3,237,876      
         

 

 

     

NET ASSETS - 100%

           $ 162,785,424      
         

 

 

     

KEY:

G.O. Bond - General Obligation Bond

Impt. - Improvement

Scheduled principal and interest payments are guaranteed by:

AGC (Assured Guaranty Corp.)

AGM (Assurance Guaranty Municipal Corp.)

AMBAC (AMBAC Assurance Corp.)

CIFG (CIFG North America, Inc.)

FGRNA (FGIC reinsured by NATL)

NATL (National Public Finance Guarantee Corp.)

XLCA (XL Capital Assurance)

The insurance does not guarantee the market value of the municipal bonds.

1 Credit ratings from Moody’s (unaudited).

2 Credit ratings from S&P (unaudited).

3 Credit rating has been withdrawn. As of December 31, 2012, there is no rating available (unaudited).

The Series’ portfolio holds, as a percentage of net assets, greater than 10% in bonds insured by the following companies: NATL - 14.9%; AGM - 11.6%.

The accompanying notes are an integral part of the financial statements.

 

13

New York Tax Exempt Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments (identified cost $152,983,689) (Note 2)

    $ 159,547,548   

Receivable for fund shares sold

      2,482,473   

Interest receivable

      1,464,568   

Dividends receivable

      21   
  

 

 

  

TOTAL ASSETS

      163,494,610   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      69,696   

Accrued fund accounting and administration fees (Note 3)

      13,382   

Accrued transfer agent fees (Note 3)

      795   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      588,666   

Other payables and accrued expenses

      36,273   
  

 

 

  

TOTAL LIABILITIES

      709,186   
  

 

 

  

TOTAL NET ASSETS

    $ 162,785,424   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 151,076   

Additional paid-in-capital

      155,893,890   

Undistributed net investment income

      59,998   

Accumulated net realized gain on investments

      116,601   

Net unrealized appreciation on investments

      6,563,859   
  

 

 

  

TOTAL NET ASSETS

    $ 162,785,424   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A ($162,785,424/15,107,632 shares)

    $ 10.78   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

14

New York Tax Exempt Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Interest

    $ 3,790,467   

Dividends

      124   
  

 

 

  

Total Investment Income

      3,790,591   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      817,993   

Fund accounting and administration fees (Note 3)

      86,972   

Transfer agent fees (Note 3)

      4,982   

Directors’ fees (Note 3)

      3,151   

Chief Compliance Officer service fees (Note 3)

      2,440   

Custodian fees

      8,647   

Miscellaneous

      52,514   
  

 

 

  

Total Expenses

      976,699   
  

 

 

  

NET INVESTMENT INCOME

      2,813,892   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

   

Net realized gain (loss) on investments

      120,091   

Net change in unrealized appreciation (depreciation) on investments

      2,342,321   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

      2,462,412   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 5,276,304   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

15

New York Tax Exempt Series

 

 

Statements of Changes in Net Assets

 

     FOR THE
YEAR ENDED
12/31/12		     FOR THE
YEAR ENDED
12/31/11		  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 2,813,892      $ 4,033,672   

Net realized gain (loss) on investments

      120,091        1,958,406   

Net change in unrealized appreciation on investments

      2,342,321        6,312,571   
  

 

 

    

 

 

  

Net increase from operations

      5,276,304        12,304,649   
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 8):

     

From net investment income

      (3,018,903 )      (3,912,940 ) 

From net realized gain on investments

      (1,500 )      (1,975,445 ) 
  

 

 

    

 

 

  

Total distributions to shareholders

      (3,020,403 )      (5,888,385 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      2,437,158        15,450,731   
  

 

 

    

 

 

  

Net increase in net assets

      4,693,059        21,866,995   

NET ASSETS:

     

Beginning of year

      158,092,365        136,225,370   
  

 

 

    

 

 

  

End of year (including undistributed net investment income of $59,998 and $265,009, respectively)

    $ 162,785,424      $ 158,092,365   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

16

New York Tax Exempt Series

 

 

Financial Highlights

 

     

 

FOR THE YEARS ENDED

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 10.63      $ 10.19      $ 10.55      $ 9.79      $ 10.41   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment income

      0.19 1      0.28 1      0.36 1      0.38 1      0.38   

Net realized and unrealized gain (loss) on investments

      0.16        0.56        (0.32 )      0.82        (0.63 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      0.35        0.84        0.04        1.20        (0.25 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net investment income

      (0.20 )      (0.27 )      (0.39 )      (0.41 )      (0.36 ) 

From net realized gain on investments

      — 2      (0.13 )      (0.01 )      (0.03 )      (0.01 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions to shareholders

      (0.20 )      (0.40 )      (0.40 )      (0.44 )      (0.37 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 10.78      $ 10.63      $ 10.19      $ 10.55      $ 9.79   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 162,785      $ 158,092      $ 136,225      $ 110,532      $ 97,202   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return3

      3.31 %      8.37 %      0.32 %      12.46 %      (2.37 %) 

Ratios (to average net assets)/

Supplemental Data:

           

Expenses*

      0.60 %      0.61 %      0.61 %      0.64 %      0.64 % 

Net investment income

      1.72 %      2.66 %      3.41 %      3.64 %      3.71 % 

Portfolio turnover

      7 %      48 %      7 %      10 %      11 % 
*For certain years 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 Series, the expense ratio (to average net assets) would have increased by the following amounts:     
     N/A        N/A        0.00 %4      0.00 %4      N/A   

1Calculated based on average shares outstanding during the year.

2Less than $0.01 per share.

3Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during certain years.

4Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

17

New York Tax Exempt Series

 

 

Notes to Financial Statements

 

1. Organization

New York Tax Exempt Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide as high a level of current income exempt from federal income tax and New York State personal income tax as the Advisor believes is consistent with the preservation of capital.

The Fund’s advisor is Manning & Napier Advisors, 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated as New York Tax Exempt Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).

Short-term investments that mature in sixty days or less are 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 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.

 

18

New York Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

The following is a summary of the valuation levels used for major security types as of December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Debt securities:

            

  States and political subdivisions (municipals)

    $ 157,069,236       $ —       $ 157,069,236       $                     —   

  Mutual fund

      2,478,312         2,478,312         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       159,547,548       $       2,478,312       $       157,069,236       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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 December 31, 2012, 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 and various states, 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, 2009 through December 31, 2012. 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.

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.

 

19

New York Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Indemnifications

The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 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.

The Advisor has contractually agreed, until at least April 30, 2014, to waive its management fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.85% of average daily net assets each year. The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

20

New York Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

4. Purchases and Sales Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $15,481,295 and $10,680,241 respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in shares of New York Tax Exempt Series were:

 

    FOR THE YEAR ENDED 12/31/12     FOR THE YEAR ENDED 12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

     2,071,760       $       22,298,750                  2,710,969       $ 28,225,077   

Reinvested

     263,446        2,829,327        533,767        5,631,412   

Repurchased

     (2,101,837 )      (22,690,919 )      (1,735,257 )      (18,405,758 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

               233,369       $ 2,437,158        1,509,479       $       15,450,731   
 

 

 

    

 

 

    

 

 

    

 

 

  

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

7. Concentration of Credit

The Series primarily invests in debt obligations issued by the State of New York and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Series is more susceptible to factors adversely affecting issues of New York municipal securities than is a municipal bond fund that is not concentrated in these issues to the same extent.

 

8. Federal Income Tax Information

The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to book and tax treatments in the timing of the recognition of net investment income or gains and losses, including late year ordinary losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR  
ENDED 12/31/12		     FOR THE YEAR  
ENDED 12/31/11		       

Ordinary income

   $ —          $ 79,163          

Tax exempt income

     3,018,903            3,913,194          

Long-term capital gains

     1,500            1,896,028          

 

21

New York Tax Exempt Series

 

 

Notes to Financial Statements (continued)

 

 

8. Federal Income Tax Information (continued)

 

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on the identified cost of investments for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 152,943,810   

Unrealized appreciation

      6,677,898   

Unrealized depreciation

      (74,160 ) 
  

 

 

  

Net unrealized appreciation

    $ 6,603,738   
  

 

 

  

Undistributed tax exempt income

    $ 20,119   

Undistributed long-term capital gains

    $ 116,601   
 

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010 may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series did not have pre or post-enactment net capital loss carryforwards.

 

22

New York Tax Exempt Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of New York Tax Exempt Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the New York Tax Exempt Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

23

New York Tax Exempt Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

The Series hereby reports $1,500 as capital gains for its taxable year ended December 31, 2012. In addition, the Series hereby reports $3,018,903 as tax exempt dividends for the year ended December 31, 2012. For each item it is the intention of the Series to designate the maximum allowable under tax law.

 

24

New York Tax Exempt Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro- Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

25

New York Tax Exempt Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

26

New York Tax Exempt Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995 - 2008)

The Ashley Group (1995 - 2008)

Genesee Corporation (1987 - 2007)

Name:    Peter L. Faber
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Partnership for New York City, Inc. (non-profit)(1989 - 2010)

New York Collegium (non-profit)(2004 - 2011))

Boston Early Music Festival (non-profit)

Name:    Harris H. Rusitzky
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994; Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

27

New York Tax Exempt Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Incyte Corp. (2000 - present)

ViroPharma, Inc. (2000 - present)

HLTH Corp. (2000 - present)

Cheyne Capital International (2000 - present)

MPM Bio-equities (2000 - 2009)

GMP Companies (2000 - 2012)

HoustonPharma (2000 - 2009)

Name:    Chester N. Watson
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004 - 2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:   

President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC

Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

28

New York Tax Exempt Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

29

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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNNYT-12/12-AR

 

LOGO

 

        CORE BOND SERIES                          

 

 

 

 

www.manning-napier.com

      

LOGO          

Core Bond Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months.

Even with the myriad of looming uncertainties, a number of issues pushed forward toward more clarity and resolution as the year progressed. For example, during the fourth quarter, progress was made with respect to “fiscal cliff” headwinds in the U.S. Also, the Federal Open Market Committee (FOMC) stated it expects to keep its highly accommodative monetary policy stance in place at least until unemployment falls below 6.5%, provided that near-term inflation remains within 0.5% of its 2% goal and longer-term inflation remains “well anchored.” Additionally, European Central Bank President Mario Draghi’s commitment earlier in the year to do “whatever it takes” to preserve the Euro, along with positive developments in Greece in the fourth quarter also aided wavering investor concerns as the year came to a close. Given this backdrop, although equity and fixed income markets generally performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor feels are going to continue to weigh on global economic growth.

Overall, each of the major sectors of the fixed income market experienced positive absolute performance. This strong performance was led by corporate bonds, where high yield bonds were the top performer in 2012, followed by their investment grade counterparts. Beyond corporate bonds, Treasury Inflation Protected Securities (TIPS) and municipal bonds also performed well in 2012. In contrast, although Treasuries and mortgages ended the year with positive performance, they generally trailed other sectors in 2012.

Given the market environment, the Bank of America Merrill Lynch U.S. Corporate, Government & Mortgage Index returned 4.42% during the year. Similarly, the Series also produced strong absolute returns in 2012. However, the Series also materially outperformed the index, returning 9.74%.

Throughout 2012, the Core Bond Series maintained a heavy weighting to corporate bonds relative to the benchmark because the Advisor believes the fundamentals and supply and demand dynamics within this sector remain attractive. As of the end of the year, the Series had 84.6% of its assets invested in corporate bonds and preferred stocks. With corporate bonds outperforming Treasuries for the year, the Series’ large allocation to this area positively impacted returns relative to the benchmark in 2012. Further, the Series relative underweight allocation as compared to the benchmark to the mortgage and Treasury sectors also aided performance.

Managing to an index can prove limiting and present challenges to reaching investors’ objectives. As an active fixed income manager, the Advisor’s investment decisions are based on prevailing market conditions and fundamentals, allowing us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. This philosophy has guided the Advisor’s choices in selectively choosing the Series’ investments. Through its security selection process, we feel we have the ability to manage risks, while simultaneously providing compelling income and total return potential to help the Series’ investors reach their goals.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Core Bond Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012
      ONE
 YEAR1                		    FIVE
 YEAR                 		    SINCE
 INCEPTION2        

Manning & Napier Fund, Inc. - Core Bond Series3

     9.74%    7.44%    6.25%

Bank of America (BofA) Merrill Lynch U.S. Corporate, Government & Mortgage Index4

     4.42%    6.03%    5.66%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Core Bond Series from its inception2 (4/21/05) to present (12/31/12) to the BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Index are calculated from April 21, 2005, the Series’ inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 0.70%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.70% for the year ended December 31, 2012.

4The unmanaged BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index (formerly a Merrill Lynch Index) is a market value weighted measure that represents U.S. government, corporate, and pass-through securities issued by entities within the United States, by supranational entities, or by entities headquartered outside of the United States but who have issued dollar-denominated securities within the United States. The Index only includes investment-grade securities with maturities of greater than one year. The Index returns assume reinvestment of coupons and, unlike the Series returns, do not reflect any fees or expenses.

 

2

Core Bond Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

   

 BEGINNING

 ACCOUNT VALUE                             

 7/1/12

  

 ENDING

 ACCOUNT VALUE                             

 12/31/12

  

 EXPENSES PAID

 DURING PERIOD*                             

 7/1/12-12/31/12

Actual

    $1,000.00    $1,045.30    $3.56

Hypothetical

(5% return before expenses)

    $1,000.00    $1,021.73    $3.52

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 0.69%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data.

 

3

Core Bond Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

4

Core Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS - 82.7%

             

Convertible Corporate Bonds - 0.8%

             

Health Care - 0.1%

             

Health Care Equipment & Supplies - 0.1%

             

Medtronic, Inc., 1.625%, 4/15/2013

         A1           $ 120,000       $ 120,375      
         

 

 

     

Information Technology - 0.7%

             

Computers & Peripherals - 0.7%

             

EMC Corp., 1.75%, 12/1/2013

         A2             870,000         1,388,737      
         

 

 

     

Total Convertible Corporate Bonds

             

(Identified Cost $1,451,479)

             1,509,112      
         

 

 

     

Non-Convertible Corporate Bonds - 81.9%

             

Consumer Discretionary - 10.5%

             

Hotels, Restaurants & Leisure - 1.8%

             

International Game Technology, 7.50%, 6/15/2019

         Baa2             1,750,000         2,071,554      

Yum! Brands, Inc., 3.875%, 11/1/2020

         Baa3             1,250,000         1,357,940      
         

 

 

     
            3,429,494      
         

 

 

     

Household Durables - 2.9%

             

Newell Rubbermaid, Inc., 4.70%, 8/15/2020

         Baa3             1,345,000         1,485,540      

NVR, Inc., 3.95%, 9/15/2022

         Baa2             1,775,000         1,839,353      

Tupperware Brands Corp., 4.75%, 6/1/2021

         Baa3                   2,000,000         2,140,094      
         

 

 

     
            5,464,987      
         

 

 

     

Media - 3.5%

             

DIRECTV Holdings LLC - DIRECTV Financing Co., Inc., 5.20%, 3/15/2020

         Baa2             1,280,000         1,452,562      

Discovery Communications LLC, 5.05%, 6/1/2020

         Baa2             1,275,000         1,475,371      

NBCUniversal Media LLC, 5.15%, 4/30/2020

         Baa2             1,540,000         1,825,601      

Time Warner, Inc., 4.75%, 3/29/2021

         Baa2             1,110,000         1,275,624      

The Walt Disney Co., 5.50%, 3/15/2019

         A2             500,000         604,273      
         

 

 

     
            6,633,431      
         

 

 

     

Multiline Retail - 0.6%

             

Target Corp., 6.00%, 1/15/2018

         A2             670,000         823,823      

Target Corp., 3.875%, 7/15/2020

         A2             335,000         375,585      
         

 

 

     
            1,199,408      
         

 

 

     

Specialty Retail - 1.4%

             

The Home Depot, Inc., 5.40%, 3/1/2016

         A3             1,065,000               1,216,673      

Lowe’s Companies, Inc., 6.10%, 9/15/2017

         A3             745,000         904,626      

O’Reilly Automotive, Inc., 4.875%, 1/14/2021

         Baa3             500,000         553,809      
         

 

 

     
            2,675,108      
         

 

 

     

Textiles, Apparel & Luxury Goods - 0.3%

             

VF Corp., 5.95%, 11/1/2017

         A3             485,000         573,564      
         

 

 

     

Total Consumer Discretionary

             19,975,992      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

5

Core Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS (continued)

             

Non-Convertible Corporate Bonds (continued)

             

Consumer Staples - 2.2%

             

Beverages - 0.5%

             

PepsiCo, Inc., 7.90%, 11/1/2018

         Aa3           $ 775,000       $ 1,045,825      
         

 

 

     

Food Products - 1.7%

             

General Mills, Inc., 5.65%, 2/15/2019

         Baa1             765,000         930,101      

Grupo Bimbo S.A.B. de C.V. (Mexico)3, 4.875%, 6/30/2020

         Baa2             500,000         564,415      

Kraft Foods Group, Inc.3, 6.125%, 8/23/2018

         Baa2             417,000         510,877      

Kraft Foods Group, Inc.3, 5.375%, 2/10/2020

         Baa2             356,000         427,452      

Tyson Foods, Inc., 4.50%, 6/15/2022

         Baa3             650,000         703,635      
         

 

 

     
            3,136,480      
         

 

 

     

Total Consumer Staples

             4,182,305      
         

 

 

     

Energy - 5.5%

             

Energy Equipment & Services - 1.5%

             

Baker Hughes, Inc., 7.50%, 11/15/2018

         A2             885,000         1,172,405      

Schlumberger Oilfield plc3, 4.20%, 1/15/2021

         A1             1,465,000         1,657,075      
         

 

 

     
            2,829,480      
         

 

 

     

Oil, Gas & Consumable Fuels - 4.0%

             

Apache Corp., 6.90%, 9/15/2018

         A3             630,000         803,453      

EOG Resources, Inc., 2.625%, 3/15/2023

         A3             775,000         780,453      

Petrobras International Finance Co. (Brazil), 5.375%, 1/27/2021

         A3             2,000,000         2,251,640      

Shell International Finance B.V. (Netherlands), 4.30%, 9/22/2019

         Aa1                   3,295,000         3,817,241      
         

 

 

     
            7,652,787      
         

 

 

     

Total Energy

             10,482,267      
         

 

 

     

Financials - 33.4%

             

Capital Markets - 10.9%

             

The Charles Schwab Corp., 4.45%, 7/22/2020

         A2             1,320,000         1,491,681      

Credit Suisse AG (Switzerland)3, 2.60%, 5/27/2016

         Aaa             1,205,000         1,271,526      

The Goldman Sachs Group, Inc., 6.15%, 4/1/2018

         A3             690,000         810,590      

The Goldman Sachs Group, Inc., 7.50%, 2/15/2019

         A3             1,100,000         1,384,081      

The Goldman Sachs Group, Inc., 5.375%, 3/15/2020

         A3             935,000         1,071,538      

The Goldman Sachs Group, Inc., 5.25%, 7/27/2021

         A3             1,150,000         1,310,972      

Jefferies Group, Inc., 5.125%, 4/13/2018

         Baa3             1,000,000         1,050,000      

Jefferies Group, Inc., 8.50%, 7/15/2019

         Baa3             3,245,000         3,877,775      

Merrill Lynch & Co., Inc., 6.875%, 4/25/2018

         Baa2             1,200,000         1,446,545      

Merrill Lynch & Co., Inc., 6.875%, 11/15/2018

         Baa2             1,000,000         1,224,102      

Morgan Stanley, 5.55%, 4/27/2017

         Baa1             1,727,000         1,914,613      

Morgan Stanley, 7.30%, 5/13/2019

         Baa1             1,620,000         1,968,656      

Morgan Stanley, 4.875%, 11/1/2022

         Baa2             1,800,000               1,863,709      
         

 

 

     
            20,685,788      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

6

Core Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

CORPORATE BONDS (continued)

             

Non-Convertible Corporate Bonds (continued)

             

Financials (continued)

             

Commercial Banks - 5.6%

             

KeyBank National Association, 5.45%, 3/3/2016

         Baa1           $ 1,050,000       $ 1,173,766      

Manufacturers & Traders Trust Co., 6.625%, 12/4/2017

         A3             1,480,000         1,790,192      

National Bank of Canada (Canada)3, 2.20%, 10/19/2016

         Aaa             800,000         841,920      

National City Corp., 6.875%, 5/15/2019

         Baa1             1,445,000         1,802,755      

PNC Bank National Association, 5.25%, 1/15/2017

         A3             880,000         1,002,529      

Royal Bank of Canada (Canada)3, 3.125%, 4/14/2015

         Aaa             500,000         528,900      

Royal Bank of Canada (Canada), 1.20%, 9/19/2017

         Aaa             445,000         446,068      

Santander Holdings USA, Inc., 4.625%, 4/19/2016

         Baa2             750,000         784,117      

The Toronto-Dominion Bank (Canada)3, 1.625%, 9/14/2016

         Aaa             400,000         412,520      

Wachovia Bank National Association, 5.60%, 3/15/2016

         A1             450,000         506,431      

Wachovia Corp., 5.25%, 8/1/2014

         A3             945,000               1,007,691      

Westpac Banking Corp. (Australia)3, 1.25%, 12/15/2017

         Aaa             430,000         429,441      
         

 

 

     
            10,726,330      
         

 

 

     

Consumer Finance - 0.6%

             

American Express Co., 7.25%, 5/20/2014

         A3             1,000,000         1,088,207      
         

 

 

     

Diversified Financial Services - 6.0%

             

The Bear Stearns Companies LLC, 7.25%, 2/1/2018

         A2             2,935,000         3,677,681      

Citigroup, Inc., 8.50%, 5/22/2019

         Baa2                   3,401,000         4,573,110      

CME Group, Inc., 3.00%, 9/15/2022

         Aa3             1,720,000         1,745,189      

JPMorgan Chase & Co., 6.30%, 4/23/2019

         A2             1,180,000         1,455,839      
         

 

 

     
            11,451,819      
         

 

 

     

Insurance - 4.0%

             

American International Group, Inc., 4.25%, 5/15/2013

         Baa1             660,000         668,016      

American International Group, Inc., 4.875%, 6/1/2022

         Baa1             1,610,000         1,838,010      

American International Group, Inc., 6.25%, 3/15/2037

         Baa2             930,000         992,775      

Fidelity National Financial, Inc., 6.60%, 5/15/2017

         Baa3             1,575,000         1,775,389      

Hartford Financial Services Group, Inc., 5.125%, 4/15/2022

         Baa3             1,980,000         2,284,623      
         

 

 

     
            7,558,813      
         

 

 

     

Real Estate Investment Trusts (REITS) - 6.3%

             

BioMed Realty LP, 3.85%, 4/15/2016

         Baa3             740,000         780,475      

Boston Properties LP, 5.875%, 10/15/2019

         Baa2             935,000         1,114,900      

Boston Properties LP, 5.625%, 11/15/2020

         Baa2             300,000         354,899      

Camden Property Trust, 5.70%, 5/15/2017

         Baa1             780,000         897,753      

Digital Realty Trust LP, 5.875%, 2/1/2020

         Baa2             1,305,000         1,491,102      

Digital Realty Trust LP, 5.25%, 3/15/2021

         Baa2             45,000         49,805      

HCP, Inc., 6.70%, 1/30/2018

         Baa1             1,315,000         1,586,006      

Health Care REIT, Inc., 6.20%, 6/1/2016

         Baa2             375,000         427,798      

Health Care REIT, Inc., 4.95%, 1/15/2021

         Baa2             990,000               1,082,795      

Mack-Cali Realty LP, 7.75%, 8/15/2019

         Baa2             735,000         910,878      

The accompanying notes are an integral part of the financial statements.

 

7

Core Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

CORPORATE BONDS (continued)

             

Non-Convertible Corporate Bonds (continued)

             

Financials (continued)

             

Real Estate Investment Trusts (REITS) (continued)

             

Simon Property Group LP, 10.35%, 4/1/2019

         A3           $ 990,000       $ 1,415,687      

UDR, Inc., 4.625%, 1/10/2022

         Baa2                   1,600,000         1,759,570      
         

 

 

     
            11,871,668      
         

 

 

     

Total Financials

             63,382,625      
         

 

 

     

Health Care - 2.1%

             

Biotechnology - 0.2%

             

Amgen, Inc., 3.45%, 10/1/2020

         Baa1             370,000         396,054      
         

 

 

     

Health Care Equipment & Supplies - 0.4%

             

CR Bard, Inc., 4.40%, 1/15/2021

         A3             655,000         745,778      
         

 

 

     

Health Care Providers & Services - 1.1%

             

UnitedHealth Group, Inc., 4.70%, 2/15/2021

         A3             1,000,000         1,164,997      

UnitedHealth Group, Inc., 2.75%, 2/15/2023

         A3             1,000,000         1,008,996      
         

 

 

     
            2,173,993      
         

 

 

     

Life Sciences Tools & Services - 0.4%

             

Thermo Fisher Scientific, Inc., 4.50%, 3/1/2021

         Baa1             600,000         677,939      
         

 

 

     

Total Health Care

                   3,993,764      
         

 

 

     

Industrials - 11.0%

             

Aerospace & Defense - 2.3%

             

The Boeing Co., 6.00%, 3/15/2019

         A2             870,000         1,083,661      

Honeywell International, Inc., 5.30%, 3/1/2018

         A2             690,000         824,814      

Textron, Inc., 4.625%, 9/21/2016

         Baa3             900,000         980,276      

Textron, Inc., 7.25%, 10/1/2019

         Baa3             1,245,000         1,520,212      
         

 

 

     
            4,408,963      
         

 

 

     

Air Freight & Logistics - 0.5%

             

FedEx Corp., 8.00%, 1/15/2019

         Baa1             790,000         1,040,433      
         

 

 

     

Airlines - 0.5%

             

Southwest Airlines Co., 5.25%, 10/1/2014

         Baa3             910,000         968,502      
         

 

 

     

Commercial Services & Supplies - 0.6%

             

Waste Management, Inc., 7.375%, 3/11/2019

         Baa3             830,000         1,055,389      
         

 

 

     

Industrial Conglomerates - 3.2%

             

General Electric Capital Corp., 5.625%, 5/1/2018

         A1             1,440,000         1,710,049      

General Electric Capital Corp., 5.50%, 1/8/2020

         A1             320,000         378,788      

General Electric Capital Corp., 5.30%, 2/11/2021

         A2             2,100,000         2,437,642      

General Electric Co., 5.25%, 12/6/2017

         Aa3             370,000         436,285      

Tyco Electronics Group S.A. (Switzerland), 4.875%, 1/15/2021

         Baa2             975,000         1,093,835      
         

 

 

     
            6,056,599      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

8

Core Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

CORPORATE BONDS (continued)

             

Non-Convertible Corporate Bonds (continued)

             

Industrials (continued)

             

Machinery - 2.5%

             

Caterpillar Financial Services Corp., 7.05%, 10/1/2018

         A2           $ 1,095,000       $ 1,409,018      

John Deere Capital Corp., 5.50%, 4/13/2017

         A2             225,000         264,542      

John Deere Capital Corp., 5.75%, 9/10/2018

         A2             1,245,000         1,518,210      

Joy Global, Inc., 5.125%, 10/15/2021

         Baa2             650,000         716,526      

Kennametal, Inc., 3.875%, 2/15/2022

         Baa2             840,000         877,132      
         

 

 

     
            4,785,428      
         

 

 

     

Road & Rail - 1.4%

             

JB Hunt Transport Services, Inc., 3.375%, 9/15/2015

         Baa2             795,000         817,210      

Union Pacific Corp., 5.65%, 5/1/2017

         Baa1             705,000         827,267      

Union Pacific Corp., 2.95%, 1/15/2023

         Baa1             900,000         930,532      
         

 

 

     
                  2,575,009      
         

 

 

     

Total Industrials

             20,890,323      
         

 

 

     

Information Technology - 6.5%

             

Computers & Peripherals - 1.6%

             

Dell, Inc., 5.875%, 6/15/2019

         A2             1,055,000         1,216,549      

Hewlett-Packard Co., 2.125%, 9/13/2015

         Baa1                   1,850,000         1,848,722      
         

 

 

     
            3,065,271      
         

 

 

     

Electronic Equipment, Instruments & Components - 1.0%

             

Amphenol Corp., 4.00%, 2/1/2022

         Baa2             500,000         528,741      

Corning, Inc., 6.625%, 5/15/2019

         A3             650,000         828,587      

Corning, Inc., 4.25%, 8/15/2020

         A3             500,000         558,273      
         

 

 

     
            1,915,601      
         

 

 

     

IT Services - 1.1%

             

International Business Machines Corp., 1.875%, 8/1/2022

         Aa3             1,000,000         962,306      

The Western Union Co., 5.253%, 4/1/2020

         Baa1             945,000         1,015,944      
         

 

 

     
            1,978,250      
         

 

 

     

Office Electronics - 0.6%

             

Xerox Corp.4, 1.71%, 9/13/2013

         Baa2             1,100,000         1,107,213      
         

 

 

     

Software - 2.2%

             

Autodesk, Inc., 3.60%, 12/15/2022

         Baa2             1,825,000         1,833,048      

Oracle Corp., 5.00%, 7/8/2019

         A1             700,000         840,624      

Oracle Corp., 3.875%, 7/15/2020

         A1             1,355,000         1,528,208      
         

 

 

     
            4,201,880      
         

 

 

     

Total Information Technology

             12,268,215      
         

 

 

     

Materials - 7.3%

             

Chemicals - 1.1%

             

E.I. du Pont de Nemours & Co., 6.00%, 7/15/2018

         A2             885,000         1,092,209      

The accompanying notes are an integral part of the financial statements.

 

9

Core Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

CORPORATE BONDS (continued)

             

Non-Convertible Corporate Bonds (continued)

             

Materials (continued)

             

Chemicals (continued)

             

Eastman Chemical Co., 3.60%, 8/15/2022

         Baa2           $ 855,000       $ 895,461      
         

 

 

     
            1,987,670      
         

 

 

     

Metals & Mining - 4.9%

             

Allegheny Technologies, Inc., 5.95%, 1/15/2021

         Baa3             1,625,000         1,800,126      

BHP Billiton Finance (USA) Ltd. (Australia), 6.50%, 4/1/2019

         A1             2,445,000         3,118,109      

Freeport-McMoRan Copper & Gold, Inc., 3.55%, 3/1/2022

         Baa3             840,000         833,092      

Rio Tinto Finance USA Ltd. (United Kingdom), 3.75%, 9/20/2021

         A3                   2,505,000         2,678,594      

Teck Resources Ltd. (Canada), 3.00%, 3/1/2019

         Baa2             845,000         871,117      
         

 

 

     
            9,301,038      
         

 

 

     

Paper & Forest Products - 1.3%

             

International Paper Co., 7.50%, 8/15/2021

         Baa3             1,885,000         2,466,864      
         

 

 

     

Total Materials

             13,755,572      
         

 

 

     

Telecommunication Services - 1.3%

             

Diversified Telecommunication Services - 0.2%

             

Verizon Communications, Inc., 8.75%, 11/1/2018

         A3             373,000         517,899      
         

 

 

     

Wireless Telecommunication Services - 1.1%

             

Crown Castle Towers LLC3, 6.113%, 1/15/2020

         A2             745,000         897,340      

Crown Castle Towers LLC3, 4.883%, 8/15/2020

         A2             250,000         282,091      

SBA Tower Trust3, 5.101%, 4/17/2017

         A2             375,000         422,839      

SBA Tower Trust3, 2.933%, 12/15/2017

         A2             430,000         447,515      
         

 

 

     
            2,049,785      
         

 

 

     

Total Telecommunication Services

             2,567,684      
         

 

 

     

Utilities - 2.1%

             

Electric Utilities - 2.1%

             

Exelon Generation Co. LLC, 6.20%, 10/1/2017

         Baa1             350,000         413,320      

Exelon Generation Co. LLC, 5.20%, 10/1/2019

         Baa1             550,000         623,503      

Exelon Generation Co. LLC, 4.00%, 10/1/2020

         Baa1             865,000         909,311      

Southwestern Electric Power Co., 6.45%, 1/15/2019

         Baa3             855,000         1,040,581      

System Energy Resources, Inc., 4.10%, 4/1/2023

         Baa1             885,000         915,216      
         

 

 

     

Total Utilities

                   3,901,931      
         

 

 

     

Total Non-Convertible Corporate Bonds

             

(Identified Cost $ 141,838,048)

             155,400,678      
         

 

 

     
            

TOTAL CORPORATE BONDS

             

(Identified Cost $ 143,289,527)

             156,909,790      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

10

Core Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              SHARES/
          PRINCIPAL
         AMOUNT		       VALUE
  (NOTE 2)		       

PREFERRED STOCKS - 1.9%

             

Financials - 1.9%

             

Commercial Banks - 1.4%

             

BB&T Corp., Series D (non-cumulative), 5.85%

         Baa2             34,120       $ 886,438      

PNC Financial Services Group, Inc., Series Q (non-cumulative), 5.375%

         Baa3             35,125         876,369      

U.S. Bancorp., Series F (non-cumulative), 6.50%5

         Baa1             32,800         939,392      
         

 

 

     
            2,702,199      
         

 

 

     

Real Estate Investment Trusts (REITS) - 0.5%

             

Public Storage, Series Q, 6.50%

         A3             29,910         811,757      
         

 

 

     
            

TOTAL PREFERRED STOCKS

             

(Identified Cost $3,298,875)

                   3,513,956      
         

 

 

     

ASSET-BACKED SECURITIES - 0.7%

             

FDIC Trust, Series 2011-R1, Class A3, 2.672%, 7/25/2026

         Aaa           $ 194,249         199,858      

Hertz Vehicle Financing LLC, Series 2009-2A, Class A23, 5.29%, 3/25/2016

         Aaa             370,000         402,437      

Hertz Vehicle Financing LLC, Series 2010-1A, Class A23, 3.74%, 2/25/2017

         Aaa             595,000         640,400      
         

 

 

     
            

TOTAL ASSET-BACKED SECURITIES

             

(Identified Cost $1,159,094)

             1,242,695      
         

 

 

     

COMMERCIAL MORTGAGE-BACKED SECURITIES - 4.7%

             

American Tower Trust, Series 2007-1A, Class AFX3, 5.42%, 4/15/2037

         Aaa                   400,000         410,278      

Americold LLC Trust, Series 2010-ARTA, Class A13, 3.847%, 1/14/2029

         AAA2             84,461         90,744      

Banc of America Commercial Mortgage Trust, Series 2006-2, Class A44, 5.732%, 5/10/2045

         AAA2             200,000         229,134      

Banc of America Commercial Mortgage Trust, Series 2006-4, Class A4, 5.634%, 7/10/2046

         Aaa             100,000         114,403      

Banc of America Re-REMIC Trust, Series 2012-PARK, Class A3, 2.959%, 12/10/2030

         AAA2             215,000         222,473      

Bear Stearns Commercial Mortgage Securities, Series 2005-PWR9, Class A4A, 4.871%, 9/11/2042

         Aaa             160,000         175,765      

Bear Stearns Commercial Mortgage Securities, Series 2006-PW12, Class A44, 5.712%, 9/11/2038

         Aaa             200,000         228,942      

Bear Stearns Commercial Mortgage Securities, Series 2006-PW13, Class A4, 5.54%, 9/11/2041

         AAA2             300,000         344,536      

CFCRE Commercial Mortgage Trust, Series 2011-C1, Class A23, 3.759%, 4/15/2044

         Aaa             60,000         64,915      

Citigroup - Deutsche Bank Commercial Mortgage Trust, Series 2005-CD1, Class A44, 5.219%, 7/15/2044

         Aaa             280,000         310,734      

Commercial Mortgage Pass Through Certificates, Series 2012-CR4, Class A3, 2.853%, 10/15/2045

         Aaa             300,000         308,204      

Commercial Mortgage Pass-Through Certificates, Series 2010-C1, Class A13, 3.156%, 7/10/2046

         Aaa             242,939         256,500      

The accompanying notes are an integral part of the financial statements.

