UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04087
Manning & Napier Fund, Inc.
(Exact name of registrant as specified in charter)
290 Woodcliff Drive, Fairport, NY 14450
(Address of principal executive offices)(Zip Code)
Paul J. Battaglia, 290 Woodcliff Drive, Fairport, NY 14450
(Name and address of agent for service)
Registrant’s telephone number, including area code: 585-325-6880
Date of fiscal year end: December 31
Date of reporting period: January 1, 2020 through December 31, 2020
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. §3507.
ITEM 1(a): REPORTS TO STOCKHOLDERS
Manning & Napier Fund, Inc.
Real Estate Series
Paper copies of the Series’ shareholder reports are no longer sent by mail, unless you specifically request them from the Series or from your financial intermediary, such as a broker-dealer or bank. Shareholder reports are available online. Each time a report is posted on the Series’ website you will be provided with a link to access the report online, either by mail (hard copy notice) or by email, if you have already signed up for electronic delivery of shareholder reports.
You may elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies. If you invest directly with the Fund, you can inform the Fund that you wish to continue receiving paper copies by visiting www.manning-napier.com or calling 1-800-466-3863. Your election to receive reports in paper will apply to all funds held with your financial intermediary if you invest through a financial intermediary or all series of the Fund if you invest directly with the Fund.
Additionally, If you have not yet signed up for electronic delivery of shareholder reports and other Fund communications, you may do so by contacting your financial intermediary or, if you are a direct investor, by visiting www.manning-napier.com or calling 1-800-466-3863.
Independent Perspective | Real-World Solutions |
A Note from Our CEO
Dear Shareholder,
2020. What a momentous year.
Political change, social unrest, the pandemic, economic shutdowns, and, of course, the fastest stock market selloff and recovery in history, all describe what has been a remarkably tumultuous and challenging time.
Maybe it should come as no surprise that after a year of such change, we yearn for a return of convention, clarity, facts, and perhaps, less drama.
This desire for normalcy is understandable, but we cannot hide our heads in the sand. The profound challenges we face are not going to simply go away.
If anything, many of the structural issues that brought us to where we are today, technological progress, the information age, a shifting economy and culture, may very well accelerate from here. Whether we want it or not, change is coming.
As investors, logically and rationally deciphering an uncertain future is one of our most existential tasks. Particularly in times like these, it is too easy to get caught up in the turbulence—to let emotion get the best of us—to fail to see the forest for the trees.
This is why the key question we must ask ourselves today is, what is the best way for us to understand and invest upon the paths that lie before us?
We believe the answer is, in many ways, an evergreen one, and we hope it offers you a helpful perspective.
It is to invest for the long-term, not speculate on short-term developments. It is to take an active, hands-on approach to investment decisions. It is to be patient, disciplined, and confident when the right investment opportunities present themselves. And it is to be constantly attentive to risk, particularly the most significant risks, permanent loss of capital and the risk of falling short of long-term needs and goals.
These are the same investing principles that we have been successfully implementing for clients since our founding more than 50 years ago.
Whether you are an individual investor, a financial advisor, or an institutional investor making decisions on behalf of others, you can trust that we are well equipped to handle whatever challenges the markets have in store for us next.
We wish you safety and good health, and we appreciate your continued confidence in our firm and our approach.
Sincerely,
Marc Mayer Chief Executive Officer |
Corporate Headquarters | 290 Woodcliff Drive | Fairport, NY 14450 | (585) 325-6880 phone | (800) 551-0224 toll free | www.manning-napier.com
1
Real Estate Series
Fund Commentary
(unaudited)
Investment Objective
To provide high current income and long-term capital appreciation by investing principally in companies in the real estate industry. Under normal circumstances, at least 80% of the Series’ assets will be invested in securities of companies that are principally engaged in the US real estate industry.
Performance Commentary
Real estate markets lagged behind the broader U.S. equity market and experienced negative returns during 2020. Within the real estate market, performance varied meaningfully between sub-industries during the year. For example, Mall REITs and Shopping Center REITs were largely negative during the year, while Data Storage REITs, Industrial REITs, and Self-Storage REITs posted double digit gains.
The Real Estate Series Class S shares posted negative returns for the year, but did outperform the benchmark (i.e., the MSCI US REIT Index), returning -6.27% versus -8.70%. In aggregate, industry allocations drove the Series’ outperformance, while individual security selection slightly detracted from relative returns. The largest contributors to relative outperformance during the year were an underweight to the Hospitality space early in the year (as well as positioning within the industry), an overweight to Data Storage REITs, and an overweight to single-family housing REITs. Detractors from relative performance included selection with Industrial REITs and within the Triple-Net Retail space. During the year, the portfolio’s allocation to Apartments, Health Care, and Retail decreased, while exposure to Data Centers, Industrials, and Manufactured Housing increased.
The portfolio currently favors Residential REITs, with the primary focus on Single-Family Housing and Manufactured Housing, as we expect the underbuilding of new houses relative to long-term household formation to result in excess demand and support pricing of residential rentals. The portfolio also has an overweight allocation to Industrials REITs compared to the benchmark given significant pull-forward in demand for warehouse space as companies manage increased inventories due to increased e-commerce. The portfolio also continued to maintain an overweight allocation to Data Storage REITs, which continue to be key beneficiaries of the secular shift of data moving to the cloud. Within traditional office REITs, we generally continue to prefer Sun Belt markets over coastal metropolitan markets due to the combination of strong job growth and manageable supply. The pandemic environment has strengthened this case as it has weakened demand for space in large metropolitan areas further. The portfolio has zero allocation to Mall and Shopping Center REITs, as the environment for retail has only continued to grow more challenging as the trend towards e-commerce has only strengthened further.
Performance for the Real Estate Series Class S shares is provided above. Performance for other shares classes will differ based on each class’ underlying expenses.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than that quoted; investors can obtain the most recent month-end performance at www.manning-napier.com or by calling (800) 466-3863.
Additional information and associated disclosures can be found on the Performance Update page of this report.
All investments involve risks, including potential loss of principal. Funds whose investments are concentrated in a specific industry or sector may be subject to a higher degree of market risk than funds whose investments are diversified among a variety of sectors. The Real Estate Series is subject to risks associated with the direct ownership of real estate, including the potential for falling real estate prices and the possibility of being highly leveraged; an investment in the Series will be closely aligned with the performance of the real estate markets. Additionally, like all derivatives, investments in options can be highly volatile and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk.
2
Real Estate Series
Performance Update as of December 31, 2020
(unaudited)
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2020 | |||
ONE YEAR1 | FIVE YEAR | TEN YEAR | |
Real Estate Series - Class S2 | (6.27%) | 5.77% | 8.82% |
Real Estate Series - Class I2,3 | (5.96%) | 6.03% | 9.05% |
Real Estate Series - Class W2,4 | (5.33%) | 6.14% | 9.01% |
Real Estate Series - Class Z2,4 | (5.96%) | 5.92% | 8.90% |
MSCI U.S. Real Estate Investment Trust (REIT) Index5 | (8.70%) | 3.51% | 6.99% |
The following graph compares the value of a $10,000 investment in the Real Estate Series - Class S for the ten years ended December 31, 2020 to the MSCI U.S. REIT Index.
1 The 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.
2 The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2020, this net expense ratio was 1.10% for Class S, 0.85% for Class I, 0.10% for Class W and 0.70% for Class Z. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.13% for Class S, 0.86% for Class I, 0.74% for Class W and 0.74% for Class Z for the year ended December 31, 2020.
3 For periods through August 1, 2012 (the inception date of the Class I shares), performance for Class I shares is based on the historical performance of the Class S shares. Because the Class I shares invest in the same portfolio of securities as Class S, performance will only be different to the extent that the Class S shares have a higher expense ratio.
4 For periods through March 1, 2019 (the inception date of the Class W and Class Z shares), performance for the Class W and Class Z shares is based on the historical performance of the Class S shares. Because the Class W and Class Z shares invest in the same portfolio of securities as the Class S shares, performance will be different only to the extent that the Class S shares have a higher expense ratio.
5 The MSCI U.S. Real Estate Investment Trust (REIT) Index is a free float-adjusted market capitalization index that is comprised of equity REITs as classified as Equity REITs Industry under the GICS® Real Estate sector. The MSCI U.S. REIT Index is a subset of the MSCI USA Investable Market Index (IMI) which captures large, mid, and small-cap securities. The Index returns do not reflect any fees or expenses. The Index is denominated in U.S. dollars. The Index returns are net of withholding taxes. They assume daily reinvestment of net dividends thus accounting for any applicable dividend taxation. Index returns provided by Bloomberg.