 

11

Core Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

COMMERCIAL MORTGAGE-BACKED SECURITIES (continued)

             

Fannie Mae Multifamily REMIC Trust, Series 2012-M13, Class A2, 2.377%, 5/25/2022

         Aaa           $ 400,000       $ 407,047      

Fannie Mae Multifamily REMIC Trust, Series 2012-M13, Class ASQ2, 1.246%, 8/25/2017

         Aaa             380,000         385,575      

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K-P01, Class A2, 1.72%, 1/25/2019

         Aaa             420,000         430,749      

FREMF Mortgage Trust, Series 2011-K701, Class B3,4, 4.286%, 7/25/2048

         A2             160,000         171,696      

Greenwich Capital Commercial Funding Corp., Series 2006-GG7, Class A44, 5.867%, 7/10/2038

         Aaa             415,000         476,590      

JP Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CB13, Class A44, 5.294%, 1/12/2043

         Aaa             650,000         715,654      

JP Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP5, Class A44, 5.20%, 12/15/2044

         Aaa             325,000         362,235      

JP Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP7, Class A44, 5.872%, 4/15/2045

         Aaa             435,000         500,603      

JP Morgan Chase Commercial Mortgage Securities Corp., Series 2010-C2, Class A33, 4.07%, 11/15/2043

         AAA2                   200,000         225,261      

LSTAR Commercial Mortgage Trust, Series 2011-1, Class A3, 3.913%, 6/25/2043

         Aaa             56,488         59,058      

Morgan Stanley Bank of America Merrill Lynch Trust, Series 2012-C5 Class A4, 3.176%, 8/15/2045

         Aaa             430,000         456,826      

Motel 6 Trust, Series 2012-MTL6, Class A23, 1.948%, 10/5/2025

         AAA2             300,000         302,242      

OBP Depositor LLC Trust, Series 2010-OBP, Class A3, 4.646%, 7/15/2045

         AAA2             100,000         117,352      

Vornado DP LLC Trust, Series 2010-VNO, Class A2FX3, 4.004%, 9/13/2028

         AAA2             245,000         276,764      

Wachovia Bank Commercial Mortgage Trust, Series 2005-C21, Class A44, 5.24%, 10/15/2044

         Aaa             132,732         146,924      

Wachovia Bank Commercial Mortgage Trust, Series 2006-C26, Class A34, 6.011%, 6/15/2045

         Aaa             280,000         324,861      

Wells Fargo Commercial Mortgage Trust, Series 2010-C1, Class A23, 4.393%, 11/15/2043

         Aaa             275,000         315,072      

Wells Fargo Commercial Mortgage Trust, Series 2012-LC5, Class A3, 2.918%, 10/15/2045

         Aaa             545,000         564,910      
         

 

 

     
            

TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES

             

(Identified Cost $8,624,839)

                   8,996,047      
         

 

 

     

MUNICIPAL BONDS - 0.7%

             

Monroe County Water Authority, Water Utility Impt., Revenue Bond, 6.339%, 8/1/2035

         Aa2             500,000         674,635      

New York City, Public Impt., G.O. Bond, 6.646%, 12/1/2031

         Aa2             500,000         614,925      
         

 

 

     
            

TOTAL MUNICIPAL BONDS

             

(Identified Cost $1,000,000)

             1,289,560      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

12

Core Bond Series

 

 

Investment Portfolio - December 31, 2012

 

                         PRINCIPAL
          AMOUNT/
         SHARES		    

  VALUE

  (NOTE 2)

       

U.S. GOVERNMENT AGENCIES - 4.2%

             

Mortgage-Backed Securities - 4.2%

             

Fannie Mae, Pool #888468, 5.50%, 9/1/2021

         $ 943,632       $ 1,022,312      

Fannie Mae, Pool #995233, 5.50%, 10/1/2021

           71,474         77,434      

Fannie Mae, Pool #888017, 6.00%, 11/1/2021

           84,582         92,950      

Fannie Mae, Pool #995329, 5.50%, 12/1/2021

           606,221         656,768      

Fannie Mae, Pool #888136, 6.00%, 12/1/2021

           107,617         118,263      

Fannie Mae, Pool #888810, 5.50%, 11/1/2022

           1,048,572         1,136,002      

Fannie Mae, Pool #AD0462, 5.50%, 10/1/2024

           64,339         69,583      

Fannie Mae, Pool #995876, 6.00%, 11/1/2038

                 1,403,995         1,537,109      

Fannie Mae, Pool #AE0061, 6.00%, 2/1/2040

           1,014,311               1,108,988      

Freddie Mac, Pool #G11850, 5.50%, 7/1/2020

           350,654         380,631      

Freddie Mac, Pool #G12610, 6.00%, 3/1/2022

           104,134         114,485      

Freddie Mac, Pool #G12655, 6.00%, 5/1/2022

           76,452         84,051      

Freddie Mac, Pool #G12988, 6.00%, 1/1/2023

           60,320         66,608      

Freddie Mac, Pool #G13078, 6.00%, 3/1/2023

           106,563         119,950      

Freddie Mac, Pool #G03332, 6.00%, 10/1/2037

           173,034         188,304      

Freddie Mac, Pool #G03696, 5.50%, 1/1/2038

           50,968         55,059      

Freddie Mac, Pool #G05671, 5.50%, 8/1/2038

           90,879         98,345      

Freddie Mac, Pool #G05900, 6.00%, 3/1/2040

           561,660         611,225      

Freddie Mac, Pool #G05906, 6.00%, 4/1/2040

           384,259         418,169      
         

 

 

     
            

TOTAL U.S. GOVERNMENT AGENCIES

             

(Identified Cost $7,827,579)

             7,956,236      
         

 

 

     
            

SHORT-TERM INVESTMENT - 3.0%

             

Dreyfus Cash Management, Inc. - Institutional Shares6, 0.06%,

             

(Identified Cost $5,666,873)

           5,666,873        5,666,873      
         

 

 

     

TOTAL INVESTMENTS - 97.9%

             

(Identified Cost $170,866,787)

             185,575,157      

OTHER ASSETS, LESS LIABILITIES - 2.1%

             4,040,668      
         

 

 

     

NET ASSETS - 100%

           $ 189,615,825      
         

 

 

     

G.O. Bond - General Obligation Bond

Impt. - Improvement

1Credit ratings from Moody’s (unaudited).

2Credit ratings from S&P (unaudited).

3Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. These securities have been sold under rule 144A and have been determined to be liquid under guidelines established by the Board of Directors. These securities amount to $12,448,961, or 6.6%, of the Series’ net assets as of December 31, 2012 (see Note 2 to the financial statements).

4The coupon rate is floating and is the effective rate as of December 31, 2012.

5The rate shown is a fixed rate as of December 31, 2012; the rate becomes floating, based on LIBOR plus a spread, in 2022.

6Rate shown is the current yield as of December 31, 2012.

The accompanying notes are an integral part of the financial statements.

 

13

Core Bond Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments, at value (identified cost $170,866,787) (Note 2)

    $ 185,575,157   

Receivable for fund shares sold

      2,097,855   

Interest receivable

      2,074,954   

Dividends receivable

      13,603   
  

 

 

  

TOTAL ASSETS

      189,761,569   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      94,580   

Accrued fund accounting and administration fees (Note 3)

      11,197   

Accrued transfer agent fees (Note 3)

      645   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Audit fees payable

      33,662   

Other payables and accrued expenses

      5,286   
  

 

 

  

TOTAL LIABILITIES

      145,744   
  

 

 

  

TOTAL NET ASSETS

    $ 189,615,825   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 164,064   

Additional paid-in-capital

      174,503,403   

Distributions in excess of net investment income

      (12,365 ) 

Accumulated net realized gain on investments

      252,353   

Net unrealized appreciation on investments

      14,708,370   
  

 

 

  

TOTAL NET ASSETS

    $ 189,615,825   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A
($189,615,825/16,406,424 shares)

    $ 11.56   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

14

Core Bond Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Interest

    $ 7,157,811   

Dividends

      271,627   
  

 

 

  

Total Investment Income

      7,429,438   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      1,049,024   

Fund accounting and administration fees (Note 3)

      74,020   

Transfer agent fees (Note 3)

      4,165   

Directors’ fees (Note 3)

      3,391   

Chief Compliance Officer service fees (Note 3)

      2,440   

Custodian fees

      11,084   

Miscellaneous

      73,447   
  

 

 

  

Total Expenses

      1,217,571   
  

 

 

  

NET INVESTMENT INCOME

      6,211,867   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

   

Net realized gain (loss) on investments

      2,750,729   

Net change in unrealized appreciation (depreciation) on investments

      6,969,384   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

      9,720,113   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 15,931,980   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

15

Core Bond Series

 

 

Statement of Changes in Net Assets

 

     FOR THE
YEAR ENDED
12/31/12		     FOR THE
YEAR ENDED
12/31/11		  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 6,211,867      $ 5,996,410   

Net realized gain (loss) on investments

      2,750,729        1,133,109   

Net change in unrealized appreciation (depreciation) on investments

      6,969,384        1,294,303   
  

 

 

    

 

 

  

Net increase from operations

      15,931,980        8,423,822   
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 8):

     

From net investment income

      (6,256,063 )      (6,177,113 ) 

From net realized gain on investments

      (2,295,666 )      (963,693 ) 
  

 

 

    

 

 

  

Total distributions to shareholders

      (8,551,729 )      (7,140,806 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      18,149,946        48,744,598   
  

 

 

    

 

 

  

Net increase in net assets

      25,530,197        50,027,614   

NET ASSETS:

     

Beginning of year

      164,085,628        114,058,014   
  

 

 

    

 

 

  

End of year (including distributions in excess of net investment income of $12,365 and undistributed net investment income of $29,970, respectively)

    $ 189,615,825      $ 164,085,628   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

16

Core Bond Series

 

 

Financial Highlights

 

     

 

FOR THE YEARS ENDED

  
     

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 11.05      $ 10.94      $ 10.38      $ 9.69      $ 10.05   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment income

      0.41 1      0.44 1      0.45 1      0.49 1      0.45   

Net realized and unrealized gain (loss) on investments

      0.66        0.18        0.48        0.62        (0.30 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      1.07        0.62        0.93        1.11        0.15   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net investment income

      (0.41 )      (0.44 )      (0.37 )      (0.42 )      (0.46 ) 

From net realized gain on investments

      (0.15 )      (0.07 )      —        —        (0.05 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions to shareholders

      (0.56 )      (0.51 )      (0.37 )      (0.42 )      (0.51 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 11.56      $ 11.05      $ 10.94      $ 10.38      $ 9.69   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000’s omitted)

    $ 189,616      $ 164,086      $ 114,058      $ 76,601      $ 53,071   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return2

      9.74 %      5.68 %      8.97 %      11.46 %      1.66 % 

Ratios (to average net assets)/

Supplemental Data:

           

Expenses*

      0.70 %      0.71 %      0.76 %      0.79 %      0.80 % 

Net investment income

      3.55 %      3.91 %      4.10 %      4.84 %      4.73 % 

Portfolio turnover

      31 %      18 %      23 %      67 %      53 % 
*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 Series, the expense ratio (to average net assets) would have increased by the following amount:    
     N/A        N/A        0.00 %3      0.00 %3      0.03 % 

1Calculated based on average shares outstanding during the year.

2Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total returns would have been lower had certain expenses not been waived or reimbursed during certain years.

3Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

17

Core Bond Series

 

 

Notes to Financial Statements

 

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 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 125 million have been designated as Core Bond Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ 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 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 an independent pricing service that utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings).

Short-term investments that mature in sixty days or less are 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

 

18

Core Bond Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Preferred securities:

            

  Financials

    $ 3,513,956       $ 3,513,956       $ —       $                     —   

  Debt securities:

            

  U.S. Treasury and other U.S. Government agencies

      7,956,236         —         7,956,236         —   

  States and political subdivisions (municipals)

      1,289,560         —         1,289,560         —   

  Corporate debt:

            

  Consumer Discretionary

      19,975,992         —         19,975,992         —   

  Consumer Staples

      4,182,305         —         4,182,305         —   

  Energy

      10,482,267         —         10,482,267         —   

  Financials

      63,382,625         —         63,382,625         —   

  Health Care

      3,993,764         —         3,993,764         —   

  Industrials

      20,890,323         —         20,890,323         —   

  Information Technology

      12,268,215         —         12,268,215         —   

  Materials

      13,755,572         —         13,755,572         —   

  Telecommunication Services

      2,567,684         —         2,567,684         —   

  Utilities

      3,901,931         —         3,901,931         —   

  Convertible corporate debt:

            

  Health Care

      120,375         —         120,375         —   

  Information Technology

      1,388,737         —         1,388,737         —   

  Asset-backed securities

      1,242,695         —         1,242,695         —   

  Commercial mortgage-backed securities

      8,996,047         —         8,996,047         —   

  Mutual fund

      5,666,873         5,666,873         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       185,575,157       $       9,180,829       $       176,394,328       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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

 

19

Core Bond Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Transactions, Investment Income and Expenses (continued)

 

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.

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 December 31, 2012.

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 December 31, 2012.

Restricted Securities

Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of the Series’ Investment Portfolio.

Illiquid Securities

A security may be considered illiquid if so deemed in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board. Securities that are illiquid are marked with the applicable footnote on the Investment Portfolio. No such investments were held by the Series on December 31, 2012.

 

20

Core Bond Series

 

 

Notes to Financial Statements (continued)

 

 

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 December 31, 2012, 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, 2009 through December 31, 2012. 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.60% of the Series’ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend,

 

21

Core Bond Series

 

 

Notes to Financial Statements (continued)

 

 

3. Transactions with Affiliates (continued)

 

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.

The Advisor has contractually agreed, until at least April 30, 2014, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.80% of average daily net assets each year. The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $71,654,717 and $52,144,166 respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in shares of Core Bond Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE YEAR ENDED  12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

     1,780,781       $       20,734,234                  4,653,992       $ 51,537,767   

Reinvested

     734,730        8,458,577        639,771        7,046,886   

Repurchased

     (953,817 )      (11,042,865 )      (871,679 )      (9,840,055 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

               1,561,694       $ 18,149,946        4,422,084       $       48,744,598   
 

 

 

    

 

 

    

 

 

    

 

 

  

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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

 

22

Core Bond Series

 

 

Notes to Financial Statements (continued)

 

 

6. Financial Instruments (continued)

 

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 December 31, 2012.

 

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 accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including investments in hybrid securities, convertibles, and post-October losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the fiscal year ended December 31, 2012, $1,861 was reclassified within the capital accounts from Accumulated Net Realized Gain on Investments to Undistributed Net Investment Income. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR
ENDED 12/31/12		     FOR THE YEAR
ENDED 12/31/11		       

Ordinary income

   $ 6,235,528          $ 6,177,402          

Long-term capital gains

     2,316,201            963,404          

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 170,879,151   

Unrealized appreciation

      14,771,383   

Unrealized depreciation

      (75,377 ) 
  

 

 

  

Net unrealized appreciation

    $ 14,696,006   
  

 

 

  

Undistributed long-term capital gains

    $ 252,353   
 

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010, may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

At December 31, 2012, the Series did not have pre or post-enactment net capital loss carryforwards.

 

23

Core Bond Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Core Bond Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Core Bond Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

24

Core Bond Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal year $99,798 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

The Series hereby reports $2,316,201 as capital gains for its taxable year ended December 31, 2012, or if different, the maximum allowable under tax law.

For corporate shareholders, the percentage of investment income (dividend income plus short-term gain, if any) that qualifies for the dividends received deduction for the current fiscal year is 1.63%, or if different, the maximum allowable under tax law.

The percentage of ordinary income distribution paid by the Series during the year ended December 31, 2012 which was derived from U.S. Treasury securities is 0.08%.

 

25

Core Bond Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

26

Core Bond Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

27

Core Bond Series

 

 

Directors’ and Officers’ Information

(unaudited)

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002.
   President since 2004. Vice President 1984-2003.
Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003-2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995-2008 and Chairman (non-executive) 2004-2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Fannie Mae (1995-2008)
   The Ashley Group (1995-2008)
     Genesee Corporation (1987-2007)
Name:    Peter L. Faber
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006-2012), Partner (1995-2006 & 2013-present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Partnership for New York City, Inc. (non-profit)(1989-2010)
   New York Collegium (non-profit)(2004-2011))
     Boston Early Music Festival (non-profit)
Name:    Harris H. Rusitzky
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994; Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

28

Core Bond Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005-2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Incyte Corp. (2000-present)
   ViroPharma, Inc. (2000-present)
   HLTH Corp. (2000-present)
   Cheyne Capital International (2000-present)
   MPM Bio-equities (2000-2009)
   GMP Companies (2000-2012)
     HoustonPharma (2000-2009)
Name:    Chester N. Watson
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003-2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004-2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, – Manning & Napier Advisors, LLC Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 – Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

29

Core Bond Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

30

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      
Commission’s (SEC) web site    http://www.sec.gov   

Proxy Voting Record

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

Quarterly Portfolio Holdings

The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNCOB-12/12-AR

 

LOGO

 

        CORE PLUS BOND SERIES                          

 

 

 

 

www.manning-napier.com

      

LOGO         

Core Plus Bond Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors´ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors´ appetite for risk shifted frequently throughout the last twelve months.

Even with the myriad of looming uncertainties, a number of issues pushed forward toward more clarity and resolution as the year progressed. For example, during the fourth quarter, progress was made with respect to “fiscal cliff” headwinds in the U.S. Also, the Federal Open Market Committee (FOMC) stated it expects to keep its highly accommodative monetary policy stance in place at least until unemployment falls below 6.5%, provided that near-term inflation remains within 0.5% of its 2% goal and longer-term inflation remains “well anchored.” Additionally, European Central Bank President Mario Draghi´s commitment earlier in the year to do “whatever it takes” to preserve the Euro, along with positive developments in Greece in the fourth quarter, also aided wavering investor concerns as the year came to a close. Given this backdrop, although equity and fixed income markets generally performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor feels are going to continue to weigh on global economic growth.

Overall, each of the major sectors of the fixed income market experienced positive absolute performance. This strong performance was led by corporate bonds, where high yield bonds were the top performer in 2012, followed by their investment grade counterparts. Beyond corporate bonds, Treasury Inflation Protected Securities (TIPS) and municipal bonds also performed well in 2012. In contrast, although Treasuries and mortgages ended the year with positive performance, they generally trailed other sectors in 2012.

Given the market environment, the Bank of America Merrill Lynch U.S. Corporate, Government & Mortgage Index returned 4.42% during the year. Similarly, the Series also produced strong absolute returns in 2012. However, the Series also materially outperformed the index, returning 10.94%.

Throughout 2012, the Core Plus Bond Series maintained a heavy weighting to corporate bonds relative to the benchmark because the Advisor believes the fundamentals and supply and demand dynamics within this sector remain attractive. As of the end of the year, the Series had 84.7% of its assets invested in corporate bonds and preferred stocks. With corporate bonds outperforming Treasuries for the year, the Series´ large allocation to this area positively impacted returns relative to the benchmark in 2012. Further, the Series´ relative underweight allocation as compared to the benchmark to the mortgage and Treasury sectors also aided performance.

Managing to an index can prove limiting and present challenges to reaching investors´ objectives. As an active fixed income manager, the Advisor´s investment decisions are based on prevailing market conditions and fundamentals, which allow us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. This philosophy has guided the Advisor´s choices in selectively choosing the Series´ investments. Through our security selection process, we feel we have the ability to manage risks, while simultaneously providing compelling income and total return potential to help the Series´ investors reach their goals.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Core Plus Bond Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012
    

 ONE

 YEAR1                

  

 FIVE

 YEAR                 

    SINCE
 INCEPTION2        

Manning & Napier Fund, Inc. - Core Plus Bond Series3

     10.94%    8.22%    6.61%

Bank of America (BofA) Merrill Lynch U.S. Corporate, Government & Mortgage Index4

     4.42%    6.03%    5.66%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Core Plus Bond Series from its inception2 (4/21/05) to present (12/31/12) to the BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Index are calculated from April 21, 2005, the Series’ inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 0.75%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.75% for the year ended December 31, 2012.

4The unmanaged BofA Merrill Lynch U.S. Corporate, Government & Mortgage Index (formerly a Merrill Lynch Index) is a market value weighted measure that represents U.S. government, corporate, and pass-through securities issued by entities within the United States, by supranational entities, or by entities headquartered outside of the United States but who have issued dollar-denominated securities within the United States. The Index only includes investment-grade securities with maturities of greater than one year. The Index returns assume reinvestment of coupons and, unlike the Series returns, do not reflect any fees or expenses.

 

2

Core Plus Bond Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series‘ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

   

 BEGINNING

 ACCOUNT VALUE                             

 7/1/12

  

 ENDING

 ACCOUNT VALUE                             

 12/31/12

  

 EXPENSES PAID

 DURING PERIOD*                             

 7/1/12-12/31/12

Actual

    $1,000.00    $1,052.10    $3.88

Hypothetical

(5% return before expenses)

    $1,000.00    $1,021.42    $3.82

*Expenses are equal to the Series‘ annualized expense ratio (for the six-month period) of 0.75%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data.

 

3

Core Plus Bond Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

4

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS - 82.7%

             

Convertible Corporate Bonds - 1.1%

             

Financials - 0.5%

             

Real Estate Investment Trusts (REITS) - 0.5%

             

BioMed Realty LP2, 3.75%, 1/15/2030

         WR3           $ 2,375,000       $ 2,778,750       
         

 

 

     

Health Care - 0.1%

             

Health Care Equipment & Supplies - 0.1%

             

Alere, Inc., 3.00%, 5/15/2016

         CCC4             655,000         612,425      
         

 

 

     

Information Technology - 0.4%

             

Computers & Peripherals - 0.4%

             

EMC Corp., 1.75%, 12/1/2013

         A4             1,685,000         2,689,681      
         

 

 

     

Materials - 0.1%

             

Containers & Packaging - 0.1%

             

Owens-Brockway Glass Container, Inc.2, 3.00%, 6/1/2015

         Ba3             750,000         742,031      
         

 

 

     

Total Convertible Corporate Bonds

             

(Identified Cost $6,214,246)

                   6,822,887      
         

 

 

     

Non-Convertible Corporate Bonds - 81.6%

             

Consumer Discretionary - 11.3%

             

Auto Components - 0.1%

             

Exide Technologies, 8.625%, 2/1/2018

         B2             435,000         368,663      

UCI International, Inc., 8.625%, 2/15/2019

         B3             435,000         431,194      
         

 

 

     
            799,857      
         

 

 

     

Hotels, Restaurants & Leisure - 1.2%

             

Choice Hotels International, Inc., 5.70%, 8/28/2020

         Baa3             730,000         792,050      

International Game Technology, 7.50%, 6/15/2019

         Baa2                   2,755,000         3,261,217      

Yum! Brands, Inc., 3.875%, 11/1/2020

         Baa3             3,295,000         3,579,530      
         

 

 

     
            7,632,797      
         

 

 

     

Household Durables - 1.8%

             

NVR, Inc., 3.95%, 9/15/2022

         Baa2             6,225,000         6,450,687      

Taylor Morrison Communities, Inc. - Monarch Communities, Inc.2, 7.75%, 4/15/2020

         B2             430,000         455,800      

Tupperware Brands Corp., 4.75%, 6/1/2021

         Baa3             4,000,000         4,280,188      
         

 

 

     
            11,186,675      
         

 

 

     

Media - 4.7%

             

Cablevision Systems Corp., 8.625%, 9/15/2017

         B1             105,000         122,456      

DIRECTV Holdings LLC - DIRECTV Financing Co., Inc., 5.20%, 3/15/2020

         Baa2             4,710,000         5,344,974      

Discovery Communications LLC, 5.05%, 6/1/2020

         Baa2             4,875,000         5,641,126      

MDC Partners, Inc. (Canada), 11.00%, 11/1/2016

         B3             370,000         406,537      

Nara Cable Funding Ltd. (Spain)2, 8.875%, 12/1/2018

         B1             480,000         488,400      

NBCUniversal Media LLC, 5.15%, 4/30/2020

         Baa2             5,510,000         6,531,857      

Sirius XM Radio, Inc.2, 8.75%, 4/1/2015

         B1             350,000         396,375      

Time Warner, Inc., 3.15%, 7/15/2015

         Baa2             3,000,000         3,172,485      

The accompanying notes are an integral part of the financial statements.

 

5

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS (continued)

  

     

Non-Convertible Corporate Bonds (continued)

             

Consumer Discretionary (continued)

             

Media (continued)

             

Time Warner, Inc., 4.75%, 3/29/2021

         Baa2           $ 4,110,000       $ 4,723,257      

The Walt Disney Co., 1.35%, 8/16/2016

         A2             3,000,000         3,040,869      
         

 

 

     
            29,868,336      
         

 

 

     

Multiline Retail - 0.6%

             

Target Corp., 6.00%, 1/15/2018

         A2             3,225,000         3,965,415      
         

 

 

     

Specialty Retail - 2.3%

             

Advance Auto Parts, Inc., 4.50%, 1/15/2022

         Baa3             1,650,000         1,722,615      

Dufry Finance SCA (Switzerland)2, 5.50%, 10/15/2020

         Ba3             365,000         377,775      

The Home Depot, Inc., 5.40%, 3/1/2016

         A3             4,325,000         4,940,949      

Lowe’s Companies, Inc., 6.10%, 9/15/2017

         A3             3,175,000         3,855,285      

O’Reilly Automotive, Inc., 4.875%, 1/14/2021

         Baa3             2,500,000         2,769,045      

Rent-A-Center, Inc., 6.625%, 11/15/2020

         Ba3             500,000         545,000      
         

 

 

     
            14,210,669      
         

 

 

     

Textiles, Apparel & Luxury Goods - 0.6%

             

Jones Group, Inc. - Apparel Group Holdings - Apparel Group USA - Footwear Accessories Retail, 6.875%, 3/15/2019

         Ba3             380,000         395,200      

VF Corp., 5.95%, 11/1/2017

         A3             2,815,000         3,329,036      
         

 

 

     
            3,724,236      
         

 

 

     

Total Consumer Discretionary

             71,387,985      
         

 

 

     

Consumer Staples - 2.1%

             

Beverages - 0.6%

             

The Coca-Cola Co., 1.50%, 11/15/2015

         Aa3                   3,000,000               3,072,213      

Constellation Brands, Inc., 7.25%, 9/1/2016

         Ba1             650,000         750,750      
         

 

 

     
            3,822,963      
         

 

 

     

Food Products - 1.5%

             

C&S Group Enterprises LLC2, 8.375%, 5/1/2017

         B1             680,000         719,100      

FAGE Dairy Industry S.A. - FAGE USA Dairy Industry, Inc. (Greece)2, 9.875%, 2/1/2020

         B3             375,000         398,437      

Kraft Foods Group, Inc.2, 6.125%, 8/23/2018

         Baa2             2,670,000         3,271,084      

Minerva Luxembourg S.A. (Brazil)2, 12.25%, 2/10/2022

         B2             640,000         766,400      

Mondelez International, Inc., 6.125%, 2/1/2018

         Baa2             940,000         1,143,765      

Shearer’s Foods LLC - Chip Finance Corp.2, 9.00%, 11/1/2019

         B3             375,000         393,750      

Tyson Foods, Inc., 4.50%, 6/15/2022

         Baa3             2,350,000         2,543,913      
         

 

 

     
            9,236,449      
         

 

 

     

Household Products - 0.0%*

             

The Procter & Gamble Co., 4.85%, 12/15/2015

         Aa3             25,000         28,023      
         

 

 

     

Total Consumer Staples

             13,087,435      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

6

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS (continued)

  

       

Non-Convertible Corporate Bonds (continued)

             

Energy - 5.4%

             

Energy Equipment & Services - 3.1%

             

Baker Hughes, Inc., 7.50%, 11/15/2018

         A2           $ 3,155,000       $ 4,179,589      

Calfrac Holdings LP (Canada)2, 7.50%, 12/1/2020

         B1             745,000         737,550      

Global Geophysical Services, Inc., 10.50%, 5/1/2017

         B3             370,000         329,300      

Petroleum Geo-Services ASA (Norway)2, 7.375%, 12/15/2018

         Ba2             1,000,000         1,080,000      

Schlumberger Oilfield plc2, 4.20%, 1/15/2021

         A1             2,630,000         2,974,817      

SESI LLC, 6.375%, 5/1/2019

         Ba2             710,000         759,700      

Shelf Drilling Holdings Ltd. (United Arab Emirates)2, 8.625%, 11/1/2018

         B1             375,000         384,375      

Sidewinder Drilling, Inc.2, 9.75%, 11/15/2019

         B3             375,000         376,875      

Thermon Industries, Inc., 9.50%, 5/1/2017

         B1             346,000         384,060      

Weatherford International Ltd., 9.625%, 3/1/2019

         Baa2             6,175,000         8,056,121      
         

 

 

     
            19,262,387      
         

 

 

     

Oil, Gas & Consumable Fuels - 2.3%

             

Carrizo Oil & Gas, Inc., 7.50%, 9/15/2020

         B3             405,000         416,137      

Chesapeake Oilfield Operating LLC - Chesapeake Oilfield Finance,

Inc.2, 6.625%, 11/15/2019

         Ba3             775,000         730,437      

CVR Refining LLC - Coffeyville Finance, Inc.2, 6.50%, 11/1/2022

         Ba3             375,000         373,125      

EOG Resources, Inc., 2.625%, 3/15/2023

         A3             2,765,000         2,784,455      

EPL Oil & Gas, Inc.2, 8.25%, 2/15/2018

         Caa1             455,000         467,513      

EV Energy Partners LP - EV Energy Finance Corp., 8.00%, 4/15/2019

         B3             740,000         785,325      

Gulfport Energy Corp.2, 7.75%, 11/1/2020

         B3             565,000         580,537      

Northern Tier Energy LLC - Northern Tier Finance Corp.2, 7.125%, 11/15/2020

         B1             380,000         393,300      

PBF Holding Co. LLC - PBF Finance Corp.2, 8.25%, 2/15/2020

         Ba3             320,000         344,800      

Petrobras International Finance Co. (Brazil), 5.375%, 1/27/2021

         A3                   6,900,000               7,768,158      
         

 

 

     
            14,643,787      
         

 

 

     

Total Energy

             33,906,174      
         

 

 

     

Financials - 35.4%

             

Capital Markets - 9.4%

             

Credit Suisse AG (Switzerland)2, 2.60%, 5/27/2016

         Aaa             4,295,000         4,532,118      

GFI Group, Inc., 8.625%, 7/19/2018

         Ba2             480,000         421,200      

Goldman Sachs Capital II5, 4.00%, 6/1/2043

         Ba2             4,205,000         3,284,441      

The Goldman Sachs Group, Inc., 6.15%, 4/1/2018

         A3             3,385,000         3,976,590      

The Goldman Sachs Group, Inc., 5.375%, 3/15/2020

         A3             4,510,000         5,168,595      

The Goldman Sachs Group, Inc., 5.25%, 7/27/2021

         A3             3,085,000         3,516,826      

Innovation Ventures LLC - Innovation Ventures Finance Corp.2, 9.50%, 8/15/2019

         B2             370,000         347,800      

Jefferies Group, Inc., 5.125%, 4/13/2018

         Baa3             4,000,000         4,200,000      

Jefferies Group, Inc., 8.50%, 7/15/2019

         Baa3             6,925,000         8,275,375      

Merrill Lynch & Co., Inc., 6.875%, 4/25/2018

         Baa2             2,295,000         2,766,517      

Morgan Stanley, 5.55%, 4/27/2017

         Baa1             3,544,000         3,929,002      

The accompanying notes are an integral part of the financial statements.

 

7

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS (continued)

  

       

Non-Convertible Corporate Bonds (continued)

             

Financials (continued)

             

Capital Markets (continued)

             

Morgan Stanley, 7.30%, 5/13/2019

         Baa1           $ 4,310,000       $ 5,237,598      

Morgan Stanley, 5.50%, 1/26/2020

         Baa1             4,485,000         5,031,242      

Morgan Stanley, 5.75%, 1/25/2021

         Baa1             5,400,000         6,166,989      

Morgan Stanley, 5.50%, 7/28/2021

         Baa1             2,320,000         2,634,068      
         

 

 

     
            59,488,361      
         

 

 

     

Commercial Banks - 5.3%

             

KeyBank National Association, 5.45%, 3/3/2016

         Baa1             4,640,000         5,186,926      

Manufacturers & Traders Trust Co., 6.625%, 12/4/2017

         A3             7,665,000         9,271,500      

National Bank of Canada (Canada)2, 2.20%, 10/19/2016

         Aaa             2,700,000         2,841,480      

National City Corp., 6.875%, 5/15/2019

         Baa1             1,920,000         2,395,356      

PNC Bank National Association, 5.25%, 1/15/2017

         A3             5,640,000         6,425,302      

Royal Bank of Canada (Canada), 1.20%, 9/19/2017

         Aaa             1,550,000         1,553,720      

Santander Holdings USA, Inc., 3.00%, 9/24/2015

         Baa2             2,000,000         2,036,678      

Santander Holdings USA, Inc., 4.625%, 4/19/2016

         Baa2             750,000         784,117      

The Toronto-Dominion Bank (Canada)2, 1.625%, 9/14/2016

         Aaa             1,400,000         1,443,820      

Westpac Banking Corp. (Australia)2, 1.25%, 12/15/2017

         Aaa             1,475,000               1,473,083      
         

 

 

     
            33,411,982      
         

 

 

     

Consumer Finance - 2.0%

             

American Express Co., 7.25%, 5/20/2014

         A3             3,000,000         3,264,621      

American Express Co.2, 2.65%, 12/2/2022

         A3             4,525,000         4,506,981      

American Express Co.5, 6.80%, 9/1/2066

         Baa2             3,445,000         3,699,069      

Credit Acceptance Corp., 9.125%, 2/1/2017

         B1             530,000         579,025      

General Motors Financial Co., Inc.2, 4.75%, 8/15/2017

         Ba3             600,000         630,894      
         

 

 

     
            12,680,590      
         

 

 

     

Diversified Financial Services - 6.3%

             

Bank of America Corp., 5.75%, 8/15/2016

         Baa2             3,715,000         4,062,471      

The Bear Stearns Companies LLC, 7.25%, 2/1/2018

         A2             2,195,000         2,750,429      

Citigroup, Inc., 8.50%, 5/22/2019

         Baa2             11,876,000         15,968,909      

CME Group, Inc., 3.00%, 9/15/2022

         Aa3                   6,010,000         6,098,016      

CNG Holdings, Inc.2, 9.375%, 5/15/2020

         B3             705,000         715,575      

JPMorgan Chase & Co., 6.30%, 4/23/2019

         A2             4,300,000         5,305,177      

JPMorgan Chase Bank National Association, 5.875%, 6/13/2016

         A1             3,000,000         3,421,275      

Ladder Capital Finance Holdings LLLP - Ladder Capital Finance Corp.2, 7.375%, 10/1/2017

         Ba3             480,000         493,200      

SPL Logistics Escrow LLC - SPL Logistics Finance Corp.2, 8.875%, 8/1/2020

         B2             715,000         757,900      
         

 

 

     
            39,572,952      
         

 

 

     

Insurance - 5.0%

             

American International Group, Inc., 4.25%, 5/15/2013

         Baa1             1,840,000         1,862,349      

The accompanying notes are an integral part of the financial statements.

 

8

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS (continued)

  

       

Non-Convertible Corporate Bonds (continued)

             

Financials (continued)

             

Insurance (continued)

             

American International Group, Inc., 4.875%, 6/1/2022

         Baa1           $ 5,625,000       $ 6,421,618      

American International Group, Inc., 6.25%, 3/15/2037

         Baa2             2,070,000         2,209,725      

Fidelity National Financial, Inc., 6.60%, 5/15/2017

         Baa3             5,495,000         6,194,134      

Genworth Financial, Inc., 7.625%, 9/24/2021

         Baa3             5,980,000         6,599,343      

Hartford Financial Services Group, Inc., 5.125%, 4/15/2022

         Baa3             6,915,000         7,978,873      

Hub International Ltd.2, 8.125%, 10/15/2018

         Caa2             480,000         492,000      
         

 

 

     
            31,758,042      
         

 

 

     

Real Estate Investment Trusts (REITS) - 7.4%

             

BioMed Realty LP, 3.85%, 4/15/2016

         Baa3             2,750,000         2,900,414      

Boston Properties LP, 5.875%, 10/15/2019

         Baa2             4,455,000         5,312,169      

Camden Property Trust, 5.70%, 5/15/2017

         Baa1             4,025,000         4,632,634      

Digital Realty Trust LP, 5.875%, 2/1/2020

         Baa2                   1,000,000         1,142,607      

Digital Realty Trust LP, 5.25%, 3/15/2021

         Baa2             4,180,000         4,626,319      

HCP, Inc., 6.70%, 1/30/2018

         Baa1             4,500,000         5,427,396      

Health Care REIT, Inc., 4.95%, 1/15/2021

         Baa2             3,450,000         3,773,375      

Mack-Cali Realty LP, 7.75%, 8/15/2019

         Baa2             2,665,000         3,302,708      

Simon Property Group LP, 6.125%, 5/30/2018

         A3             3,000,000         3,654,336      

Simon Property Group LP, 10.35%, 4/1/2019

         A3             3,670,000         5,248,052      

UDR, Inc., 4.625%, 1/10/2022

         Baa2             5,700,000         6,268,467      
         

 

 

     
            46,288,477      
         

 

 

     

Total Financials

             223,200,404      
         

 

 

     

Health Care - 1.7%

             

Health Care Equipment & Supplies - 0.2%

             

Fresenius Medical Care US Finance, Inc. (Germany)2, 6.50%, 9/15/2018

         Ba2             555,000         620,213      

Fresenius US Finance II, Inc.2, 9.00%, 7/15/2015

         Ba1             445,000         512,863      
         

 

 

     
                1,133,076      
         

 

 

     

Health Care Providers & Services - 1.0%

             

CHS - Community Health Systems, Inc., 5.125%, 8/15/2018

         Ba3             155,000         161,587      

CHS - Community Health Systems, Inc., 7.125%, 7/15/2020

         B3             210,000         224,175      

HCA, Inc., 6.375%, 1/15/2015

         B3             100,000         108,125      

HCA, Inc., 6.50%, 2/15/2020

         Ba3             715,000         804,375      

Health Management Associates, Inc., 6.125%, 4/15/2016

         BB4             515,000         556,200      

UnitedHealth Group, Inc., 4.70%, 2/15/2021

         A3             4,000,000         4,659,988      
         

 

 

     
            6,514,450      
         

 

 

     

Life Sciences Tools & Services - 0.4%

             

Thermo Fisher Scientific, Inc., 4.50%, 3/1/2021

         Baa1             2,400,000         2,711,758      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

9

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS (continued)

             

Non-Convertible Corporate Bonds (continued)

             

Health Care (continued)

             

Pharmaceuticals - 0.1%

             

Valeant Pharmaceuticals International (Canada)2, 6.75%, 8/15/2021

         B1           $ 395,000       $ 423,637      
         

 

 

     

Total Health Care

             10,782,921      
         

 

 

     

Industrials - 9.8%

             

Aerospace & Defense - 2.0%

             

The Boeing Co., 6.00%, 3/15/2019

         A2             3,465,000         4,315,959      

Ducommun, Inc., 9.75%, 7/15/2018

         B3             550,000         591,250      

Textron, Inc., 4.625%, 9/21/2016

         Baa3             3,100,000         3,376,508      

Textron, Inc., 7.25%, 10/1/2019

         Baa3             3,790,000         4,627,795      
         

 

 

     
            12,911,512      
         

 

 

     

Air Freight & Logistics - 0.2%

             

Aguila 3 S.A. (Luxembourg)2, 7.875%, 1/31/2018

         B2             600,000         636,000      

FedEx Corp., 8.00%, 1/15/2019

         Baa1             435,000         572,897      
         

 

 

     
            1,208,897      
         

 

 

     

Airlines - 0.8%

             

Continental Airlines, Inc.2, 6.75%, 9/15/2015

         Ba2             535,000         561,750      

Delta Air Lines Pass-Through Trust, Series 2010-1, Class B, 6.375%, 1/2/2016

         Ba3             165,000         171,600      

Delta Air Lines Pass-Through Trust, Series 2010-2, Class B, 6.75%, 11/23/2015

         Ba3             365,000         379,600      

Southwest Airlines Co., 5.25%, 10/1/2014

         Baa3                   3,925,000         4,177,330      
         

 

 

     
            5,290,280      
         

 

 

     

Commercial Services & Supplies - 0.7%

             

Clean Harbors, Inc., 5.25%, 8/1/2020

         Ba2             365,000         380,513      

Garda World Security Corp. (Canada)2, 9.75%, 3/15/2017

         B2             380,000         398,050      

Waste Management, Inc., 7.375%, 3/11/2019

         Baa3             2,950,000         3,751,081      
         

 

 

     
            4,529,644      
         

 

 

     

Industrial Conglomerates - 2.7%

             

General Electric Capital Corp., 5.625%, 5/1/2018

         A1             2,150,000         2,553,198      

General Electric Capital Corp., 5.50%, 1/8/2020

         A1             3,105,000         3,675,423      

General Electric Capital Corp., 5.30%, 2/11/2021

         A2             6,150,000         7,138,809      

General Electric Co., 5.25%, 12/6/2017

         Aa3             2,100,000         2,476,213      

Tyco Electronics Group S.A. (Switzerland), 4.875%, 1/15/2021

         Baa2             800,000         897,506      
         

 

 

     
            16,741,149      
         

 

 

     

Machinery - 2.4%

             

Caterpillar Financial Services Corp., 7.05%, 10/1/2018

         A2             3,385,000               4,355,730      

Dynacast International LLC - Dynacast Finance, Inc., 9.25%, 7/15/2019

         B2             535,000         572,450      

John Deere Capital Corp., 5.75%, 9/10/2018

         A2             3,795,000         4,627,798      

Joy Global, Inc., 5.125%, 10/15/2021

         Baa2             2,350,000         2,590,515      

The accompanying notes are an integral part of the financial statements.

 

10

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS (continued)

             

Non-Convertible Corporate Bonds (continued)

             

Industrials (continued)

             

Machinery (continued)

             

Kennametal, Inc., 3.875%, 2/15/2022

         Baa2           $ 2,925,000       $ 3,054,300      
         

 

 

     
            15,200,793      
         

 

 

     

Marine - 0.1%

             

Navios Maritime Holdings, Inc. - Navios Maritime Finance US, Inc., 8.875%, 11/1/2017

         B1             535,000         533,663      
         

 

 

     

Road & Rail - 0.9%

             

Union Pacific Corp., 5.65%, 5/1/2017

         Baa1             3,675,000         4,312,352      

Union Pacific Corp., 2.95%, 1/15/2023

         Baa1                   1,100,000         1,137,316      
         

 

 

     
            5,449,668      
         

 

 

     

Total Industrials

                   61,865,606      
         

 

 

     

Information Technology - 3.6%

             

Communications Equipment - 0.1%

             

Hughes Satellite Systems Corp., 6.50%, 6/15/2019

         Ba3             325,000         358,313      

ViaSat, Inc., 6.875%, 6/15/2020

         B1             500,000         522,500      
         

 

 

     
            880,813      
         

 

 

     

Computers & Peripherals - 1.0%

             

Hewlett-Packard Co., 2.125%, 9/13/2015

         Baa1             6,615,000         6,610,429      
         

 

 

     

Electronic Equipment, Instruments & Components - 0.8%

             

Amphenol Corp., 4.00%, 2/1/2022

         Baa2             1,500,000         1,586,221      

Corning, Inc., 4.25%, 8/15/2020

         A3             2,500,000         2,791,365      

CPI International, Inc., 8.00%, 2/15/2018

         B3             390,000         380,737      
         

 

 

     
            4,758,323      
         

 

 

     

Office Electronics - 0.6%

             

Xerox Corp.5, 1.71%, 9/13/2013

         Baa2             3,900,000         3,925,572      
         

 

 

     

Software - 1.1%

             

Autodesk, Inc., 3.60%, 12/15/2022

         Baa2             6,260,000         6,287,607      

Nuance Communications, Inc.2, 5.375%, 8/15/2020

         Ba3             375,000         391,875      
         

 

 

     
            6,679,482      
         

 

 

     

Total Information Technology

             22,854,619      
         

 

 

     

Materials - 7.3%

             

Chemicals - 1.0%

             

E.I. du Pont de Nemours & Co., 6.00%, 7/15/2018

         A2             1,635,000         2,017,811      

Eastman Chemical Co., 3.60%, 8/15/2022

         Baa2             3,000,000         3,141,969      

Nufarm Australia Ltd. (Australia)2, 6.375%, 10/15/2019

         Ba3             735,000         768,075      

Taminco Global Chemical Corp. (Belgium)2, 9.75%, 3/31/2020

         Caa1             315,000        344,925      
         

 

 

     
            6,272,780      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

11

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS (continued)

             

Non-Convertible Corporate Bonds (continued)

             

Materials (continued)

             

Containers & Packaging - 0.3%

             

Consolidated Container Co. LLC - Consolidated Container Capital, Inc.2, 10.125%, 7/15/2020

         Caa1           $ 715,000       $ 765,050      

Reynolds Group Issuer, Inc. - Reynolds Group Issuer LLC - Reynolds Group Issuer S.A.2, 5.75%, 10/15/2020

         B1             580,000         598,850      

Sealed Air Corp.2, 6.50%, 12/1/2020

         B1             385,000         415,800      
         

 

 

     
            1,779,700      
         

 

 

     

Metals & Mining - 4.8%

             

Alcoa, Inc., 5.87%, 2/23/2022

         Baa3             5,685,000         6,132,120      

Allegheny Technologies, Inc., 5.95%, 1/15/2021

         Baa3             5,185,000         5,743,787      

BHP Billiton Finance (USA) Ltd. (Australia), 6.50%, 4/1/2019

         A1             3,230,000         4,119,219      

Calcipar S.A. (Luxembourg)2, 6.875%, 5/1/2018

         B1             450,000         459,000      

Cliffs Natural Resources, Inc., 5.90%, 3/15/2020

         Baa3                   1,000,000         1,063,339      

Cliffs Natural Resources, Inc., 4.80%, 10/1/2020

         Baa3             2,000,000         1,987,602      

FMG Resources August 2006 Pty. Ltd. (Australia)2, 6.875%, 2/1/2018

         B1             355,000         366,537      

Freeport-McMoRan Copper & Gold, Inc., 3.55%, 3/1/2022

         Baa3             2,925,000         2,900,945      

Rio Tinto Finance USA Ltd. (United Kingdom), 3.75%, 9/20/2021

         A3             4,000,000         4,277,196      

Shale-Inland Holdings LLC - Shale-Inland Finance Corp.2, 8.75%, 11/15/2019

         B3             375,000         392,813      

Teck Resources Ltd. (Canada), 3.00%, 3/1/2019

         Baa2             3,010,000         3,103,033      
         

 

 

     
            30,545,591      
         

 

 

     

Paper & Forest Products - 1.2%

             

International Paper Co., 7.50%, 8/15/2021

         Baa3             5,330,000         6,975,270      

Smurfit Kappa Acquisitions (Ireland)2, 4.875%, 9/15/2018

         Ba2             730,000         744,600      
         

 

 

     
            7,719,870      
         

 

 

     

Total Materials

             46,317,941      
         

 

 

     

Telecommunication Services - 2.8%

             

Diversified Telecommunication Services - 1.2%

             

Inmarsat Finance plc (United Kingdom)2, 7.375%, 12/1/2017

         Ba2             295,000         317,125      

UPCB Finance III Ltd. (Netherlands)2, 6.625%, 7/1/2020

         Ba3             155,000         166,044      

UPCB Finance VI Ltd. (Netherlands)2, 6.875%, 1/15/2022

         Ba3             410,000         443,825      

Verizon Communications, Inc., 2.00%, 11/1/2016

         A3             3,000,000         3,104,805      

Verizon Communications, Inc., 8.75%, 11/1/2018

         A3                   1,386,000               1,924,419      

Virgin Media Finance plc (United Kingdom), 4.875%, 2/15/2022

         Ba2             375,000         383,437      

Wind Acquisition Finance S.A. (Italy)2, 7.25%, 2/15/2018

         Ba3             525,000         531,563      

Windstream Corp., 7.50%, 6/1/2022

         Ba3             485,000         514,100      
         

 

 

     
            7,385,318      
         

 

 

     

Wireless Telecommunication Services - 1.6%

             

Crown Castle Towers LLC2, 6.113%, 1/15/2020

         A2             4,070,000         4,902,246      

Crown Castle Towers LLC2, 4.883%, 8/15/2020

         A2             610,000         688,301      

The accompanying notes are an integral part of the financial statements.

 

12

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT/
         SHARES		    

  VALUE

  (NOTE 2)

       

CORPORATE BONDS (continued)

             

Non-Convertible Corporate Bonds (continued)

             

Telecommunication Services (continued)

             

Wireless Telecommunication Services (continued)

             

NII Capital Corp., 7.625%, 4/1/2021

         B2           $ 1,030,000       $ 780,225      

SBA Tower Trust2, 5.101%, 4/17/2017

         A2                   2,095,000         2,362,263      

SBA Tower Trust2, 2.933%, 12/15/2017

         A2             1,515,000         1,576,711      
         

 

 

     
            10,309,746      
         

 

 

     

Total Telecommunication Services

             17,695,064      
         

 

 

     

Utilities - 2.2%

             

Electric Utilities - 2.2%

             

Allegheny Energy Supply Co. LLC2, 5.75%, 10/15/2019

         Baa3             2,385,000               2,616,409      

Exelon Generation Co. LLC, 4.00%, 10/1/2020

         Baa1             4,000,000         4,204,908      

Southwestern Electric Power Co., 6.45%, 1/15/2019

         Baa3             3,240,000         3,943,255      

System Energy Resources, Inc., 4.10%, 4/1/2023

         Baa1             3,110,000         3,216,182      
         

 

 

     

Total Utilities

             13,980,754      
         

 

 

     

Total Non-Convertible Corporate Bonds

             

(Identified Cost $467,706,066)

             515,078,903      
         

 

 

     
            

TOTAL CORPORATE BONDS

             

(Identified Cost $473,920,312)

             521,901,790      
         

 

 

     

PREFERRED STOCKS - 2.0%

             

Financials - 2.0%

             

Commercial Banks - 1.5%

             

BB&T Corp., Series D (non-cumulative), 5.85%

         Baa2             119,980         3,117,080      

PNC Financial Services Group, Inc., Series Q (non-cumulative), 5.375%

         Baa3             123,550         3,082,573      

U.S. Bancorp., Series F (non-cumulative), 6.50%6

         Baa1             114,010         3,265,246      
         

 

 

     
            9,464,899      
         

 

 

     

Real Estate Investment Trusts (REITS) - 0.5%

             

Public Storage, Series Q, 6.50%

         A3             109,100         2,960,974      
         

 

 

     
            

TOTAL PREFERRED STOCKS

             

(Identified Cost $11,666,000)

             12,425,873      
         

 

 

     

ASSET-BACKED SECURITIES - 1.0%

             

FDIC Trust, Series 2011-R1, Class A2, 2.672%, 7/25/2026

         Aaa           $ 974,816         1,002,964      

Hertz Vehicle Financing LLC, Series 2009-2A, Class A22, 5.29%, 3/25/2016

         Aaa             2,585,000         2,811,622      

Hertz Vehicle Financing LLC, Series 2010-1A, Class A22, 3.74%, 2/25/2017

         Aaa             2,360,000         2,540,072      

SLM Student Loan Trust, Series 2002-4, Class A45, 0.448%, 3/15/2017

         Aaa             126,604         126,210      
         

 

 

     
            

TOTAL ASSET-BACKED SECURITIES

             

(Identified Cost $6,044,204)

             6,480,868      
         

 

 

     

The accompanying notes are an integral part of the financial statements.

 

13

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		       VALUE
  (NOTE 2)		       

COMMERCIAL MORTGAGE-BACKED SECURITIES - 5.0%

             

Americold LLC Trust, Series 2010-ARTA, Class A12, 3.847%, 1/14/2029

         AAA4           $ 367,405       $ 394,735      

Banc of America Commercial Mortgage Trust, Series 2006-2, Class A45, 5.732%, 5/10/2045

         AAA4             700,000         801,970      

Banc of America Commercial Mortgage Trust, Series 2006-4, Class A4, 5.634%, 7/10/2046

         Aaa             335,000         383,250      

Banc of America Re-REMIC Trust, Series 2012-PARK, Class A2, 2.959%, 12/10/2030

         AAA4             745,000         770,896      

Bear Stearns Commercial Mortgage Securities, Series 2005-PWR9, Class A4A, 4.871%, 9/11/2042

         Aaa             715,000         785,451      

Bear Stearns Commercial Mortgage Securities, Series 2006-PW12, Class A45, 5.712%, 9/11/2038

         Aaa                   1,010,000         1,156,158      

Bear Stearns Commercial Mortgage Securities, Series 2006-PW13, Class A4, 5.54%, 9/11/2041

         AAA4             650,000         746,495      

CFCRE Commercial Mortgage Trust, Series 2011-C1, Class A22, 3.759%, 4/15/2044

         Aaa             240,000         259,660      

Citigroup - Deutsche Bank Commercial Mortgage Trust, Series 2005-CD1, Class A45, 5.219%, 7/15/2044

         Aaa             500,000         554,882      

Commercial Mortgage Pass Through Certificates, Series 2012-CR4, Class A3, 2.853%, 10/15/2045

         Aaa                   1,055,000               1,083,851      

Commercial Mortgage Pass-Through Certificates, Series 2010-C1, Class A12, 3.156%, 7/10/2046

         Aaa             1,196,359         1,263,141      

Fannie Mae Multifamily REMIC Trust, Series 2012-M13, Class A2, 2.377%, 5/25/2022

         Aaa             1,400,000         1,424,664      

Fannie Mae Multifamily REMIC Trust, Series 2012-M13, Class ASQ2, 1.246%, 8/25/2017

         Aaa             1,325,000         1,344,438      

Freddie Mac Multifamily Structured Pass-Through Certificates, Series K-P01, Class A2, 1.72%, 1/25/2019

         Aaa             1,480,000         1,517,876      

FREMF Mortgage Trust, Series 2011-K701, Class B2,5, 4.286%, 7/25/2048

         A4             950,000         1,019,448      

FREMF Mortgage Trust, Series 2011-K702, Class B2,5, 4.77%, 4/25/2044

         A3             230,000         251,694      

Greenwich Capital Commercial Funding Corp., Series 2006-GG7, Class A45, 5.867%, 7/10/2038

         Aaa             1,695,000         1,946,555      

JP Morgan Chase Commercial Mortgage Securities Corp., Series 2005-CB13, Class A45, 5.294%, 1/12/2043

         Aaa             850,000         935,855      

JP Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP5, Class A45, 5.20%, 12/15/2044

         Aaa             1,670,000         1,861,332      

JP Morgan Chase Commercial Mortgage Securities Corp., Series 2006-LDP7, Class A45, 5.872%, 4/15/2045

         Aaa             1,075,000         1,237,123      

JP Morgan Chase Commercial Mortgage Securities Corp., Series 2010-C2, Class A32, 4.07%, 11/15/2043

         AAA4             750,000         844,729      

Morgan Stanley Bank of America Merrill Lynch Trust, Series 2012-C5 Class A4, 3.176%, 8/15/2045

         Aaa             1,505,000         1,598,891      

Morgan Stanley Capital I Trust, Series 2005-IQ10, Class A4A5, 5.23%, 9/15/2042

         Aaa             210,000         231,123      

The accompanying notes are an integral part of the financial statements.

 

14

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

            CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT/
         SHARES		    

  VALUE

  (NOTE 2)

       

COMMERCIAL MORTGAGE-BACKED SECURITIES (continued)

             

Morgan Stanley Capital I Trust, Series 2011-C1, Class A22, 3.884%, 9/15/2047

         AAA4           $ 200,000       $ 216,933      

Motel 6 Trust, Series 2012-MTL6, Class A22, 1.948%, 10/5/2025

         AAA4             1,055,000               1,062,883      

OBP Depositor LLC Trust, Series 2010-OBP, Class A2, 4.646%, 7/15/2045

         AAA4             420,000         492,878      

Vornado DP LLC Trust, Series 2010-VNO, Class A2FX2, 4.004%, 9/13/2028

         AAA4             1,195,000               1,349,931      

Wachovia Bank Commercial Mortgage Trust, Series 2005-C21, Class A45, 5.24%, 10/15/2044

         Aaa             1,079,552               1,194,980      

Wachovia Bank Commercial Mortgage Trust, Series 2006-C26, Class A35, 6.011%, 6/15/2045

         Aaa             1,220,000               1,415,467      

Wells Fargo Commercial Mortgage Trust, Series 2010-C1, Class A22, 4.393%, 11/15/2043

         Aaa             1,350,000               1,546,714      

Wells Fargo Commercial Mortgage Trust, Series 2012-LC5, Class A3, 2.918%, 10/15/2045

         Aaa             1,915,000               1,984,959      
         

 

 

     
            

TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES

             

(Identified Cost $30,107,158)

             31,678,962      
         

 

 

     

FOREIGN GOVERNMENT BONDS - 1.1%

             

Malaysia Government Bond (Malaysia), 4.262%, 9/15/2016

         A3           MYR  8,905,000               3,026,524      

Portugal Obrigacoes do Tesouro OT (Portugal), 4.80%, 6/15/2020

         Ba3           EUR  3,140,000               3,678,392      
         

 

 

     
            

TOTAL FOREIGN GOVERNMENT BONDS

             

(Identified Cost $6,071,088)

                   6,704,916      
         

 

 

     

MUTUAL FUND - 0.0%*

             

John Hancock Preferred Income Fund

             

(Identified Cost $139,390)

           10,500         230,055      
         

 

 

     

U.S. GOVERNMENT AGENCIES - 4.3%

             

Mortgage-Backed Securities - 4.3%

             

Fannie Mae, Pool #888468, 5.50%, 9/1/2021

         $ 2,288,722              2,479,556      

Fannie Mae, Pool #995233, 5.50%, 10/1/2021

           187,049        202,645      

Fannie Mae, Pool #888017, 6.00%, 11/1/2021

           205,572        225,909      

Fannie Mae, Pool #995329, 5.50%, 12/1/2021

           1,473,877              1,596,769      

Fannie Mae, Pool #888136, 6.00%, 12/1/2021

           260,634        286,419      

Fannie Mae, Pool #888810, 5.50%, 11/1/2022

           2,543,944              2,756,059      

Fannie Mae, Pool #AD0462, 5.50%, 10/1/2024

           156,270        169,007      

Fannie Mae, Pool #918516, 5.50%, 6/1/2037

           1,186,386              1,289,229      

Fannie Mae, Pool #995876, 6.00%, 11/1/2038

           6,854,800              7,504,708      

Fannie Mae, Pool #AE0061, 6.00%, 2/1/2040

           2,804,110              3,065,849      

Freddie Mac, Pool #G11850, 5.50%, 7/1/2020

           852,424        925,297      

Freddie Mac, Pool #G12610, 6.00%, 3/1/2022

           252,702        277,821      

The accompanying notes are an integral part of the financial statements.

 

15

Core Plus Bond Series

 

 

Investment Portfolio - December 31, 2012

 

                         PRINCIPAL
          AMOUNT/
         SHARES		    

  VALUE

  (NOTE 2)

       

U.S. GOVERNMENT AGENCIES (continued)

             

Mortgage-Backed Securities (continued)

             

Freddie Mac, Pool #G12655, 6.00%, 5/1/2022

         $ 185,702       $ 204,161      

Freddie Mac, Pool #G12988, 6.00%, 1/1/2023

           146,645         161,932      

Freddie Mac, Pool #G13078, 6.00%, 3/1/2023

           258,304         290,753      

Freddie Mac, Pool #G13331, 5.50%, 10/1/2023

           118,755         128,165      

Freddie Mac, Pool #G03332, 6.00%, 10/1/2037

           337,060         366,804      

Freddie Mac, Pool #G03696, 5.50%, 1/1/2038

           85,019         91,844      

Freddie Mac, Pool #G04176, 5.50%, 5/1/2038

                 1,597,758         1,725,026      

Freddie Mac, Pool #A78227, 5.50%, 6/1/2038

                 1,256,679         1,356,780      

Freddie Mac, Pool #G05671, 5.50%, 8/1/2038

           151,651         164,110      

Freddie Mac, Pool #G06021, 5.50%, 1/1/2040

           187,048         202,064      

Freddie Mac, Pool #G05900, 6.00%, 3/1/2040

                 1,079,971               1,175,277      

Freddie Mac, Pool #G05906, 6.00%, 4/1/2040

           730,091         794,520      
         

 

 

     
            

TOTAL U.S. GOVERNMENT AGENCIES

             

(Identified Cost $27,024,525)

             27,440,704      
         

 

 

     
            

SHORT-TERM INVESTMENT - 2.7%

             

Dreyfus Cash Management, Inc. - Institutional Shares7, 0.06%,

             

(Identified Cost $16,739,215)

           16,739,215         16,739,215      
         

 

 

     

TOTAL INVESTMENTS - 98.8%

             

(Identified Cost $571,711,892)

             623,602,383      

OTHER ASSETS, LESS LIABILITIES - 1.2%

             7,479,175      
         

 

 

     

NET ASSETS - 100%

           $ 631,081,558      
         

 

 

     

*Less than 0.1%

EUR - Euro

MYR - Malaysian Ringgit

1Credit ratings from Moody‘s (unaudited).

2Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. These securities have been sold under rule 144A and have been determined to be liquid under guidelines established by the Board of Directors. These securities amount to $75,298,907, or 11.9%, of the Series‘ net assets as of December 31, 2012 (see Note 2 to the financial statements).

3Credit rating has been withdrawn. As of December 31, 2012, there is no rating available.

4Credit ratings from S&P (unaudited).

5The coupon rate is floating and is the effective rate as of December 31, 2012.

6The rate shown is a fixed rate as of December 31, 2012; the rate becomes floating, based on LIBOR plus a spread, in 2022.

7Rate shown is the current yield as of December 31, 2012.

The accompanying notes are an integral part of the financial statements.

 

16

Core Plus Bond Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments, at value (identified cost $571,711,892) (Note 2)

    $ 623,602,383   

Interest receivable

      7,258,651   

Receivable for fund shares sold

      810,022   

Dividends receivable

      48,429   
  

 

 

  

TOTAL ASSETS

      631,719,485   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      375,089   

Accrued fund accounting and administration fees (Note 3)

      21,696   

Accrued transfer agent fees (Note 3)

      1,797   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      181,508   

Audit fees payable

      34,657   

Other payables and accrued expenses

      22,806   
  

 

 

  

TOTAL LIABILITIES

      637,927   
  

 

 

  

TOTAL NET ASSETS

    $ 631,081,558   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 559,859   

Additional paid-in-capital

      575,430,317   

Distributions in excess of net investment income

      (52,812 ) 

Accumulated net realized gain on investments, foreign currency and translation of other assets and liabilities

      3,250,283   

Net unrealized appreciation on investments, foreign currency and translation of other assets and liabilities

      51,893,911   
  

 

 

  

TOTAL NET ASSETS

    $ 631,081,558   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A
($631,081,558/55,985,876 shares)

    $ 11.27   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

17

Core Plus Bond Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Interest

    $ 27,945,754   

Dividends (net of foreign taxes withheld, $6,452)

      1,127,196   
  

 

 

  

Total Investment Income

      29,072,950   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      4,275,403   

Fund accounting and administration fees (Note 3)

      134,931   

Directors‘ fees (Note 3)

      12,202   

Transfer agent fees (Note 3)

      11,695   

Chief Compliance Officer service fees (Note 3)

      2,440   

Custodian fees

      36,286   

Miscellaneous

      117,956   
  

 

 

  

Total Expenses

      4,590,913   
  

 

 

  

NET INVESTMENT INCOME

      24,482,037   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

   

Investments

      8,199,447   

Foreign currency transactions and translation of other assets and liabilities

      (185,622)   
  

 

 

  
     8,013,825   
  

 

 

  

Net change in unrealized appreciation (depreciation) on-

   

Investments

      30,156,328   

Foreign currency and translation of other assets and liabilities

      (7,966)   
  

 

 

  
     30,148,362   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      38,162,187   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 62,644,224   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

18

Core Plus Bond Series

 

 

Statement of Changes in Net Assets

 

     FOR THE
YEAR ENDED
12/31/12		     FOR THE
YEAR ENDED
12/31/11		  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 24,482,037      $ 25,565,400   

Net realized gain (loss) on investments and foreign currency

      8,013,825        13,389,041   

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      30,148,362        (12,244,570 ) 
  

 

 

    

 

 

  

Net increase from operations

      62,644,224        26,709,871   
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 8):

     

From net investment income

      (24,561,572 )      (25,361,704 ) 

From net realized gain on investments

      (5,701,872 )      (15,905,245 ) 
  

 

 

    

 

 

  

Total distributions to shareholders

      (30,263,444 )      (41,266,949 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      29,117,332        48,785,177   
  

 

 

    

 

 

  

Net increase in net assets

      61,498,112        34,228,099   

NET ASSETS:

     

Beginning of year

      569,583,446        535,355,347   
  

 

 

    

 

 

  

End of year (including distributions in excess of net investment income of $52,812 and undistributed net investment income of $169,272, respectively)

    $ 631,081,558      $ 569,583,446   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

19

Core Plus Bond Series

 

Financial Highlights

 

    

 

FOR THE YEARS ENDED

  
    

 

12/31/12

    

 

12/31/11

    

 

12/31/10

    

 

12/31/09

    

 

12/31/08

  

Per share data (for a share outstanding throughout each year):

           

Net asset value - Beginning of year

    $ 10.67      $ 10.96      $ 10.49      $ 9.66      $ 10.02   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) from investment operations:

           

Net investment income

      0.45 1      0.51 1      0.55 1      0.57 1      0.42   

Net realized and unrealized gain (loss) on investments

      0.70        0.03        0.51        0.82        (0.32 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      1.15        0.54        1.06        1.39        0.10   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

           

From net investment income

      (0.45 )      (0.51 )      (0.52 )      (0.56 )      (0.45 ) 

From net realized gain on investments

      (0.10 )      (0.32 )      (0.07 )      —        (0.01 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions to shareholders

      (0.55 )      (0.83 )      (0.59 )      (0.56 )      (0.46 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of year

    $ 11.27      $ 10.67      $ 10.96      $ 10.49      $ 9.66   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of year (000‘s omitted)

    $ 631,082      $ 569,583      $ 535,355      $ 395,308      $ 340,631   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total return2

      10.94 %      4.91 %      10.18 %      14.35 %      1.24 % 

Ratios (to average net assets)/

Supplemental Data:

           

Expenses*

      0.75 %      0.75 %      0.76 %      0.78 %      0.80 % 

Net investment income

      4.01 %      4.56 %      4.92 %      5.60 %      4.84 % 

Portfolio turnover

      41 %      35 %      31 %      72 %      63 % 
*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 Series, the expense ratio (to average net assets) would have increased by the following amount:    
     N/A        N/A        0.00 %3      0.00 %3      N/A   

1Calculated based on average shares outstanding during the year.

2Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions. Total returns would have been lower had certain expenses not been waived or reimbursed during certain years.

3Less than 0.01%.

 

The accompanying notes are an integral part of the financial statements.

 

20

Core Plus Bond Series

 

 

Notes to Financial Statements

 

1. Organization

Core Plus 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 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 125 million have been designated as Core Plus Bond Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ 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 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 an independent pricing service that utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings).

Short-term investments that mature in sixty days or less are 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

 

21

Core Plus Bond Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series‘ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Preferred securities:

            

  Financials

    $       12,425,873       $       12,425,873       $ —       $                     —   

  Debt securities:

            

  U.S. Treasury and other U.S.

            

  Government agencies

      27,440,704         —         27,440,704         —   

  Corporate debt:

            

  Consumer Discretionary

      71,387,985         —         71,387,985         —   

  Consumer Staples

      13,087,435         —         13,087,435         —   

  Energy

      33,906,174         —         33,906,174         —   

  Financials

      223,200,404         —         223,200,404         —   

  Health Care

      10,782,921         —         10,782,921         —   

  Industrials

      61,865,606         —         61,865,606         —   

  Information Technology

      22,854,619         —         22,854,619         —   

  Materials

      46,317,941         —         46,317,941         —   

  Telecommunication Services

      17,695,064         —         17,695,064         —   

  Utilities

      13,980,754         —         13,980,754         —   

  Convertible corporate debt:

            

  Financials

      2,778,750         —         2,778,750         —   

  Health Care

      612,425         —         612,425         —   

  Information Technology

      2,689,681         —         2,689,681         —   

  Materials

      742,031         —         742,031         —   

  Asset-backed securities

      6,480,868         —         6,480,868         —   

  Commercial mortgage-backed securities

      31,678,962         —         31,678,962         —   

  Foreign government bonds

      6,704,916         —         6,704,916         —   

  Mutual funds

      16,969,270         16,969,270         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       623,602,383       $       29,395,143       $       594,207,240       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund‘s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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

 

22

Core Plus Bond Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Transactions, Investment Income and Expenses (continued)

 

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.

Forward Foreign Currency Exchange Contracts

The Series may purchase or sell forward foreign currency exchange contracts in order to hedge a portfolio position or specific transaction. Risks may arise if the counterparties to a contract are unable to meet the terms of the contract or if the value of the foreign currency moves unfavorably.

All forward foreign currency exchange contracts are adjusted daily by the exchange rate of the underlying currency and, for financial statement purposes, any gain or loss is recorded as unrealized gain or loss until a contract has been closed. Realized loss of $8,639 arising from forward foreign currency exchange contracts closed during the year is included in net realized loss on foreign currency transaction and translation of other assets and liabilities.

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 did not hold any forward foreign currency exchange contacts on December 31, 2012. The average volume of derivative activity (measured in terms of the notional amount) during the period January 1, 2012 to March 19, 2012, the period for which derivatives were held, was approximately $1.3 million.

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 December 31, 2012.

 

23

Core Plus Bond Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Securities Purchased on a When-Issued Basis or Forward Commitment (continued)

 

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 December 31, 2012.

Restricted Securities

Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of the Series‘ Investment Portfolio.

Illiquid Securities

A security may be considered illiquid if so deemed in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund‘s Board. Securities that are illiquid are marked with the applicable footnote on the Investment Portfolio. No such investments were held by the Series on December 31, 2012.

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 December 31, 2012, 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, 2009 through December 31, 2012. 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

 

24

Core Plus Bond Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Indemnifications (continued)

 

unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.70% of the Series‘ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series‘ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund‘s Chief Compliance Officer‘s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended.

The Advisor has contractually agreed, until at least April 30, 2014, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.90% of average daily net assets each year. The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund‘s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund‘s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series‘ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $274,990,130 and $242,785,416 respectively. There were no purchases and sales of U.S. Government securities.

 

25

Core Plus Bond Series

 

 

Notes to Financial Statements (continued)

 

 

5. Capital Stock Transactions

Transactions in shares of Core Plus Bond Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE YEAR ENDED  12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

               5,829,953       $       65,592,237                  5,512,628       $           61,835,044   

Reinvested

               2,664,854                  29,775,472                  3,813,913                  40,674,011   

Repurchased

     (5,875,777 )      (66,250,377 )      (4,794,577 )      (53,723,878 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

               2,619,030       $       29,117,332                  4,531,964       $           48,785,177   
 

 

 

    

 

 

    

 

 

    

 

 

  

Substantially all of the Series‘ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

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 accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses, investments in hybrid securities, investments in convertible securities, foreign currency contracts, losses deferred due to wash sales and qualified late-year losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series‘ net asset value. For the fiscal year ended December 31, 2012, $142,549 was reclassified within the capital accounts from Undistributed Net Investment Income to Accumulated Net Realized Gain on Investments. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions were as follows:

 

   

FOR THE YEAR

ENDED 12/31/12  

    

FOR THE YEAR

ENDED 12/31/11  

       

Ordinary income

   $ 26,389,475          $ 27,335,699        

Long-term capital gains

     3,873,969            13,931,250        

 

26

Core Plus Bond Series

 

 

Notes to Financial Statements (continued)

 

 

8. Federal Income Tax Information (continued)

 

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $  571,769,866   

Unrealized appreciation

      52,323,458   

Unrealized depreciation

      (490,941 ) 
  

 

 

  

Net unrealized appreciation

    $ 51,832,517   
  

 

 

  

Undistributed long-term gains

      3,259,208   

Qualified late-year losses1

      3,763   
 

 

1The Series has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010, may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series did not have pre or post-enactment net capital loss carryforwards.

 

27

Core Plus Bond Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Core Plus Bond Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Core Plus Bond Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series‘ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

28

Core Plus Bond Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal year $643,680 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

The Series hereby reports $3,873,969 as capital gains for its taxable year ended December 31, 2012, or if different, the maximum allowable under tax law.

For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal year is 2.44%, or if different, the maximum allowable under tax law.

The percentage of ordinary income distribution paid by the Series during the year ended December 31, 2012 which was derived from U.S. Treasury securities is 0.10%.