3
Real Estate Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested in each class at the beginning of the period and held for the entire period (July 1, 2020 to December 31, 2020).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the Actual line for the Class in which you have invested under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The Hypothetical lines of each class in the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ACCOUNT VALUE 7/1/20 | ENDING ACCOUNT VALUE 12/31/20 | EXPENSES PAID DURING PERIOD* 7/1/20 - 12/31/20 | ANNUALIZED EXPENSE RATIO | |
Class S | ||||
Actual | $1,000.00 | $1,102.20 | $5.81 | 1.10% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,019.61 | $5.58 | 1.10% |
Class I | ||||
Actual | $1,000.00 | $1,103.10 | $4.49 | 0.85% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.86 | $4.32 | 0.85% |
Class W | ||||
Actual | $1,000.00 | $1,107.30 | $0.53 | 0.10% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.63 | $0.51 | 0.10% |
Class Z | ||||
Actual | $1,000.00 | $1,104.50 | $3.70 | 0.70% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.62 | $3.56 | 0.70% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data. The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
4
Real Estate Series
Portfolio Composition as of December 31, 2020
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
Top Ten Stock Holdings2 | |||
Equinix, Inc. | 9.6% | Public Storage | 3.3% |
Prologis, Inc. | 8.7% | Mid-America Apartment Communities, Inc. | 3.2% |
Invitation Homes, Inc. | 4.2% | Americold Realty Trust | 2.9% |
Digital Realty Trust, Inc. | 4.0% | Crown Castle International Corp. | 2.9% |
Sun Communities, Inc. | 3.9% | Cousins Properties, Inc. | 2.8% |
2As a percentage of total investments. |
5
Real Estate Series
Investment Portfolio - December 31, 2020
SHARES | VALUE (NOTE 2) | |||||||
COMMON STOCKS - 99.6% | ||||||||
Consumer Discretionary - 2.7% | ||||||||
Hotels, Resorts & Cruise Lines - 2.7% | ||||||||
Hilton Worldwide Holdings, Inc. | 42,100 | $ | 4,684,046 | |||||
Wyndham Hotels & Resorts, Inc. | 49,083 | 2,917,493 | ||||||
Total Consumer Discretionary | 7,601,539 | |||||||
Information Technology - 2.3% | ||||||||
Internet Services & Infrastructure - 2.3% | ||||||||
Switch, Inc. - Class A | 397,883 | 6,513,345 | ||||||
Real Estate - 94.6% | ||||||||
REITS - Health Care - 8.9% | ||||||||
CareTrust REIT, Inc. | 106,045 | 2,352,078 | ||||||
Community Healthcare Trust, Inc. | 88,085 | 4,149,684 | ||||||
Healthcare Realty Trust, Inc. | 136,270 | 4,033,592 | ||||||
Healthcare Trust of America, Inc. - Class A | 173,525 | 4,778,879 | ||||||
Healthpeak Properties, Inc. | 228,030 | 6,893,347 | ||||||
Welltower, Inc. | 47,841 | 3,091,485 | ||||||
25,299,065 | ||||||||
REITS - Hotel & Resort - 1.5% | ||||||||
Apple Hospitality REIT, Inc. | 337,300 | 4,354,543 | ||||||
REITS - Industrial - 19.6% | ||||||||
Americold Realty Trust | 222,245 | 8,296,406 | ||||||
Duke Realty Corp. | 172,381 | 6,890,068 | ||||||
First Industrial Realty Trust, Inc. | 122,990 | 5,181,569 | ||||||
Prologis, Inc. | 247,684 | 24,684,187 | ||||||
Rexford Industrial Realty, Inc. | 86,715 | 4,258,574 | ||||||
STAG Industrial, Inc. | 88,975 | 2,786,697 | ||||||
Terreno Realty Corp. | 63,315 | 3,704,561 | ||||||
55,802,062 | ||||||||
REITS - Office - 8.0% | ||||||||
Brandywine Realty Trust | 220,135 | 2,621,808 | ||||||
Cousins Properties, Inc. | 238,367 | 7,985,294 | ||||||
Douglas Emmett, Inc. | 128,675 | 3,754,736 | ||||||
Hibernia REIT plc (Ireland) | 1,606,740 | 2,265,157 | ||||||
Kilroy Realty Corp. | 104,369 | 5,990,781 | ||||||
22,617,776 | ||||||||
REITS - Residential - 26.4% | ||||||||
American Campus Communities, Inc. | 98,500 | 4,212,845 | ||||||
American Homes 4 Rent - Class A | 256,695 | 7,700,850 | ||||||
Apartment Income REIT Corp.* | 88,560 | 3,401,590 | ||||||
AvalonBay Communities, Inc. | 26,115 | 4,189,629 | ||||||
Camden Property Trust | 53,565 | 5,352,215 | ||||||
Equity LifeStyle Properties, Inc. | 121,860 | 7,721,049 | ||||||
Essex Property Trust, Inc. | 12,997 | 3,085,748 | ||||||
Flagship Communities REIT | 126,285 | 1,863,967 | ||||||
Invitation Homes, Inc. | 401,170 | 11,914,749 | ||||||
Mid-America Apartment Communities,Inc. | 72,105 | 9,134,982 | ||||||
Sun Communities, Inc. | 72,800 | 11,061,960 |
SHARES | VALUE (NOTE 2) | |||||||
COMMON STOCKS (continued) | ||||||||
Real Estate (continued) | ||||||||
REITS - Residential (continued) | ||||||||
UDR, Inc. | 136,751 | $ | 5,255,341 | |||||
74,894,925 | ||||||||
REITS - Retail - 4.1% | ||||||||
Agree Realty Corp. | 81,738 | 5,442,116 | ||||||
Getty Realty Corp. | 124,960 | 3,441,399 | ||||||
Realty Income Corp. | 43,225 | 2,687,298 | ||||||
11,570,813 | ||||||||
REITS - Specialized - 26.1% | ||||||||
American Tower Corp. | 21,025 | 4,719,272 | ||||||
Crown Castle International Corp. | 50,925 | 8,106,751 | ||||||
CubeSmart | 89,515 | 3,008,599 | ||||||
Digital Realty Trust, Inc. | 81,394 | 11,355,277 | ||||||
Equinix, Inc. | 38,046 | 27,171,692 | ||||||
Extra Space Storage, Inc. | 19,370 | 2,244,208 | ||||||
Lamar Advertising Co. - Class A | 40,375 | 3,360,008 | ||||||
Life Storage, Inc. | 39,675 | 4,736,798 | ||||||
Public Storage | 40,525 | 9,358,438 | ||||||
74,061,043 | ||||||||
Total Real Estate | 268,600,227 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Identified Cost $241,035,878) | 282,715,111 | |||||||
SHORT-TERM INVESTMENT - 0.1% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 0.03%1 | ||||||||
(Identified Cost $297,864) | 297,864 | 297,864 | ||||||
TOTAL INVESTMENTS - 99.7% | ||||||||
(Identified Cost $241,333,742) | 283,012,975 | |||||||
OTHER ASSETS, LESS LIABILITIES - 0.3% | 957,115 | |||||||
NET ASSETS - 100% | $ | 283,970,090 |
REIT - Real Estate Investment Trust
The accompanying notes are an integral part of the financial statements.
6
Real Estate Series
Investment Portfolio - December 31, 2020
*Non-income producing security.
1Rate shown is the current yield as of December 31, 2020.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
7
Real Estate Series
Statement of Assets and Liabilities
December 31, 2020
ASSETS: | ||||
Investments, at value (identified cost $241,333,742) (Note 2) | $ | 283,012,975 | ||
Dividends receivable | 804,524 | |||
Receivable for fund shares sold | 361,090 | |||
Foreign tax reclaims receivable | 13,092 | |||
Prepaid and other expenses | 21,246 | |||
TOTAL ASSETS | 284,212,927 | |||
LIABILITIES: | ||||
Accrued management fees (Note 3) | 28,934 | |||
Accrued sub-transfer agent fees (Note 3) | 23,550 | |||
Accrued fund accounting and administration fees (Note 3) | 21,665 | |||
Accrued distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 8,005 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 1,503 | |||
Payable for fund shares repurchased | 107,919 | |||
Audit fees payable | 15,803 | |||
Accrued printing and postage fees payable | 13,172 | |||
Other payables and accrued expenses | 22,286 | |||
TOTAL LIABILITIES | 242,837 | |||
TOTAL NET ASSETS | $ | 283,970,090 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 225,255 | ||
Additional paid-in-capital | 248,826,206 | |||
Total distributable earnings (loss) | 34,918,629 | |||
TOTAL NET ASSETS | $ | 283,970,090 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S | ||||
($37,762,491/2,531,613 shares) | $ | 14.92 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I | ||||
($30,787,222/5,469,047 shares) | $ | 5.63 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W | ||||
($214,870,910/14,427,405 shares) | $ | 14.89 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class Z | ||||
($549,467/97,408 shares) | $ | 5.64 |
The accompanying notes are an integral part of the financial statements.
8
Real Estate Series
Statement of Operations
For the Year Ended December 31, 2020
INVESTMENT INCOME: | ||||
Dividends (net of foreign taxes withheld, $25,041) | $ | 5,787,293 | ||
EXPENSES: | ||||
Management fees (Note 3) | 1,563,335 | |||
Distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 107,031 | |||
Sub-transfer agent fees (Note 3) | 104,353 | |||
Fund accounting and administration fees (Note 3) | 81,409 | |||
Directors’ fees (Note 3) | 31,540 | |||
Chief Compliance Officer service fees (Note 3) | 3,784 | |||
Custodian fees | 15,864 | |||
Miscellaneous | 226,429 | |||
Total Expenses | 2,133,745 | |||
Less reduction of expenses (Note 3) | (1,162,038 | ) | ||
Net Expenses | 971,707 | |||
NET INVESTMENT INCOME | 4,815,586 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: | ||||
Net realized gain (loss) on- | ||||
Investments | (6,366,594 | ) | ||
Foreign currency and translation of other assets and liabilities | 2,295 | |||
(6,364,299 | ) | |||
Net change in unrealized appreciation (depreciation) on- | ||||
Investments | (17,859,858 | ) | ||
Foreign currency and translation of other assets and liabilities | 1,177 | |||
(17,858,681 | ) | |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY | (24,222,980 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (19,407,394 | ) |
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 12/31/20 | FOR THE YEAR ENDED 12/31/19 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,815,586 | $ | 5,851,609 | ||||
Net realized gain (loss) on investments and foreign currency | (6,364,299 | ) | 15,584,064 | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | (17,858,681 | ) | 54,145,860 | |||||
Net increase (decrease) from operations | (19,407,394 | ) | 75,581,533 | |||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 10): | ||||||||
Class S | (827,914 | ) | (2,082,294 | ) | ||||
Class I | (1,966,961 | ) | (4,713,102 | ) | ||||
Class W | (6,148,808 | ) | (8,513,530 | ) | ||||
Class Z | (33,883 | ) | (50,026 | ) | ||||
From return of capital (Class S) | (94,621 | ) | – | |||||
From return of capital (Class I) | (262,791 | ) | – | |||||
From return of capital (Class W) | (952,851 | ) | – | |||||
From return of capital (Class Z) | (4,609 | ) | – | |||||
Total distributions to shareholders | (10,292,438 | ) | (15,358,952 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | 11,810,090 | (23,194,930 | ) | |||||
Net increase (decrease) in net assets | (17,889,742 | ) | 37,027,651 | |||||
NET ASSETS: | ||||||||
Beginning of year | 301,859,832 | 264,832,181 | ||||||
End of year | $ | 283,970,090 | $ | 301,859,832 |
The accompanying notes are an integral part of the financial statements.
10
Real Estate Series
Financial Highlights - Class S
FOR THE YEAR ENDED | |||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |||||
Per share data (for a share outstanding throughout each year): | |||||||||
Net asset value - Beginning of year | $16.31 | $13.09 | $14.93 | $14.48 | $14.15 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income1 | 0.12 | 2 | 0.15 | 0.26 | 0.24 | 0.22 | |||
Net realized and unrealized gain (loss) on investments | (1.15 | ) | 3.65 | (1.24 | ) | 1.02 | 0.88 | ||
Total from investment operations | (1.03 | ) | 3.80 | (0.98 | ) | 1.26 | 1.10 | ||
Less distributions to shareholders: | |||||||||
From net investment income | (0.13 | ) | (0.16 | ) | (0.21 | ) | (0.25 | ) | (0.27) |
From net realized gain on investments | (0.19 | ) | (0.42 | ) | (0.63 | ) | (0.56 | ) | (0.50) |
From return of capital | (0.04 | ) | — | (0.02 | ) | — | — | ||
Total distributions to shareholders | (0.36 | ) | (0.58 | ) | (0.86 | ) | (0.81 | ) | (0.77) |
Net asset value - End of year | $14.92 | $16.31 | $13.09 | $14.93 | $14.48 | ||||
Net assets - End of year (000’s omitted) | $37,762 | $59,923 | $214,722 | $271,496 | $278,322 | ||||
Total return3 | (6.27% | ) | 29.14% | 4 | (6.73% | ) | 8.66% | 7.91% | |
Ratios (to average net assets)/Supplemental Data: | |||||||||
Expenses* | 1.10% | 1.11% | 1.11% | 1.10% | 1.09% | ||||
Net investment income | 0.81% | 2 | 1.02% | 1.82% | 1.58% | 1.47% | |||
Series portfolio turnover | 69% | 24% | 44% | 42% | 46% | ||||
*For certain years presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some years may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | |||||||||
0.03% | 0.00% | 5 | N/A | 0.00% | 5 | N/A |
1Calculated based on average shares outstanding during the years.