 

29

Core Plus Bond Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors‘ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board‘s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor‘s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund‘s Series was reasonable based on the Fund‘s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor‘s costs and profits, the Board discussed the Advisor‘s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor‘s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor‘s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro- Blend‘s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

30

Core Plus Bond Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor‘s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor‘s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor‘s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board‘s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

31

Core Plus Bond Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund‘s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund‘s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984-2003.
Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003-2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc. Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995-2008 and Chairman (non-executive) 2004-2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995-2008)

The Ashley Group (1995-2008)

Genesee Corporation (1987-2007)

Name:    Peter L. Faber
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006-2012), Partner (1995-2006 & 2013-present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Partnership for New York City, Inc. (non-profit)(1989-2010)

New York Collegium (non-profit)(2004-2011))

Boston Early Music Festival (non-profit)

Name:    Harris H. Rusitzky
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994; Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

32

Core Plus Bond Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)

 

Name:    Paul A. Brooke
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005-2009) – Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Incyte Corp. (2000-present)

ViroPharma, Inc. (2000-present)

HLTH Corp. (2000-present)

Cheyne Capital International (2000-present)

MPM Bio-equities (2000-2009)

GMP Companies (2000-2012)

HoustonPharma (2000-2009)

Name:    Chester N. Watson
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003-2011) – General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004-2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, – Manning & Napier Advisors, LLC Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

33

Core Plus Bond Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)

 

Name:

   

 

Christine Glavin

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds
   one or more of the following titles for various affiliates; Director or
   Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund‘s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund‘s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund‘s By-Laws.

 

34

Core Plus 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC‘s web site    http://www.sec.gov   

The Series‘ Form N-Q may be reviewed and copied at the SEC‘s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC‘s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNCPB-12/12-AR

 

LOGO

 

        HIGH YIELD BOND SERIES                          

 

 

 

 

www.manning-napier.com

       LOGO          

High Yield Bond Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months.

Even with the myriad of looming uncertainties, a number of issues pushed forward toward more clarity and resolution as the year progressed. For example, during the fourth quarter, progress was made with respect to “fiscal cliff” headwinds in the U.S. Also, the Federal Open Market Committee (FOMC) stated it expects to keep its highly accommodative monetary policy stance in place at least until unemployment falls below 6.5%, provided that near-term inflation remains within 0.5% of its 2% goal and longer-term inflation remains “well anchored.” Additionally, European Central Bank President Mario Draghi’s commitment earlier in the year to do “whatever it takes” to preserve the Euro, along with positive developments in Greece in the fourth quarter, also aided wavering investor concerns as the year came to a close. Given this backdrop, although equity and fixed income markets generally performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor feels are going to continue to weigh on global economic growth.

Overall, each of the major sectors of the fixed income market experienced positive absolute performance. This strong performance was led by corporate bonds, where high yield bonds were the top performer in 2012, followed by their investment grade counterparts. Beyond corporate bonds, Treasury Inflation Protected Securities (TIPS) and municipal bonds also performed well in 2012. In contrast, although Treasuries and mortgages ended the year with positive performance, they generally trailed other sectors in 2012.

For the year, the Bank of America Merrill Lynch U.S. High Yield Bond, Cash Pay, BB-B Rated Index gained 14.71%. Meanwhile, although the Class S shares of the High Yield Bond Series experienced positive absolute performance for the year of 14.46%, it modestly trailed the benchmark in 2012.

Historically, the high yield market has provided strong absolute and relative returns for several years following a recession, as defaults recede and credit spreads tighten. Such favorable conditions are a large reason the Advisor currently sees investment opportunities in the high yield market. Indeed, the high yield market generated very strong performance in the two years after the 2008 credit crisis. However, in 2011 high yield corporate bonds produced more moderate absolute returns and underperformed the broader fixed income markets as a result of the strong rally in U.S. Treasuries and the widening of credit spreads. In 2012, the high yield market generated strong returns as the market benefitted from both lower Treasury rates and a significant tightening in credit spreads. The tightening in credit spreads was driven by improving economic conditions, continued accommodative monetary policy and a reduction in stress on European sovereign debt concerns.

As of the end of 2012, the High Yield Bond Series had a relatively high allocation to the Consumer Non-Cyclical, Healthcare and Capital Goods sectors versus the benchmark, as the Advisor continues to identify specific opportunities in companies with positive fundamentals within these sectors. In contrast, the Series was underweight to the Banking, Basic Industry and Utilities sectors as compared to the benchmark. Many of the companies in these sectors are tied to the overall economic growth rate, and given our slow growth view for the economy, we continue to prefer companies that have clear growth drivers and are less dependent on the broader economy for growth. Looking at credit quality, the High Yield Bond Series had a slightly higher quality portfolio than the benchmark.

Managing to an index can prove limiting and present challenges to reaching investors’ objectives. As an active fixed income manager, the Advisor’s investment decisions are based on prevailing market conditions and fundamentals, which allows us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. This philosophy has guided the Advisor’s choices in selectively choosing the Series’ investments. Through our security selection process, we feel we have the ability to manage risks, while simultaneously providing compelling income and total return potential to help the Series’ investors reach their goals.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

High Yield Bond Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL  RETURNS AS OF DECEMBER 31, 2012    
  

 ONE

 YEAR1                

  

 SINCE

 INCEPTION2        

Manning & Napier Fund, Inc. - High Yield Bond Series - Class S3

     14.46%    11.44%

Manning & Napier Fund, Inc. - High Yield Bond Series - Class I3,4

     14.59%    5.59%

Bank of America (BofA) Merrill Lynch U.S. High Yield, Cash Pay, BB-B Rated Index4

     14.71%    12.82%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - High Yield Bond Series Class S from its current activation1 (9/14/09) to present (12/31/12) to the BofA Merrill Lynch U.S. High Yield, Cash Pay, BB-B Rated Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Index are calculated from September 14, 2009, the Class S inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.10% for Class S and 0.87% for Class I (annualized). The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.10% for Class S and 0.87% for Class I (annualized) for the year ended December 31, 2012.

4For periods prior to the inception of Class I on August 1, 2012, the performance figures are hypothetical and reflect the performance of the Manning & Napier Fund, Inc. - High Yield Bond Series - Class S.

5The unmanaged BofA Merrill Lynch U.S. High Yield, Cash Pay, BB-B Rated Index (formerly a Merrill Lynch Index) is a market value weighted measure of BB and B rated corporate bonds with maturities of at least one-year. The Index returns assume reinvestment of coupons and, unlike the Series returns, do not reflect any fees or expenses.

 

2

High Yield Bond Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

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 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 the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the Hypothetical lines for each Class in the table are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING
 ACCOUNT VALUE             
 7/1/12*		    ENDING
 ACCOUNT VALUE             
 12/31/12		  

 EXPENSES PAID
 DURING PERIOD**             

 7/1/12-12/31/12

    ANNUALIZED
 EXPENSE RATIO             

Class S

                

Actual

    $1,000.00    $1,074.30    $5.75    1.10%

Hypothetical

(5% return before expenses)

    $1,000.00    $1,019.66    $5.60    1.10%

Class I

                

Actual

    $1,000.00    $1,055.90    $3.75    0.87%

Hypothetical

(5% return before expenses)

    $1,000.00    $1,020.82    $4.43    0.87%

*Class I inception date was August 1, 2012.

**Expenses are equal to the Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/365 to reflect the one-half year period (except for the Series’ Class I Actual return information, which reflects the 153 day period ended December 31, 2012 due to its inception date of August 1, 2012). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which is based on one-year data.

 

3

High Yield Bond Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

4

High Yield Bond Series

 

 

Investment Portfolio - December 31, 2012

 

   

CREDIT

RATING 1

(UNAUDITED)

    

          PRINCIPAL

          AMOUNT

    

 VALUE

 (NOTE 2)

      

CORPORATE BONDS - 95.8%

        

Convertible Corporate Bonds - 2.3%

        

Health Care - 0.4%

        

Health Care Equipment & Supplies - 0.4%

        

Alere, Inc., 3.00%, 5/15/2016

     CCC2           $ 825,000       $ 771,375     
     

 

 

    

Materials - 1.9%

        

Containers & Packaging - 1.9%

        

Owens-Brockway Glass Container, Inc.3, 3.00%, 6/1/2015

     Ba3             3,735,000         3,695,316     
     

 

 

    

Total Convertible Corporate Bonds

        

(Identified Cost $4,355,622)

         4,466,691     
     

 

 

    

Non-Convertible Corporate Bonds - 93.5%

        

Consumer Discretionary - 11.5%

        

Auto Components - 1.4%

        

Exide Technologies, 8.625%, 2/1/2018

     B2             1,080,000         915,300     

UCI International, Inc., 8.625%, 2/15/2019

     B3             1,755,000         1,739,644     
     

 

 

    
        2,654,944     
     

 

 

    

Hotels, Restaurants & Leisure - 0.8%

        

Choice Hotels International, Inc., 5.70%, 8/28/2020

     Baa3             1,440,000         1,562,400     
     

 

 

    

Household Durables - 1.3%

        

Taylor Morrison Communities, Inc. - Monarch Communities, Inc.3, 7.75%, 4/15/2020

     B2             1,810,000         1,918,600     

Taylor Morrison Communities, Inc. - Monarch Communities, Inc.3, 7.75%, 4/15/2020

     B2             500,000         530,000     
     

 

 

    
        2,448,600     
     

 

 

    

Media - 4.5%

        

Cablevision Systems Corp., 8.625%, 9/15/2017

     B1             1,580,000         1,842,675     

MDC Partners, Inc. (Canada), 11.00%, 11/1/2016

     B3             1,495,000         1,642,631     

Nara Cable Funding Ltd. (Spain)3, 8.875%, 12/1/2018

     B1             2,165,000         2,202,888     

Sirius XM Radio, Inc.3, 8.75%, 4/1/2015

     B1             1,685,000         1,908,263     

Unitymedia Hessen GmbH & Co. KG - Unitymedia NRW GmbH (Germany)3, 5.50%, 1/15/2023

     Ba3             1,000,000         1,032,500     
     

 

 

    
        8,628,957     
     

 

 

    

Specialty Retail - 2.5%

        

Dufry Finance SCA (Switzerland)3, 5.50%, 10/15/2020

     Ba3             2,000,000         2,070,000     

Rent-A-Center, Inc., 6.625%, 11/15/2020

     Ba3             2,630,000         2,866,700     
     

 

 

    
        4,936,700     
     

 

 

    

Textiles, Apparel & Luxury Goods - 1.0%

        

Jones Group, Inc. - Apparel Group Holdings - Apparel Group USA - Footwear Accessories Retail, 6.875%, 3/15/2019

     Ba3             1,870,000         1,944,800     
     

 

 

    

Total Consumer Discretionary

         22,176,401     
     

 

 

    

The accompanying notes are an integral part of the financial statements.

 

5

High Yield Bond Series

 

 

Investment Portfolio - December 31, 2012

 

   

CREDIT

RATING 1

(UNAUDITED)

    

          PRINCIPAL

          AMOUNT

    

 VALUE

 (NOTE 2)

      

CORPORATE BONDS (continued)

        

Non-Convertible Corporate Bonds (continued)

        

Consumer Staples - 6.6%

        

Beverages - 1.5%

        

Constellation Brands, Inc., 7.25%, 9/1/2016

     Ba1           $ 1,000,000       $ 1,155,000     

Constellation Brands, Inc., 7.25%, 5/15/2017

     Ba1             1,510,000         1,778,025     
     

 

 

    
        2,933,025     
     

 

 

    

Food Products - 5.1%

        

C&S Group Enterprises LLC3, 8.375%, 5/1/2017

     B1             2,665,000         2,818,238     

FAGE Dairy Industry S.A. - FAGE USA Dairy Industry, Inc. (Greece)3, 9.875%, 2/1/2020

     B3             1,875,000         1,992,187     

Land O´ Lakes, Inc.3, 6.00%, 11/15/2022

     Ba2             1,000,000         1,082,500     

Minerva Luxembourg S.A. (Brazil)3, 12.25%, 2/10/2022

     B2             1,620,000         1,939,950     

Shearer’s Foods LLC - Chip Finance Corp.3, 9.00%, 11/1/2019

     B3             1,890,000         1,984,500     
     

 

 

    
        9,817,375     
     

 

 

    

Total Consumer Staples

         12,750,400     
     

 

 

    

Energy - 16.6%

        

Energy Equipment & Services - 7.1%

        

Calfrac Holdings LP (Canada)3, 7.50%, 12/1/2020

     B1             3,680,000         3,643,200     

Global Geophysical Services, Inc., 10.50%, 5/1/2017

     B3             925,000         823,250     

Petroleum Geo-Services ASA (Norway)3, 7.375%, 12/15/2018

     Ba2             1,865,000         2,014,200     

SESI LLC, 6.375%, 5/1/2019

     Ba2             1,675,000         1,792,250     

Shelf Drilling Holdings Ltd. (United Arab Emirates)3, 8.625%, 11/1/2018

     B1             1,890,000         1,937,250     

Sidewinder Drilling, Inc.3, 9.75%, 11/15/2019

     B3             1,890,000         1,899,450     

Thermon Industries, Inc., 9.50%, 5/1/2017

     B1             1,330,000         1,476,300     
     

 

 

    
        13,585,900     
     

 

 

    

Oil, Gas & Consumable Fuels - 9.5%

        

Carrizo Oil & Gas, Inc., 7.50%, 9/15/2020

     B3             1,830,000         1,880,325     

Chesapeake Oilfield Operating LLC - Chesapeake Oilfield Finance, Inc.3, 6.625%, 11/15/2019

     Ba3            3,930,000         3,704,025     

CVR Refining LLC - Coffeyville Finance, Inc.3, 6.50%, 11/1/2022

     Ba3            1,865,000         1,855,675     

EPL Oil & Gas, Inc.3, 8.25%, 2/15/2018

     Caa1             2,260,000         2,322,150     

EV Energy Partners LP - EV Energy Finance Corp., 8.00%, 4/15/2019

     B3             1,840,000         1,952,700     

Gulfport Energy Corp.3, 7.75%, 11/1/2020

     B3             2,800,000         2,877,000     

Northern Tier Energy LLC - Northern Tier Finance Corp.3, 7.125%, 11/15/2020

     B1             1,895,000         1,961,325     

PBF Holding Co. LLC - PBF Finance Corp.3, 8.25%, 2/15/2020

     Ba3             1,715,000         1,847,913     
     

 

 

    
        18,401,113     
     

 

 

    

Total Energy

         31,987,013     
     

 

 

    

Financials - 11.2%

        

Capital Markets - 2.7%

        

GFI Group, Inc., 8.625%, 7/19/2018

     Ba2             1,485,000         1,303,087     

The accompanying notes are an integral part of the financial statements.

 

6

High Yield Bond Series

 

 

Investment Portfolio - December 31, 2012

 

   

CREDIT

RATING 1

(UNAUDITED)

    

          PRINCIPAL

          AMOUNT

    

 VALUE

 (NOTE 2)

      

CORPORATE BONDS (continued)

        

Non-Convertible Corporate Bonds (continued)

        

Financials (continued)

        

Capital Markets (continued)

        

Innovation Ventures LLC - Innovation Ventures Finance Corp.3, 9.50%, 8/15/2019

     B2           $  925,000       $  869,500     

Jefferies Group, Inc., 8.50%, 7/15/2019

     Baa3             2,500,000         2,987,500     
     

 

 

    
        5,160,087     
     

 

 

    

Consumer Finance - 2.9%

        

Credit Acceptance Corp., 9.125%, 2/1/2017

     B1             2,430,000         2,654,775     

General Motors Financial Co., Inc.3, 4.75%, 8/15/2017

     Ba3             2,750,000         2,891,598     
     

 

 

    
        5,546,373     
     

 

 

    

Diversified Financial Services - 5.0%

        

CNG Holdings, Inc.3, 9.375%, 5/15/2020

     B3             1,785,000         1,811,775     

CNH Capital LLC3, 3.875%, 11/1/2015

     Ba2             1,000,000         1,031,250     

CNH Capital LLC, 6.25%, 11/1/2016

     Ba2             1,730,000         1,907,325     

Ladder Capital Finance Holdings LLLP - Ladder Capital Finance Corp.3, 7.375%, 10/1/2017

     Ba3             1,840,000         1,890,600     

SPL Logistics Escrow LLC - SPL Logistics Finance Corp.3, 8.875%, 8/1/2020

     B2             2,760,000         2,925,600     
     

 

 

    
        9,566,550     
     

 

 

    

Insurance - 0.6%

        

Hub International Ltd.3, 8.125%, 10/15/2018

     Caa2             1,225,000         1,255,625     
     

 

 

    

Total Financials

         21,528,635     
     

 

 

    

Health Care - 11.2%

        

Health Care Equipment & Supplies - 4.1%

        

Alere, Inc.3, 7.25%, 7/1/2018

     B3             1,880,000         1,884,700     

Fresenius Medical Care US Finance, Inc. (Germany), 6.875%, 7/15/2017

     Ba2             2,370,000         2,701,800     

Fresenius Medical Care US Finance, Inc. (Germany)3, 6.50%, 9/15/2018

     Ba2             825,000         921,937     

Fresenius US Finance II, Inc.3, 9.00%, 7/15/2015

     Ba1             2,170,000         2,500,925     
     

 

 

    
        8,009,362     
     

 

 

    

Health Care Providers & Services - 6.0%

        

CHS - Community Health Systems, Inc., 5.125%, 8/15/2018

     Ba3             1,845,000         1,923,413     

CHS - Community Health Systems, Inc., 7.125%, 7/15/2020

     B3             1,760,000         1,878,800     

HCA, Inc., 6.375%, 1/15/2015

     B3             1,955,000         2,113,844     

HCA, Inc., 6.50%, 2/15/2020

     Ba3             920,000         1,035,000     

Health Management Associates, Inc., 6.125%, 4/15/2016

     BB2             2,545,000         2,748,600     

STHI Holding Corp.3, 8.00%, 3/15/2018

     B2             1,725,000         1,867,313     
     

 

 

    
        11,566,970     
     

 

 

    

The accompanying notes are an integral part of the financial statements.

 

7

High Yield Bond Series

 

 

Investment Portfolio - December 31, 2012

 

   

CREDIT

RATING 1

(UNAUDITED)

    

          PRINCIPAL

          AMOUNT

    

 VALUE

 (NOTE 2)

      

CORPORATE BONDS (continued)

        

Non-Convertible Corporate Bonds (continued)

        

Health Care (continued)

        

Pharmaceuticals - 1.1%

        

Valeant Pharmaceuticals International (Canada)3, 6.75%, 8/15/2021

     B1          $ 1,895,000       $ 2,032,387     
     

 

 

    

Total Health Care

         21,608,719     
     

 

 

    

Industrials - 12.5%

        

Aerospace & Defense - 1.5%

        

Ducommun, Inc., 9.75%, 7/15/2018

     B3            2,650,000         2,848,750     
     

 

 

    

Air Freight & Logistics - 1.5%

        

Aguila 3 S.A. (Luxembourg)3, 7.875%, 1/31/2018

     B2            2,660,000         2,819,600     
     

 

 

    

Airlines - 2.7%

        

Continental Airlines, Inc.3, 6.75%, 9/15/2015

     Ba2            1,545,000         1,622,250     

Delta Air Lines Pass-Through Trust, Series 2010-1, Class B, 6.375%, 1/2/2016

     Ba3            1,890,000         1,965,600     

Delta Air Lines Pass-Through Trust, Series 2010-2, Class B, 6.75%, 11/23/2015

     Ba3            850,000         884,000     

UAL 2009-2B Pass Through Trust3, 12.00%, 1/15/2016

     Ba3            701,358         771,494     
     

 

 

    
        5,243,344     
     

 

 

    

Building Products - 0.4%

        

Building Materials Corp. of America3, 7.50%, 3/15/2020

     Ba3            800,000         880,000     
     

 

 

    

Commercial Services & Supplies - 2.8%

        

Clean Harbors, Inc., 5.25%, 8/1/2020

     Ba2            1,695,000         1,767,037     

Garda World Security Corp. (Canada)3, 9.75%, 3/15/2017

     B2            1,795,000         1,880,263     

International Lease Finance Corp., 6.375%, 3/25/2013

     Ba3            1,815,000         1,834,057     
     

 

 

    
        5,481,357     
     

 

 

    

Machinery - 1.4%

        

Dynacast International LLC - Dynacast Finance, Inc., 9.25%, 7/15/2019

     B2            2,500,000         2,675,000     
     

 

 

    

Marine - 1.4%

        

Navios Maritime Holdings, Inc. - Navios Maritime Finance US, Inc., 8.875%, 11/1/2017

     B1            2,720,000         2,713,200     
     

 

 

    

Professional Services - 0.8%

        

FTI Consulting, Inc.3, 6.00%, 11/15/2022

     Ba2            1,500,000         1,552,500     
     

 

 

    

Total Industrials

         24,213,751     
     

 

 

    

Information Technology - 4.0%

        

Communications Equipment - 2.0%

        

Hughes Satellite Systems Corp., 6.50%, 6/15/2019

     Ba3            1,780,000         1,962,450     

ViaSat, Inc., 6.875%, 6/15/2020

     B1            1,845,000         1,928,025     
     

 

 

    
        3,890,475     
     

 

 

    

Electronic Equipment, Instruments & Components - 1.0%

        

CPI International, Inc., 8.00%, 2/15/2018

     B3            1,950,000         1,903,687     
     

 

 

    

The accompanying notes are an integral part of the financial statements.

 

8

High Yield Bond Series

 

 

Investment Portfolio - December 31, 2012

 

    CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT		      VALUE
 (NOTE 2)		      

CORPORATE BONDS (continued)

        

Non-Convertible Corporate Bonds (continued)

        

Information Technology (continued)

        

Software - 1.0%

        

Nuance Communications, Inc.3, 5.375%, 8/15/2020

     Ba3          $ 1,890,000      $ 1,975,050     
     

 

 

    

Total Information Technology

         7,769,212     
     

 

 

    

Materials - 11.4%

        

Chemicals - 2.9%

        

Nufarm Australia Ltd. (Australia)3, 6.375%, 10/15/2019

     Ba3            3,640,000        3,803,800     

Taminco Global Chemical Corp. (Belgium)3, 9.75%, 3/31/2020

     Caa1            1,705,000        1,866,975     
     

 

 

    
        5,670,775     
     

 

 

    

Containers & Packaging - 3.5%

        

Consolidated Container Co. LLC - Consolidated Container Capital, Inc.3, 10.125%, 7/15/2020

     Caa1            1,775,000        1,899,250     

Reynolds Group Issuer, Inc. - Reynolds Group Issuer LLC - Reynolds Group Issuer S.A.3, 5.75%, 10/15/2020

     B1            2,730,000        2,818,725     

Sealed Air Corp.3, 6.50%, 12/1/2020

     B1            1,875,000        2,025,000     
     

 

 

    
        6,742,975     
     

 

 

    

Metals & Mining - 3.0%

        

Calcipar S.A. (Luxembourg)3, 6.875%, 5/1/2018

     B1            1,795,000        1,830,900     

FMG Resources August 2006 Pty. Ltd. (Australia)3, 6.875%, 2/1/2018

     B1            1,955,000        2,018,537     

Shale-Inland Holdings LLC - Shale-Inland Finance Corp.3, 8.75%, 11/15/2019

     B3            1,890,000        1,979,775     
     

 

 

    
        5,829,212     
     

 

 

    

Paper & Forest Products - 2.0%

        

Smurfit Kappa Acquisitions (Ireland)3, 4.875%, 9/15/2018

     Ba2            3,775,000        3,850,500     
     

 

 

    

Total Materials

         22,093,462     
     

 

 

    

Telecommunication Services - 8.5%

        

Diversified Telecommunication Services - 7.5%

        

Inmarsat Finance plc (United Kingdom)3, 7.375%, 12/1/2017

     Ba2            1,685,000        1,811,375     

Sable International Finance Ltd. (United Kingdom)3, 8.75%, 2/1/2020

     Ba2            1,615,000        1,849,175     

UPCB Finance III Ltd. (Netherlands)3, 6.625%, 7/1/2020

     Ba3            650,000        696,313     

UPCB Finance VI Ltd. (Netherlands)3, 6.875%, 1/15/2022

     Ba3            2,000,000        2,165,000     

Virgin Media Finance plc (United Kingdom), 4.875%, 2/15/2022

     Ba2            1,890,000        1,932,525     

Wind Acquisition Finance S.A. (Italy)3, 11.75%, 7/15/2017

     B3            1,925,000        2,016,437     

Wind Acquisition Finance S.A. (Italy)3, 7.25%, 2/15/2018

     Ba3            1,035,000        1,047,937     

Windstream Corp., 7.50%, 6/1/2022

     Ba3            2,745,000        2,909,700     
     

 

 

    
        14,428,462     
     

 

 

    

The accompanying notes are an integral part of the financial statements.

 

9

High Yield Bond Series

 

 

Investment Portfolio - December 31, 2012

 

    CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
          AMOUNT/
         SHARES		    

 VALUE

 (NOTE 2)

       

CORPORATE BONDS (continued)

         

Non-Convertible Corporate Bonds (continued)

         

Telecommunication Services (continued)

         

Wireless Telecommunication Services - 1.0%

         

NII Capital Corp., 8.875%, 12/15/2019

     B2           $ 2,545,000       $ 2,023,275      
     

 

 

     

Total Telecommunication Services

         16,451,737      
     

 

 

     

Total Non-Convertible Corporate Bonds
(Identified Cost $173,857,863)

         180,579,330      
     

 

 

     
        

TOTAL CORPORATE BONDS
(Identified Cost $178,213,485)

         185,046,021      
     

 

 

     
        

SHORT-TERM INVESTMENT - 2.4%

         

Dreyfus Cash Management, Inc. - Institutional Shares4, 0.06%,

         

(Identified Cost $4,645,044)

             4,645,044               4,645,044      
     

 

 

     

TOTAL INVESTMENTS - 98.2%

        

(Identified Cost $182,858,529)

         189,691,065      

OTHER ASSETS, LESS LIABILITIES - 1.8%

         3,498,070      
     

 

 

     

NET ASSETS - 100%

       $ 193,189,135      
     

 

 

     

1Credit ratings from Moody’s (unaudited).

2Credit ratings from S&P (unaudited).

3Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. These securities have been sold under rule 144A and have been determined to be liquid under guidelines established by the Board of Directors. These securities amount to $112,301,196 or 58.1% of the Series’ net assets as of December 31, 2012 (see Note 2 to the financial statements).

4Rate shown is the current yield as of December 31, 2012.

The accompanying notes are an integral part of the financial statements.

 

10

High Yield Bond Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments (identified cost $182,858,529) (Note 2)

    $ 189,691,065   

Interest receivable

      3,612,509   

Receivable for fund shares sold

      893,395   

Prepaid expenses

      1,578   

Dividends receivable

      241   
  

 

 

  

TOTAL ASSETS

      194,198,788   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      122,026   

Accrued shareholder services fees (Class S) (Note 3)

      37,874   

Accrued fund accounting and administration fees (Note 3)

      9,751   

Accrued transfer agent fees (Note 3)

      2,201   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      837,427   
  

 

 

  

TOTAL LIABILITIES

      1,009,653   
  

 

 

  

TOTAL NET ASSETS

    $ 193,189,135   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 180,957   

Additional paid-in-capital

      184,864,741   

Undistributed net investment income

      1,259   

Accumulated net realized gain on investments

      1,309,642   

Net unrealized appreciation on investments

      6,832,536   
  

 

 

  

TOTAL NET ASSETS

    $ 193,189,135   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S ($179,187,142/ 16,664,185 shares)

    $ 10.75   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I ($14,001,993/ 1,431,487 shares)

    $ 9.78   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

11

High Yield Bond Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Interest

    $ 12,685,716   

Dividends

      125,358   
  

 

 

  

Total Investment Income

      12,811,074   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      1,651,922   

Shareholder services fees (Class S) (Note 3)

      185,237   

Fund accounting and administration fees (Note 3)

      62,392   

Transfer agent fees (Note 3)

      13,096   

Directors’ fees (Note 3)

      3,644   

Chief Compliance Officer service fees (Note 3)

      2,442   

Custodian fees

      11,109   

Miscellaneous

      93,483   
  

 

 

  

Total Expenses

      2,023,325   
  

 

 

  

NET INVESTMENT INCOME

      10,787,749   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:

   

Net realized gain (loss) on investments

      7,047,305   

Net change in unrealized appreciation (depreciation) on investments

      7,175,708   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

      14,223,013   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 25,010,762   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

12

High Yield Bond Series

 

 

Statements of Changes in Net Assets

 

    

FOR THE

YEAR ENDED
12/31/12

    

FOR THE

YEAR ENDED
12/31/11

  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 10,787,749      $ 10,530,980   

Net realized gain (loss) on investments

      7,047,305        4,681,436   

Net change in unrealized appreciation (depreciation) on investments

      7,175,708        (7,373,376 ) 
  

 

 

    

 

 

  

Net increase from operations

      25,010,762        7,839,040   
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 8):

     

From net investment income (Class S)

      (10,361,600 )      (10,504,997 ) 

From net investment income (Class I)

      (467,597 )      —   

From net realized gain on investments (Class S)

      (5,914,586 )      (4,479,165 ) 

From net realized gain on investments (Class I)

      (472,249 )      —   
  

 

 

    

 

 

  

Total distributions to shareholders

      (17,216,032 )      (14,984,162 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      10,044,454        24,313,762   
  

 

 

    

 

 

  

Net increase in net assets

      17,839,184        17,168,640   

NET ASSETS:

     

Beginning of year

      175,349,951        158,181,311   
  

 

 

    

 

 

  

End of year (including undistributed net investment income of $ 1,259 and $ 31,969, respectively)

    $ 193,189,135      $ 175,349,951   
  

 

 

    

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

13

High Yield Bond Series

 

 

Financial Highlights - Class S*

 

    

FOR THE YEARS ENDED

    

FOR THE
PERIOD
9/14/091 TO

12/31/09

  
     12/31/12     12/31/11     12/31/10    

Per share data (for a share outstanding throughout each period):

         

Net asset value - Beginning of period

    $ 10.30      $ 10.74      $ 10.37      $ 10.00   
  

 

 

    

 

 

    

 

 

    

 

 

  

Income from investment operations:

         

Net investment income2

      0.63        0.69        0.75        0.20   

Net realized and unrealized gain (loss) on investments

      0.83        (0.17 )      0.66        0.28   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total from investment operations

      1.46        0.52        1.41        0.48   
  

 

 

    

 

 

    

 

 

    

 

 

  

Less distributions to shareholders:

         

From net investment income

      (0.64 )      (0.67 )      (0.75 )      (0.10 ) 

From net realized gain on investments

      (0.37 )      (0.29 )      (0.29 )      (0.01 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total distributions to shareholders

      (1.01 )      (0.96 )      (1.04 )      (0.11 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net asset value - End of period

    $ 10.75      $ 10.30      $ 10.74      $ 10.37   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net assets - End of period (000’s omitted)

    $ 179,187      $ 175,350      $ 158,181      $ 127,678   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total return3

      14.46 %      4.87 %      13.59 %      4.82 % 

Ratios (to average net assets)/

Supplemental Data:

         

Expenses**

      1.10 %      1.12 %      1.14 %      1.20 %4 

Net investment income

      5.83 %      6.26 %      6.79 %      6.51 %4 

Portfolio turnover

      91 %      63 %      54 %      22 % 

*Effective August 1, 2012, the shares of the Series have been designated as Class S.

**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 Series, the expense ratio (to average net assets) would have increased by the following amounts:

  

    

     N/A        N/A        0.00 %5      0.02 %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 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

High Yield Bond Series

 

 

Financial Highlights - Class I

 

     FOR THE  PERIOD
8/1/121 TO
12/31/12		  

Per share data (for a share outstanding throughout the period):

  

Net asset value - Beginning of period

   $ 10.00   
 

 

 

  

Income (loss) from investment operations:

  

Net investment income2

     0.25   

Net realized and unrealized gain (loss) on investments

     0.30   
 

 

 

  

Total from investment operations

     0.55   
 

 

 

  

Less distributions to shareholders:

  

From net investment income

     (0.40 ) 

From net realized gain on investments

     (0.37 ) 
 

 

 

  

Total distributions to shareholders

     (0.77 ) 
 

 

 

  

Net asset value - End of period

   $ 9.78   
 

 

 

  

Net assets - End of period (000’s omitted)

   $ 14,002   
 

 

 

  

Total return3

     5.59 % 

Ratios (to average net assets)/

Supplemental Data:

  

Expenses

     0.87 %4 

Net investment income

     5.90 %4 

Portfolio turnover

     91 % 

1Commencement of operations.

2Calculated based on average shares outstanding during the period.

3Represents aggregate total return for the period 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.

 

15

High Yield Bond Series

 

 

Notes to Financial Statements

 

1. Organization

High Yield Bond Series (the “Series”) is a no-load non-diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide 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 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. Effective August 1, 2012 the Class A shares of the Series have been redesignated as Class S shares and the Series issued Class I shares. Each class of shares is substantially the same, except that Class S shares bear shareholder services fees. 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 125 million have been designated as High Yield Bond Series Class S common stock and 100 million shares have been designated as High Yield Bond Class I common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ 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 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.

Short-term investments that mature in sixty days or less are 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

 

16

High Yield Bond Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Debt securities:

            

  Corporate debt:

            

  Consumer Discretionary

      22,176,401         —         22,176,401         —   

  Consumer Staples

      12,750,400         —         12,750,400         —   

  Energy

      31,987,013         —         31,987,013         —   

  Financials

      21,528,635         —         21,528,635         —   

  Health Care

      21,608,719         —         21,608,719         —   

  Industrials

      24,213,751         —         24,213,751         —   

  Information Technology

      7,769,212         —         7,769,212         —   

  Materials

      22,093,462         —         22,093,462         —   

  Telecommunication Services

      16,451,737         —         16,451,737         —   

  Convertible corporate debt:

            

  Health Care

      771,375         —         771,375         —   

  Materials

      3,695,316         —         3,695,316         —   

  Mutual fund

      4,645,044         4,645,044         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       189,691,065       $       4,645,044       $ 185,046,021       $                     —   
  

 

 

     

 

 

     

 

 

     

 

 

  

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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.

 

17

High Yield Bond Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Transactions, Investment Income and Expenses (continued)

 

The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.

Foreign Currency Translation

The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series does not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the 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.

Restricted Securities

Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of the Series’ Investment Portfolio.

Illiquid Securities

A security may be considered illiquid if so deemed in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board. Securities that are illiquid are marked with the applicable footnote on the Investment Portfolio. No such investments were held by the Series on December 31, 2012.

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 December 31, 2012, 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, 2009 and the years ended December 31, 2010 through December 31, 2012. 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.

 

18

High Yield Bond Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Indemnifications

The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.75% of the Series’ average daily net assets. Prior to August 1, 2012, this fee was 1.00% of the Series’ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended.

The Class S shares of the Series are subject to a shareholder service fee in accordance with a shareholder service plan adopted by the Board. The shareholder service fee is intended to compensate financial intermediaries, including affiliates of the Fund, in connection with the provision of direct client service, personal services, maintenance of shareholder accounts and reporting services. For these services, Class S of the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.25% of the average daily net assets of Class S. The Fund has a Shareholder Services Agreement with the Advisor, for which the Advisor receives the shareholder services fee as stated above.

Effective August 1, 2012, the Advisor has contractually agreed, until at least April 30, 2014, to waive its management fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series, exclusive of shareholder service fees, at no more than 0.95% of average daily net assets. Prior to August 1, 2012, this amount was 1.20%. The Advisor did not waive any fees for the year ended December 31, 2012. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed in prior years.

Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program,

 

19

High Yield Bond Series

 

 

Notes to Financial Statements (continued)

 

 

3. Transactions with Affiliates (continued)

 

are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $163,902,385 and $160,825,111 respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in shares of Class S and Class I shares of High Yield Bond Series were:

 

CLASS S   FOR THE YEAR ENDED  12/31/12     FOR THE YEAR ENDED  12/31/11  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

               2,014,989       $       21,922,842                  2,430,734       $ 26,727,792   

Reinvested

     1,474,830        15,828,509        1,428,302        14,581,472   

Repurchased

     (3,857,491 )      (42,040,705 )      (1,560,326 )      (16,995,502 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     (367,672 )     $ (4,289,354 )      2,298,710       $       24,313,762   
 

 

 

    

 

 

    

 

 

    

 

 

  
       
CLASS I   FOR THE PERIOD 8/1/12
(COMMENCEMENT OF
OPERATIONS) TO 12/31/12		        
  SHARES     AMOUNT    

Sold

               1,360,330       $       13,642,660       

Reinvested

     94,180        923,980       

Repurchased

     (23,023 )      (232,832 )     
 

 

 

    

 

 

      

Total

     1,431,487      $ 14,333,808       
 

 

 

    

 

 

      

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

20

High Yield Bond Series

 

 

Notes to Financial Statements (continued)

 

 

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 accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including investments in hybrid securities. 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. For the fiscal year ended December 31, 2012, $10,738 was reclassified within the capital accounts from Accumulated Net Realized Gain on Investments to Undistributed Net Investment Income. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

   

  FOR THE YEAR  

  ENDED 12/31/12

       FOR THE YEAR  
  ENDED 12/31/11		      

Ordinary income

   $ 14,255,662          $ 11,925,465         

Long-term capital gains

     2,960,370            3,058,697         

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on the identified cost of investments for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 182,858,529   

Unrealized appreciation

      7,869,208   

Unrealized depreciation

      (1,036,672 ) 
  

 

 

  

Net unrealized appreciation

    $ 6,832,536   
  

 

 

  

Undistributed ordinary income

    $ 88,911   

Undistributed long-term gains

    $ 1,221,990   

 

 

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series after December 31, 2010 may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses. Prior to the Act, net capital losses incurred by the Series were carried forward for eight years and treated as short-term losses. The Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of December 31, 2012, the Series did not have pre- or post-enactment net capital loss carryforwards.