2Includes special dividends from two of the Series' securities. Excluding this amount, the net investment income per share would have been $0.11 and the net investment income ratio would have been 0.72%.
3Represents aggregate total return for the 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.
4Includes litigation proceeds. Excluding this amount, the Class’ total return is 29.06%.
5Less than 0.01%.
The accompanying notes are an integral part of the financial statements.
11
Real Estate Series
Financial Highlights - Class I
FOR THE YEAR ENDED | |||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |||||
Per share data (for a share outstanding throughout each year): | |||||||||
Net asset value - Beginning of year | $6.44 | $5.50 | $6.81 | $7.03 | $7.26 | ||||
Income (loss) from investment operations: | |||||||||
Net investment income1 | 0.06 | 2 | 0.11 | 0.14 | 0.14 | 0.11 | |||
Net realized and unrealized gain (loss) on investments | (0.45 | ) | 1.49 | (0.55 | ) | 0.49 | 0.47 | ||
Total from investment operations | (0.39 | ) | 1.60 | (0.41 | ) | 0.63 | 0.58 | ||
Less distributions to shareholders: | |||||||||
From net investment income | (0.18 | ) | (0.24 | ) | (0.24 | ) | (0.29) | (0.31) | |
From net realized gain on investments | (0.19 | ) | (0.42 | ) | (0.63 | ) | (0.56) | (0.50) | |
From return of capital | (0.05 | ) | — | (0.03 | ) | — | — | ||
Total distributions to shareholders | (0.42 | ) | (0.66 | ) | (0.90 | ) | (0.85 | ) | (0.81) |
Net asset value - End of year | $5.63 | $6.44 | $5.50 | $6.81 | $7.03 | ||||
Net assets - End of year (000’s omitted) | $30,787 | $50,025 | $50,111 | $47,074 | $26,300 | ||||
Total return3 | (5.96% | ) | 29.31% | (6.41% | ) | 8.85% | 8.17% | ||
Ratios (to average net assets)/Supplemental Data: | |||||||||
Expenses* | 0.85% | 0.84% | 0.86% | 0.85% | 0.84% | ||||
Net investment income | 1.02% | 2 | 1.62% | 2.12% | 1.95% | 1.50% | |||
Series portfolio turnover | 69% | 24% | 44% | 42% | 46% | ||||
*For certain years presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some years may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | |||||||||
0.01% | N/A | N/A | 0.00% | 4 | N/A |
1Calculated based on average shares outstanding during the years.
2Includes special dividends from two of the Series' securities. Excluding this amount, the net investment income per share would have been $0.05 and the net investment income ratio would have been 0.93%.
3Represents aggregate total return for the 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.
12
Real Estate Series
Financial Highlights - Class W
FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/191 TO 12/31/19 | |||
Per share data (for a share outstanding throughout each period): | ||||
Net asset value - Beginning of period | $16.27 | $14.76 | ||
Income (loss) from investment operations: | ||||
Net investment income2 | 0.33 | 3 | 0.35 | |
Net realized and unrealized gain (loss) on investments | (1.20 | ) | 1.91 | |
Total from investment operations | (0.87 | ) | 2.26 | |
Less distributions to shareholders: | ||||
From net investment income | (0.25 | ) | (0.33 | ) |
From net realized gain on investments | (0.19 | ) | (0.42 | ) |
From return of capital | (0.07 | ) | — | |
Total distributions to shareholders | (0.51 | ) | (0.75 | ) |
Net asset value - End of period | $14.89 | $16.27 | ||
Net assets - End of period (000’s omitted) | $214,871 | $191,373 | ||
Total return4 | (5.33% | ) | 15.43% | 5 |
Ratios (to average net assets)/Supplemental Data: | ||||
Expenses* | 0.10% | 0.10% | 6 | |
Net investment income | 2.27% | 3 | 2.58% | 6 |
Series portfolio turnover | 69% | 24% | ||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||
0.64% | 0.62% | 6 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Includes special dividends from two of the Series' securities. Excluding this amount, the net investment income per share would have been $0.31 and the net investment income ratio would have been 2.14%.
4Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
5Includes litigation proceeds. Excluding this amount, the Class’ total return is 15.36%.
6Annualized.
The accompanying notes are an integral part of the financial statements.
13
Real Estate Series
Financial Highlights - Class Z
FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/191 TO 12/31/19 | |||
Per share data (for a share outstanding throughout each period): | ||||
Net asset value - Beginning of period | $6.46 | $6.21 | ||
Income (loss) from investment operations: | ||||
Net investment income2 | 0.09 | 3 | 0.08 | |
Net realized and unrealized gain (loss) on investments | (0.48 | ) | 0.84 | |
Total from investment operations | (0.39 | ) | 0.92 | |
Less distributions to shareholders: | ||||
From net investment income | (0.19 | ) | (0.25 | ) |
From net realized gain on investments | (0.19 | ) | (0.42 | ) |
From return of capital | (0.05 | ) | — | |
Total distributions to shareholders | (0.43 | ) | (0.67 | ) |
Net asset value - End of period | $5.64 | $6.46 | ||
Net assets - End of period (000’s omitted) | $549 | $539 | ||
Total return4 | (5.96% | ) | 14.98% | 5 |
Ratios (to average net assets)/Supplemental Data: | ||||
Expenses* | 0.70% | 0.70% | 6 | |
Net investment income | 1.51% | 3 | 1.42% | 6 |
Series portfolio turnover | 69% | 24% | ||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||
0.04% | 0.02% | 6 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Includes special dividends from two of the Series' securities. Excluding this amount, the net investment income per share would have been $0.08 and the net investment income ratio would have been 1.39%.
4Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
5Includes litigation proceeds. Excluding this amount, the Class’ total return is 14.62%
6Annualized.
The accompanying notes are an integral part of the financial statements.
14
Real Estate Series
Notes to Financial Statements
1. | Organization |
Real Estate Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series’ investment objective is to provide high current income and long-term capital appreciation by investing principally in companies in the real estate industry.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The Series is authorized to issue four classes of shares (Class S, I, W, and Z). Each class of shares is substantially the same, except that class specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of December 31, 2020, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Real Estate Series Class I common stock, Real Estate Series Class S common stock and Real Estate Series Class Z common stock and 75 million have been designated as Real Estate Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market are valued at the latest quoted sales price of the exchange on which the security is primarily traded. Securities not traded on valuation date or securities not listed on an exchange are valued at the latest quoted bid price provided by the Fund’s pricing service. Securities listed on the NASDAQ Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board of Directors (the “Board”). Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account. In accordance with the procedures approved by the Board, the values of certain securities trading outside the U.S. were adjusted following the close of local trading using a factor from a third party vendor. The third party vendor uses statistical analyses and quantitative models, which consider among other things subsequent movement and changes in the prices of indices, securities and exchange rates in other markets, to determine the factors which are used to adjust local market prices. The value of securities
15
Real Estate Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
used for net asset value calculation under these procedures may differ from published prices for the same securities. It is the Fund’s policy to classify each foreign equity security where a factor from a third party vendor is provided as a Level 2 security.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of December 31, 2020 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2# | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Equity securities: | ||||||||||||||||
Consumer Discretionary | $ | 7,601,539 | $ | 7,601,539 | $ | — | $ | — | ||||||||
Information Technology | 6,513,345 | 6,513,345 | — | — | ||||||||||||
Real Estate | 268,600,227 | 266,335,070 | 2,265,157 | — | ||||||||||||
Short-Term Investment | 297,864 | 297,864 | — | — | ||||||||||||
Total assets | $ | 283,012,975 | $ | 280,747,818 | $ | 2,265,157 | $ | — |
#Includes certain foreign equity securities for which a factor from a third party vendor was applied to determine the securities’ fair value following the close of local trading.
There were no Level 3 securities held by the Series as of December 31, 2019 or December 31, 2020.
Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
Expenses are recorded on an accrual basis. Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund’s Board, taking into consideration, among other things, the nature and type of expense. Income, expenses (other than shareholder services fees), and realized and unrealized gains and losses are prorated among the classes based on the relative net assets of each class. Class specific expenses are directly charged to that Class.
The Fund records distributions received in excess of income from underlying investments as a reduction of cost of investments and/or realized gain. Such amounts are based on estimates if actual amounts are not available and actual amounts of income, realized gain and return of capital may differ from the estimated amounts. The Fund adjusts the estimated amounts of components of distributions (and consequently its net investment income) as necessary once the issuers provide information about the actual composition of the distributions.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
16
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, 2020, 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, 2017 through December 31, 2020. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation transactions for foreign jurisdictions in which it invests, the Series will provide for foreign taxes, and where appropriate, deferred foreign tax.
Distributions of Income and Gains
Distributions to shareholders of net investment income and net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
17
Real Estate Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.60% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
The Fund may enter into agreements with financial intermediaries pursuant to which the Fund may pay financial intermediaries for non-distribution related sub-transfer agency, administrative, sub-accounting, and other shareholder services in an annual amount not to exceed 0.15% of the average daily net assets of the Class I and Class S shares of the Series. Payments made pursuant to such agreements are generally based on the current assets and/or number of accounts of the Series attributable to the financial intermediary. Any payments made pursuant to such agreements may be in addition to, rather than in lieu of, any Distribution and Shareholder Services Fee payable under the Rule 12b-1 plan of the Fund. For the year ended December 31, 2020, the sub-transfer agency expenses incurred by Class S and Class I were $60,097 and $44,256, respectively.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The Series compensates the distributor for distributing and servicing the Series’ Class S shares pursuant to a distribution plan adopted under Rule 12b-1 of the 1940 Act, regardless of expenses actually incurred. Under the agreement, the Series pays distribution and service fees to the distributor at an annual rate of 0.25% of average daily net assets attributable to Class S shares. There are no distribution and service fees on the Class I, Class W or Class Z shares. The fees are accrued daily and paid monthly.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets (excluding Target Series); 0.0075% on the next $15 billion of average daily net assets (excluding Target Series); and 0.0065% of average daily net assets in excess of $40 billion (excluding Target Series); plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the shareholder services fee and/or distribution and service (12b-1) fees and waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.85% of the average daily net assets of the Class S and Class I shares, 0.10% of the average daily net assets of the Class W shares, and 0.70% of the average daily net assets of the Class Z shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
18
Real Estate Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
Pursuant to the advisory fee waiver, the Advisor waived $1,079,438 in management fees for Class W for the year ended December 31, 2020. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $12,058, $2,362, $67,990 and $190 for Class S, Class I, Class W and Class Z, respectively, for the year ended December 31, 2020. These amounts are included as a reduction of expenses on the Statement of Operations.