 

21

High Yield Bond Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of High Yield Bond Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the High Yield Bond Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

22

High Yield Bond Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal period $152,416 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal period is 1.07%, or if different, the maximum allowable under tax law.

 

23

High Yield Bond Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor´s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro- Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

24

High Yield Bond Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

25

High Yield Bond Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:   

Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc.

Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

Address:

   

 

Stephen B. Ashley

290 Woodcliff Drive

Fairport, NY 14450

Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995 - 2008)

The Ashley Group (1995 - 2008)

Genesee Corporation (1987 - 2007)

Name:    Peter L. Faber
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Partnership for New York City, Inc. (non-profit) (1989 - 2010)

New York Collegium (non-profit) (2004 - 2011))

Boston Early Music Festival (non-profit)

Name:    Harris H. Rusitzky
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994; Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

26

High Yield Bond Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005-2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Incyte Corp. (2000-present)

ViroPharma, Inc. (2000-present)

HLTH Corp. (2000-present)

Cheyne Capital International (2000-present)

MPM Bio-equities (2000-2009)

GMP Companies (2000-2012)

HoustonPharma (2000-2009)

Name:    Chester N. Watson
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee
   Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003-2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 - Manning & Napier Advisors, LLC;
   Manager (2004-2011) - KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

27

High Yield Bond Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

28

 

{This page intentionally left blank}

 

 

 

 

29

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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNHYB-12/12-AR

 

LOGO

 

 

        INFLATION FOCUS EQUITY SERIES                          

 

 

 

 

www.manning-napier.com

       LOGO          

Inflation Focus Equity Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months. Although markets generally witnessed positive traction throughout the year and performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor believes may to continue to weigh on global economic growth.

Broad-based inflationary pressures also remained subdued as the year came to a close despite the fact that monetary authorities in many countries continue to battle slow growth and structural headwinds with highly accommodative policies. While the overall inflationary environment remains predominantly benign, the continued implementation of expansionary policies necessitates the monitoring of pockets of inflationary pressures moving forward.

To select securities that are expected to benefit from an inflationary environment, the Advisor considers the nature of inflation today. Given the presence of excess slack in global productive capacity, as well as regions with high unemployment and global competition for jobs, the Advisor believes today’s reality is less about traditional broad-based inflation and more about pockets of inflation. The Advisor’s approach to investing in this inflationary environment combines a top-down thematic analysis to identify and understand the sources of inflationary pressures with a traditional bottom-up industry and company level fundamental analysis to identify the beneficiaries of these inflationary pressures. Industries where there are bottlenecks and tight supply conditions stand to benefit from inflationary pressures where they may exist.

While major U.S. indices produced strong, double-digit absolute performance for all of 2012, international equities as a whole fared slightly better. For the twelve months ending December 31, 2012, the MSCI All Country World Index (ACWI) gained 16.13%. Although the Inflation Focus Equity Series underperformed relative to the benchmark, it had a strong absolute return of 14.26% in 2012.

In the current market environment, the Advisor has identified several key sources of potential price inflation that are represented in the Series. Two of the more prominent themes that impacted the Series’ performance during 2012 were the AgFlation and FuelFlation themes. Simply put, the AgFlation theme refers to inflation in agricultural commodities and FuelFlation refers to inflation related to rising energy prices. Overall, the Series’ underperformance was driven by sector allocation decisions, although equity selection had a positive impact on relative performance for the year. In particular, holdings in the Series’ FuelFlation and Real Estate themes detracted from returns for the year, while certain holdings in its AgFlation theme contributed positively to relative performance.

Seeking to invest in specific companies exposed to favorable long-term inflationary themes, the Advisor uses three disciplined investment strategies to ultimately determine which stocks comprise the Inflation Focus Equity Series. As inflationary conditions around the world evolve, the Advisor remains committed to an active and flexible investment approach, which enables us to adapt to changing market conditions.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Inflation Focus Equity Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012    
    

 ONE

 YEAR1                

  

 TOTAL

 RETURN

 SINCE

 INCEPTION1,2                

Manning & Napier Fund, Inc. - Inflation Focus Equity Series3

     14.26%    9.90%

MSCI All Country World Index4

     16.13%    12.93%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Inflation Focus Equity Series from its inception2 (August 23, 2011) to present (December 31, 2012) to the MSCI All Country World Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Index are calculated from August 23, 2011, the Series’ inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.20%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.23% for the year ended December 31, 2012.

4MSCI All Country World Index (ACWI) is a free float-adjusted market capitalization index that is designed to measure global developed and emerging market equity performance and consists of 45 developed and emerging market country indices. The Index is denominated in U.S. dollars. The Index returns assume daily reinvestment of net dividends (thus accounting for foreign dividend taxation). Unlike the Series returns, the Index returns do not reflect any fees or expenses.

 

2

Inflation Focus Equity Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

   

 BEGINNING
 ACCOUNT VALUE                             

 7/1/12

  

 ENDING
 ACCOUNT VALUE                             

 12/31/12

  

 EXPENSES PAID
 DURING PERIOD*                             

 7/1/12-12/31/12

Actual

    $1,000.00    $1,085.90    $6.31

Hypothetical

(5% return before expenses)

    $1,000.00    $1,019.16    $6.11

*Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.20%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.

 

3

Inflation Focus Equity Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

Top Ten Stock Holdings2   

Monsanto Co.

      4.4 %   

    Westport Innovations, Inc. - ADR (Canada)

      3.2 % 

Syngenta AG (Switzerland)

      3.4 %   

    Cameron International Corp.

      3.1 % 

Polypore International, Inc.

      3.4 %   

    DuPont Fabros Technology, Inc.

      3.0 % 

Pentair Ltd. - ADR

      3.2 %   

    Ingredion, Inc.

      2.9 % 

Pall Corp.

      3.2 %   

    Umicore S.A. (Belgium)

      2.8 % 
   
2As a percentage of total investments.                      

 

4

Inflation Focus Equity Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS - 94.2%

      

Consumer Staples - 12.4%

      

Food & Staples Retailing - 2.7%

      

The Fresh Market, Inc.*

     14,510       $ 697,786     

United Natural Foods, Inc.*

     13,820         740,614     

Whole Foods Market, Inc.

     7,970         727,900     
   

 

 

    
      2,166,300     
   

 

 

    

Food Products - 9.7%

      

Alliance Grain Traders, Inc. (Canada)

     53,420         701,382     

Cal-Maine Foods, Inc.

     19,470         783,083     

The Hain Celestial Group, Inc.*

     10,900         590,998     

Ingredion, Inc.

     35,140         2,264,070     

Mead Johnson Nutrition Co.

     17,190         1,132,649     

Sanderson Farms, Inc.

     18,930         900,121     

SunOpta, Inc.*

     65,070         366,344     

Tyson Foods, Inc. - Class A

     47,030         912,382     
   

 

 

    
      7,651,029     
   

 

 

    

Total Consumer Staples

       9,817,329     
   

 

 

    

Energy - 15.8%

      

Energy Equipment & Services - 8.6%

      

Baker Hughes, Inc.

     23,610         964,232     

Bourbon S.A. (France)1

     15,000         415,713     

Cameron International Corp.*

     43,230         2,440,766     

Gulfmark Offshore, Inc. - Class A

     20,790         716,215     

Hornbeck Offshore Services, Inc.*

     18,340         629,796     

National Oilwell Varco, Inc.

     9,800         669,830     

Schlumberger Ltd.

     13,940         965,903     
   

 

 

    
      6,802,455     
   

 

 

    

Oil, Gas & Consumable Fuels - 7.2%

      

Apache Corp.

     8,380         657,830     

Ceres, Inc.*

     19,480         88,439     

Chesapeake Energy Corp.

     21,770         361,817     

Encana Corp. (Canada)

     49,700         982,072     

EOG Resources, Inc.

     7,090         856,401     

Hess Corp.

     38,910         2,060,674     

Range Resources Corp.

     11,120         698,670     
   

 

 

    
      5,705,903     
   

 

 

    

Total Energy

             12,508,358     
   

 

 

    

Financials - 6.2%

      

Diversified Financial Services - 0.9%

      

JSE Ltd. (South Africa)1

     79,770         737,043     
   

 

 

    

The accompanying notes are an integral part of the financial statements.

 

5

Inflation Focus Equity Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS (continued)

      

Financials (continued)

      

Real Estate Investment Trusts (REITS) - 5.3%

      

Digital Realty Trust, Inc.

     26,690       $ 1,811,984     

DuPont Fabros Technology, Inc.

     98,010         2,367,922     
   

 

 

    
      4,179,906     
   

 

 

    

Total Financials

       4,916,949     
   

 

 

    

Health Care - 2.8%

      

Health Care Equipment & Supplies - 2.8%

      

Neogen Corp.*

     49,340         2,236,089     
   

 

 

    

Industrials - 33.2%

      

Electrical Equipment - 3.4%

      

Polypore International, Inc.*

     58,140         2,703,510     
   

 

 

    

Machinery - 19.6%

      

AGCO Corp.*

     26,010         1,277,611     

Deere & Co.

     14,700         1,270,374     

FANUC Corp. (Japan)1

     4,600         855,828     

First Tractor Co. Ltd. - Class H (China)*1

     876,380         871,694     

Lindsay Corp.

     21,010         1,683,321     

Pall Corp.

     41,640         2,509,226     

Pentair Ltd. - ADR

     51,940         2,552,851     

Turk Traktor ve Ziraat Makineleri AS (Turkey)1

     22,370         733,988     

Westport Innovations, Inc. - ADR (Canada)*

     93,510         2,497,652     

Xylem, Inc.

     46,190         1,251,749     
   

 

 

    
            15,504,294     
   

 

 

    

Professional Services - 2.3%

      

ALS Ltd. (Australia)1

     158,850         1,812,068     
   

 

 

    

Trading Companies & Distributors - 5.3%

      

Brenntag AG (Germany)1

     11,790         1,553,286     

Fastenal Co.

     30,590         1,428,247     

MSC Industrial Direct Co., Inc. - Class A

     8,000         603,040     

WW Grainger, Inc.

     2,730         552,470     
   

 

 

    
      4,137,043     
   

 

 

    

Transportation Infrastructure - 2.6%

      

Groupe Eurotunnel S.A. (France)1

     265,710         2,064,773     
   

 

 

    

Total Industrials

       26,221,688     
   

 

 

    

Information Technology - 2.3%

      

Electronic Equipment, Instruments & Components - 2.3%

      

Maxwell Technologies, Inc.*

     215,690         1,788,070     
   

 

 

    

Materials - 21.5%

      

Chemicals - 16.0%

      

Agrium, Inc. (Canada)

     8,800         879,208     

The accompanying notes are an integral part of the financial statements.

 

6

Inflation Focus Equity Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES    

  VALUE

  (NOTE 2)

      

COMMON STOCKS (continued)

      

Materials (continued)

      

Chemicals (continued)

      

Israel Chemicals Ltd. (Israel)1

     67,210       $ 809,420     

Johnson Matthey plc (United Kingdom)1

     51,640         2,028,591     

Monsanto Co.

     36,490         3,453,778     

Nufarm Ltd. (Australia)1

     294,670         1,797,057     

Sigma-Aldrich Corp.

     13,360         983,029     

Syngenta AG (Switzerland)1

     6,700         2,706,709     
   

 

 

    
      12,657,792     
   

 

 

    

Metals & Mining - 5.5%

      

Alumina Ltd. (Australia)1

     1,034,290         992,652     

Schnitzer Steel Industries, Inc. - Class A

     37,190         1,127,973     

Umicore S.A. (Belgium)1

     40,480         2,241,512     
   

 

 

    
      4,362,137     
   

 

 

    

Total Materials

       17,019,929     
   

 

 

    
     

TOTAL COMMON STOCKS

      

(Identified Cost $67,502,642)

             74,508,412     
   

 

 

    
     

SHORT-TERM INVESTMENT - 5.5%

      

Dreyfus Cash Management, Inc. - Institutional Shares2, 0.06%

      

(Identified Cost $4,379,811)

     4,379,811         4,379,811     
   

 

 

    

TOTAL INVESTMENTS - 99.7%

      

(Identified Cost $71,882,453)

       78,888,223     

OTHER ASSETS, LESS LIABILITIES - 0.3%

       225,675     
   

 

 

    

NET ASSETS - 100%

     $ 79,113,898     
   

 

 

    

ADR - American Depository Receipt

*Non-income producing security

1A factor from a third party vendor was applied to determine the security’s fair value following the close of local trading.

2Rate shown is the current yield as of December 31, 2012.

The accompanying notes are an integral part of the financial statements.

 

7

Inflation Focus Equity Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments, at value (identified cost $71,882,453) (Note 2)

    $ 78,888,223   

Cash

      8,449   

Receivable for fund shares sold

      258,251   

Dividends receivable

      87,762   

Foreign tax reclaims receivable

      30,411   
  

 

 

  

TOTAL ASSETS

      79,273,096   
  

 

 

  

LIABILITIES:

   

Accrued management fees (Note 3)

      55,254   

Accrued fund accounting and administration fees (Note 3)

      5,675   

Accrued transfer agent fees (Note 3)

      2,486   

Accrued Directors’ fees (Note 3)

      1,197   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      47,748   

Audit fees payable

      32,187   

Other payables and accrued expenses

      14,277   
  

 

 

  

TOTAL LIABILITIES

      159,198   
  

 

 

  

TOTAL NET ASSETS

    $ 79,113,898   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 71,566   

Additional paid-in-capital

      72,143,336   

Accumulated net realized loss on investments, foreign currency and translation of other assets and liabilities

      (107,298 ) 

Net unrealized appreciation on investments, foreign currency and translation of other assets and liabilities

      7,006,294   
  

 

 

  

TOTAL NET ASSETS

    $ 79,113,898   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A ($79,113,898/7,156,615 shares)

    $ 11.05   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

8

Inflation Focus Equity Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Dividends (net of foreign taxes withheld, $59,813)

    $ 1,254,432   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      753,029   

Fund accounting and administration fees (Note 3)

      38,957   

Transfer agent fees (Note 3)

      15,486   

Chief Compliance Officer service fees (Note 3)

      2,556   

Directors’ fees (Note 3)

      2,220   

Custodian fees

      13,701   

Miscellaneous

      92,975   
  

 

 

  

Total Expenses

      918,924   
  

 

 

  

Less reduction of expenses (Note 3)

      (20,284 ) 
  

 

 

  

Net Expenses

      898,640   
  

 

 

  

NET INVESTMENT INCOME

      355,792   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

   

Investments

      2,162,472   

Foreign currency and translation of other assets and liabilities

      (4,679 ) 
  

 

 

  
     2,157,793   
  

 

 

  

Net change in unrealized appreciation (depreciation) on-

   

Investments

      7,367,469   

Foreign currency and translation of other assets and liabilities

      712   
  

 

 

  
     7,368,181   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      9,525,974   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 9,881,766   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

9

Inflation Focus Equity Series

 

 

Statements of Changes in Net Assets

 

    

 

FOR THE

YEAR ENDED

12/31/12

    

 

FOR THE

PERIOD
8/23/111 TO 12/31/11

  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 355,792      $ 14,003   

Net realized gain (loss) on investments and foreign currency

      2,157,793        (455,571 ) 

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      7,368,181        (361,887 ) 
  

 

 

    

 

 

  

Net increase (decrease) from operations

      9,881,766        (803,455 ) 
  

 

 

    

 

 

  

From net investment income

      (367,886 )      —   

From net realized gain on investments

      (1,816,566 )      —   
  

 

 

    

 

 

  

Total distributions to shareholders

      (2,184,452 )      —   
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      2,149,322        70,070,717   
  

 

 

    

 

 

  

Net increase in net assets

      9,846,636        69,267,262   

NET ASSETS:

     

Beginning of period

      69,267,262        —   
  

 

 

    

 

 

  

End of period (including undistributed net investment income of $0 and accumulated net investment loss of $11,418, respectively)

    $ 79,113,898      $ 69,267,262   
  

 

 

    

 

 

  

1Commencement of operations.

 

The accompanying notes are an integral part of the financial statements.

 

10

Inflation Focus Equity Series

 

 

Financial Highlights

 

    

 

FOR THE
YEAR ENDED
12/31/12

    

 

FOR THE

PERIOD
8/23/111 TO 12/31/11

  

Per share data (for a share outstanding throughout each period):

     

Net asset value - Beginning of period

    $ 9.95      $ 10.00   
  

 

 

    

 

 

  

Income (loss) from investment operations:

     

Net investment income2

      0.05        0.00 3 

Net realized and unrealized gain (loss) on investments

      1.36        (0.05 ) 
  

 

 

    

 

 

  

Total from investment operations

      1.41        (0.05 ) 
  

 

 

    

 

 

  

Less distributions to shareholders:

     

From net investment income

      (0.05 )      —   

From net realized gain on investments

      (0.26 )      —   
  

 

 

    

 

 

  

Total distributions to shareholders

      (0.31 )      —   
  

 

 

    

 

 

  

Net asset value - End of period

    $ 11.05      $ 9.95   
  

 

 

    

 

 

  

Net assets - End of period (000’s omitted)

    $ 79,114      $ 69,267   
  

 

 

    

 

 

  

Total return4

      14.26 %      (0.50 %) 

Ratios (to average net assets)/Supplemental Data:

     

Expenses*

      1.20 %      1.20 %5 

Net investment income

      0.47 %      0.60 %5 

Portfolio turnover

      56 %      9 % 
*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 Series, the expense ratio (to average net assets) would have increased by the following amount:     
     0.03 %      0.16 %5 

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 certain periods. Periods less than one year are not annualized.

5Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

11

Inflation Focus Equity Series

 

 

Notes to Financial Statements

 

1. Organization

Inflation Focus Equity Series (the “Series”) is a no-load non-diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide long-term growth and inflation protection primarily through investment in equity securities that are expected to benefit from an inflationary environment.

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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated as Inflation Focus Equity Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ 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 are 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 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

 

12

Inflation Focus Equity Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Equity securities:

            

  Consumer Staples

    $ 9,817,329       $ 9,817,329       $ —       $ —   

  Energy

      12,508,358         12,092,645         415,713         —   

  Financials

      4,916,949         4,179,906         737,043         —   

  Health Care

      2,236,089         2,236,089         —         —   

  Industrials

      26,221,688         18,330,051         7,891,637         —   

  Information Technology

      1,788,070         1,788,070         —         —   

  Materials

      17,019,929         6,443,988         10,575,941         —   

  Mutual fund

      4,379,811         4,379,811         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       78,888,223       $       59,267,889       $       19,620,334       $                     —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Please see the Investment Portfolio for foreign securities where a factor from a third party vendor was applied to determine the security’s fair value following the close of local trading. Such securities are included in Level 2 in the table above.

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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 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.

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

 

13

Inflation Focus Equity Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Foreign Currency Translation (continued)

 

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.

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 December 31, 2012, 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, 2011 and the year ended December 31, 2012. 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series’ average daily net assets.

 

14

Inflation Focus Equity Series

 

 

Notes to Financial Statements (continued)

 

 

3. Transactions with Affiliates (continued)

 

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended.

The Advisor has contractually agreed, until at least April 30, 2014, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 1.20% of average daily net assets each year. For the year ended December 31, 2012, the Advisor voluntarily waived fees of $20,284, which is included as a reduction of expenses on the Statement of Operations. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed.

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.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $40,154,763 and $40,471,334 respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in Class A shares of Inflation Focus Equity Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE PERIOD 8/23/11
(COMMENCEMENT OF
OPERATIONS) TO 12/31/11		  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

     684,939       $ 7,455,324        7,270,819       $ 73,101,576   

Reinvested

     197,345        2,153,038        —        —   

Repurchased

     (687,077 )      (7,459,040 )      (309,411 )      (3,030,859 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

               195,207       $       2,149,322                  6,961,408       $       70,070,717   
 

 

 

    

 

 

    

 

 

    

 

 

  

 

15

Inflation Focus Equity Series

 

 

Notes to Financial Statements (continued)

 

 

5. Capital Stock Transactions (continued)

 

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

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 accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses, losses deferred due to wash sales and qualified late-year losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the fiscal year ended December 31, 2012, $23,512 was reclassified within the capital accounts from Accumulated Net Realized Gain on Investments to Undistributed Net Investment Income. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR
ENDED 12/31/12  		     FOR THE PERIOD 8/23/11
(COMMENCEMENT OF
OPERATIONS) TO 12/31/11  		       

Ordinary income

   $ 2,088,150          $ —          

Long-term capital gains

     96,302            —          

 

16

Inflation Focus Equity Series

 

 

Notes to Financial Statements (continued)

 

 

8. Federal Income Tax Information (continued)

 

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 72,054,672   

Unrealized appreciation

      9,530,081   

Unrealized depreciation

      (2,696,530 ) 
  

 

 

  

Net unrealized appreciation

    $ 6,833,551   
  

 

 

  

Undistributed ordinary income

    $ 267,194   

Qualified late-year losses1

    $ 202,273   
 

1The Series has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses.

As of December 31, 2012, the Series did not have post-enactment net capital loss carryforwards.

The capital loss carryover utilized in the current year was $178,409.

 

17

Inflation Focus Equity Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Inflation Focus Equity Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Inflation Focus Equity Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and for the period August 23, 2011 (commencement of operations) through December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

18

Inflation Focus Equity Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal year $991,663 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

For corporate shareholders, the percentage of investment income (dividend income plus short-term gains, if any) that qualifies for the dividends received deduction for the current fiscal year is 19.79%, or if different, the maximum allowable under tax law.

 

19

Inflation Focus Equity Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

20

Inflation Focus Equity Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

21

Inflation Focus Equity Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:   

Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc.

Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Fannie Mae (1995 - 2008)
   The Ashley Group (1995 - 2008)
     Genesee Corporation (1987 - 2007)
Name:    Peter L. Faber
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Partnership for New York City, Inc. (non-profit)(1989 - 2010)
   New York Collegium (non-profit)(2004 - 2011))
     Boston Early Music Festival (non-profit)
Name:    Harris H. Rusitzky
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994; Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

22

Inflation Focus Equity Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing
   Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Incyte Corp. (2000 - present)
   ViroPharma, Inc. (2000 - present)
   HLTH Corp. (2000 - present)
   Cheyne Capital International (2000 - present)
   MPM Bio-equities (2000 - 2009)
   GMP Companies (2000 - 2012)
     HoustonPharma (2000 - 2009)
Name:    Chester N. Watson
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004 - 2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:   

President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC

Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

23

Inflation Focus Equity Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

24

 

{This page intentionally left blank}

 

 

 

 

25

Inflation Focus Equity 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNIFE-12/12-AR

 

LOGO

 

        EMERGING MARKETS SERIES                          

 

 

 

 

www.manning-napier.com

      

LOGO          

Emerging Markets Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months. As investors in general continue to focus on safety, the Advisor remains focused on the Series’ objectives. As an active manager, the Advisor bases its investment decisions on prevailing market conditions and fundamentals. Doing so allows it to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. Although markets witnessed positive traction throughout the year and performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor believes may continue to weigh on global economic growth.

Despite the prevailing sense of uncertainty amongst investors, most global equity markets experienced strong positive absolute performance during 2012. For the twelve months ending December 31, 2012, the MSCI Net Emerging Markets Index rose by 18.22%. The Emerging Market Series rose by 22.90% during the same time period, earning strong positive absolute returns for the year while also outperforming the benchmark on a relative basis.

Across emerging markets, significant social and economic growth potential is vastly evident, particularly when compared to the slow growth path for developed markets. As local businesses continue to emerge and thrive alongside broader economic growth, compelling long-term investment opportunities also emerge. The Emerging Markets Series seeks to capture these opportunities by investing in businesses whose principal securities’ trading market is an emerging market country or those that derive a majority of their annual revenue from goods produced, sales made or services performed in an emerging market country. Importantly, the Advisor uses a selective investment approach and monitors the various risks associated with investing in emerging markets companies.

Many emerging markets stand to benefit from the emergence and growth of domestic consumption, even as export markets in developed economies struggle against macroeconomic headwinds. With this in mind, the Emerging Markets Series’ allocations to the Consumer-related and Health Care sectors are currently overweight relative to the MSCI Net Emerging Markets Index. In the Advisor’s view, the ongoing development and expansion of a new consumer class in emerging markets should serve as an important economic growth driver. For the year, specific selections and the relative overweight to Health Care and Consumer Staples have proven beneficial, whereas individual holdings in the Consumer Discretionary sector have hurt relative returns as compared to the benchmark. Elsewhere, certain equity selections in the Industrials sector, as well as an underweight to the Energy and Materials sectors, contributed positively to relative performance. However, certain equity selection in the Information Technology sector and an underweight allocation to the Financials sector detracted from relative returns.

From a country perspective, equity selection contributed positively to relative performance, while overall country allocations detracted from relative returns. In regard to equity selection, specific selections in Brazil and India aided relative returns. Conversely, certain investments in Korea and China challenged relative results. Where country allocation is concerned, an underweight allocation to Mexico and Thailand as compared to the benchmark detracted from relative returns, while an overweight allocation to Turkey and a lack of exposure to Indonesia aided relative performance.

In the Advisor’s view, slow growth remains the most likely path for the U.S. and many other global economies. However, in this challenging environment, many opportunities exist. The Advisor’s active and flexible investment approach is well-equipped to capture these opportunities. As has been the case for more than forty years, Manning & Napier remains committed to providing competitive absolute returns over full market cycles. Today, it feels the best way to do this is to seek attractively priced companies with positive long-term growth drivers that are trading at attractive valuations relative to their growth potential.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Emerging Markets Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

      AVERAGE ANNUAL TOTAL RETURNS  AS OF DECEMBER 31, 2012
  

 ONE

 YEAR1                

  

 TOTAL

 RETURN

 SINCE

 INCEPTION1,2        

Manning & Napier Fund, Inc. - Emerging Markets Series3

     22.90%    18.52%

MSCI Net Emerging Markets Index4

     18.22%    11.43%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Emerging Markets Series from its inception2 (November 16, 2011) to present (December 31, 2012) to the MSCI Net Emerging Markets Index.

 

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and the Index are calculated from November 16, 2011, the Series’ inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2012, this net expense ratio was 1.19%. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.26% for the year ended December 31, 2012.

4The MSCI Net Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Net Emerging Markets Index consists of 21 emerging market country indices. The Index is denominated in U.S. dollars. Unlike the Series returns, the Index returns do not reflect any fees or expenses.

 

2

Emerging Markets Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2012 to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING
 ACCOUNT VALUE                             
 7/1/12		    ENDING
 ACCOUNT VALUE                             
 12/31/12		    EXPENSES PAID
 DURING  PERIOD                             
 7/1/12-12/31/12

Actual

    $1,000.00    $1,145.20    $6.49

Hypothetical

(5% return before expenses)

    $1,000.00    $1,019.16    $6.11

Expenses are equal to the Series’ annualized expense ratio (for the six-month period) of 1.20%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratio stated above may differ from the expense ratio stated in the financial highlights, which is based on one-year data. The Series’ total return would have been lower had certain expenses not been waived during the period.

 

3

Emerging Markets Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

4

Emerging Markets Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES     VALUE
(NOTE 2)		      

COMMON STOCKS - 90.5%

      

Consumer Discretionary - 11.7%

      

Auto Components - 1.9%

      

Mando Corp. (South Korea)1

     14,900      $ 1,803,335     
   

 

 

    

Automobiles - 2.3%

      

Hyundai Motor Co. (South Korea)1

     10,570        2,178,944     
   

 

 

    

Diversified Consumer Services - 2.8%

      

Anhanguera Educacional Participacoes S.A. (Brazil)

     156,730        2,646,230     
   

 

 

    

Hotels, Restaurants & Leisure - 1.1%

      

Arcos Dorados Holdings, Inc. (Argentina)

     91,000        1,088,360     
   

 

 

    

Household Durables - 1.2%

      

LG Electronics, Inc. (South Korea)1

     15,900        1,103,516     
   

 

 

    

Specialty Retail - 2.4%

      

Belle International Holdings Ltd. (Hong Kong)1

     1,036,000        2,291,192     
   

 

 

    

Total Consumer Discretionary

       11,111,577     
   

 

 

    

Consumer Staples - 14.7%

      

Beverages - 4.3%

      

Cia Cervecerias Unidas S.A. - ADR (Chile)

     83,000        2,625,290     

Cia de Bebidas das Americas (AmBev) - ADR (Brazil)

     34,900        1,465,451     
   

 

 

    
      4,090,741     
   

 

 

    

Food & Staples Retailing - 3.1%

      

President Chain Store Corp. (Taiwan)1

     239,000        1,282,320     

Raia Drogasil S.A. (Brazil)

     150,000        1,690,110     
   

 

 

    
      2,972,430     
   

 

 

    

Food Products - 4.9%

      

Biostime International Holdings Ltd. (China)1

     358,500        1,128,972     

Charoen Pokphand Foods PCL (Thailand)1

     1,640,000        1,817,670     

M Dias Branco S.A. (Brazil)

     46,000        1,754,403     
   

 

 

    
      4,701,045     
   

 

 

    

Personal Products - 2.4%

      

Natura Cosmeticos S.A. (Brazil)

     79,000        2,262,545     
   

 

 

    

Total Consumer Staples

       14,026,761     
   

 

 

    

Energy - 4.6%

      

Oil, Gas & Consumable Fuels - 4.6%

      

Pacific Rubiales Energy Corp. (Colombia)

     110,000        2,555,645     

Petroleo Brasileiro S.A. - ADR (Brazil)

     93,700        1,808,410     
   

 

 

    

Total Energy

       4,364,055     
   

 

 

    

Financials - 11.0%

      

Capital Markets - 0.4%

      

OSK Holdings Berhad (Malaysia)1

     712,375        336,918     
   

 

 

    

The accompanying notes are an integral part of the financial statements.

 

5

Emerging Markets Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES     VALUE
(NOTE 2)		      

COMMON STOCKS (continued)

      

Financials (continued)

      

Commercial Banks - 3.8%

      

Hong Leong Financial Group Berhad (Malaysia)1

     338,000      $ 1,463,856     

ICICI Bank Ltd. - ADR (India)

     50,000        2,180,500     
   

 

 

    
      3,644,356     
   

 

 

    

Diversified Financial Services - 2.6%

      

JSE Ltd. (South Africa)1

     271,000        2,503,934     
   

 

 

    

Insurance - 1.5%

      

Brasil Insurance Participacoes e Administracao S.A. (Brazil)

     143,000        1,396,825     
   

 

 

    

Real Estate Management & Development - 2.7%

      

BR Malls Participacoes S.A. (Brazil)

     71,000        936,957     

General Shopping Brasil S.A. (Brazil)*

     318,000        1,657,172     
   

 

 

    
      2,594,129     
   

 

 

    

Total Financials

       10,476,162     
   

 

 

    

Health Care - 21.3%

      

Biotechnology - 1.9%

      

Green Cross Corp. (South Korea)1

     13,780        1,786,295     
   

 

 

    

Health Care Equipment & Supplies - 2.3%

      

Mindray Medical International Ltd. - ADR (China)

     67,700        2,213,790     
   

 

 

    

Health Care Providers & Services - 3.0%

      

Apollo Hospitals Enterprise Ltd. (India)1

     166,367        2,402,641     

Qualicorp S.A. (Brazil)*

     46,000        476,513     
   

 

 

    
      2,879,154     
   

 

 

    

Life Sciences Tools & Services - 1.6%

      

WuXi PharmaTech Cayman, Inc. - ADR (China)*

     93,500        1,472,625     
   

 

 

    

Pharmaceuticals - 12.5%

      

Glenmark Pharmaceuticals Ltd. (India)1

     410,383        3,978,635     

Lupin Ltd. (India)1

     310,080        3,501,952     

Strides Arcolab Ltd. (India)1

     219,480        4,438,236     
   

 

 

    
      11,918,823     
   

 

 

    

Total Health Care

       20,270,687     
   

 

 

    

Industrials - 10.7%

      

Airlines - 1.1%

      

Copa Holdings S.A. - ADR - Class A (Panama)

     11,000        1,093,950     
   

 

 

    

Electrical Equipment - 1.7%

      

Teco Electric and Machinery Co. Ltd. (Taiwan)1

     2,052,000        1,579,042     
   

 

 

    

Machinery - 4.6%

      

Hiwin Technologies Corp. (Taiwan)1

     177,450        1,311,565     

Turk Traktor ve Ziraat Makineleri AS (Turkey)1

     92,156        3,023,755     
   

 

 

    
      4,335,320     
   

 

 

    

The accompanying notes are an integral part of the financial statements.

 

6

Emerging Markets Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES     VALUE
(NOTE 2)		      

COMMON STOCKS (continued)

      

Industrials (continued)

      

Marine - 1.6%

      

Sinotrans Shipping Ltd. (China)1

     6,200,000      $ 1,520,493     
   

 

 

    

Transportation Infrastructure - 1.7%

      

Malaysia Airports Holdings Berhad (Malaysia)1

     967,000        1,647,505     
   

 

 

    

Total Industrials

       10,176,310     
   

 

 

    

Information Technology - 9.4%

      

Internet Software & Services - 5.9%

      

Mail.ru Group Ltd. - GDR (Russia)1

     25,400        887,176     

NHN Corp. (South Korea)1

     9,800        2,081,743     

Tencent Holdings Ltd. (China)1

     20,000        655,934     

Yandex N.V. - Class A - ADR (Russia)*

     45,700        985,749     

Youku Tudou, Inc. - ADR (China)*

     56,800        1,036,032     
   

 

 

    
      5,646,634     
   

 

 

    

Semiconductors & Semiconductor Equipment - 3.5%

      

Samsung Electronics Co. Ltd. (South Korea)1

     1,360        1,954,048     

Trina Solar Ltd. - ADR (China)*

     141,000        611,940     

Yingli Green Energy Holding Co. Ltd. - ADR (China)*

     313,000        735,550     
   

 

 

    
      3,301,538     
   

 

 

    

Total Information Technology

       8,948,172     
   

 

 

    

Materials - 3.4%

      

Chemicals - 1.7%

      

Yingde Gases (Hong Kong)1

     1,604,000        1,644,079     
   

 

 

    

Metals & Mining - 1.7%

      

Impala Platinum Holdings Ltd. (South Africa)1

     82,000        1,639,929     
   

 

 

    

Total Materials

       3,284,008     
   

 

 

    

Telecommunication Services - 3.7%

      

Wireless Telecommunication Services - 3.7%

      

MTN Group Ltd. (South Africa)1

     94,700        1,993,314     

SK Telecom Co. Ltd. (South Korea)1

     10,900        1,554,146     
   

 

 

    

Total Telecommunication Services

       3,547,460     
   

 

 

    

TOTAL COMMON STOCKS

      

(Identified Cost $73,395,749)

       86,205,192     
   

 

 

    

MUTUAL FUNDS - 5.2%

      

iShares S&P India Nifty 50 Index Fund

     104,000        2,590,640     

PowerShares India Portfolio

     128,000        2,350,080     
   

 

 

    

TOTAL MUTUAL FUNDS

      

(Identified Cost $4,613,804)

       4,940,720     
   

 

 

    

The accompanying notes are an integral part of the financial statements.

 

7

Emerging Markets Series

 

 

Investment Portfolio - December 31, 2012

 

    SHARES     VALUE
(NOTE 2)		      
     

SHORT-TERM INVESTMENT - 4.9%

      

Dreyfus Cash Management, Inc. Institutional Shares2 , 0.06%,

      

(Identified Cost $ 4,674,811)

     4,674,811      $ 4,674,811     
   

 

 

    

TOTAL INVESTMENTS - 100.6%

      

(Identified Cost $ 82,684,364)

       95,820,723     

LIABILITIES, LESS OTHER ASSETS - (0.6%)

       (567,491 )   
   

 

 

    

NET ASSETS - 100%

     $ 95,253,232     
   

 

 

    

ADR - American Depository Receipt

GDR - Global Depository Receipt

*Non-income producing security

1A factor from a third party vendor was applied to determine the security’s fair value following the close of local trading.