As of December 31, 2020, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, | ||
2022 | 2023 | Total | |
Class S | $6,660 | $12,058 | $18,718 |
Class I | – | 2,362 | 2,362 |
Class W | 32,160 | 67,990 | 100,150 |
Class Z | 382 | 190 | 572 |
For the year ended December 31, 2020, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
4. | Purchases and Sales of Securities |
For the year ended December 31, 2020, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $195,581,894 and $180,964,999, respectively. There were no purchases or sales of U.S. Government securities.
5. | Capital Stock Transactions |
Transactions in Class S, Class I, Class W and Class Z shares of Real Estate Series were:
CLASS S | FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 497,285 | $ | 7,097,568 | 730,886 | $ | 11,290,209 | ||||||||||
Reinvested | 60,668 | 894,249 | 126,718 | 2,016,087 | ||||||||||||
Repurchased | (1,701,388 | ) | (23,099,433 | ) | (13,580,492 | ) | (201,560,930 | ) | ||||||||
Total | (1,143,435 | ) | $ | (15,107,616 | ) | (12,722,888 | ) | $ | (188,254,634 | ) |
CLASS I | FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 2,278,198 | $ | 13,092,128 | 3,862,253 | $ | 25,033,978 | ||||||||||
Reinvested | 355,681 | 1,977,588 | 708,353 | 4,455,539 | ||||||||||||
Repurchased | (4,926,892 | ) | (26,342,003 | ) | (5,917,378 | ) | (37,598,078 | ) | ||||||||
Total | (2,293,013 | ) | $ | (11,272,287 | ) | (1,346,772 | ) | $ | (8,108,561 | ) |
19
Real Estate Series
Notes to Financial Statements (continued)
5. | Capital Stock Transactions (continued) |
CLASS W | FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/19 (COMMENCEMENT OF OPERATIONS) TO 12/31/19 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 4,172,038 | $ | 59,888,503 | 13,695,504 | $ | 203,620,504 | ||||||||||
Reinvested | 459,235 | 6,755,357 | 520,176 | 8,255,204 | ||||||||||||
Repurchased | (1,966,099 | ) | (28,531,311 | ) | (2,453,449 | ) | (38,939,976 | ) | ||||||||
Total | 2,665,174 | $ | 38,112,549 | 11,762,231 | $ | 172,935,732 |
CLASS Z | FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/19 (COMMENCEMENT OF OPERATIONS) TO 12/31/19 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 21,301 | $ | 122,725 | 520,511 | $ | 3,286,106 | ||||||||||
Reinvested | 6,859 | 38,206 | 7,871 | 49,584 | ||||||||||||
Repurchased | (14,322 | ) | (83,487 | ) | (444,812 | ) | (3,103,157 | ) | ||||||||
Total | 13,838 | $ | 77,444 | 83,570 | $ | 232,533 |
Approximately 75% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund (with the exception of Credit Series) may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in August 2021 unless extended or renewed. During the year ended December 31, 2020, the Series did not borrow under the line of credit.
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of December 31, 2020.
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.
20
Real Estate Series
Notes to Financial Statements (continued)
9. | Real Estate Securities |
The Series may focus its investments in certain real estate related industries; hence, the Series may subject itself to a greater degree of risk than a series that is more diversified.
10. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. The portion of distributions that exceeds a Series’ current and accumulated earnings and profits, as measured on a tax basis, constitutes a non-taxable return of capital. These differences are primarily due to differing book and tax treatments in the timing and/or treatment of the recognition of net investment income or gains and losses, including foreign currency gains and losses, redesignation of distributions paid, including losses deferred due to wash sales. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | |||||||
Ordinary income | $ | 5,358,439 | $ | 7,071,573 | ||||
Long-term capital gains | $ | 3,619,127 | $ | 8,287,379 | ||||
Return of capital | $ | 1,314,872 | $ | — |
At December 31, 2020, 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 | $ | 242,193,939 | ||
Unrealized appreciation | 44,235,688 | |||
Unrealized depreciation | (3,416,652 | ) | ||
Net unrealized appreciation | $ | 40,819,036 | ||
Capital loss carryforwards | $ | (5,901,383 | ) |
At December 31, 2020, the Series had net short-term capital loss carryforwards of $5,901,383 which may be carried forward indefinitely.
11. | Market Event |
In March 2020, the World Health Organization declared COVID-19 (a novel coronavirus) to be a pandemic. The situation is dynamic. Global financial markets have experienced and may continue to experience significant volatility resulting from the spread of COVID-19. The outbreak of COVID-19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand and general market uncertainty. The global economy, the economies of certain nations and individual issuers have been and may continue to be adversely affected by COVID-19, particularly in light of the interconnectivity between economies and financial markets, all of which may negatively impact the Series’ performance. In addition, COVID-19 and governmental responses to COVID-19 may negatively impact the capabilities of the Series’ service providers and disrupt the Series’ operations. Management of the Series will continue to monitor the impact of COVID-19.
21
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
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of Real Estate Series (one of the series constituting Manning & Napier Fund, Inc., referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, 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 ended December 31, 2020 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
New York, New York
February 17, 2021
We have served as the auditor of one or more investment companies in Manning & Napier Mutual Funds since 1992.
22
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 $244,378 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 1.39%.
The Series designates $4,545,647, or 87.51% of the dividends distributed as Section 199A dividends.
23
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.manning-napier.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 directors and officers, 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 and Officer | |
Name: | Paul Battaglia* |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 42 |
Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1 & Length of Time Served: | Indefinite – Chairman and Director since November 2018 |
Principal Occupation(s) During Past 5 Years: | Chief Financial Officer since 2018; Vice President of Finance (2016 – 2018); Director of Finance (2011 – 2016); Financial Analyst/Internal Auditor (2004-2006) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various subsidiaries and affiliates: Chief Financial Officer |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | N/A |
Independent Directors | |
Name: | Stephen B. Ashley |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 80 |
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 and Director since 1997; Chief Executive Officer (1997-2019) - Ashley Companies (property management and investment) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Ashley Companies since 1997 |
Name: | Paul A. Brooke |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 75 |
Current Position(s) Held with Fund: | Lead Independent Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since 2007; Governance & Nominating Committee Chairman since 2016; Lead Independent Director since 2017 |
Principal Occupation(s) During Past 5 Years: | Managing Member since 1991 - PMSV Holdings LLC (investments); Managing Member (2010-2016) - Venbio (investments).. |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Incyte Corp. (biotech) (2000-2020); PureEarth (non-profit) since 2012; Cerus(biomedical) since 2016; Caelum BioSciences (biomedical) since 2018; Cheyne Capital International (investment)(2000-2017); |
24
Real Estate Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued) | |
Name: | Peter L. Faber2 |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 82 |
Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Since 1987 |
Principal Occupation(s) During Past 5 Years: | Partner (1995-2006 & 2013-2018); Senior Counsel (2006-2012) - McDermott, Will & Emery LLP (law firm) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Boston Early Music Festival (non-profit) since 2007; Amherst Early Music, Inc. (non-profit) since 2009; Gotham Early Music Scene, Inc. (non-profit) since 2009; S’Cool Sounds, Inc. (non-profit) since 2017 |
Name: | Harris H. Rusitzky2 |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 85 |
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 since 1994 - The Greening Group (business consultants); Partner since 2006 - The Restaurant Group (restaurants) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (university) since 1972; Culinary Institute of America (non-profit college) since 1985; George Eastman Museum(museum) since 1988; National Restaurant Association (restaurant trade organization) (1978-2020) |
Name: | Russell O. Vernon |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 63 |
Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since April 2020; Governance & Nominating Committee Chairman since November 2020 |
Principal Occupation(s) During Past 5 Years: | Founder and General Partner (2009-2019) – BVM Capital Management(economic development) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Board Member, Vice Chairman and President since 2010 – Newburgh Armory Unity Center (military); Board Member and Executive Director since 2020 – National Purple Heart Honor Mission, Inc. (military); Board Member, Vice Chairman (2015-2020) – National Purple Heart Hall of Honor, Inc. (military) |
25
Real Estate Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued) | |
Name: | Chester N. Watson |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 70 |
Current Position(s) Held with Fund: | Director, Audit Committee Chairman, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member Since 2012; Audit Committee Chairman since 2013 |
Principal Occupation(s) During Past 5 Years: | General Auditor (2003-2011) - General Motors Company (auto manufacturer) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (University) since 2005; Hudson Valley Center for Innovation, Inc. (New Business and Economic Development) since 2019; Town of Greenburgh, NY Planning Board (Municipal Government) (2015-2019); |
Officers: | |
Name: | Elizabeth Craig |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 33 |
Current Position(s) Held with Fund: | Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2016 |
Principal Occupation(s) During Past 5 Years: | Fund Regulatory Administration Manager since 2018; Fund Administration Manager (2015-2018); Mutual Fund Compliance Specialist (2009-2015) - Manning & Napier Advisors, LLC; Assistant Corporate Secretary (2011-2016) - Manning & Napier Fund, Inc.; Corporate Secretary, Director since 2019– Manning & Napier Investor Services, Inc. |
Name: | Samantha Larew |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 40 |
Current Position(s) Held with Fund: | Chief Compliance Officer and Anti-Money Laundering Compliance Officer |
Term of Office1 & Length of Time Served: | Chief Compliance Officer since 2019; Anti-Money Laundering Compliance Officer since 2018 |
Principal Occupation(s) During Past 5 Years: | Co-Director of Compliance since 2018; Compliance Communications Supervisor (2014-2018); Compliance Supervisor (2013-2014); Broker-Dealer Compliance Supervisor (2011-2013); Broker-Dealer Compliance Analyst (2010-2011) - Manning & Napier Advisors, LLC & Affiliates; Broker-Dealer Chief Compliance Officer since 2013; Broker-Dealer Assistant Corporate Secretary since 2011 – Manning & Napier Investor Services, Inc.; Compliance Analyst (2007-2009) – Wall Street Financial Group; Compliance Specialist (2003-2007) – Manning & Napier Advisors, LLC & Affiliates |
Name: | Scott Morabito |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 33 |
Current Position(s) Held with Fund: | Vice President |
Term of Office1 & Length of Time Served: | Vice President since 2019; Assistant Vice President (2017-2019) |
Principal Occupation(s) During Past 5 Years: | Managing Director of Operations since 2019; Director of Funds Group (2017-2019); Fund Product and Strategy Manager (2014-2017); Senior Product and Strategy Analyst (2013-2014); Product and Strategy Analyst (2011-2013) - Manning & Napier Advisors, LLC; President, Director since 2018 – Manning & Napier Investor Services, Inc. |
26
Real Estate Series
Directors’ and Officers’ Information
(unaudited)
Officers: (continued) | |
Name: | Troy Statczar |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 49 |
Current Position(s) Held with Fund: | Principal Financial Officer, Treasurer |
Term of Office1 & Length of Time Served: | Principal Financial Officer and Treasurer since 2020 |
Principal Occupation(s) During Past 5 Years: | Senior Director, Foreside Treasurer Services since 2020 - Foreside Financial Group; Director of Fund Administration (2017-2019) - Thornburg Investment Management, Inc.; Director of U.S. Operations (2008-2017) - Henderson Global Investors N.A., Inc. |
Name: | Sarah Turner |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 38 |
Current Position(s) Held with Fund: | Chief Legal Officer; Assistant Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2018 |
Principal Occupation(s) During Past 5 Years: | Attorney since 2018 - Manning & Napier Advisors, LLC and affiliates; Counsel (2017-2018) – Harter Secrest and Emery LLP; Legal Counsel (2010-2017) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various affiliates: Corporate Secretary, General Counsel |
*Interested Director, within the meaning of the 1940 Act by reason of his positions with the Fund’s Advisor, Manning & Napier Advisors, LLC, and Distributor, Manning & Napier Investor Services, Inc.