2Rate shown is the current yield as of December 31, 2012.

The Series’ portfolio holds, as a percentage of net assets, greater than 10% in the following countries: India - 17.3%; Brazil - 16.9%; South Korea - 13.1%.

The accompanying notes are an integral part of the financial statements.

 

8

Emerging Markets Series

 

 

Statement of Assets & Liabilities

December 31, 2012

 

ASSETS:

   

Investments, at value (identified cost $82,684,364) (Note 2)

    $ 95,820,723   

Foreign currency (identified cost $54,391)

      56,099   

Receivable for fund shares sold

      309,861   

Dividends receivable

      57,782   
  

 

 

  

TOTAL ASSETS

      96,244,465   
  

 

 

  

LIABILITIES:

   

Accrued foreign capital gains tax (Note 2)

      624,038   

Accrued management fees (Note 3)

      59,547   

Accrued fund accounting and administration fees (Note 3)

      5,493   

Accrued transfer agent fees (Note 3)

      2,572   

Accrued Directors’ fees (Note 3)

      584   

Accrued Chief Compliance Officer service fees (Note 3)

      374   

Payable for fund shares repurchased

      223,937   

Other payables and accrued expenses

      74,688   
  

 

 

  

TOTAL LIABILITIES

      991,233   
  

 

 

  

TOTAL NET ASSETS

    $ 95,253,232   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 81,843   

Additional paid-in-capital

      82,055,536   

Accumulated net realized gain on investments, foreign currency and translation of other assets and liabilities

      601,837   

Net unrealized appreciation on investments (net of foreign capital gains tax of $624,038), foreign currency and translation of other assets and liabilities

      12,514,016   
  

 

 

  

TOTAL NET ASSETS

    $ 95,253,232   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A
($95,253,232/ 8,184,340 shares)

    $ 11.64   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

9

Emerging Markets Series

 

 

Statement of Operations

For the Year Ended December 31, 2012

 

INVESTMENT INCOME:

   

Dividends (net of foreign taxes withheld, $135,281)

    $ 1,387,215   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      876,187   

Fund accounting and administration fees (Note 3)

      40,426   

Transfer agent fees (Note 3)

      10,850   

Chief Compliance Officer service fees (Note 3)

      2,440   

Custodian fees

      101,764   

Registration fees

      14,168   

Miscellaneous

      60,412   
  

 

 

  

Total Expenses

      1,106,247   
  

 

 

  

Less reduction of expenses (Note 3)

      (62,181 ) 
  

 

 

  

Net Expenses

      1,044,066   
  

 

 

  

NET INVESTMENT INCOME

      343,149   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-

   

Investments(net of India tax of $107,862)

      3,971,105   

Foreign currency and translation of other assets and liabilities

      (34,922 ) 
  

 

 

  
     3,936,183   
  

 

 

  

Net change in unrealized appreciation (depreciation) on-

   

Investments (net of increase in accrued foreign capital gains tax of $624,038)

      13,480,442   

Foreign currency and translation of other assets and liabilities

      1,788   
  

 

 

  
     13,482,230   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      17,418,413   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 17,761,562   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

10

Emerging Markets Series

 

 

Statements of Changes in Net Assets

 

    

FOR THE

YEAR ENDED

12/31/12

     FOR THE PERIOD
11/16/111 TO
12/31/11		  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 343,149      $ 82,242   

Net realized gain (loss) on investments and foreign currency

      3,936,183        (177,838 ) 

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      13,482,230        (968,214 ) 
  

 

 

    

 

 

  

Net increase (decrease) from operations

      17,761,562        (1,063,810 ) 
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 8):

     

From net investment income

      (208,190 )      (100,029 ) 

From net realized gain on investments

      (3,291,467 )      —   
  

 

 

    

 

 

  

Total distributions to shareholders

      (3,499,657 )      (100,029 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 5)

      2,876,916        79,278,250   
  

 

 

    

 

 

  

Net increase in net assets

      17,138,821        78,114,411   

NET ASSETS:

     

Beginning of period

      78,114,411        —   
  

 

 

    

 

 

  

End of period (including undistributed net investment income of $0 and distributions in excess of net investment income of $177,838, respectively)

    $ 95,253,232      $ 78,114,411   
  

 

 

    

 

 

  

1Commencement of operations.

 

The accompanying notes are an integral part of the financial statements.

 

11

Emerging Markets Series

 

 

Financial Highlights

 

    

FOR THE

YEAR ENDED

12/31//2012

     FOR THE PERIOD
11/16/111 TO
12/31/11		  

Per share data (for a share outstanding throughout each period):

     

Net asset value - Beginning of period

    $ 9.85      $ 10.00   
  

 

 

    

 

 

  

Income (loss) from investment operations:

     

Net investment income2

      0.04        0.01   

Net realized and unrealized gain (loss) on investments

      2.20        (0.15 ) 
  

 

 

    

 

 

  

Total from investment operations

      2.24        (0.14 ) 
  

 

 

    

 

 

  

Less distributions to shareholders:

     

From net investment income

      (0.03 )      (0.01 ) 

From net realized gain on investments

      (0.42 )      —   
  

 

 

    

 

 

  

Total distributions to shareholders

      (0.45 )      (0.01 ) 
  

 

 

    

 

 

  

Net asset value - End of period

    $ 11.64      $ 9.85   
  

 

 

    

 

 

  

Net assets - End of period (000’s omitted)

    $ 95,253      $ 78,114   
  

 

 

    

 

 

  

Total return3

      22.77%        (1.37% ) 

Ratios (to average net assets)/

Supplemental Data:

     

Expenses*

      1.20%        1.20% 4 

Net investment income

      0.39%        0.86% 4 

Portfolio turnover

      40%        0%   
*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 Series, the expense ratio (to average net assets) would have increased by the following amount:     
     0.07%        0.95% 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 certain periods. Periods less than one year are not annualized.

4Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

12

Emerging Markets Series

 

 

Notes to Financial Statements

 

1. Organization

Emerging Markets Series (the “Series”) is a no-load non-diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.

The Series’ investment objective is to provide long-term growth.

The Fund’s advisor is Manning and 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated as Emerging Markets Series Class A common stock.

 

2. Significant Accounting Policies

Security Valuation

Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ 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 are 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 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

 

13

Emerging Markets Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Equity securities:

            

  Consumer Discretionary

    $ 11,111,577       $ 3,734,590       $ 7,376,987       $                     —   

  Consumer Staples

      14,026,761         9,797,799         4,228,962         —   

  Energy

      4,364,055         4,364,055         —         —   

  Financials

      10,476,162         6,171,454         4,304,708         —   

  Health Care

      20,270,687         4,162,928         16,107,759         —   

  Industrials

      10,176,310         1,093,950         9,082,360         —   

  Information Technology

      8,948,172         3,369,271         5,578,901         —   

  Materials

      3,284,008         —         3,284,008         —   

  Telecommunication Services

      3,547,460         —         3,547,460         —   

  Mutual funds

      9,615,531         9,615,531         —         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       95,820,723       $       42,309,578       $       53,511,145       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

Please see the Investment Portfolio for foreign securities where a factor from a third party vendor was applied to determine the securities’ fair value following the close of local trading. Such securities are included in Level 2 in the table above.

There were no Level 3 securities held by the Series as of December 31, 2011 or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2012.

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

 

14

Emerging Markets Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Foreign Currency Translation (continued)

 

on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.

Forward Foreign Currency Exchange Contracts

The Series may purchase or sell forward foreign currency exchange contracts in order to hedge a portfolio position or specific transaction. Risks may arise if the counterparties to a contract are unable to meet the terms of the contract or if the value of the foreign currency moves unfavorably.

All forward foreign currency exchange contracts are adjusted daily by the exchange rate of the underlying currency and, for financial statement purposes, any gain or loss is recorded as unrealized gain or loss until a contract has been closed. Realized and unrealized gain or loss arising from a transaction is included in net realized and unrealized gain (loss) on investments.

The Series may regularly trade forward foreign currency exchange contracts with off-balance sheet risk in the normal course of its investing activities to assist in managing exposure to changes in foreign currency exchange rates.

The notional or contractual amount of these instruments represents the investment the Series has in forward foreign currency exchange contracts and does not necessarily represent the amounts potentially at risk. The measurement of the risks associated with forward foreign currency exchange contracts is meaningful only when all related and offsetting transactions are considered. As of December 31, 2012, no investments in forward foreign currency exchange contracts were held by the Series.

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 December 31, 2012, 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, 2011 and the year ended December 31, 2012. 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. The Series is subject to a tax imposed on short term capital gains on securities of issuers domiciled in India. The Series records an estimated deferred tax liability for securities that have been held for less than a year at the end of the reporting period, assuming those positions were disposed of at the end of the period. This amount is reported in Accrued foreign capital gains tax in the accompanying Statement of Assets and Liabilities. Realized losses on the sale of securities of issuers domiciled in India can be carried forward for eight years to offset potential future short term realized capital gains.

 

15

Emerging Markets Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Distributions of Income and Gains

Distributions to shareholders of net investment income and net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.

Indemnifications

The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series’ average daily net assets.

Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended.

The Advisor has contractually agreed, until at least April 30, 2014, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 1.20% of average daily net assets each year. For the year ended December 31 2012, the Advisor voluntarily waived fees of $62,181, which is included as a reduction of expenses on the statement of operations. The Advisor is not eligible to recoup any expenses that have been waived or reimbursed.

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.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

 

16

Emerging Markets Series

 

 

Notes to Financial Statements (continued)

 

 

3. Transactions with Affiliates (continued)

 

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the year ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $36,710,330 and $32,244,324, respectively. There were no purchases or sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in shares of Emerging Markets Series were:

 

    FOR THE YEAR ENDED  12/31/12     FOR THE PERIOD  11/16/11
(COMMENCEMENT OF
OPERATIONS) TO 12/31/11		  
    SHARES     AMOUNT     SHARES     AMOUNT  

Sold

     786,473       $           8,680,541                  8,116,595       $ 81,114,177   

Reinvested

     304,792        3,462,433        10,010        96,995   

Repurchased

     (835,935 )      (9,266,058 )      (197,595 )      (1,932,922 ) 
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

               255,330       $ 2,876,916        7,929,010       $           79,278,250   
 

 

 

    

 

 

    

 

 

    

 

 

  

Substantially all of the Series’ shares represent investments by fiduciary accounts over which the Advisor has sole investment discretion.

 

6. Financial Instruments

The Series may trade in 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 December 31, 2012.

 

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 accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses, and late-year ordinary losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the fiscal year ended December 31,

 

17

Emerging Markets Series

 

 

Notes to Financial Statements (continued)

 

 

8. Federal Income Tax Information (continued)

 

2012, $42,879 was reclassified within the capital accounts from Accumulated Net Realized Gain on Investments to Undistributed Net Investment Income. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions paid were as follows:

 

    FOR THE YEAR  
ENDED 12/31/12		     FOR THE PERIOD 11/16/11  
(COMMENCEMENT OF
OPERATIONS)  TO 12/31/11		       

Ordinary income

   $ 3,478,088          $ 100,029          

Long-term capital gains

     21,569            —          

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 82,684,364   

Unrealized appreciation

      16,069,477   

Unrealized depreciation

      (2,933,118 ) 
  

 

 

  

Net unrealized appreciation

    $ 13,136,359   
  

 

 

  

Undistributed long-term capital gains

    $ 601,837   
  

 

 

  

 

 

 

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses.

As of December 31, 2012, the Series did not have net capital loss carryforwards.

 

18

Emerging Markets Series

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Emerging Markets Series:

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Emerging Markets Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and for the period November 16, 2011 (commencement of operations) through December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

19

Emerging Markets Series

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly are subject to change.

For federal income tax purposes, the Series reports for the current fiscal year $753,354 or, if different, the maximum amount allowable under the tax law as qualified dividend income.

 

20

Emerging Markets Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

21

Emerging Markets Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

22

Emerging Markets Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

Address:

   

 

B. Reuben Auspitz*

290 Woodcliff Drive

Fairport, NY 14450

Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:   

Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc.

Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

Address:

   

 

Stephen B. Ashley

290 Woodcliff Drive

Fairport, NY 14450

Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995 - 2008)

The Ashley Group (1995 - 2008)

Genesee Corporation (1987 - 2007)

Name:

Address:

   

Peter L. Faber

290 Woodcliff Drive

Fairport, NY 14450

Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Partnership for New York City, Inc. (non-profit)(1989 - 2010)
   New York Collegium (non-profit)(2004 - 2011))
     Boston Early Music Festival (non-profit)

Name:

Address:

   

Harris H. Rusitzky

290 Woodcliff Drive

Fairport, NY 14450

Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994; Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

23

Emerging Markets Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

Address:

   

 

Paul A. Brooke

290 Woodcliff Drive

Fairport, NY 14450

Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee
   Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Incyte Corp. (2000 - present)
   ViroPharma, Inc. (2000 - present)
   HLTH Corp. (2000 - present)
   Cheyne Capital International (2000 - present)
   MPM Bio-equities (2000 - 2009)
   GMP Companies (2000 - 2012)
     HoustonPharma (2000 - 2009)
Name:    Chester N. Watson
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004 - 2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:   

President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC

Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

24

Emerging Markets Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)

 

   
Name:    Christine Glavin
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

25

Emerging Markets 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNEMS-12/12-AR

 

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        STRATEGIC INCOME CONSERVATIVE SERIES                          
        STRATEGIC INCOME MODERATE SERIES                         

 

 

 

 

www.manning-napier.com

       LOGO LOGO          

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months.

Even with the myriad of looming uncertainties, a number of issues pushed forward toward more clarity and resolution as the year progressed. For example, during the fourth quarter, progress was made with respect to “fiscal cliff” headwinds in the U.S. Also, the Federal Open Market Committee (FOMC) stated it expects to keep its highly accommodative monetary policy stance in place at least until unemployment falls below 6.5%, provided that near-term inflation remains within 0.5% of its 2% goal and longer-term inflation remains “well anchored.” Additionally, European Central Bank President Mario Draghi’s commitment earlier in the year to do “whatever it takes” to preserve the Euro, along with positive developments in Greece in the fourth quarter, also aided wavering investor concerns as the year came to a close. Given this backdrop, although equity and fixed income markets generally performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor feels are going to continue to weigh on global economic growth.

Despite multiple shifts in market temperament over the past year, U.S. equity markets, global equity markets, and the domestic bond market all posted positive absolute results. However, during the fourth quarter, while the international equity markets were largely positive, most sectors of the domestic fixed income markets were generally flat to slightly positive, while domestic equity markets were flat.

With regard to the relative performance, both series were started on August 1, 2012. Since its inception, the Conservative Series returned 3.12% and 3.08% for its Class S and Class I shares, respectively, resulting in the Series outperforming its blended benchmark, which returned 1.71%. Meanwhile, although the Moderate Series slightly underperformed its blended benchmark’s return of 3.32% for the period, both the Class S and Class I shares of the Series experienced positive absolute returns of 3.23% and 3.29% since inception.

Overall, fixed income positioning within each Series aided relative returns during the fourth quarter. However, relative performance for both Series was challenged by stock selection decisions. In particular, holdings in the Consumer Staples and Consumer Discretionary sectors detracted from performance. In terms of sector allocation, decisions had a relatively muted effect for both Series. More specifically, an underweight to Financials and an overweight to Health Care detracted from relative results, while an underweight to Telecommunication Services and Utilities offset some of the relative underperformance.

As investors’ appetite for risk fluctuated throughout the October through December period, U.S. Treasuries declined and underperformed other areas with the exception of mortgages. Given the current market environment, the Advisor continues to believe valuations indicate that U.S. Treasury yields, especially longer-term securities, are unattractive. Simply put, the Advisor believes fundamentals and relative value indicate that opportunities exist for both investment grade and high yield corporate bonds, as well as select areas within the municipal and agency sectors.

On the equity side, most major domestic equity indices were also flat during the fourth quarter, while producing strong absolute performance for the year. Within the Series, the Advisor continues to focus on high quality businesses trading at attractive valuations. In particular, we are looking for companies that pay attractive dividends, but also have the ability to grow their dividend in the future. We do this by looking at fundamental characteristics such as free cash flow generation and balance sheet positioning. Additionally, the Advisor believes equity investment opportunities in the Real Estate sector can also provide attractive yield and capital appreciation potential. As developments in this particular area continue to evolve, we will actively seek opportunities where dislocations remain.

Fears remaining from the credit crisis and elevated concerns in the market about capital risk have made some investors less willing to accept pronounced swings in their investments. While the Series cannot guarantee protection against these concerns, the Advisor believes the active management of the Strategic Income portfolios can help mitigate risks that can adversely impact traditionally

 

1

 

 

Management Discussion and Analysis

(unaudited)

“safe” investments (e.g., capital risk, inflation risk, and reinvestment rate risk in today’s U.S. Treasury market). The Advisor’s proactive approach to addressing these risks is reflected by both the asset allocation of the Series’ portfolios and the flexible nature of each Series’ investment strategy. By investing the portfolios in this manner, the Advisor believes the Series can help investors achieve their income and investment goals without overextending their reach for “safety” or yield.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

2

 

 

Performance Update - Strategic Income Conservative Series

(unaudited)

 

    

 TOTAL

 RETURN

 SINCE
 INCEPTION1,2        

Manning & Napier Fund, Inc. - Strategic Income Conservative Series - Class S3

     3.12%

Manning & Napier Fund, Inc. - Strategic Income Conservative Series - Class I3

     3.08%

Barclays Capital U.S. Intermediate Aggregate Bond Index4,6

     0.61%

20%/10%/70% Blended Index5,6

     1.71%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Strategic Income Conservative Series - Class S from its inception2 (8/1/12) to present (12/31/12) to the Barclays Capital U.S. Intermediate Aggregate Bond Index and the 20%/10%/70% Blended Index.

 

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1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series are calculated from August 1, 2012, the Series’ inception date. The Barclays Capital U.S. Intermediate Aggregate Bond Index, a component of the Strategic Income Conservative Series Blended Index, only publishes month-end numbers; therefore, performance numbers for the Index are calculated from July 31, 2012.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended December 31, 2012, this annualized net expense ratio was 0.30% for Class S and 0.05% for Class I. The annualized gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 11.19% for Class S and 27.19% for Class I for the period ended December 31, 2012.

4The Barclays Capital U.S. Intermediate Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities greater than one year and less than ten years. The Index returns, unlike the Series returns, do not reflect any fees or expenses.

5The 20%/10%/70% Blended Index is made up of 20% Russell 1000 Value Index, 10% MSCI U.S. REIT Index and 70% Bank of America (BoA) Merrill Lynch U.S. Corporate, Government & Mortgage Index. The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values. The MSCI U.S. REIT Index, a free float-adjusted market capitalization index, consists of equity REITs that are included in the MSCI U.S. Investable Market 2500 Index, except for specialty equity REITs that do not generate a majority of their revenue and income from real estate rental and leasing operations. The BoA Merrill Lynch U.S. Corporate, Government & Mortgage Index includes a mixture of government bonds, corporate bonds and mortgage pass through securities of investment grade quality, having a maturity greater than or equal to one year.

6Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Index portfolios.

 

3

 

 

Performance Update - Strategic Income Moderate Series

(unaudited)

 

    

 TOTAL

 RETURN

 SINCE
 INCEPTION1,2        

Manning & Napier Fund, Inc. - Strategic Income Moderate Series - Class S3

     3.23%

Manning & Napier Fund, Inc. - Strategic Income Moderate Series - Class I3

     3.29%

Barclays Capital U.S. Aggregate Bond Index4,6

     0.42%

45%/15%/40% Blended Index5,6

     3.32%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Strategic Income Moderate Series - Class S from its inception2 (8/1/12) to present (12/31/12) to the Barclays Capital U.S. Aggregate Bond Index and the 45%15%/40% Blended Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series are calculated from August 1, 2012, the Series’ inception date. The Barclays Capital U.S. Aggregate Bond Index, a component of the Strategic Income Moderate Series Blended Index, only publishes month-end numbers; therefore, performance numbers for the Index are calculated from July 31, 2012.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended December 31, 2012, this annualized net expense ratio was 0.30% for Class S and 0.05% for Class I. The annualized gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 10.58% for Class S and 27.30% for Class I for the period ended December 31, 2012.

4The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index that represents the U.S. domestic investment-grade bond market. It is a market value weighted index of investment-grade debt issues, including government, corporate, asset-backed and mortgage-backed securities, with maturities of one year or more. The Index returns, unlike the Series returns, do not reflect any fees or expenses.

5The 45%/15%/40% Blended Index is made up of 45% Russell 1000 Value Index, 15% MSCI U.S. REIT Index and 40% Bank of America (BoA) Merrill Lynch U.S. Corporate, Government & Mortgage Index. The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values. The MSCI U.S. REIT Index, a free float-adjusted market capitalization index, consists of equity REITs that are included in the MSCI U.S. Investable Market 2500 Index, except for specialty equity REITs that do not generate a majority of their revenue and income from real estate rental and leasing operations. The BoA Merrill Lynch U.S. Corporate, Government & Mortgage Index includes a mixture of government bonds, corporate bonds and mortgage pass through securities of investment grade quality, having a maturity greater than or equal to one year.

6Because the Series’ asset allocation will vary over time, the composition of the Series’ portfolio may not match the composition of the comparative Index portfolios.

 

4

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs, including potential wire charges on redemptions and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (August 1, 2012* to December 31, 2012).

Actual Expenses

The Actual lines of the tables 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 Series and 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 the tables below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example for the Series and 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 tables are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the Hypothetical lines of the tables are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING
 ACCOUNT VALUE             
 8/1/12*		    ENDING
 ACCOUNT VALUE             
 12/31/12		    EXPENSES PAID
 DURING PERIOD             
 8/1/12*-12/31/12		  

 ANNUALIZED             
 EXPENSE

 RATIO1

Strategic Income Conservative Series

            

Actual (Class S)

    $1,000.00    $1,031.20    $1.272    0.30%

Hypothetical

(5% return before expenses)

    $1,000.00    $1,023.69    $1.533    0.30%

Actual (Class I)

    $1,000.00    $1,030.80    $0.212    0.05%

Hypothetical

(5% return before expenses)

    $1,000.00    $1,024.95    $0.263    0.05%

 

     BEGINNING
 ACCOUNT VALUE             
 8/1/12*		    ENDING
 ACCOUNT VALUE             
 12/31/12		    EXPENSES PAID
 DURING PERIOD             
 8/1/12*-12/31/12		  

 ANNUALIZED             
 EXPENSE

 RATIO1

Strategic Income Moderate Series

            

Actual (Class S)

    $1,000.00    $1,032.30    $1.272    0.30%

Hypothetical

(5% return before expenses)

    $1,000.00    $1,023.69    $1.533    0.30%

Actual (Class I)

    $1,000.00    $1,032.90    $0.212    0.05%

Hypothetical

(5% return before expenses)

    $1,000.00    $1,024.95    $0.263    0.05%

*Commencement of operations.

1Expense ratios of the Class do not include fees and expenses indirectly incurred by the underlying funds. If these expenses were included, the expense ratios would have been higher.

 

5

 

 

Shareholder Expense Example

(unaudited)

2Expenses are equal to the Class’ annualized expense ratio (for the period 8/1/2012* to 12/31/2012), multiplied by the average account value over the period, multiplied by 153/365 (to reflect the period since inception). The Class’ total returns would have been lower had certain expenses not been reimbursed during the period.

3Expenses are equal to the Class’ annualized expense ratio (for the period 8/1/2012* to 12/31/2012), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year. The Class’ total returns would have been lower had certain expenses not been reimbursed during the period.

 

6

 

 

Portfolio Composition as of December 31, 2012 - Asset Allocation1

(unaudited)

 

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7

 

 

Statements of Assets and Liabilities

December 31, 2012

 

     STRATEGIC INCOME
CONSERVATIVE SERIES		     STRATEGIC INCOME
MODERATE SERIES		  

ASSETS:

     

Manning & Napier Core Bond Series - Class I (119,674 shares and 56,954 shares, respectively)

    $ 1,383,430      $ 658,392   

Manning & Napier Dividend Focus Series - Class I (33,919 shares and 72,910 shares, respectively)

      439,596        944,919   

Manning & Napier High Yield Bond Series - Class I (13,094 shares and 16,601 shares, respectively)

      128,059        162,360   

Manning & Napier Real Estate Series - Class I (22,176 shares and 31,663 shares, respectively)

      211,779        302,382   
  

 

 

    

 

 

  

Total investments in securities:

     

At value*

      2,162,864        2,068,053   

Cash

      494        —   

Receivable from Advisor (Note 3)

      51,501        51,720   

Receivable for fund shares sold

      178,001        —   
  

 

 

    

 

 

  

TOTAL ASSETS

      2,392,860        2,119,773   
  

 

 

    

 

 

  

LIABILITIES:

     

Accrued fund accounting and administration fees (Note 3)

      13,838        13,838   

Accrued transfer agent fees (Note 3)

      1,125        1,120   

Accrued Chief Compliance Officer service fees (Note 3)

      539        539   

Accrued shareholder services fees (Note 3)

      403        426   

Payable for securities purchased

      178,495        —   

Audit fees payable

      17,541        17,541   

Registration and filing fees payable

      7,470        7,467   

Other payables and accrued expenses

      6,821        7,006   
  

 

 

    

 

 

  

TOTAL LIABILITIES

      226,232        47,937   
  

 

 

    

 

 

  

TOTAL NET ASSETS

    $ 2,166,628      $ 2,071,836   
  

 

 

    

 

 

  

NET ASSETS CONSIST OF:

     

Capital stock

      2,152        2,058   

Additional paid-in-capital

      2,181,780        2,089,080   

Accumulated net realized gain on underlying series

      24,275        22,448   

Net unrealized depreciation on underlying series

      (41,579 )      (41,750 ) 
  

 

 

    

 

 

  

TOTAL NET ASSETS

    $ 2,166,628      $ 2,071,836   
  

 

 

    

 

 

  

Class S

     

Net Assets

    $ 2,115,106      $ 2,018,828   

Shares Outstanding

      210,064        200,487   

Net Asset Value, Offering Price, and Redemption Price per share

    $ 10.07      $ 10.07   

Class I

     

Net Assets

    $ 51,522      $ 53,008   

Shares Outstanding

      5,123        5,264   

Net Asset Value, Offering Price, and Redemption Price per share

    $ 10.06      $ 10.07   

*At identified cost

    $ 2,204,443      $ 2,109,803   
  

 

 

    

 

 

  

The accompanying notes are an integral part of the financial statements.

 

8

 

 

Statements of Operations

For the Period Ended December 31, 2012

 

    

STRATEGIC INCOME
CONSERVATIVE SERIES
FOR THE  PERIOD
8/1/121 TO

12/31/12

    

STRATEGIC INCOME
MODERATE SERIES
FOR THE  PERIOD
8/1/121 TO

12/31/12

  

INVESTMENT INCOME:

     

Income distributions from underlying series

    $ 32,236      $ 33,796   
  

 

 

    

 

 

  

EXPENSES:

     

Fund accounting and administration fees (Note 3)

      17,133        17,133   

Transfer agent fees (Note 3)

      1,401        1,392   

Shareholder services fees (Class S)(Note 3)

      1,051        1,116   

Chief Compliance Officer service fees (Note 3)

      908        908   

Directors’ fees (Note 3)

      8        10   

Audit fees

      17,735        17,735   

Registration and filing fees

      7,500        7,500   

Printing fees

      3,600        3,600   

Miscellaneous

      3,437        3,676   
  

 

 

    

 

 

  

Total Expenses

      52,773        53,070   

Less reduction of expenses (Note 3)

      (51,501 )      (51,720 ) 
  

 

 

    

 

 

  

Net Expenses

      1,272        1,350   
  

 

 

    

 

 

  

NET INVESTMENT INCOME

      30,964        32,446   
  

 

 

    

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON UNDERLYING SERIES:

     

Net realized gain (loss) on underlying series

      (57 )      60   

Distributions of realized gains from underlying series

      30,420        32,732   

Net change in unrealized depreciation on underlying series

      (41,579 )      (41,750 ) 
  

 

 

    

 

 

  

NET REALIZED AND UNREALIZED LOSS ON UNDERLYING SERIES

      (11,216 )      (8,958 ) 
  

 

 

    

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 19,748      $ 23,488   
  

 

 

    

 

 

  

1Commencement of operations.

 

The accompanying notes are an integral part of the financial statements.

 

9

 

 

Statements of Changes in Net Assets

 

    

STRATEGIC INCOME
CONSERVATIVE
SERIES

FOR THE PERIOD
8/1/121 TO 12/31/12

    

STRATEGIC INCOME
MODERATE

SERIES

FOR THE PERIOD
8/1/121 TO 12/31/12

  

INCREASE (DECREASE) IN NET ASSETS:

     

OPERATIONS:

     

Net investment income

    $ 30,964      $ 32,446   

Net realized gain (loss) on underlying series

      (57 )      60   

Distributions of realized gains from underlying series

      30,420        32,732   

Net change in unrealized depreciation on underlying series

      (41,579 )      (41,750 ) 
  

 

 

    

 

 

  

Net increase from operations

      19,748        23,488   
  

 

 

    

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 8):

     

From net investment income (Class S)

      (35,255 )      (40,601 ) 

From net investment income (Class I)

      (1,223 )      (1,301 ) 

From net realized gain on investments (Class S)

      (559 )      (865 ) 

From net realized gain on investments (Class I)

      (15 )      (23 ) 
  

 

 

    

 

 

  

Total distributions to shareholders

      (37,052 )      (42,790 ) 
  

 

 

    

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

     

Net increase from capital share transactions (Note 6)

      2,183,932        2,091,138   
  

 

 

    

 

 

  

Net increase in net assets

      2,166,628        2,071,836   

NET ASSETS:

     

Beginning of period

      —        —   
  

 

 

    

 

 

  

End of period

    $ 2,166,628      $ 2,071,836   
  

 

 

    

 

 

  

1Commencement of operations.

 

The accompanying notes are an integral part of the financial statements.

 

10

 

 

Financial Highlights

 

STRATEGIC INCOME CONSERVATIVE SERIES CLASS S   

 

FOR THE PERIOD
8/1/121 TO 12/31/12

  

Per share data (for a share outstanding throughout the period):

   

Net asset value - Beginning of period

    $ 10.00   
  

 

 

  

Income (loss) from investment operations:

   

Net investment income2

      0.30   

Net realized and unrealized gain (loss) on underlying series

      0.01   
  

 

 

  

Total from investment operations

      0.31   
  

 

 

  

Less distributions to shareholders:

   

From net investment income

      (0.24 ) 

From net realized gain on investments

      (0.00 )3 
  

 

 

  

Total distributions to shareholders

      (0.24 ) 
  

 

 

  

Net asset value - End of period

    $ 10.07   
  

 

 

  

Net assets - End of period (000’s omitted)

    $ 2,115   
  

 

 

  

Total return4

      3.12 % 

Ratios (to average net assets)/

Supplemental Data:

   

Expenses*

      0.30 %5,6 

Net investment income

      2.95 %9 

Series portfolio turnover7

      5 % 
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased by the following amount:    
     10.89 %5,6,8 

 

STRATEGIC INCOME CONSERVATIVE SERIES CLASS I   

 

FOR THE PERIOD
8/1/121 TO 12/31/12

  

Per share data (for a share outstanding throughout the period):

   

Net asset value - Beginning of period

    $ 10.00   
  

 

 

  

Income (loss) from investment operations:

   

Net investment income2

      0.22   

Net realized and unrealized gain (loss) on underlying series

      0.08   
  

 

 

  

Total from investment operations

      0.30   
  

 

 

  

Less distributions to shareholders:

   

From net investment income

      (0.24 ) 

From net realized gain on investments

      (0.00 )3 
  

 

 

  

Total distributions to shareholders

      (0.24 ) 

Net asset value - End of period

    $ 10.06   
  

 

 

  

Net assets - End of period (000’s omitted)

    $ 52   
  

 

 

  

Total return4

      3.08 % 

Ratios (to average net assets)/

Supplemental Data:

   

Expenses*

      0.05 %5,6 

Net investment income

      2.15 %9 

Series portfolio turnover7

      5 % 
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased by the following amount:    
     27.14 %5,6,8 

1Commencement of operations.

2Calculated based on average shares outstanding during the period.

3Less than ($0.01) per share.

4Represents aggregate total return for the period indicated. Total return would have been lower had certain expenses not been reimbursed during the period. Periods less than one year are not annualized.

5Annualized.

6Expense ratios do not include expenses of the Underlying Series in which the Series invests. The average expense ratio of the Underlying Series was 0.71%.

7Reflects activity of the Series and does not include the activity of the Underlying Series.

8The increase to the expense ratios (to average net assets) is largely due to the small net assets in each class.

9Net investment income is impacted by the timing of distributions from Underlying Series.

 

The accompanying notes are an integral part of the financial statements.

 

11

 

 

 

Financial Highlights

 

STRATEGIC INCOME MODERATE SERIES CLASS S  

 

FOR THE PERIOD
8/1/121 TO 12/31/12

  

Per share data (for a share outstanding throughout the period):

  

Net asset value - Beginning of period

   $ 10.00   
 

 

 

  

Income (loss) from investment operations:

  

Net investment income2

     0.30   

Net realized and unrealized gain (loss) on underlying series

     0.02   
 

 

 

  

Total from investment operations

     0.32   
 

 

 

  

Less distributions to shareholders:

  

From net investment income

     (0.25 ) 

From net realized gain on investments

     (0.00 )3 
 

 

 

  

Total distributions to shareholders

     (0.25 ) 
 

 

 

  

Net asset value - End of period

   $ 10.07   
 

 

 

  

Net assets - End of period (000’s omitted)

   $ 2,019   
 

 

 

  

Total return4

     3.23 % 

Ratios (to average net assets)/

Supplemental Data:

  

Expenses*

     0.30 %5,6 

Net investment income

     2.92 %9 

Series portfolio turnover7

     7 % 
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series,the expense ratio (to average net assets) would have been increased by the following amount:    
    10.28 %5,6,8 

 

STRATEGIC INCOME MODERATE SERIES CLASS I  

 

FOR THE PERIOD
8/1/121 TO 12/31/12

  

Per share data (for a share outstanding throughout the period):

  

Net asset value - Beginning of period

   $ 10.00   
 

 

 

  

Income (loss) from investment operations:

  

Net investment income2

     0.22   

Net realized and unrealized gain (loss) on underlying series

     0.10   
 

 

 

  

Total from investment operations

     0.32   
 

 

 

  

Less distributions to shareholders:

  

From net investment income

     (0.25 ) 

From net realized gain on investments

     (0.00 )3 
 

 

 

  

Total distributions to shareholders

     (0.25 ) 
 

 

 

  

Net asset value - End of period

   $ 10.07   
 

 

 

  

Net assets - End of period (000’s omitted)

   $ 53   
 

 

 

  

Total return4

     3.29 % 

Ratios (to average net assets)/

Supplemental Data:

  

Expenses*

     0.05 %5,6 

Net investment income

     2.16 %9 

Series portfolio turnover7

     7 % 
*The investment advisor paid a portion of the Series’ expenses. If these expenses had been incurred by the Series,the expense ratio (to average net assets) would have been increased by the following amount:    
    27.25 %5,6,8 

1Commencement of operations.

2Calculated based on average shares outstanding during the period.

3Less than ($0.01) per share.

4Represents aggregate total return for the period indicated. Total return would have been lower had certain expenses not been reimbursed during the period. Periods less than one year are not annualized.

5Annualized.

6Expense ratios do not include expenses of the Underlying Series in which the Series invests. The average expense ratio of the Underlying Series was 0.70%. 7Reflects activity of the Series and does not include the activity of the Underlying Series.

8The increase to the expense ratios (to average net assets) is largely due to the small net assets in each class.

9Net investment income is impacted by the timing of distributions from Underlying Series.

 

The accompanying notes are an integral part of the financial statements.

 

12

 

 

Notes to Financial Statements

 

1. Organization

Strategic Income Conservative Series and Strategic Income Moderate Series (each the “Series”) are no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940 (the “1940 Act”), as amended, as an open-end management investment company.

The goals of each Series are as follows: Strategic Income Conservative Series - primary goal is to manage against capital risk and generate income; secondary goal is to provide long term capital growth. Strategic Income Moderate Series - equal emphasis on managing against capital risk while generating income and pursuing long term capital growth.

Each Series seeks to achieve its investment objectives by investing in a combination of other Manning & Napier mutual funds (the “Underlying Series”). The Underlying Series include the Core Bond Series, the Dividend Focus Series, the High Yield Bond Series, and the Real Estate Series of the Fund. The financial statements of the Underlying Series should be read in conjunction with the Series’ financial statements.

Each Series is authorized to issue two classes of shares (Class S and I). 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 each Series are offered to investors 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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated in each of the Series for Class S common stock and 100 million have been designated in each of the Series for Class I common stock.

 

2. Significant Accounting Policies

Security Valuation

Investments in the Underlying Series are valued at their net asset value per share on valuation date. In the absence of the availability of a net asset value per share on the Underlying Series, security valuations may be 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”).

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 measure 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 on 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.

 

13

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Valuation (continued)

 

The following is a summary of the valuation levels used for major security types as of December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION

    STRATEGIC INCOME CONSERVATIVE SERIES  
   TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Mutual funds

    $ 2,162,864       $ 2,162,864       $ —       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets:

    $       2,162,864       $       2,162,864       $                     —       $                     —   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

DESCRIPTION

    STRATEGIC INCOME MODERATE SERIES  
   TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Mutual funds

    $ 2,068,053       $ 2,068,053       $ —       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets:

    $       2,068,053       $       2,068,053       $                     —       $                     —   
  

 

 

     

 

 

     

 

 

     

 

 

  

There were no Level 2 or Level 3 securities held by any of the Series as of December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the period ended December 31, 2012.

Security Transactions, Investment Income and Expenses

Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Income and capital gains distributions from the Underlying Series, if any, are recorded on the ex-dividend date.

Expenses are recorded on an accrual basis. Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund’s Board, taking into consideration, among other things, the nature and type of expense. Expenses included in the accompanying statements of operations do not include any expense of the Underlying Series.

Income, expenses (other than class specific expenses), and realized and unrealized gains and losses are prorated among the classes based on the relative net assets of each class. Class specific expenses are directly charged to that Class.

The Series use the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.

Federal Taxes

Each Series’ policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. The Series are not subject to federal income tax or excise tax to the extent that each Series distributes to shareholders each year its taxable income, including any net realized gains on investments, in accordance with requirements of the Internal Revenue Code. Accordingly, no provision for federal income tax or excise tax has been made in the financial statements.

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 December 31, 2012, the Series have recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.

 

14

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Federal Taxes (continued)

 

The Series file income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions, as required. No income tax returns are currently under investigation. As the commencement of operations of the Series was August 1, 2012, the statute of limitations remains open for the period ended December 31, 2012. The Series are 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 they invest, 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 a Series. Distributions are recorded on the ex-dividend date.

Indemnifications

The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.

Other

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Advisor does not receive an advisory fee for the services it performs for the Series. However, the Advisor is entitled to receive an advisory fee from each of the Underlying Series in which the Series invest.

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.

The Class S shares of the Series are subject to a shareholder service fee in accordance with a shareholder service plan adopted by the Board. The shareholder service fee is intended to compensate financial intermediaries, including affiliates of the Fund, in connection with the provision of direct client services, personal services, maintenance of shareholder accounts and reporting services. For these services, Class S of the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.25% of the average daily net assets of Class S. The Fund has a Shareholder Services Agreement with the Advisor, for which the Advisor receives the shareholder services fee as stated above.

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.

 

15

 

 

Notes to Financial Statements (continued)

 

 

3. Transactions with Affiliates (continued)

 

The Advisor has contractually agreed, until at least April 30, 2014, to limit each class’ total direct annual fund operating expenses for the Series at no more than 0.05% for each class, exclusive of shareholder service fees, of average daily net assets each year. The Advisor’s agreement to limit each class’ operating expenses is limited to direct operating expenses and, therefore, does not apply to the indirect expenses incurred by the Series through their investments in the Underlying Series. For the period ended December 31, 2012, the Advisor reimbursed expenses of $51,501 for Strategic Income Conservative Series and $51,720 for Strategic Income Moderate Series, which is included as a reduction of expenses on the Statements of Operations.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The fee rates for these Series are as follows: An annual fee related to fund accounting and administration of 0.0025% of the average daily net assets with an annual base fee of $40,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain cusip-based and out-of-pocket expenses are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the period ended December 31, 2012, purchases and sales of Underlying Series were as follows:

 

SERIES   PURCHASES       SALES         

Strategic Income Conservative Series

   $ 2,255,069          $ 50,569          

Strategic Income Moderate Series

   $ 2,184,215          $ 74,472          

 

5. Investments in Affiliated Issuers

A summary of the Series’ transactions in the shares of affiliated issuers during the period ended December 31, 2012 is set forth below:

 

STRATEGIC

INCOME

CONSERVATIVE

SERIES

   VALUE
AT
8/1/121		     PURCHASE
COST		     SALES
PROCEEDS		     VALUE AT
12/31/12		     SHARES
HELD
AT
12/31/12		    

DIVIDEND
INCOME
8/1/121

THROUGH
12/31/12

    

DISTRIBUTIONS
AND

NET REALIZED
GAIN/(LOSS)

8/1/121
THROUGH
12/31/12

  

Manning & Napier Core Bond Series - Class I

   $ —      $ 1,411,236      $ 5,285      $ 1,383,430        119,674      $ 18,914      $ 15,387   

Manning & Napier Dividend Focus Series - Class I

        —        447,498        2,861        439,596        33,919        4,020        1,878   

Manning & Napier High Yield Bond Series - Class I

        —        173,697        41,588        128,059        13,094        3,366        3,815   

Manning & Napier Real Estate Series - Class I

        —        222,638        835        211,779        22,176        5,936        9,283   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $  —      $ 2,255,069      $ 50,569      $ 2,162,864        $ 32,236      $ 30,363   
 

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

  

1Commencement of operations.

 

16

 

 

Notes to Financial Statements (continued)

 

 

5. Investments in Affiliated Issuers (continued)

 

 

STRATEGIC

INCOME

MODERATE

SERIES

   VALUE
AT
8/1/121		     PURCHASE
COST		     SALES
PROCEEDS		     VALUE AT
12/31/12		     SHARES
HELD
AT
12/31/12		     DIVIDEND
INCOME
8/1/121
THROUGH
12/31/12		    

DISTRIBUTIONS
AND

NET REALIZED
GAIN/(LOSS)
8/1/121
THROUGH
12/31/12

  

Manning & Napier Core Bond Series -
Class I

   $  —      $ 672,710      $ 1,631      $ 658,392        56,954      $ 9,958      $ 8,094   

Manning & Napier Dividend Focus Series - Class I

        —        958,699        4,695        944,919        72,910        9,643        4,412   

Manning & Napier High Yield Bond Series - Class I

        —        234,723        67,089        162,360        16,601        4,807        5,539   

Manning & Napier Real Estate Series - Class I

        —        318,083        1,057        302,382        31,663        9,388        14,747   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
  $  —      $ 2,184,215      $ 74,472      $ 2,068,053        $ 33,796      $ 32,792   
 

 

 

    

 

 

    

 

 

    

 

 

      

 

 

    

 

 

  

1Commencement of operations.

 

6. Capital Stock Transactions

Transactions in Class S and Class I shares were:

 

STRATEGIC

INCOME

CONSERVATIVE

SERIES:

   FOR THE PERIOD 8/1/12
(COMMENCEMENT OF
OPERATIONS) TO 12/31/12		     FOR THE PERIOD 8/1/12
(COMMENCEMENT OF
OPERATIONS) TO 12/31/12		  
    CLASS S           CLASS I        
    SHARES     AMOUNTS     SHARES     AMOUNTS  

Sold

     206,735      $ 2,099,291        5,000      $ 50,000   

Reinvested

     3,329        33,402        123        1,239   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     210,064      $ 2,132,693        5,123      $ 51,239   
 

 

 

    

 

 

    

 

 

    

 

 

  

 

STRATEGIC

INCOME

MODERATE

SERIES:

   FOR THE PERIOD 8/1/12
(COMMENCEMENT OF
OPERATIONS) TO 12/31/12		     FOR THE PERIOD 8/1/12
(COMMENCEMENT OF
OPERATIONS) TO 12/31/12		  
    CLASS S           CLASS I        
    SHARES     AMOUNTS     SHARES     AMOUNTS  

Sold

     196,369      $ 1,996,999        5,133      $ 51,350   

Reinvested

     4,118        41,466        131        1,323   
 

 

 

    

 

 

    

 

 

    

 

 

  

Total

     200,487      $ 2,038,465        5,264      $ 52,673   
 

 

 

    

 

 

    

 

 

    

 

 

  

At December 31, 2012, one account owned the following in Strategic Income Conservative Series and four accounts, each owning greater than 10% of the net assets, owned the following in Strategic Income Moderate Series:

 

17

 

Notes to Financial Statements (continued)

 

6. Capital Stock Transactions (continued)

 

SERIES    SHARES
OWNED		      PERCENTAGE
OF SERIES
SHARES
OUTSTANDING		     VALUE  

Strategic Income Conservative Series

      69,939         32.5 %    $ 704,284   

Strategic Income Moderate Series

      148,019         71.9 %    $ 1,490,551   

Investment activities of these shareholders may have a material effect on the Series.

 

7. Financial Instruments

The Underlying 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 Underlying 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 Underlying Series to close out their position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Underlying Series as of December 31, 2012.

 

8. Federal Income Tax Information

The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments of the timing of the recognition of net investment income, or gains and losses, including losses deferred to wash sales and distributions from the Underlying Series. Each Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the fiscal year ended December 31, 2012, $5,514 and $9,456 was reclassified within the Strategic Income Conservative Series and Strategic Income Moderate Series capital accounts, respectively, from Accumulated Net Realized Gain on Investments to Undistributed Net Investment Income. Any such reclassifications are not reflected in the financial highlights.

The tax character of distributions for the period ended December 31, 2012 were as follows:

 

     STRATEGIC INCOME
CONSERVATIVE
SERIES		     

STRATEGIC INCOME
MODERATE

SERIES

  

Ordinary income

        $     36,660               $     42,145       

Long-term capital gain

        $ 392               $ 645       

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized depreciation based on the identified cost for federal income tax purposes were as follows:

 

     STRATEGIC INCOME
CONSERVATIVE
SERIES		     

STRATEGIC INCOME
MODERATE

SERIES

  

Cost for federal income tax purposes

        $     2,204,731                $     2,109,996        

Unrealized appreciation

         —                 —        

Unrealized depreciation

      (41,867)             (41,943)       
  

 

 

     

 

 

  

Net unrealized depreciation

        $ (41,867)               $ (41,943)       
  

 

 

     

 

 

  

Undistributed ordinary income

         —                $ 50        

Undistributed long-term capital gains

        $ 24,563                $ 22,591        

 

18

 

 

Notes to Financial Statements (continued)

 

8. Federal Income Tax Information (continued)

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses.

At December 31, 2012, the Series did not have any net capital loss carryforwards.

 

19

 

 

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of –Strategic Income Conservative Series and Strategic Income Moderate Series:

In our opinion, the accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Strategic Income Conservative Series and Strategic Income Moderate Series (each a series of Manning & Napier Fund, Inc.) at December 31, 2012, and the results of each of their operations, the changes in each of their net assets and the financial highlights for the period August 1, 2012 (commencement of operations) through December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2012 by correspondence with the transfer agent, provide a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

20

 

 

Supplemental Tax Information

(unaudited)

All reportings are based on financial information available as of the date of this annual report and, accordingly, are subject to change.

For federal income tax purposes, each of the Series reports for the current fiscal year the amount disclosed below or, if different, the maximum amount allowable under the tax law, as qualified dividend income (“QDI”).

 

Series

    QDI  

Strategic Income Conservative Series

    $ 6,867   

Strategic Income Moderate Series

      14,889   

 

 

 

For corporate shareholders, the percentage of investment income (dividend income plus short-term gain, if any) that qualifies for the dividends received deduction (DRD) for the current fiscal year is as follows:

 

Series

    DRD%  

Strategic Income Conservative Series

      12.60 % 

Strategic Income Moderate Series

      24.43 % 

 

 

 

The percentage of ordinary income distribution paid by the Series during the year ended October 31, 2012 which was derived from U.S. Treasury securities is as follows:

 

Series

    U.S. Treasury%

Strategic Income Conservative Series

        0.04%       

Strategic Income Moderate Series

        0.02%       

 

 

 

The law varies in each state as to whether and what percentage of dividend income attributable to U.S. Treasury securities is exempt from state and local income tax. It is recommended that you consult your tax advisor to determine if any portion of the dividends you received is exempt from income taxes.

 

21

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

22

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

23

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

   

 

B. Reuben Auspitz*

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:    Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc.
   Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Fannie Mae (1995 - 2008)
   The Ashley Group (1995 - 2008)
     Genesee Corporation (1987 - 2007)
Name:    Peter L. Faber
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Partnership for New York City, Inc. (non-profit)(1989 - 2010)
   New York Collegium (non-profit)(2004 - 2011))
     Boston Early Music Festival (non-profit)
Name:    Harris H. Rusitzky
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:    President, The Greening Group (business consultants) since 1994;
   Partner, The Restaurant Group (restaurants) since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

24

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)

 

Name:    Paul A. Brooke
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing
   Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Incyte Corp. (2000 - present)
   ViroPharma, Inc. (2000 - present)
   HLTH Corp. (2000 - present)
   Cheyne Capital International (2000 - present)
   MPM Bio-equities (2000 - 2009)
   GMP Companies (2000 - 2012)
     HoustonPharma (2000 - 2009)
Name:    Chester N. Watson
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC;
   Manager (2004 - 2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:    President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC Holds one or more of the following titles for various subsidiaries and affiliates: President, Director, Treasurer or Senior Trust Officer.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier
   Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

25

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)

 

Name:    Christine Glavin
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering
   Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

26

Literature Requests

(unaudited)

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:

 

By phone    1-800-466-3863   
On the Securities and Exchange      
Commission’s (SEC) web site    http://www.sec.gov   

Proxy Voting Record

Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

Quarterly Portfolio Holdings

The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On the Advisor’s web site    http://www.manning-napier.com   

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.

MNSTI-12/12-AR

 

LOGO

 

 

        GLOBAL FIXED INCOME SERIES                           

 

 

 

 

www.manning-napier.com

       LOGO          

Global Fixed Income Series

 

 

Management Discussion and Analysis

(unaudited)

Dear Shareholders:

Uncertainty was a common theme impacting investors’ choices in 2012. From continuing developments with respect to the European sovereign debt crisis, to the ongoing evolution of the “fiscal cliff” discussions in the U.S., to persistent concerns arising in the Middle East, investors’ appetite for risk shifted frequently throughout the last twelve months.

Even with the myriad of looming uncertainties, a number of issues pushed forward toward more clarity and resolution as the year progressed. For example, during the fourth quarter, progress was made with respect to “fiscal cliff” headwinds in the U.S. Also, the Federal Open Market Committee (FOMC) stated it expects to keep its highly accommodative monetary policy stance in place at least until unemployment falls below 6.5%, provided that near-term inflation remains within 0.5% of its 2% goal and longer-term inflation remains “well anchored.” Additionally, European Central Bank President Mario Draghi’s commitment earlier in the year to do “whatever it takes” to preserve the Euro, along with positive developments in Greece in the fourth quarter, also aided wavering investor concerns as the year came to a close. Given this backdrop, although equity and fixed income markets generally performed quite well on an absolute basis, there remain many structural uncertainties which the Advisor feels are going to continue to weigh on global economic growth.

Despite multiple shifts in market temperament over the past year, U.S. equity markets, global equity markets, and the global bond market all posted positive absolute results. With regard to relative performance, the Global Fixed Income series was started on October 1, 2012. Therefore, relative results are only available for the final quarter of the year. Over the course of the fourth quarter, the Series experienced returns of 0.95%, outperforming its benchmark, the Bank of America Merrill Lynch U.S. Broad Market Index, which was down 0.49%.

With respect to conditions in the global bond markets, in developed markets bond yields continue to hover around all-time lows, reflecting central bank assistance in many economies, investors’ continued preference for “safety,” and a slow global growth outlook. In the emerging markets, yields are also generally near their lows due to growth concerns. Within the context of this environment, the Series is positioned with roughly one-half of its assets in non-U.S. dollar denominated fixed income securities and nearly one-third invested in U.S. dollar denominated fixed income securities. In terms of credit quality, over 80% of the Series is in investment grade fixed income securities, while a large proportion of the remainder is invested in below-investment grade securities.

On a relative basis, being underweight the Japanese Yen denominated securities as compared to the benchmark and having half of the Series’ Yen exposure hedged helped contribute to the outperformance since the Series’ inception. The outperformance of short-term investment grade U.S. corporate bonds and below-investment grade U.S. corporate bonds also aided returns relative to the benchmark. In contrast, in Germany and France, falling yields helped the absolute return of the Series, though the position hurt relative performance as the Series has a short duration position relative to the index.

Managing to an index can prove limiting and present challenges to reaching investors’ objectives. As an active fixed income manager, the Advisor’s investment decisions are based on prevailing market conditions and fundamentals, which allow us to capitalize on opportunities as they unfold rather than becoming caught up in short term swings in market sentiment. This philosophy has guided the Advisor’s choices in selectively choosing the Series’ investments. Through our security selection process, we feel we have the ability to manage risks, while simultaneously providing compelling income and total return potential to help the Series’ investors reach their goals.

As always, we appreciate your business.

Sincerely,

Manning & Napier Advisors, LLC

 

1

Global Fixed Income Series

 

 

Performance Update as of December 31, 2012

(unaudited)

 

     TOTAL
RETURN
SINCE
INCEPTION1,2    

Manning & Napier Fund, Inc. - Global Fixed Income Series3

      0.95%

Bank of America (BofA) Merrill Lynch U.S. Broad Market Bond Index4

     -0.49%

The following graph compares the value of a $10,000 investment in the Manning & Napier Fund, Inc. - Global Fixed Income Series from its inception2 (October 1, 2012) to present (December 31, 2012) to the BofA Merrill Lynch U.S. Broad Market Bond Index.

 

LOGO

1The returns shown are based on net asset values calculated for shareholder transactions and may differ from the returns shown in the financial highlights, which reflect adjustments made to the net asset values in accordance with accounting principles generally accepted in the United States of America.

2Performance numbers for the Series and Index are calculated from October 1, 2012, the Series’ inception date.

3The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the period ended December 31, 2012, this annualized net expense ratio was 0.70%. The annualized gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 4.78% for the period ended December 31, 2012.

4The unmanaged BofA Merrill Lynch U.S. Broad Market Bond Index (formerly a Merrill Lynch Index) is a market value weighted measure that represents U.S. government, corporate, and pass-through securities issued by entities within the United States, by supranational entities, or by entities headquartered outside of the United States but who have issued dollar-denominated securities within the United States. The Index only includes investment-grade securities with maturities of greater than one year. The Index returns assume reinvestment of coupons and, unlike the Series returns, do not reflect any fees or expenses.

 

2

Global Fixed Income Series

 

 

Shareholder Expense Example

(unaudited)

 

As a shareholder of the Series, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2012* to December 31, 2012).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Series and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

 

 

     BEGINNING    ENDING    EXPENSES PAID
     ACCOUNT VALUE                                 ACCOUNT VALUE                                 DURING PERIOD                             
     10/1/12*    12/31/12    10/1/12*-12/31/12

Actual

   $1,000.00   $1,009.50   $1.751

Hypothetical

(5% return before expenses)

  

$1,000.00

  

$1,021.68

  

$3.572

*Commencement of Operations.

1Expenses are equal to the Series’ annualized expense ratio (for the period 10/1/2012* to 12/31/2012) of 0.70%, multiplied by the average account value over the period, multiplied by 92/365 (to reflect the period since inception). The Series’ total return would have been lower had certain expenses not been waived during the period.

2Expenses are equal to the Series’ annualized expense ratio (for the period 10/1/2012* to 12/31/2012), multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).

 

3

Global Fixed Income Series

 

 

Portfolio Composition as of December 31, 2012

(unaudited)

 

LOGO

 

4

Global Fixed Income Series

 

 

Investment Portfolio - December 31, 2012

 

    CREDIT
RATING1
(UNAUDITED)		              PRINCIPAL
           AMOUNT2		       VALUE
  (NOTE 2)		  

CORPORATE BONDS - 54.0%

      

Non-Convertible Corporate Bonds - 54.0%

      

Consumer Discretionary - 4.4%

      

Hotels, Restaurants & Leisure - 0.3%

      

Yum! Brands, Inc., 3.875%, 11/1/2020

     Baa3             15,000       $ 16,295   
     

 

 

  

Household Durables - 0.9%

      

Newell Rubbermaid, Inc., 4.70%, 8/15/2020

     Baa3             20,000         22,090   

NVR, Inc., 3.95%, 9/15/2022

     Baa2             20,000         20,725   
     

 

 

  
        42,815   
     

 

 

  

Media - 2.2%

      

DIRECTV Holdings LLC - DIRECTV Financing Co., Inc., 5.20%, 3/15/2020

     Baa2             20,000         22,696   

Discovery Communications LLC, 5.05%, 6/1/2020

     Baa2             20,000         23,143   

NBCUniversal Media LLC, 5.15%, 4/30/2020

     Baa2             20,000         23,709   

Time Warner, Inc., 3.15%, 7/15/2015

     Baa2             15,000         15,862   

Time Warner, Inc., 4.75%, 3/29/2021

     Baa2             15,000         17,238   

The Walt Disney Co., 5.625%, 9/15/2016

     A2             10,000         11,634   
     

 

 

  
              114,282   
     

 

 

  

Multiline Retail - 0.3%

      

Target Corp., 3.875%, 7/15/2020

     A2             15,000         16,817   
     

 

 

  

Specialty Retail - 0.7%

      

Advance Auto Parts, Inc., 4.50%, 1/15/2022

     Baa3             5,000         5,220   

The Home Depot, Inc., 5.40%, 3/1/2016

     A3             15,000         17,136   

Lowe’s Companies, Inc., 6.10%, 9/15/2017

     A3             10,000         12,143   
     

 

 

  
        34,499   
     

 

 

  

Total Consumer Discretionary

         224,708   
     

 

 

  

Consumer Staples - 0.7%

      

Beverages - 0.2%

      

The Coca-Cola Co., 1.50%, 11/15/2015

     Aa3             10,000         10,241   
     

 

 

  

Food Products - 0.5%

      

Mondelez International, Inc., 6.125%, 2/1/2018

     Baa2             15,000         18,252   

Tyson Foods, Inc., 4.50%, 6/15/2022

     Baa3             10,000         10,825   
     

 

 

  
        29,077   
     

 

 

  

Total Consumer Staples

         39,318   
     

 

 

  

Energy - 3.6%

      

Energy Equipment & Services - 2.5%

      

Baker Hughes, Inc., 7.50%, 11/15/2018

     A2             10,000         13,248   

Schlumberger Finance BV (Netherlands), 2.75%, 12/1/2015

     A1           EUR       50,000         70,038   

Schlumberger Oilfield plc3, 4.20%, 1/15/2021

     A1             10,000         11,311   

Weatherford International Ltd., 9.625%, 3/1/2019

     Baa2             25,000         32,616   
     

 

 

  
        127,213   
     

 

 

  

The accompanying notes are an integral part of the financial statements.

 

5

Global Fixed Income Series

 

 

Investment Portfolio - December 31, 2012

 

   

CREDIT

RATING 1

(UNAUDITED)

              PRINCIPAL
           AMOUNT2		    

  VALUE

  (NOTE 2)

  

CORPORATE BONDS (continued)

      

Non-Convertible Corporate Bonds (continued)

      

Energy (continued)

      

Oil, Gas & Consumable Fuels - 1.1%

      

Apache Corp., 6.90%, 9/15/2018

     A3             15,000       $ 19,130   

EOG Resources, Inc., 2.625%, 3/15/2023

     A3             10,000         10,070   

Petrobras International Finance Co. (Brazil), 5.375%, 1/27/2021

     A3             25,000         28,146   
     

 

 

  
        57,346   
     

 

 

  

Total Energy

               184,559   
     

 

 

  

Financials - 30.8%

      

Capital Markets - 7.6%

      

BNP Paribas Home Loan Covered Bonds S.A. (France), 4.50%,

     Aaa           EUR       100,000         139,584   

BNP Paribas Home Loan Covered Bonds S.A. (France), 3.75%, 4/20/2020

     Aaa           EUR 50,000         76,091   

The Goldman Sachs Group, Inc., 5.375%, 3/15/2020

     A3             35,000         40,111   

Jefferies Group, Inc., 5.125%, 4/13/2018

     Baa3             15,000         15,750   

Jefferies Group, Inc., 8.50%, 7/15/2019

     Baa3             25,000         29,875   

Morgan Stanley, 5.50%, 7/28/2021

     Baa1             75,000         85,153   
     

 

 

  
        386,564   
     

 

 

  

Commercial Banks - 13.7%

      

Banco Santander S.A. (Spain), 4.00%, 4/7/2020

     A3           EUR 100,000         133,364   

Barclays Bank plc (United Kingdom), 4.25%, 1/12/2022

     Aaa           GBP 100,000         184,335   

National City Corp., 6.875%, 5/15/2019

     Baa1             25,000         31,190   

Nordea Bank Finland plc (Finland), 2.25%, 11/16/2015

     Aaa           EUR 50,000         69,287   

Royal Bank of Canada (Canada), 3.18%, 3/16/2015

     Aaa           CAD 90,000         93,365   

Royal Bank of Canada (Canada), 3.77%, 3/30/2018

     Aaa           CAD 40,000         43,334   

Santander Holdings USA, Inc., 4.625%, 4/19/2016

     Baa2             15,000         15,682   

Wachovia Corp., 5.25%, 8/1/2014

     A3             15,000         15,995   

Westpac Banking Corp. (Australia), 5.75%, 2/6/2017

     Aaa           AUD 100,000         111,767   
     

 

 

  
        698,319   
     

 

 

  

Consumer Finance - 1.8%

      

American Express Co.3, 2.65%, 12/2/2022

     A3             17,000         16,932   

American Express Co.4, 6.80%, 9/1/2066

     Baa2             20,000         21,475   

Pfandbriefbank der schweizerischen Hypothekarinstitute AG (Switzerland), 2.25%, 9/2/2016

     Aaa           CHF 45,000         52,760   
     

 

 

  
        91,167   
     

 

 

  

Diversified Financial Services - 2.2%

      

Citigroup, Inc., 8.50%, 5/22/2019

     Baa2             35,000         47,062   

CME Group, Inc., 3.00%, 9/15/2022

     Aa3             25,000         25,366   

JPMorgan Chase & Co., 3.70%, 1/20/2015

     A2             15,000         15,793   

JPMorgan Chase & Co., 6.30%, 4/23/2019

     A2             20,000         24,675   
     

 

 

  
        112,896   
     

 

 

  

The accompanying notes are an integral part of the financial statements.

 

6

Global Fixed Income Series

 

 

Investment Portfolio - December 31, 2012

 

   

CREDIT

RATING 1

(UNAUDITED)

    

          PRINCIPAL
         AMOUNT2

    

  VALUE

  (NOTE 2)

  

CORPORATE BONDS (continued)

      

Non-Convertible Corporate Bonds (continued)

      

Financials (continued)

      

Insurance - 1.9%

      

American International Group, Inc., 4.25%, 5/15/2013

     Baa1             15,000       $ 15,182   

American International Group, Inc., 4.875%, 6/1/2022

     Baa1             20,000         22,832   

Fidelity National Financial, Inc., 6.60%, 5/15/2017

     Baa3             10,000         11,272   

Genworth Financial, Inc., 7.625%, 9/24/2021

     Baa3             25,000         27,589   

Hartford Financial Services Group, Inc., 5.125%, 4/15/2022

     Baa3             20,000         23,077   
     

 

 

  
        99,952   
     

 

 

  

Real Estate Investment Trusts (REITS) - 3.6%

      

BioMed Realty LP, 3.85%, 4/15/2016

     Baa3             10,000         10,547   

Boston Properties LP, 5.875%, 10/15/2019

     Baa2             15,000         17,886   

Camden Property Trust, 5.70%, 5/15/2017

     Baa1             15,000         17,265   

Digital Realty Trust LP, 5.875%, 2/1/2020

     Baa2             25,000         28,565   

HCP, Inc., 6.70%, 1/30/2018

     Baa1             15,000         18,091   

Health Care REIT, Inc., 4.95%, 1/15/2021

     Baa2             15,000         16,406   

Mack-Cali Realty LP, 7.75%, 8/15/2019

     Baa2             10,000         12,393   

Simon Property Group L.P., 6.125%, 5/30/2018

     A3             15,000         18,272   

Simon Property Group LP, 10.35%, 4/1/2019

     A3             15,000         21,450   

UDR, Inc., 4.625%, 1/10/2022

     Baa2             20,000         21,995   
     

 

 

  
        182,870   
     

 

 

  

Total Financials

               1,571,768   
     

 

 

  

Health Care - 1.9%

      

Health Care Equipment & Supplies - 1.3%

      

Fresenius Finance BV (Germany), 5.50%, 1/31/2016

     Ba1           EUR       50,000         68,060   
     

 

 

  

Health Care Providers & Services - 0.4%

      

UnitedHealth Group, Inc., 4.70%, 2/15/2021

     A3             15,000         17,475   
     

 

 

  

Life Sciences Tools & Services - 0.2%

      

Thermo Fisher Scientific, Inc., 4.50%, 3/1/2021

     Baa1             10,000         11,299   
     

 

 

  

Total Health Care

         96,834   
     

 

 

  

Industrials - 5.7%

      

Aerospace & Defense - 1.2%

      

The Boeing Co., 6.00%, 3/15/2019

     A2             15,000         18,684   

Textron, Inc., 7.25%, 10/1/2019

     Baa3             35,000         42,737   
     

 

 

  
        61,421   
     

 

 

  

Air Freight & Logistics - 0.3%

      

FedEx Corp., 8.00%, 1/15/2019

     Baa1             10,000         13,170   
     

 

 

  

Airlines - 0.3%

      

Southwest Airlines Co., 5.25%, 10/1/2014

     Baa3             15,000         15,964   
     

 

 

  

Commercial Services & Supplies - 1.3%

      

Garda World Security Corp. (Canada), 9.75%, 3/15/2017

     B2           CAD 50,000         52,277   

The accompanying notes are an integral part of the financial statements.

 

7

Global Fixed Income Series

 

 

Investment Portfolio - December 31, 2012

 

   

CREDIT

RATING 1

(UNAUDITED)

    

          PRINCIPAL

         AMOUNT2

    

  VALUE

  (NOTE 2)

  

CORPORATE BONDS (continued)

      

Non-Convertible Corporate Bonds (continued)

      

Industrials (continued)

      

Commercial Services & Supplies (continued)

      

Waste Management, Inc., 7.375%, 3/11/2019

     Baa3                   10,000       $ 12,716   
     

 

 

  
        64,993   
     

 

 

  

Industrial Conglomerates - 0.9%

      

General Electric Capital Corp., 5.50%, 1/8/2020

     A1             30,000         35,511   

Tyco Electronics Group S.A. (Switzerland), 4.875%, 1/15/2021

     Baa2             10,000         11,219   
     

 

 

  
        46,730   
     

 

 

  

Machinery - 1.4%

      

Caterpillar Financial Services Corp., 7.05%, 10/1/2018

     A2             25,000         32,169   

John Deere Capital Corp., 5.75%, 9/10/2018

     A2             15,000         18,292   

Joy Global, Inc., 5.125%, 10/15/2021

     Baa2             10,000         11,024   

Kennametal, Inc., 3.875%, 2/15/2022

     Baa2             10,000         10,442   
     

 

 

  
        71,927   
     

 

 

  

Road & Rail - 0.3%

      

Union Pacific Corp., 2.95%, 1/15/2023

     Baa1             15,000         15,509   
     

 

 

  

Total Industrials

               289,714   
     

 

 

  

Information Technology - 2.4%

      

Computers & Peripherals - 0.6%

      

Hewlett-Packard Co., 2.125%, 9/13/2015

     Baa1             30,000         29,979   
     

 

 

  

Electronic Equipment, Instruments & Components - 0.4%

      

Corning, Inc., 6.625%, 5/15/2019

     A3             15,000         19,121   
     

 

 

  

IT Services - 0.3%

      

International Business Machines Corp., 8.375%, 11/1/2019

     Aa3             10,000         14,209   
     

 

 

  

Office Electronics - 0.3%

      

Xerox Corp.4, 1.71%, 9/13/2013

     Baa2             15,000         15,098   
     

 

 

  

Software - 0.8%

      

Autodesk, Inc., 3.60%, 12/15/2022

     Baa2             20,000         20,088   

Oracle Corp., 3.875%, 7/15/2020

     A1             20,000         22,557   
     

 

 

  
        42,645   
     

 

 

  

Total Information Technology

         121,052   
     

 

 

  

Materials - 3.2%

      

Chemicals - 0.3%

      

E.I. du Pont de Nemours & Co., 6.00%, 7/15/2018

     A2             5,000         6,171   

Eastman Chemical Co., 3.60%, 8/15/2022

     Baa2             10,000         10,473   
     

 

 

  
        16,644   
     

 

 

  

Metals & Mining - 2.4%

      

Alcoa, Inc., 6.15%, 8/15/2020

     Baa3             20,000         21,843   

Allegheny Technologies, Inc., 5.95%, 1/15/2021

     Baa3             20,000         22,155   

The accompanying notes are an integral part of the financial statements.

 

8

Global Fixed Income Series

 

 

Investment Portfolio - December 31, 2012

 

   

CREDIT

RATING 1

(UNAUDITED)

    

          PRINCIPAL

         AMOUNT2

    

  VALUE

  (NOTE 2)

  

CORPORATE BONDS (continued)

      

Non-Convertible Corporate Bonds (continued)

      

Materials (continued)

      

Metals & Mining (continued)

      

BHP Billiton Finance (USA) Ltd. (Australia), 6.50%, 4/1/2019

     A1             15,000       $ 19,130   

Cliffs Natural Resources, Inc., 5.90%, 3/15/2020

     Baa3             15,000         15,950   

Freeport-McMoRan Copper & Gold, Inc., 3.55%, 3/1/2022

     Baa3             10,000         9,918   

Rio Tinto Finance USA Ltd. (United Kingdom), 3.75%, 9/20/2021

     A3             15,000         16,040   

Teck Resources Ltd. (Canada), 3.00%, 3/1/2019

     Baa2             15,000         15,464   
     

 

 

  
        120,500   
     

 

 

  

Paper & Forest Products - 0.5%

      

International Paper Co., 7.50%, 8/15/2021

     Baa3             20,000         26,174   
     

 

 

  

Total Materials

         163,318   
     

 

 

  

Telecommunication Services - 0.4%

      

Diversified Telecommunication Services - 0.4%

      

Verizon Communications, Inc., 2.00%, 11/1/2016

     A3             15,000         15,524   

Verizon Communications, Inc., 8.75%, 11/1/2018

     A3             6,000         8,331   
     

 

 

  

Total Telecommunication Services

         23,855   
     

 

 

  

Utilities - 0.9%

      

Electric Utilities - 0.9%

      

Allegheny Energy Supply Co. LLC3, 5.75%, 10/15/2019

     Baa3             10,000         10,970   

Exelon Generation Co. LLC, 4.00%, 10/1/2020

     Baa1             15,000         15,768   

Southwestern Electric Power Co., 6.45%, 1/15/2019

     Baa3             15,000         18,256   
     

 

 

  

Total Utilities

         44,994   
     

 

 

  
     

TOTAL CORPORATE BONDS

      

(Identified Cost $2,741,406)

               2,760,120   
     

 

 

  

FOREIGN GOVERNMENT BONDS - 33.8%

      

Austria Government Bond (Austria)3, 3.40%, 10/20/2014

     Aaa           EUR 35,000         48,924   

Belgium Government Bond (Belgium), 2.75%, 3/28/2016

     Aa3           EUR 35,000         49,733   

Bundesobligation (Germany), 1.25%, 10/14/2016

     Aaa           EUR 60,000         82,545   

Denmark Government Bond (Denmark), 4.00%, 11/15/2017

     Aaa           DKK 250,000         52,234   

French Treasury Note (France), 2.50%, 7/25/2016

     Aaa           EUR 60,000         85,169   

Indonesia Treasury Bond (Indonesia), 7.00%, 5/15/2022

     Baa3           IDR       450,000,000         52,917   

Ireland Government Bond (Ireland), 5.00%, 10/18/2020

     Ba1           EUR 35,000         47,372   

Italy Buoni Poliennali Del Tesoro (Italy), 5.50%, 9/1/2022

     Baa2           EUR 80,000         114,496   

Italy Buoni Poliennali Del Tesoro (Italy)3, 5.00%, 3/1/2025

     Baa2           EUR 65,000         88,749   

Japan Government Five Year Bond (Japan), 0.30%, 12/20/2016

     Aa3           JPY 15,000,000         174,284   

Japan Government Ten Year Bond (Japan), 1.00%, 12/20/2021

     Aa3           JPY 5,000,000         59,370   

Japan Government Two Year Bond (Japan), 0.10%, 1/15/2014

     Aa3           JPY 5,000,000         57,709   

Japan Government Two Year Bond (Japan), 0.10%, 3/15/2014

     Aa3           JPY 15,000,000         173,129   

Malaysia Government Bond (Malaysia), 3.434%, 8/15/2014

     A5           MYR 150,000         49,356   

Mexican Bonos (Mexico), 6.00%, 6/18/2015

     Baa1           MXN 625,000         49,667   

The accompanying notes are an integral part of the financial statements.