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.
2Effective December 31, 2020, Peter L. Faber and Harris Rusitzky have each retired as a Director of the Fund in accordance with the Board’s existing Board retirement policy.
27
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28
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29
Real Estate Series
Literature Requests
(unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the Securities and Exchange Commission’s (SEC) web site | http://www.sec.gov |
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling (800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End
2. Fund Holdings - Quarter-End
3. Shareholder Report - Annual
4. Shareholder Report - Semi-Annual
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNCRE-12/20-AR
30
Manning & Napier Fund, Inc.
Diversified Tax Exempt Series
Paper copies of the Series’ shareholder reports are no longer sent by mail, unless you specifically request them from the Series or from your financial intermediary, such as a broker-dealer or bank. Shareholder reports are available online. Each time a report is posted on the Series’ website you will be provided with a link to access the report online, either by mail (hard copy notice) or by email, if you have already signed up for electronic delivery of shareholder reports.
You may elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies. If you invest directly with the Fund, you can inform the Fund that you wish to continue receiving paper copies by visiting www.manning-napier.com or calling 1-800-466-3863. Your election to receive reports in paper will apply to all funds held with your financial intermediary if you invest through a financial intermediary or all series of the Fund if you invest directly with the Fund.
Additionally, If you have not yet signed up for electronic delivery of shareholder reports and other Fund communications, you may do so by contacting your financial intermediary or, if you are a direct investor, by visiting www.manning-napier.com or calling 1-800-466-3863.
Independent Perspective | Real-World Solutions |
A Note from Our CEO
Dear Shareholder,
2020. What a momentous year.
Political change, social unrest, the pandemic, economic shutdowns, and, of course, the fastest stock market selloff and recovery in history, all describe what has been a remarkably tumultuous and challenging time.
Maybe it should come as no surprise that after a year of such change, we yearn for a return of convention, clarity, facts, and perhaps, less drama.
This desire for normalcy is understandable, but we cannot hide our heads in the sand. The profound challenges we face are not going to simply go away.
If anything, many of the structural issues that brought us to where we are today, technological progress, the information age, a shifting economy and culture, may very well accelerate from here. Whether we want it or not, change is coming.
As investors, logically and rationally deciphering an uncertain future is one of our most existential tasks. Particularly in times like these, it is too easy to get caught up in the turbulence—to let emotion get the best of us—to fail to see the forest for the trees.
This is why the key question we must ask ourselves today is, what is the best way for us to understand and invest upon the paths that lie before us?
We believe the answer is, in many ways, an evergreen one, and we hope it offers you a helpful perspective.
It is to invest for the long-term, not speculate on short-term developments. It is to take an active, hands-on approach to investment decisions. It is to be patient, disciplined, and confident when the right investment opportunities present themselves. And it is to be constantly attentive to risk, particularly the most significant risks, permanent loss of capital and the risk of falling short of long-term needs and goals.
These are the same investing principles that we have been successfully implementing for clients since our founding more than 50 years ago.
Whether you are an individual investor, a financial advisor, or an institutional investor making decisions on behalf of others, you can trust that we are well equipped to handle whatever challenges the markets have in store for us next.
We wish you safety and good health, and we appreciate your continued confidence in our firm and our approach.
Sincerely,
Marc Mayer Chief Executive Officer |
Corporate Headquarters | 290 Woodcliff Drive | Fairport, NY 14450 | (585) 325-6880 phone | (800) 551-0224 toll free | www.manning-napier.com
1
Diversified Tax Exempt Series
Fund Commentary
(unaudited)
Investment Objective
To provide as high a level of current income that is exempt from federal income taxes which the Advisor believes is consistent with the preservation of capital. The Series invests primarily in municipal bonds that provide income exempt from federal income tax.
Performance Commentary
The municipal bond market posted positive returns for the twelve-month period ending December 31, 2020. Despite significant volatility at points during the year, specifically first quarter as the global pandemic upended markets and the ensuing rebound, yields ended the year lower and credit spreads tightened. The highest returning areas of the market included water/sewer and hospital bonds from a sector perspective, longer-dated issuances from a maturity perspective, and higher quality issuances when looking at it from a quality perspective.
The Diversified Tax Exempt Series Class A shares delivered positive absolute and relative returns, returning 5.73% during the year versus 4.02% for the benchmark (i.e., the Intercontinental (ICE) Bank of America (BofA) 1-12 Year Municipal Bond Index).
Relative outperformance was primarily driven by longer duration positioning, as well an overweight to essential service revenue bonds (e.g., water/sewer and utilities). Alternatively, an underweight allocation to middle tier credits, specifically BBB-rated issuances, detracted from relative returns.
In terms of positioning, we continue to have a positive view of revenue bonds and, within general obligations (GOs), we have a relatively higher quality tilt as a result of our selectivity within the sector. While both yields and spreads have compressed, we are finding select opportunities in longer-dated issuances (i.e., those 12+ years) and middle-tier credits.
While 2020 was a strong year for municipal bonds, we believe investor return expectations for the coming year should be tempered as the fixed income landscape remains challenging due to low starting rates. That stated, we believe a flexible approach with the ability to adapt to changing environments (e.g., uncovering risks and opportunities) will remain essential to achieving investor objectives.
Performance for the Diversified Tax Exempt Series Class A shares is provided above. Performance for other shares classes will differ based on each class’ underlying expenses.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than that quoted; investors can obtain the most recent month-end performance at www.manning-napier.com or by calling (800) 466-3863.
Additional information and associated disclosures can be found on the Performance Update page of this report.
All investments involve risks, including possible loss of principal. There is an inverse relationship between bond prices and interest rates; as interest rates rise, bond prices (and therefore the value of bond funds) fall. Likewise, as interest rates fall, bond prices and the value of bond funds rise. The income earned by the Series may be subject to the Alternative Minimum Tax (AMT), depending on your tax situation.
2
Diversified Tax Exempt Series
Performance Update as of December 31, 2020
(unaudited)
AVERAGE ANNUAL TOTAL RETURNS | |||
AS OF DECEMBER 31, 2020 | |||
ONE | FIVE | TEN | |
YEAR1 | YEAR | YEAR | |
Diversified Tax Exempt Series - Class A2 | 5.73% | 2.57% | 2.56% |
Diversified Tax Exempt Series - Class W2,3 | 6.23% | 2.78% | 2.67% |
Intercontinental Exchange (ICE) Bank of America (BofA) 1-12 Year Municipal Bond Index4 | 4.02% | 2.88% | 3.17% |
The following graph compares the value of a $10,000 investment in the Diversified Tax Exempt Series - Class A for the ten years ended December 31, 2020 to the Intercontinental Exchange (ICE) Bank of America (BofA) 1-12 Year Municipal Bond Index.
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.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2020, this net expense ratio was 0.61% for Class A and 0.11% for Class W. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.61% for Class A and 0.61% for Class W for the year ended December 31, 2020.
3For periods through March 1, 2019 (the inception date of the Class W shares), performance for the Class W shares is based on the historical performance of the Class A shares. Because the Class W shares invest in the same portfolio of securities as the Class A shares, performance will be different only to the extent that the Class A shares have a higher expense ratio.
4The Intercontinental Exchange (ICE) Bank of America (BofA) 1-12 Year Municipal Bond Index is a subset of the ICE BofA U.S. Municipal Securities Index. The Index includes all U.S. dollar denominated investment grade tax-exempt debt with a remaining term to final maturity greater than one year, but less than twelve years. Qualifying securities must have at least 18 months to final maturity at the time of issuance and a fixed coupon schedule. The Index returns do not reflect any fees or expenses. Index returns provided by Interactive Data. Index data referenced herein is the property of ICE Data Indices, LLC, its affiliates (ICE Data) and/or its Third Party Suppliers and has been licensed for use by Manning & Napier. ICE Data and its Third Party Suppliers accept no liability in connection with its use.
3
Diversified Tax Exempt Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested in each class at the beginning of the period and held for the entire period (July 1, 2020 to December 31, 2020).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the Actual line for the Class in which you have invested under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The Hypothetical lines of each class in the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING | ENDING | EXPENSES PAID | ANNUALIZED | |
ACCOUNT VALUE | ACCOUNT VALUE | DURING PERIOD* | EXPENSE | |
7/1/20 | 12/31/20 | 7/1/20 - 12/31/20 | RATIO | |
Class A | ||||
Actual | $1,000.00 | $1,017.80 | $3.09 | 0.61% |
Hypothetical | ||||
(5% return before expenses) | $1,000.00 | $1,022.07 | $3.10 | 0.61% |
Class W | ||||
Actual | $1,000.00 | $1,020.60 | $0.56 | 0.11% |
Hypothetical | ||||
(5% return before expenses) | $1,000.00 | $1,024.58 | $0.56 | 0.11% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data. The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
4
Diversified Tax Exempt Series
Portfolio Composition as of December 31, 2020
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
Top Ten States2 | ||||
New York | 18.9% | District of Columbia | 5.3% | |
Florida | 7.2% | Washington | 4.5% | |
Maryland | 6.6% | North Carolina | 4.4% | |
Ohio | 6.3% | Pennsylvania | 4.2% | |
Texas | 6.2% | Illinois | 3.0% | |
2As a percentage of total investments. |
5
Diversified Tax Exempt Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS - 96.3% | ||||||||
ALABAMA - 1.2% | ||||||||
Birmingham Water Works Board, Water Utility Impt., Prerefunded Balance, Series B, Revenue Bond, 5.000%, 1/1/2031 | 1,715,000 | $ | 2,039,632 | |||||
Cullman Utilities Board Water Division, Revenue Bond, AGM, 4.000%, 9/1/2025 | 1,000,000 | 1,155,270 | ||||||
3,194,902 | ||||||||
ALASKA - 0.2% | ||||||||
Alaska Municipal Bond Bank Authority, Series 2, Revenue Bond, 5.000%, 9/1/2022 | 500,000 | 525,590 | ||||||
ARIZONA - 2.5% | ||||||||
Gilbert, Public Impt., G.O. Bond, 5.000%, 7/1/2021 | 800,000 | 819,032 | ||||||
Maricopa County Unified School District No. 89-Dysart, G.O. Bond, 5.000%, 7/1/2026 | 1,000,000 | 1,156,010 | ||||||
Mesa | ||||||||
Multiple Utility Impt., Revenue Bond, 5.000%, 7/1/2023 | 1,050,000 | 1,173,144 | ||||||
Multiple Utility Impt., Revenue Bond, 5.000%, 7/1/2024 | 1,200,000 | 1,395,372 | ||||||
Pima County Sewer System, Unrefunded Balance, Series B, Revenue Bond, 5.000%, 7/1/2022 | 530,000 | 542,582 | ||||||
Scottsdale, Water & Sewer, Revenue Bond, 5.250%, 7/1/2022 | 1,130,000 | 1,215,677 | ||||||
6,301,817 | ||||||||
ARKANSAS - 0.6% | ||||||||
Arkansas State, Highway Impt., G.O. Bond, 5.000%, 6/15/2021 | 525,000 | 536,356 | ||||||
Beaver Water of Benton & Washington Counties, Revenue Bond, 4.000%, 11/15/2021 | 1,000,000 | 1,002,770 | ||||||
1,539,126 | ||||||||
COLORADO - 2.1% | ||||||||
Aurora Water, Green Bond, Revenue Bond, 4.000%, 8/1/2046 | 2,000,000 | 2,238,620 | ||||||
Boulder County, Series A, Revenue Bond, 5.000%, 7/15/2026 | 1,000,000 | 1,255,710 | ||||||
E-470 Public Highway Authority, Senior Lien, Series A, Revenue Bond, 5.000%, 9/1/2026 | 1,000,000 | 1,246,680 | ||||||
Garfield Pitkin & Eagle Counties School District No. 1 Roaring Fork, Prerefunded Balance, G.O. Bond, 5.000%, 12/15/2024 | 500,000 | 522,925 | ||||||
5,263,935 | ||||||||
DISTRICT OF COLUMBIA - 5.2% | ||||||||
District of Columbia | ||||||||
Public Impt., Series A, G.O. Bond, 5.000%, 6/1/2022 | 1,385,000 | 1,479,277 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
DISTRICT OF COLUMBIA (continued) | ||||||||
District of Columbia (continued) | ||||||||
Public Impt., Series A, G.O. Bond, 4.000%, 10/15/2044 | 2,750,000 | $ | 3,261,802 | |||||
Public Impt., Series D, G.O. Bond, 5.000%, 6/1/2022 | 1,250,000 | 1,335,088 | ||||||
Public Impt., Series D, G.O. Bond, 5.000%, 6/1/2026 | 750,000 | 938,662 | ||||||
Public Impt., Series D, G.O. Bond, 5.000%, 6/1/2035 | 1,000,000 | 1,256,430 | ||||||
Series A, Revenue Bond, 5.000%, 12/1/2021 | 515,000 | 537,691 | ||||||
District of Columbia Water & Sewer Authority | ||||||||
Series B, Revenue Bond, 5.000%, 10/1/2036 | 900,000 | 1,073,412 | ||||||
Series C, Revenue Bond, 5.000%, 10/1/2022 | 1,000,000 | 1,084,190 | ||||||
Sewer Impt., Series A, Revenue Bond, 4.000%, 10/1/2049 | 2,000,000 | 2,350,640 | ||||||
13,317,192 | ||||||||
FLORIDA - 7.1% | ||||||||
Central Florida Expressway Authority | ||||||||
Senior Lien, Revenue Bond, 5.000%, 7/1/2024 | 500,000 | 579,135 | ||||||
Senior Lien, Revenue Bond, 5.000%, 7/1/2027 | 500,000 | 636,345 | ||||||
Senior Lien, Revenue Bond, 5.000%, 7/1/2038 | 530,000 | 651,964 | ||||||
Florida State | ||||||||
Public Impt., Series B, G.O. Bond, 4.000%, 7/1/2048 | 2,000,000 | 2,336,400 | ||||||
Series B, G.O. Bond, 5.000%, 6/1/2024 | 930,000 | 1,081,283 | ||||||
Fort Lauderdale, Water & Sewer, Revenue Bond, 4.000%, 3/1/2026 | 1,180,000 | 1,342,002 | ||||||
JEA Electric System, Series A, Revenue Bond, 5.000%, 10/1/2028 | 1,000,000 | 1,289,750 | ||||||
Lee County, Water & Sewer, Series B, Revenue Bond, 5.000%, 10/1/2021 | 750,000 | 776,963 | ||||||
Miami Beach, Water & Sewer, Revenue Bond, 5.000%, 9/1/2047 | 1,400,000 | 1,698,158 | ||||||
Miami-Dade County, Water & Sewer Revenue Bond, 5.000%, 10/1/2023 | 2,000,000 | 2,258,880 | ||||||
Sewer Impt., Series B, Revenue Bond, 4.000%, 10/1/2049 | 1,000,000 | 1,185,970 | ||||||
Orlando Utilities Commission, Series B, Revenue Bond, 5.000%, 10/1/2021 | 800,000 | 828,520 | ||||||
Port St. Lucie Utility System, Water Utility Impt., Revenue Bond, NATL, 5.250%, 9/1/2023 | 500,000 | 564,380 | ||||||
Tampa-Hillsborough County Expressway Authority | ||||||||
Highway Impt., Series A, Revenue Bond, BAM, 5.000%, 7/1/2028 | 1,000,000 | 1,301,260 |
The accompanying notes are an integral part of the financial statements.
6
Diversified Tax Exempt Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
FLORIDA (continued) | ||||||||
Tampa-Hillsborough County Expressway Authority (continued) | ||||||||
Highway Impt., Series A, Revenue Bond, BAM, 5.000%, 7/1/2035 | 1,250,000 | $ | 1,638,387 | |||||
18,169,397 | ||||||||
GEORGIA - 1.2% | ||||||||
Georgia State, Series C, G.O. Bond, 5.000%, 7/1/2028 | 2,295,000 | 2,961,904 | ||||||
HAWAII - 1.2% | ||||||||
Honolulu County | ||||||||
Transit Impt., G.O. Bond, 4.000%, 9/1/2042 | 600,000 | 723,024 | ||||||
Transit Impt., G.O. Bond, 4.000%, 9/1/2043 | 420,000 | 504,811 | ||||||
Honolulu County Wastewater System, Sewer Impt., Series A, Revenue Bond, 5.000%, 7/1/2023 | 1,750,000 | 1,955,240 | ||||||
3,183,075 | ||||||||
ILLINOIS - 3.0% | ||||||||
Aurora, Waterworks & Sewerage | ||||||||
Series B, Revenue Bond, 3.000%, 12/1/2022 | 500,000 | 525,140 | ||||||
Series B, Revenue Bond, 3.000%, 12/1/2023 | 625,000 | 666,675 | ||||||
Illinois Municipal Electric Agency | ||||||||
Series A, Revenue Bond, 5.000%, 2/1/2025 | 2,000,000 | 2,349,820 | ||||||
Series A, Revenue Bond, 5.000%, 2/1/2026 | 730,000 | 866,276 | ||||||
Illinois State Toll Highway Authority | ||||||||
Highway Impt., Series B, Revenue Bond, 5.000%, 1/1/2038 | 1,050,000 | 1,251,873 | ||||||
Series B, Revenue Bond, 5.000%, 1/1/2031 | 1,500,000 | 2,000,250 | ||||||
7,660,034 | ||||||||
IOWA - 1.1% | ||||||||
Cedar Falls, Electric Utility, Revenue Bond, 5.000%, 12/1/2023 | 2,000,000 | 2,274,340 | ||||||
Johnston, Public Impt., Series A, G.O. Bond, 5.000%, 6/1/2023 | 520,000 | 579,374 | ||||||
2,853,714 | ||||||||
KENTUCKY - 0.6% | ||||||||
Kentucky Municipal Power Agency, Series A, Revenue Bond, NATL, 5.000%, 9/1/2024 | 1,355,000 | 1,566,150 | ||||||
LOUISIANA - 0.6% | ||||||||
New Orleans | ||||||||
Sewer Impt., Revenue Bond, 5.000%, 6/1/2021 | 600,000 | 610,800 | ||||||
Sewer Impt., Series B, Revenue Bond, 5.000%, 6/1/2027 | 500,000 | 625,350 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
LOUISIANA (continued) | ||||||||
Shreveport, Water & Sewer, Series B, Revenue Bond, AGM, 3.000%, 12/1/2022 | 300,000 | $ | 314,556 | |||||
1,550,706 | ||||||||
MAINE - 0.7% | ||||||||
Maine Municipal Bond Bank, Various Purposes Impt., Series E, Revenue Bond, 4.000%, 11/1/2021 | 570,000 | 588,120 | ||||||
Maine Turnpike Authority | ||||||||
Highway Impt., Revenue Bond, 5.000%, 7/1/2033 | 550,000 | 731,698 | ||||||
Highway Impt., Revenue Bond, AGM, 5.250%, 7/1/2021 | 500,000 | 512,405 | ||||||
1,832,223 | ||||||||
MARYLAND - 6.5% | ||||||||
Baltimore | ||||||||
Sewer Impt., Series A, Revenue Bond, 4.000%, 7/1/2044 | 2,000,000 | 2,393,800 | ||||||
Sewer Impt., Series C, Revenue Bond, 5.000%, 7/1/2026 | 815,000 | 1,020,160 | ||||||
Water Utility Impt., Series C, Revenue Bond, 4.000%, 7/1/2036 | 765,000 | 917,977 | ||||||
Water Utility Impt., Series C, Revenue Bond, 4.000%, 7/1/2037 | 555,000 | 663,969 | ||||||
Baltimore County, G.O. Bond, 5.000%, 3/1/2023. | 665,000 | 734,366 | ||||||
Maryland | ||||||||
School Impt., First Series, G.O. Bond, 4.000%, 6/1/2027 | 2,000,000 | 2,252,300 | ||||||
School Impt., Series A, G.O. Bond, 5.000%, 3/15/2028 | 3,000,000 | 3,832,650 | ||||||
Montgomery County, Public Impt., Series A, G.O. Bond, 5.000%, 11/1/2032 | 2,365,000 | 3,106,238 | ||||||
Prince George's County, Public Impt., Series B, G.O. Bond, 5.000%, 7/15/2022 | 1,615,000 | 1,734,478 | ||||||
16,655,938 | ||||||||
MASSACHUSETTS - 2.7% | ||||||||
Massachusetts | ||||||||
Series B, G.O. Bond, 5.000%, 7/1/2024 | 410,000 | 478,154 | ||||||
Series C, G.O. Bond, 3.625%, 10/1/2040 | 3,000,000 | 3,000,000 | ||||||
Massachusetts Water Resources Authority, Series B, Revenue Bond, AGM, 5.250%, 8/1/2032 | 970,000 | 1,426,240 | ||||||
North Reading, School Impt., G.O. Bond, 5.000%, 5/15/2035 | 2,000,000 | 2,115,700 | ||||||
7,020,094 | ||||||||
MICHIGAN - 0.3% | ||||||||
Ann Arbor Sewage Disposal System, Revenue Bond, 2.000%, 7/1/2027 | 820,000 | 877,539 |
The accompanying notes are an integral part of the financial statements.