 

9

Global Fixed Income Series

 

 

Investment Portfolio - December 31, 2012

 

   

CREDIT

RATING 1

(UNAUDITED)

              PRINCIPAL
           AMOUNT2/
          SHARES		    

  VALUE

  (NOTE 2)

  

FOREIGN GOVERNMENT BONDS (continued)

      

Netherlands Government Bond (Netherlands)3, 2.50%, 1/15/2017

     Aaa           EUR 20,000       $ 28,681   

Portugal Obrigacoes do Tesouro OT (Portugal), 4.80%, 6/15/2020

     Ba3           EUR 50,000         58,573   

Singapore Government Bond (Singapore), 2.50%, 6/1/2019

     Aaa           SGD 100,000         90,656   

State of Berlin (Germany), 3.00%, 3/29/2016

     Aa1           EUR 100,000         142,705   

Sweden Government Bond (Sweden), 4.50%, 8/12/2015

     Aaa           SEK 300,000         50,459   

Thailand Government Bond (Thailand), 2.80%, 10/10/2017

     Baa1           THB       1,500,000         48,324   

United Kingdom Gilt (United Kingdom), 2.75%, 1/22/2015

     Aaa           GBP 40,000         68,171   

United Kingdom Gilt (United Kingdom), 1.75%, 1/22/2017

     Aaa           GBP 30,000         50,810   
     

 

 

  
     

TOTAL FOREIGN GOVERNMENT BONDS

      

(Identified Cost $1,718,584)

               1,724,033   
     

 

 

  

MUTUAL FUND - 5.9%

      

iShares iBoxx High Yield Corporate Bond Fund

(Identified Cost $299,593)

       3,250         303,387   
     

 

 

  

SHORT-TERM INVESTMENT - 5.4%

      

Dreyfus Cash Management, Inc. - Institutional Shares6, 0.06%,

(Identified Cost $275,082)

       275,082         275,082   
     

 

 

  

TOTAL INVESTMENTS - 99.1%

      

(Identified Cost $5,034,665)

         5,062,622   

OTHER ASSETS, LESS LIABILITIES - 0.9%

         43,661   
     

 

 

  

NET ASSETS - 100%

       $ 5,106,283   
     

 

 

  

 

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS OPEN AT DECEMBER 31, 20127:  
SETTLEMENT DATE  

CONTRACTS TO        

DELIVER

    

IN EXCHANGE        

FOR

    

CONTRACTS        

AT VALUE

    

UNREALIZED

APPRECIATION        

  

01/09/2013

   JP Y      20,129,000      $ 245,580      $ 232,360      $ 13,220   

AUD - Australian Dollar

CAD - Canadian Dollar

CHF - Swiss Franc

DKK - Danish Krone

EUR - Euro

GBP - British Pound

IDR - Indonesian Rupiah

JPY - Japanese Yen

MXN - Mexican Peso

MYR - Malaysian Ringgit

SEK - Swedish Krona

SGD - Singapore Dollar

THB - Thai Baht

1Credit ratings from Moody’s (unaudited).

2Amount is stated in USD unless otherwise noted.

The accompanying notes are an integral part of the financial statements.

 

10

Global Fixed Income Series

 

 

Investment Portfolio - December 31, 2012

3Restricted securities - Investment in securities that are restricted as to public resale under the Securities Act of 1933, as amended. These securities have been sold under rule 144A and have been determined to be liquid under guidelines established by the Board of Directors. These securities amount to $205,567, or 4.0% of the Series’ net assets as of December 31, 2012 (see Note 2 to the financial statements).

4The coupon rate is floating and is the effective rate as of December 31, 2012.

5Credit ratings from S&P (unaudited).

6Rate shown is the current yield as of December 31, 2012.

7The counterparty for all forward foreign currency exchange contracts is the Bank of New York Mellon Corp.

The Series’ portfolio holds, as a percentage of net assets, greater than 10% in the following countries: United States 36.8%.

 

11

Global Fixed Income Series

 

 

Statement of Assets and Liabilities

December 31, 2012

 

ASSETS:

   

Investments, at value (identified cost $5,034,665) (Note 2)

    $ 5,062,622   

Interest receivable

      62,553   

Unrealized appreciation on foreign forward currency exchange contracts (Note 2)

      13,220   

Receivable from investment advisor

      11,257   

Dividends receivable

      1,657   

Foreign tax reclaims receivable

      767   
  

 

 

  

TOTAL ASSETS

      5,152,076   
  

 

 

  

LIABILITIES:

   

Accrued fund accounting and administration fees (Note 3)

      4,619   

Accrued foreign capital gains tax (Note 2)

      1,262   

Accrued transfer agent fees (Note 3)

      380   

Accrued Chief Compliance Officer service fees (Note 3)

      359   

Audit fees payable

      30,305   

Accrued custodian fees

      3,000   

Accrued printing fees payable

      2,445   

Other payables and accrued expenses

      3,423   
  

 

 

  

TOTAL LIABILITIES

      45,793   
  

 

 

  

TOTAL NET ASSETS

    $ 5,106,283   
  

 

 

  

NET ASSETS CONSIST OF:

   

Capital stock

    $ 5,060   

Additional paid-in-capital

      5,054,894   

Distributions in excess of net investment income

      (543 ) 

Accumulated net realized gain on investments, foreign currency and translation of other assets and liabilities

      5,364   

Net unrealized appreciation on investments (net of foreign capital gains tax of $214), foreign currency and translation of other assets and liabilities

      41,508   
  

 

 

  

TOTAL NET ASSETS

    $ 5,106,283   
  

 

 

  

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I ($5,106,283/506,008 shares)

    $ 10.09   
  

 

 

  

 

The accompanying notes are an integral part of the financial statements.

 

12

Global Fixed Income Series

 

 

Statement of Operations

For the Period October 1, 20121 to December 31, 2012

 

INVESTMENT INCOME:

   

Interest

    $ 24,213   

Dividends (net of foreign taxes withheld, $1,114)

      4,663   
  

 

 

  

Total Investment Income

      28,876   
  

 

 

  

EXPENSES:

   

Management fees (Note 3)

      12,401   

Fund accounting and administration fees (Note 3)

      6,903   

Chief Compliance Officer service fees (Note 3)

      539   

Transfer agent fees (Note 3)

      511   

Directors’ fees (Note 3)

      30   

Audit fees

      30,500   

Custodian fees

      3,000   

Miscellaneous

      6,150   
  

 

 

  

Total Expenses

      60,034   

Less reduction of expenses (Note 3)

      (51,236 ) 
  

 

 

  

Net Expenses

      8,798   
  

 

 

  

NET INVESTMENT INCOME

      20,078   
  

 

 

  

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:

   

Net realized gain (loss) on-
Investments

      921   

Foreign currency transactions and translation of other assets and liabilities

      (13,699 ) 
  

 

 

  
     (12,778 ) 
  

 

 

  

Net change in unrealized appreciation (depreciation) on-
Investments

      27,743   

Foreign currency transactions and translation of other assets and liabilities

      13,765   
  

 

 

  
     41,508   
  

 

 

  

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY

      28,730   
  

 

 

  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

    $ 48,808   
  

 

 

  

1Commencement of operations.

 

The accompanying notes are an integral part of the financial statements.

 

13

Global Fixed Income Series

 

 

Statement of Changes in Net Assets

 

    

 

FOR THE

PERIOD

10/1/121 TO 12/31/12

  

INCREASE (DECREASE) IN NET ASSETS:

   

OPERATIONS:

   

Net investment income

    $ 20,078   

Net realized gain (loss) on investments and foreign currency

      (12,778 ) 

Net change in unrealized appreciation (depreciation) on investments and foreign currency

      41,508   
  

 

 

  

Net increase from operations

      48,808   
  

 

 

  

DISTRIBUTIONS TO SHAREHOLDERS (Note 8):

   

From net investment income

      (2,074 ) 

From net realized gain on investments

      (405 ) 
  

 

 

  

Total distributions to shareholders

      (2,479 ) 
  

 

 

  

CAPITAL STOCK ISSUED AND REPURCHASED:

   

Net increase from capital share transactions (Note 5)

      5,059,954   
  

 

 

  

Net increase in net assets

      5,106,283   

NET ASSETS:

   

Beginning of period

      —   
  

 

 

  

End of period (including distributions in excess of net investment income of $543)

    $ 5,106,283   
  

 

 

  

 

1Commencement

of operations.

 

The accompanying notes are an integral part of the financial statements.

 

14

Global Fixed Income Series

 

 

Financial Highlights

 

     

 

FOR THE

PERIOD
10/1/121 TO 12/31/12

  

Per share data (for a share outstanding throughout the period):

   

Net asset value - Beginning of period

    $ 10.00   
  

 

 

  

Income (loss) from investment operations:

   

Net investment income2

      0.04   

Net realized and unrealized gain (loss) on investments

      0.05   
  

 

 

  

Total from investment operations

      0.09   
  

 

 

  

Less distributions to shareholders:

   

From net investment income

      — 3 

From net realized gain on investments

      — 3 
  

 

 

  

Total distributions to shareholders

      — 3 
  

 

 

  

Net asset value - End of period

    $ 10.09   
  

 

 

  

Net assets - End of period (000’s omitted)

    $ 5,106   
  

 

 

  

Total return4

      0.95 % 

Ratios (to average net assets)/Supplemental Data:

   

Expenses*

      0.70 %5 

Net investment income

      1.60 %5 

Portfolio turnover

      4 % 
*The investment advisor did not impose all of its management and/or other fees during the period, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Series, the expense ratio (to average net assets) would have been increased by the following amount:     
     4.08 %5 

1Commencement of operations.

2Calculated based on average shares outstanding during the period.

3Less than $0.01.

4Represents aggregate total return for the period indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived during the period. Periods less than one year are not annualized.

5Annualized.

 

The accompanying notes are an integral part of the financial statements.

 

15

Global Fixed Income Series

 

 

Notes to Financial Statements

 

1. Organization

Global Fixed Income 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 principally in fixed income securities of issuers located anywhere in the world.

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 December 31, 2012, 10.3 billion shares have been designated in total among 43 series, of which 100 million have been designated as Global Fixed Income Series Class I common stock, and 100 million designated as Global Fixed Income Series Class S common stock.

This Series is authorized to issue two classes of shares (Class S and I). Currently, only Class I shares have been issued. Each class of shares is substantially the same, except Class S shares are subject to shareholder servicing fees.

 

2. Significant Accounting Policies

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 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 an independent pricing service that utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings).

Short-term investments that mature in sixty days or less are 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.

 

16

Global Fixed Income Series

 

 

Notes to Financial Statements (continued)

 

 

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 December 31, 2012 in valuing the Series’ assets or liabilities carried at fair value:

 

DESCRIPTION    TOTAL      LEVEL 1      LEVEL 2      LEVEL 3  

  Assets:

            

  Debt securities:

            

  Corporate debt:

            

  Consumer Discretionary

    $ 224,708       $ —       $       224,708       $                     —   

  Consumer Staples

      39,318         —         39,318         —   

  Energy

      184,559         —         184,559         —   

  Financials

      1,571,768         —         1,571,768         —   

  Health Care

      96,834         —         96,834         —   

  Industrials

      289,714         —         289,714         —   

  Information Technology

      121,052         —         121,052         —   

  Materials

      163,318         —         163,318         —   

  Telecommunication Services

      23,855         —         23,855         —   

  Utilities

      44,994         —         44,994         —   

  Foreign government bonds

      1,724,033         —         1,724,033         —   

  Mutual funds

      578,469         578,469         —         —   

  Other financial instruments*

      13,220         —         13,220         —   
  

 

 

     

 

 

     

 

 

     

 

 

  

  Total assets

    $       5,075,842       $       578,469       $ 4,497,373       $ —   
  

 

 

     

 

 

     

 

 

     

 

 

  

*Other financial instruments are derivative instruments not reflected in the investment portfolio, such as futures, forwards, and swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument.

There were no Level 3 securities held by the Series as of October 1, 2012 (commencement of operations) or December 31, 2012.

The Fund’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between Level 1 and Level 2 during the period ended December 31, 2012.

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

 

17

Global Fixed Income Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Security Transactions, Investment Income and Expenses (continued)

 

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.

Forward Foreign Currency Exchange Contracts

The Series may purchase or sell forward foreign currency exchange contracts in order to hedge a portfolio position or specific transaction. Risks may arise if the counterparties to a contract are unable to meet the terms of the contract or if the value of the foreign currency moves unfavorably.

All forward foreign currency exchange contracts are adjusted daily by the exchange rate of the underlying currency and, for financial statement purposes, any gain or loss is recorded as unrealized gain or loss until a contract has been closed.

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. During the period of November 8, 2012 through December 31, 2012, the period for which foreign currency contracts were held, the average volume of derivative activity (measured in terms of the notional amount) was approximately $247,000.

 

18

Global Fixed Income Series

 

 

Notes to Financial Statements (continued)

 

 

2. Significant Accounting Policies (continued)

 

Forward Foreign Currency Exchange Contracts (continued)

 

The following table presents the present value of derivatives held at December 31, 2012 as reflected on the Statement of Assets and Liabilities, and the effect of the derivative instruments on the Statement of Operations:

 

STATEMENT OF ASSETS AND LIABILITIES  
   Derivative    Assets Location         
   Foreign forward currency exchange contracts    Unrealized appreciation on foreign forward currency exchange contracts    $ 13,220   
     
STATEMENT OF OPERATIONS  
   Derivative              
   Foreign forward currency exchange contracts    Net realized gain (loss) on foreign currency transactions and translation of other assets and liabilities    $ 4,848   
   Derivative              
   Foreign forward currency exchange contracts    Net unrealized appreciation (depreciation) on foreign currency transactions and translation of other assets and liabilities    $ 13,220   

Securities Purchased on a When-Issued Basis or Forward Commitment

The Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss.

In connection with its ability to purchase or sell securities on a forward commitment basis, the Series may enter into forward roll transactions principally using To Be Announced (TBA) securities. Forward roll transactions require the sale of securities for delivery in the current month, and a simultaneous agreement to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. Risks of entering into forward roll transactions include the potential inability of the counterparty to meet the terms of the agreement; the potential of the Series to receive inferior securities at redelivery as compared to the securities sold to the counterparty; counterparty credit risk; and the potential pay down speed variance between the mortgage-backed pools. During the roll period, the Series forgoes principal and interest paid on the securities. The Series accounts for such dollar rolls as purchases and sales. 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 December 31, 2012.

Restricted Securities

Restricted securities are purchased in private placement transactions, are not registered under the Securities Act of 1933, as amended, and may have contractual restrictions on resale. Information regarding restricted securities is included at the end of the Series’ Investment Portfolio.

Illiquid Securities

A security may be considered illiquid if so deemed in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board. Securities that are illiquid are marked with the applicable footnote on the Investment Portfolio. No such investments were held by the Series on December 31, 2012.

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.

 

19

Global Fixed Income Series

 

 

Notes to Financial Statements (continued)

 

 

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 December 31, 2012, 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, 2012. 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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

 

3. Transactions with Affiliates

During the period ended December 31, 2012, the Fund had an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series paid a fee, computed daily and payable monthly, at an annual rate of 1.00% of the Series’ average daily net assets. Effective December 31, 2012, the aforementioned agreement was modified to reduce the annual fee to 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.

 

20

Global Fixed Income Series

 

 

Notes to Financial Statements (continued)

 

 

3. Transactions with Affiliates (continued)

 

The Advisor has contractually agreed, until at least April 30, 2014, to waive its fee and, if necessary, pay other operating expenses of the Series in order to maintain total direct annual fund operating expenses for the Series at no more than 0.70% of average daily net assets each year. For the period ended December 31, 2012, the Advisor voluntarily waived fees of $51,236, which is included as a reduction of expenses on the Statement of Operations.

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.

The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent and sub-transfer agent. The Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0175% on the first $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); 0.015% on the next $3 billion of average daily net assets (excluding Target Series and Strategic Income Series); and 0.01% of the average daily net assets in excess of $6 billion (excluding Target Series and Strategic Income Series); plus a base fee of $25,500 per series. Transfer Agent fees are charged to the Fund on a per account basis. Additionally, certain transaction and cusip-based fees and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. Effective October 1, 2012, the aforementioned agreements were modified to reduce the annual fee related to fund accounting and administration, as well as transfer agent fees by 10%, excluding out-of-pocket expenses.

Expenses not directly attributable to a series are allocated based on each series’ relative net assets or number of accounts, depending on the expense.

 

4. Purchases and Sales of Securities

For the period ended December 31, 2012, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $4,899,097 and $125,121 respectively. There were no purchases and sales of U.S. Government securities.

 

5. Capital Stock Transactions

Transactions in Class I shares of Global Fixed Income Series were:

 

    FOR THE PERIOD 10/1/12
(COMMENCEMENT OF
OPERATIONS) TO 12/31/12		  
    SHARES     AMOUNT  

Sold

     505,762       $ 5,057,476   

Reinvested

     246        2,478   
 

 

 

    

 

 

  

Total

               506,008       $       5,059,954   
 

 

 

    

 

 

  

Approximately 99.9% of the Series’ shares represent investments by one shareholder who is a related party.

 

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 December 31, 2012.

 

21

Global Fixed Income Series

 

Notes to Financial Statements (continued)

 

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 accounting principles generally accepted in the United States of America. These differences are primarily due to differing book and tax treatments in the timing of the recognition of net investment income or gains and losses, including foreign currency gains and losses, foreign currency contracts and qualified late-year losses. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. For the fiscal year ended December 31, 2012, $18,547 was reclassified within the capital accounts to Accumulated Net Realized Gain on Investments from Distributions in Excess of Net Investment Income. Any such reclassifications are not reflected in the financial highlights.

For the period ended December 31, 2012, the Series paid an ordinary income distribution of $2,479.

At December 31, 2012, the tax basis of components of distributable earnings and the net unrealized appreciation based on identified cost for federal income tax purposes were as follows:

 

Cost for federal income tax purposes

    $ 5,034,666   

Unrealized appreciation

      43,998   

Unrealized depreciation

      (16,042 ) 
  

 

 

  

Net unrealized appreciation

    $ 27,956   
  

 

 

  

Undistributed ordinary income

    $ 7,743   

Undistributed long-term gains

    $ 10,841   

Qualified late-year losses1

    $ 543   
 

1The Series has elected to defer certain qualified late-year losses and recognize such losses in the year ending December 31, 2013.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized by the Series may get carried forward indefinitely, and will retain their character as short-term and/or long-term losses.

As of December 31, 2012, the Series did not have any net capital loss carryforwards.

 

22

Global Fixed Income Series

 

 

 

Report of Independent Registered Public Accounting Firm

In our opinion, the accompanying statement of assets and liabilities, including the investment portfolio, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Global Fixed Income Series (a series of Manning & Napier Fund, Inc., hereafter referred to as the “Series”) at December 31, 2012 and the results of its operations, the changes in its net assets and the financial highlights for the period October 1, 2012 (commencement of operations) through December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Series’ management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at December 31, 2012 by correspondence with the custodian and brokers, provides a reasonable basis for our opinion.

 

LOGO

New York, New York

February 25, 2013

 

23

Global Fixed Income Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

At the Manning & Napier Fund, Inc. Board of Directors’ meeting, held on November 14, 2012, the Investment Advisory Agreement between the Fund and Manning & Napier Advisors, LLC was considered by the Board for renewal. In connection with the decision whether to renew the Agreement, a variety of material was prepared for and considered by the Board.

Representatives of the Advisor attended the meeting and presented additional oral and written information to the Board to assist the Board in its considerations. The discussion immediately below outlines the materials and information presented to the Board in connection with the Board’s 2012 Annual consideration of the Agreement and the conclusions made by the Directors when determining to continue the Agreement.

 

  •  

The Board considered the services provided by the Advisor under the Agreement including, 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 sub-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 also considered the nature and quality of such services provided under the Agreement in light of the Advisor’s services provided to the Fund for 26 years. 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 Agreement in a reasonable manner.

 

  •  

The Board considered the performance of each Series since their inception, as well as performance over multiple time periods. Performance for one or more of the following time periods was considered as applicable to the Series inception date: inception, 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 at the meeting (and considers on a quarterly basis) a peer group performance analysis consisting of Morningstar universes of mutual funds with similar investment objectives. The Board discussed the performance with representatives from the Advisor and concluded that the investment performance of each of the Fund’s Series was reasonable based on the Fund’s actual performance and comparative performance, especially for those series with performance over the current market cycle.

 

  •  

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 Agreement. In reviewing the Advisor’s costs and profits, the Board discussed the Advisor’s revenues generated from the Fund (on both an actual and adjusted basis) and its expenses associated with providing the services under the Agreement. In addition, the Board reviewed the Advisor’s expenses associated with Fund activities outside of the 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). It was noted by representatives of the Advisor that 18 of the 37 active Series of the Fund are currently experiencing expenses above the capped expense ratios. After discussing the above costs and profits, the Board concluded that the Advisor’s profitability relating to its services provided under the Agreement was reasonable.

 

  •  

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 expense waivers or reimbursements (either contractual or voluntary) paid by the Advisor. The advisory fees and expense ratios of each Series were compared to an average (on both a mean and median basis) of similar funds as disclosed on the Morningstar database. Representatives of the Advisor discussed with the Board the levels of its advisory fee for each Series of the Fund and as compared to the median and mean advisory fees for similar funds as listed on Morningstar. Expense ratios for every Series, except the Pro-Blend’s Class C, and Target Class R and Class C, are lower than, or substantially similar with, the Morningstar mean and median reported total expense ratio. Based on their review of the information provided, the Board concluded that the fees and expenses of each Series of the Fund were reasonable on a comparative basis.

 

  •  

The Board also considered the other benefits the Advisor derives from its relationship with the Fund. Such other benefits include certain research services provided by soft dollars. Given the level of soft dollar transactions involving the Fund, the Board concluded that these additional benefits to the Advisor were reasonable.

 

24

Global Fixed Income Series

 

 

Renewal of Investment Advisory Agreement

(unaudited)

 

  •  

In addition to the factors described above, the Board considered the Advisor’s personnel, investment strategies, policies and procedures relating to compliance with personal securities transactions, reputation, expertise and resources in domestic and foreign financial markets. The Board concluded that these factors support the conclusion that the Advisor performs its services in a reasonable manner.

 

  •  

The Board then considered economies of scale and concluded that the current fee schedule to the advisory agreement remained reasonable given the multiple uses of the Fund (for the Advisor’s discretionary investment account clients in addition to direct investors), the current profitability of the Advisor’s services to the Fund under the Agreement, the number of newly established series of the Fund and the overall size of the Fund complex.

Based on the Board’s deliberations and their evaluation of the information described above, the Board, including a majority of Directors that are not “interested persons” as defined in the Investment Company Act of 1940, concluded that the compensation under the Agreement was fair and reasonable 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. Accordingly, the Board approved the renewal of the Agreement. In the course of their deliberations, the Directors did not identify any particular information that was all important or controlling.

 

25

Global Fixed Income Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

The Statement of Additional Information provides additional information about the Fund’s directors and officers and can be obtained without charge by calling 1-800-466-3863, at www.manningnapieradvisors.com, or on the EDGAR Database on the SEC Internet web site (http:// www.sec.gov). The following chart shows certain information about the Fund’s officers and directors, including their principal occupations during the last five years. Unless specific dates are provided, the individuals have held the listed positions for longer than five years.

 

Interested Director/Officer   

 

Name:

Address:

   

 

B. Reuben Auspitz*

290 Woodcliff Drive

Fairport, NY 14450

Age:    65
Current Position(s) Held with Fund:    Principal Executive Officer, President, Chairman & Director
Term of Office1 & Length of Time Served:    Indefinite - Director since 1984. Principal Executive Officer since 2002. President since 2004. Vice President 1984 - 2003.
Principal Occupation(s) During Past 5 Years:   

Executive Vice President; Chief Compliance Officer since 2004; Vice Chairman since June 2010; Co-Executive Director from 2003 - 2010 - Manning & Napier Advisors, LLC, President; Director - Manning & Napier Investor Services, Inc.

Holds or has held one or more of the following titles for various subsidiaries and affiliates: President, Vice President, Director, Chairman, Treasurer, Chief Compliance Officer or Member.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Independent Directors

   

 

Name:

   

 

Stephen B. Ashley

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    72
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1996
Principal Occupation(s) During Past 5 Years:    Chairman, Director, President & Chief Executive Officer, The Ashley Group (property management and investment). Director 1995 - 2008 and Chairman (non-executive) 2004 - 2008 - Fannie Mae (mortgage)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Fannie Mae (1995 - 2008)

The Ashley Group (1995 - 2008)

Genesee Corporation (1987 - 2007)

Name:    Peter L. Faber
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    74
Current Position(s) Held with Fund:    Director, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1987
Principal Occupation(s) During Past 5 Years:    Senior Counsel (2006 - 2012), Partner (1995 - 2006 & 2013 - present) - McDermott, Will & Emery LLP (law firm)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    Partnership for New York City, Inc. (non-profit)(1989 - 2010)
   New York Collegium (non-profit)(2004 - 2011))
     Boston Early Music Festival (non-profit)
Name:    Harris H. Rusitzky
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    78
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 1985
Principal Occupation(s) During Past 5 Years:   

President, The Greening Group (business consultants) since 1994;

Partner, The Restaurant Group (restaurants) since 2006

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

26

Global Fixed Income Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Independent Directors (continued)   

 

Name:

   

 

Paul A. Brooke

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    67
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2007
Principal Occupation(s) During Past 5 Years:    Chairman & CEO (2005 - 2009) - Alsius Corp. (investments); Managing Member, PMSV Holdings LLC (investments) since 1991.
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:   

Incyte Corp. (2000 - present)

ViroPharma, Inc. (2000 - present)

HLTH Corp. (2000 - present)

Cheyne Capital International (2000 - present)

MPM Bio-equities (2000 - 2009)

GMP Companies (2000 - 2012)

HoustonPharma (2000 - 2009)

Name:    Chester N. Watson
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    62
Current Position(s) Held with Fund:    Director, Audit Committee Member, Governance & Nominating Committee Member
Term of Office & Length of Time Served:    Indefinite - Since 2012
Principal Occupation(s) During Past 5 Years:    General Auditor (2003 - 2011) - General Motors Company (investments)
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

Officers

   

 

Name:

   

 

Ryan Albano

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    31
Current Position(s) Held with Fund:    Assistant Chief Financial Officer
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Fund Reporting Manager since 2011 – Manning & Napier Advisors, LLC; Manager (2004 - 2011) – KPMG LLP
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jeffrey S. Coons, Ph.D., CFA
Address:    290 Woodcliff Drive
   Fairport, NY 14450
Age:    49
Current Position(s) Held with Fund:    Vice President
Term of Office1 & Length of Time Served:    Since 2004
Principal Occupation(s) During Past 5 Years:   

President since 2010, Co-Director of Research since 2002, - Manning & Napier Advisors, LLC

Holds one or more of the following titles for various subsidiaries and

affiliates: President, Director, Treasurer or Senior Trust Officer.

Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Elizabeth Craig
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    26
Current Position(s) Held with Fund:    Assistant Corporate Secretary
Term of Office1 & Length of Time Served:    Since 2011
Principal Occupation(s) During Past 5 Years:    Mutual Fund Compliance Specialist since 2009 - Manning & Napier Advisors, LLC
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

 

27

Global Fixed Income Series

 

 

Directors’ and Officers’ Information

(unaudited)

 

Officers (continued)   

 

Name:

   

 

Christine Glavin

Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    46
Current Position(s) Held with Fund:    Principal Financial Officer, Chief Financial Officer
Term of Office1 & Length of Time Served:    Principal Financial Officer since 2002; Chief Financial Officer since 2001
Principal Occupation(s) During Past 5 Years:    Director of Fund Reporting, Manning & Napier Advisors, LLC since 1997
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Jodi L. Hedberg
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    45
Current Position(s) Held with Fund:    Corporate Secretary, Chief Compliance Officer, Anti-Money Laundering
   Compliance Officer
Term of Office1 & Length of Time Served:    Corporate Secretary since 1997; Chief Compliance Officer since 2004
Principal Occupation(s) During Past 5 Years:    Director of Compliance, Manning & Napier Advisors, LLC and affiliates since 1990 (title change in 2005 from Compliance Manager to Director of Compliance); Corporate Secretary, Manning & Napier Investor Services, Inc. since 2006
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A
Name:    Richard Yates
Address:   

290 Woodcliff Drive

Fairport, NY 14450

Age:    47
Current Position(s) Held with Fund:    Chief Legal Officer
Term of Office1 & Length of Time Served:    Chief Legal Officer since 2004
Principal Occupation(s) During Past 5 Years:    Counsel - Manning & Napier Advisors, LLC & affiliates since 2000; Holds one or more of the following titles for various affiliates; Director or Corporate Secretary
Number of Portfolios Overseen within Fund Complex:    41
Other Directorships Held Outside Fund Complex:    N/A

*Interested Director, within the meaning of the Investment Company Act of 1940 by reason of his position with the Fund’s investment advisor and distributor. Mr. Auspitz serves as the Executive Vice President and Director, Manning & Napier Advisors, LLC and President and Director, Manning & Napier Investor Services, Inc., the Fund’s distributor.

1The term of office of all officers shall be one year and until their respective successors are chosen and qualified, or his or her earlier resignation or removal as provided in the Fund’s By-Laws.

 

28

 

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29

Global Fixed Income 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-Q, and are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   

The Series’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Prospectus and Statement of Additional Information (SAI)

The prospectus and SAI provide additional information about each Series, including charges, expenses and risks. These documents are available, without charge, upon request:

 

By phone    1-800-466-3863   
On the SEC’s web site    http://www.sec.gov   
On our web site    http://www.manning-napier.com   

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.

MNGFI-12/12-AR

ITEM 2:

CODE OF ETHICS

(a) The registrant has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. A copy of the registrant’s code of ethics is filed herewith as Exhibit 12(a)(1).

(b) During the period covered by this report, no amendments were made to the provisions of the code of ethics adopted in 2 (a) above.

(c) During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in 2 (a) above were granted.

(d) Not applicable to the registrant due to the response given in 2 (c) above.

 

ITEM 3:

AUDIT COMMITTEE FINANCIAL EXPERT

All of the members of the Audit committee have been determined by the Registrant’s Board of Directors to be Audit Committee Financial Experts as defined in this item. The current members of the Audit Committee are: Stephen B. Ashley, Paul A. Brooke, Harris H. Rusitzky, and Chester N. Watson. All Audit Committee members are independent under applicable rules. This designation will not increase the designee’s duties, obligations or liability as compared to their duties, obligations and liability as a member of the Audit Committee and of the Board.

 

ITEM 4:

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Principal Accountant Fees and Services

Aggregate fees for professional services rendered for the Manning & Napier Fund, Inc. (Life Sciences Series, Small Cap Series, Technology Series, Financial Services Series, Real Estate Series, International Series, World Opportunities Series, Core Bond Series, Core Plus Bond Series, High Yield Bond Series, Ohio Tax Exempt Series, Diversified Tax Exempt Series, New York Tax Exempt Series, Inflation Focus Equity Series, Emerging Markets Series, Global Fixed Income Series, Strategic Income Moderate Series, and Strategic Income Conservative Series, collectively the “Fund”) by PricewaterhouseCoopers LLP (“PwC”) as of and for the years ended December 31, 2012 and 2011 were:

 

     2012      2011  
  

 

 

  

Audit Fees (a)

      478,235         394,853   

Audit Related Fees (b)

      0         0   

Tax Fees (c)

      110,900         90,675   

All Other Fees (d)

      0         0   
  

 

 

  
     589,135         485,528   
  

 

 

  

(a)

Audit Fees

These fees relate to professional services rendered by PwC for the audit of the Fund’s annual financial statements or services normally provided by the accountant in connection with statutory and regulatory filing or engagements. These services include the audits of the financial statements of the Fund, issuance of consents, income tax provision procedures and assistance with review of documents filed with the SEC.

 

(b)

Audit-Related Fees

These fees relate to assurance and related services by PwC that are reasonably related to the performance of the audit of the Fund’s financial statements and are not reported under “Audit Fees” above.

 

(c)

Tax Fees

These fees relate to professional services rendered by PwC for tax compliance, tax advice and tax planning. The tax services provided by PwC related to the review of the Fund’s federal and state income tax returns, excise tax calculations and returns, a review of the Fund’s calculations of capital gain and income distributions, and additional tax research for compliance purposes.

 

(d)

All Other Fees

These fees relate to products and services provided by PwC other than those reported above under “Audit Fees,” “Audit-Related Fees,” and “Tax Fees” above.

There were no amounts that were approved by the Audit Committee pursuant to the de minimus exception (Rule 2-01(c)(7) of Regulation S-X) for the fiscal years ended December 31, 2012 and 2011.

Non-Audit Services to the Fund’s Service Affiliates that were Pre-Approved by the Fund’s Audit Committee

The Fund’s Audit Committee is required to pre-approve non-audit services which meet both the following criteria:

 

i)

Directly relate to the Fund’s operations and financial reporting; and

ii)

Rendered by PwC to the Fund’s advisor, Manning & Napier Advisors, LLC, and entities in a control relationship with the advisor (“service affiliate”) that provide ongoing services to the Fund. For purposes of disclosure, Manning & Napier Investor Services, Inc. is considered to be a service affiliate.

 

     2012      2011  
  

 

 

  

Audit Related Fees

      1,944         1,944   

Tax Fees

      0         0   
  

 

 

  
     1,944         1,944   
  

 

 

  

The Audit Related fees for the years ended December 31, 2012 and 2011 were for a license for proprietary authoritative financial reporting and assurance literature library software.

There were no amounts that were approved by the Audit Committee pursuant to the de minimus exception (Rule 2-01(c)(7) of Regulation S-X) for the fiscal years ended December 31, 2012 and 2011.

Aggregate Fees

Aggregate fees billed to the Fund for non-audit services for 2012 and 2011 were $110,900 and $90,675, respectively. Aggregate fees billed to the Fund’s advisor and service affiliates for non-audit services were $1,944 and $1,944, respectively. These amounts include fees for non-audit services required to be pre-approved and fees for non-audit services that did not require pre-approval since they did not relate to the Fund’s operations and financial reporting.

The Fund’s Audit Committee has considered whether the provisions for non-audit services to the Fund’s advisor and service affiliates, which did not require pre-approval, are compatible with maintaining PwC’s independence.

 

ITEM 5:

AUDIT COMMITTEE OF LISTED REGISTRANTS

Not applicable.

 

ITEM 6:

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 second fiscal quarter of the period covered by this report, there have been no changes in the Funds’ internal control over financial reporting that the above officers believe to have materially affected, or to be reasonably likely to materially affect, the Funds’ internal control over financial reporting.

 

ITEM 12:

EXHIBITS

 

(a)(1)

Code of ethics that is subject to the disclosure of Item 2 above.

 

(a)(2)

Separate certifications for the Registrant’s principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX-99.CERT.

 

(a)(3)

Not applicable.

 

(b)

A certification of the Registrant’s principal executive officer and principal financial officer, as required by 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX-99.906CERT. The certification furnished pursuant to this paragraph is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Manning & Napier Fund, Inc.

/s/ B. Reuben Auspitz

 

B. Reuben Auspitz

President & Principal Executive Officer of Manning & Napier Fund, Inc.

February 27, 2013

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ B. Reuben Auspitz

 

B. Reuben Auspitz

President & Principal Executive Officer of Manning & Napier Fund, Inc.

February 27, 2013

/s/ Christine Glavin

 

Christine Glavin

Chief Financial Officer & Principal Financial Officer of Manning & Napier Fund, Inc.

February 27, 2013