7
Diversified Tax Exempt Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
MINNESOTA - 0.9% | ||||||||
Minnesota State, Series D, G.O. Bond, 5.000%, 8/1/2024 | 2,000,000 | $ | 2,344,200 | |||||
MISSOURI - 1.9% | ||||||||
Kansas City, Sanitary Sewer System, Sewer Impt., Series A, Revenue Bond, 4.000%, 1/1/2025 | 750,000 | 857,378 | ||||||
Metropolitan St Louis Sewer District, Sewer Impt., Series C, Revenue Bond, 4.000%, 5/1/2041 | 2,000,000 | 2,260,520 | ||||||
Missouri Joint Municipal Electric Utility Commission, Prairie Street Project, Revenue Bond, 5.000%, 1/1/2027 | 1,410,000 | 1,767,872 | ||||||
4,885,770 | ||||||||
NEBRASKA - 0.3% | ||||||||
Omaha, Public Impt., Series A, G.O. Bond, 2.500%, 1/15/2023 | 760,000 | 796,146 | ||||||
NEVADA - 0.6% | ||||||||
Clark County, Stadium Impt., Series A, G.O. Bond, 5.000%, 6/1/2036 | 1,155,000 | 1,434,556 | ||||||
NEW MEXICO - 1.4% | ||||||||
Albuquerque Bernalillo County Water Utility Authority | ||||||||
Water Utility Impt., Revenue Bond, 5.000%, 7/1/2022 | 1,250,000 | 1,339,150 | ||||||
Water Utility Impt., Revenue Bond, 5.000%, 7/1/2023 | 2,000,000 | 2,237,220 | ||||||
3,576,370 | ||||||||
NEW YORK - 18.7% | ||||||||
Metropolitan Transportation Authority, Transit Impt., Green Bond, Series C-1, Revenue Bond, 4.750%, 11/15/2045 | 2,000,000 | 2,344,120 | ||||||
New York City | ||||||||
Public Impt., Subseries D1, G.O. Bond, 4.000%, 12/1/2042 | 1,255,000 | 1,454,118 | ||||||
Public Impt., Subseries F-3, G.O. Bond, 5.000%, 12/1/2024 | 825,000 | 972,295 | ||||||
Series 1, G.O. Bond, 5.000%, 8/1/2023 | 2,000,000 | 2,239,540 | ||||||
Series A, G.O. Bond, 5.000%, 8/1/2023 | 2,000,000 | 2,239,540 | ||||||
Series D, G.O. Bond, 5.000%, 8/1/2025 | 700,000 | 768,537 | ||||||
Series J, G.O. Bond, 5.000%, 8/1/2023. | 950,000 | 1,063,782 | ||||||
New York City Transitional Finance Authority, Building Aid, Series S-4A, Revenue Bond, 5.000%, 7/15/2023 | 645,000 | 722,523 | ||||||
New York City Transitional Finance Authority, Future Tax Secured | ||||||||
Public Impt., Subseries B1, Revenue Bond, 5.000%, 11/1/2026 | 1,000,000 | 1,153,690 | ||||||
Public Impt., Subseries C-2, Revenue Bond, 5.000%, 5/1/2037 | 2,740,000 | 3,441,659 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
NEW YORK (continued) | ||||||||
New York City Water & Sewer System | ||||||||
Series EE, Revenue Bond, 5.000%, 6/15/2040 | 3,500,000 | $ | 4,441,710 | |||||
Water Utility Impt., Series DD, Revenue Bond, 5.000%, 6/15/2047 | 3,000,000 | 3,713,400 | ||||||
New York State Dormitory Authority | ||||||||
Public Impt., Series C, Revenue Bond, 5.000%, 3/15/2023 | 2,000,000 | 2,209,100 | ||||||
School Impt., Series A, Revenue Bond, 4.000%, 3/15/2048 | 3,000,000 | 3,430,050 | ||||||
School Impt., Series E, Revenue Bond, AGM, 5.000%, 10/1/2025 | 860,000 | 967,784 | ||||||
School Impt., Unrefunded Balance, Series E, Revenue Bond, 5.000%, 3/15/2048 | 3,000,000 | 3,745,020 | ||||||
Series A, Revenue Bond, 5.000%, 2/15/2026 | 1,025,000 | 1,173,328 | ||||||
Series A, Revenue Bond, 5.000%, 2/15/2028 | 2,950,000 | 3,373,944 | ||||||
New York State Thruway Authority, Series B, Revenue Bond, 4.000%, 1/1/2038 | 2,390,000 | 2,852,250 | ||||||
New York State Urban Development Corp., Highway Impt., Series C, Revenue Bond, 5.000%, 3/15/2024 | 765,000 | 843,542 | ||||||
Port Authority of New York & New Jersey, Airport & Marina Impt., Consolidated Series 222, Revenue Bond, 5.000%, 7/15/2032 | 1,185,000 | 1,594,951 | ||||||
Triborough Bridge & Tunnel Authority, Series A, Revenue Bond, 5.000%, 11/15/2023 | 2,805,000 | 3,094,897 | ||||||
47,839,780 | ||||||||
NORTH CAROLINA - 4.4% | ||||||||
Charlotte | ||||||||
Series A, G.O. Bond, 5.000%, 8/1/2022 | 615,000 | 661,820 | ||||||
Series A, G.O. Bond, 4.000%, 6/1/2025 | 3,510,000 | 4,095,152 | ||||||
Charlotte, Water & Sewer System, Revenue Bond, 4.000%, 7/1/2047 | 2,000,000 | 2,367,020 | ||||||
Mecklenburg County, Series A, G.O. Bond, 5.000%, 12/1/2024 | 2,000,000 | 2,374,220 | ||||||
North Carolina Turnpike Authority, Highway Impt., Revenue Bond, 5.000%, 2/1/2024 | 1,500,000 | 1,700,070 | ||||||
11,198,282 | ||||||||
OHIO - 6.2% | ||||||||
American Municipal Power, Inc., Fremont Energy Center Project, Prerefunded Balance, Series B, Revenue Bond, 5.000%, 2/15/2023 | 1,895,000 | 1,994,810 |
The accompanying notes are an integral part of the financial statements.
8
Diversified Tax Exempt Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
OHIO (continued) | ||||||||
Brecksville-Broadview Heights City School District, School Impt., Prerefunded Balance, G.O. Bond, 5.000%, 12/1/2048 | 1,000,000 | $ | 1,139,300 | |||||
Cincinnati Water System | ||||||||
Series A, Revenue Bond, 4.000%, 12/1/2025 | 625,000 | 738,987 | ||||||
Series B, Revenue Bond, 5.000%, 12/1/2026 | 500,000 | 635,435 | ||||||
Series C, Revenue Bond, 5.000%, 12/1/2025 | 1,000,000 | 1,231,100 | ||||||
Columbus, Sewer Impt., Revenue Bond, 5.000%, 6/1/2026. | 520,000 | 614,843 | ||||||
Hamilton Wastewater System, Sewer Impt., Revenue Bond, BAM, 4.000%, 10/1/2041 | 1,235,000 | 1,442,319 | ||||||
Mason | ||||||||
Recreational Facility Impt., Series A, G.O. Bond, 3.000%, 12/1/2023 | 595,000 | 640,928 | ||||||
Recreational Facility Impt., Series B, G.O. Bond, 2.000%, 12/1/2023 | 680,000 | 711,838 | ||||||
Mentor, G.O. Bond, 5.000%, 12/1/2021.. | 810,000 | 844,927 | ||||||
Middletown City School District, School Impt., Prerefunded Balance, G.O. Bond, 5.250%, 12/1/2040 | 1,000,000 | 1,095,800 | ||||||
Northeast Ohio Regional Sewer District, Sewer Impt., Revenue Bond, 4.000%, 11/15/2043 | 1,565,000 | 1,830,737 | ||||||
Ohio State Turnpike Commission, Series A, Revenue Bond, 5.250%, 2/15/2027 | 600,000 | 772,002 | ||||||
Ohio Turnpike & Infrastructure Commission, Highway Impt., Series A, Revenue Bond, 5.000%, 2/15/2030 | 1,200,000 | 1,520,088 | ||||||
Toledo Water System, Water Utility Impt., Series A, Revenue Bond, 5.000%, 11/15/2022 | 610,000 | 635,449 | ||||||
15,848,563 | ||||||||
OKLAHOMA - 0.4% | ||||||||
Tulsa Metropolitan Utility Authority, Water Utility Impt., Series A, Revenue Bond, 3.000%, 4/1/2025 | 1,020,000 | 1,110,964 | ||||||
OREGON - 2.6% | ||||||||
Metro, Recreational Facility Impt., Series A, G.O. Bond, 5.000%, 6/1/2023 | 825,000 | 881,018 | ||||||
Oregon State, Public Impt., Series K, G.O. Bond, 5.000%, 8/1/2023 | 575,000 | 646,081 | ||||||
Portland Building Project, Series B, G.O. Bond, 5.000%, 6/15/2038 | 4,000,000 | 5,095,680 | ||||||
6,622,779 | ||||||||
PENNSYLVANIA - 4.1% | ||||||||
Allegheny County Sanitary Authority, Sewer Impt., Revenue Bond, AGM, 4.000%, 12/1/2035 | 1,200,000 | 1,378,644 | ||||||
Montgomery County, Series C, G.O. Bond, 5.000%, 9/1/2024 | 1,155,000 | 1,356,975 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
PENNSYLVANIA (continued) | ||||||||
Pennsylvania Turnpike Commission | ||||||||
Highway Impt., Series A, Revenue Bond, 5.000%, 12/1/2029 | 750,000 | $ | 988,178 | |||||
Highway Impt., Series A, Revenue Bond, 5.000%, 12/1/2030 | 850,000 | 1,106,249 | ||||||
Highway Impt., Series A-1, Revenue Bond, 5.000%, 12/1/2023 | 1,200,000 | 1,364,220 | ||||||
Series A-2, Revenue Bond, 5.000%, 6/1/2028 | 590,000 | 716,567 | ||||||
Philadelphia, Water & Wastewater, Water Utility Impt., Series A, Revenue Bond, 5.000%, 11/1/2040 | 2,450,000 | 3,236,670 | ||||||
Pittsburgh Water & Sewer Authority, Series B, Revenue Bond, AGM, 5.000%, 9/1/2032 | 300,000 | 404,751 | ||||||
10,552,254 | ||||||||
SOUTH CAROLINA - 1.2% | ||||||||
Greenwood Metropolitan District, Sewer Impt., Revenue Bond, 5.000%, 10/1/2026 | 500,000 | 629,015 | ||||||
Lexington County | ||||||||
Series A, G.O. Bond, 5.000%, 2/1/2025 | 700,000 | 836,157 | ||||||
Series A, G.O. Bond, 5.000%, 2/1/2026 | 1,325,000 | 1,641,463 | ||||||
3,106,635 | ||||||||
TENNESSEE - 2.1% | ||||||||
Knoxville Electric System Revenue | ||||||||
Electric Light & Power Impt., Series II, Revenue Bond, 3.000%, 7/1/2028 | 1,090,000 | 1,184,917 | ||||||
Series FF, Revenue Bond, 5.000%, 7/1/2023 | 800,000 | 856,888 | ||||||
Series FF, Revenue Bond, 5.000%, 7/1/2025 | 705,000 | 754,040 | ||||||
Memphis, Public Impt., G.O. Bond, 4.000%, 6/1/2044 | 1,095,000 | 1,249,110 | ||||||
Robertson County, G.O. Bond, 5.000%, 6/1/2025 | 1,000,000 | 1,200,800 | ||||||
5,245,755 | ||||||||
TEXAS - 6.2% | ||||||||
Austin Electric Utility, Series A, Revenue Bond, 5.000%, 11/15/2022 | 500,000 | 544,560 | ||||||
Central Texas Turnpike System, Series C, Revenue Bond, 5.000%, 8/15/2027. | 1,470,000 | 1,700,216 | ||||||
Dallas Independent School District, G.O. Bond, 5.000%, 8/15/2029 | 500,000 | 537,595 | ||||||
Harris County, Senior Lien, Toll Road Impt., Series B, Revenue Bond, 5.000%, 8/15/2023 | 600,000 | 675,948 | ||||||
Houston Combined Utility System, Water & Sewer, Series B, Revenue Bond, 4.000%, 11/15/2044 | 1,000,000 | 1,207,180 |
The accompanying notes are an integral part of the financial statements.
9
Diversified Tax Exempt Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
TEXAS (continued) | ||||||||
Mansfield Independent School District, Unrefunded Balance, Series B, G.O. Bond, 4.000%, 2/15/2028 | 505,000 | $ | 507,020 | |||||
North Texas Tollway Authority | ||||||||
Series A, Revenue Bond, 5.000%, 1/1/2026 | 500,000 | 565,865 | ||||||
Series A, Revenue Bond, 5.000%, 1/1/2027 | 2,000,000 | 2,436,340 | ||||||
Series B, Revenue Bond, 5.000%, 1/1/2029 | 925,000 | 1,214,109 | ||||||
San Antonio Electric & Gas | ||||||||
Junior Lien, Revenue Bond, 4.000%, 2/1/2038 | 1,000,000 | 1,236,460 | ||||||
Revenue Bond, 5.000%, 2/1/2025 | 1,000,000 | 1,075,540 | ||||||
San Antonio Water System | ||||||||
Junior Lien, Series A, Revenue Bond, 5.000%, 5/15/2026 | 500,000 | 623,085 | ||||||
Junior Lien, Series A, Revenue Bond, 4.000%, 5/15/2040 | 2,000,000 | 2,456,840 | ||||||
Junior Lien, Series C, Revenue Bond, 5.000%, 5/15/2027 | 800,000 | 1,010,032 | ||||||
15,790,790 | ||||||||
UTAH - 0.2% | ||||||||
Central Utah Water Conservancy District, Series B, Revenue Bond, 5.000%, 10/1/2025 | 500,000 | 611,460 | ||||||
VIRGINIA - 1.0% | ||||||||
Norfolk Water & Sewer System, Revenue Bond, 5.000%, 11/1/2029 | 2,000,000 | 2,586,360 | ||||||
WASHINGTON - 4.5% | ||||||||
King County, Series E, G.O. Bond, 5.000%, 6/1/2022 | 2,000,000 | 2,136,140 | ||||||
King County, Water & Sewer | ||||||||
Revenue Bond, 4.000%, 7/1/2045 | 2,000,000 | 2,195,580 | ||||||
Series B, Revenue Bond, 5.000%, 7/1/2027 | 1,000,000 | 1,159,020 | ||||||
Seattle, Drainage & Wastewater, Sewer Impt., Revenue Bond, 4.000%, 4/1/2034 | 2,435,000 | 2,806,825 | ||||||
Washington State, School Impt., Series A, G.O. Bond, 5.000%, 8/1/2029. | 2,500,000 | 3,200,250 | ||||||
11,497,815 | ||||||||
WISCONSIN - 2.8% | ||||||||
Kenosha, G.O. Bond, 2.500%, 9/1/2024 | 1,000,000 | 1,067,220 | ||||||
Madison Water Utility, Series A, Revenue Bond, 5.000%, 1/1/2027. | 1,045,000 | 1,327,808 | ||||||
Wisconsin State | ||||||||
Series 3, G.O. Bond, 5.000%, 11/1/2025 | 2,900,000 | 3,155,693 | ||||||
Series 4, G.O. Bond, 5.000%, 5/1/2026 | 685,000 | 807,307 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
MUNICIPAL BONDS (continued) | ||||||||
WISCONSIN (continued) | ||||||||
Wisconsin State Environmental Improvement Fund, Sewer Impt., Series A, Revenue Bond, 5.000%, 6/1/2022 | 750,000 | $ | 801,165 | |||||
7,159,193 | ||||||||
TOTAL MUNICIPAL BONDS | ||||||||
(Identified Cost $235,035,135) | 246,681,008 | |||||||
U.S. GOVERNMENT AGENCIES - 0.4% | ||||||||
Other Agencies - 0.4% | ||||||||
Freddie Mac Multifamily ML Certificates, Series 2019-ML05, Class AUS, 3.40%, 1/25/2036 | 485,115 | 573,391 | ||||||
Freddie Mac Multifamily ML Certificates, Series 2019-ML05, Class ACA, 3.35%, 11/25/2033 | 491,458 | 571,064 | ||||||
TOTAL U.S. GOVERNMENT AGENCIES | ||||||||
(Identified Cost $991,679) | 1,144,455 | |||||||
SHORT-TERM INVESTMENT - 2.1% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 0.03%2 | ||||||||
(Identified Cost $5,381,840) | 5,381,840 | 5,381,840 | ||||||
TOTAL INVESTMENTS - 98.8% | ||||||||
(Identified Cost $241,408,654) | 253,207,303 | |||||||
OTHER ASSETS, LESS LIABILITIES - 1.2% | 3,057,224 | |||||||
NET ASSETS - 100.0% | $ | 256,264,527 |
The accompanying notes are an integral part of the financial statements.
10
Diversified Tax Exempt Series
Investment Portfolio - December 31, 2020
KEY:
G.O. Bond - General Obligation Bond
Impt. - Improvement
No. - Number
Scheduled principal and interest payments are guaranteed by:
AGM (Assurance Guaranty Municipal Corp.)
BAM (Build America Mutual Assurance Co.)
NATL (National Public Finance Guarantee Corp.)
The insurance does not guarantee the market value of the municipal bonds.
1Amount is stated in USD unless otherwise noted.
2Rate shown is the current yield as of December 31, 2020.
The accompanying notes are an integral part of the financial statements.
11
Diversified Tax Exempt Series
Statement of Assets and Liabilities
December 31, 2020
ASSETS: | ||||
Investments, at value (identified cost $241,408,654) (Note 2) | $ | 253,207,303 | ||
Interest receivable | 2,768,079 | |||
Receivable for fund shares sold | 332,795 | |||
Dividends receivable | 69 | |||
Prepaid and other expenses | 10,119 | |||
TOTAL ASSETS | 256,318,365 | |||
LIABILITIES: | ||||
Accrued fund accounting and administration fees (Note 3) | 22,398 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 1,503 | |||
Accrued management fees (Note 3) | 985 | |||
Audit fees payable | 10,766 | |||
Accrued printing and postage fees payable | 7,088 | |||
ICI membership dues payable | 5,366 | |||
Other payables and accrued expenses | 5,732 | |||
TOTAL LIABILITIES | 53,838 | |||
TOTAL NET ASSETS | $ | 256,264,527 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 221,121 | ||
Additional paid-in-capital | 243,025,537 | |||
Total distributable earnings (loss) | 13,017,869 | |||
TOTAL NET ASSETS | $ | 256,264,527 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A ($2,323,570/200,638 shares) | $ | 11.58 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W ($253,940,957/21,911,460 shares) | $ | 11.59 | ||
The accompanying notes are an integral part of the financial statements.
12
Diversified Tax Exempt Series
Statement of Operations
For the Year Ended December 31, 2020
INVESTMENT INCOME:
Interest | $ | 4,564,077 | ||
Dividends | 25,505 | |||
Total Investment Income | 4,589,582 | |||
EXPENSES: | ||||
Management fees (Note 3) | 1,202,949 | |||
Fund accounting and administration fees (Note 3) | 83,704 | |||
Directors’ fees (Note 3) | 30,210 | |||
Chief Compliance Officer service fees (Note 3) | 3,784 | |||
Custodian fees | 12,032 | |||
Miscellaneous | 131,748 | |||
Total Expenses | 1,464,427 | |||
Less reduction of expenses (Note 3) | (1,186,244 | ) | ||
Net Expenses | 278,183 | |||
NET INVESTMENT INCOME | 4,311,399 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | 2,133,194 | |||
Net change in unrealized appreciation (depreciation) on investments | 6,077,786 | |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 8,210,980 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 12,522,379 |
The accompanying notes are an integral part of the financial statements.
13
Diversified Tax Exempt Series
Statements of Changes in Net Assets
FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 4,311,399 | $ | 4,966,558 | ||||
Net realized gain (loss) on investments | 2,133,194 | 2,988,246 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 6,077,786 | 6,471,799 | ||||||
Net increase (decrease) from operations | 12,522,379 | 14,426,603 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||||||
Class A | (46,521 | ) | (258,792 | ) | ||||
Class W | (5,434,869 | ) | (6,689,944 | ) | ||||
Total distributions to shareholders | (5,481,390 | ) | (6,948,736 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | 55,493,327 | (111,561,252 | ) | |||||
Net increase (decrease) in net assets | 62,534,316 | (104,083,385 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 193,730,211 | 297,813,596 | ||||||
End of year | $ | 256,264,527 | $ | 93,730,211 |
The accompanying notes are an integral part of the financial statements.
14
Diversified Tax Exempt Series
Financial Highlights - Class A
FOR THE YEAR ENDED | ||||||||||||||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | ||||||||||||||||
Per share data (for a share outstanding throughout each year): | ||||||||||||||||||||
Net asset value - Beginning of year | $11.14 | $10.90 | $10.98 | $10.86 | $11.07 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.15 | 0.17 | 0.15 | 0.13 | 0.11 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.48 | 0.39 | (0.08 | ) | 0.13 | (0.20 | ) | |||||||||||||
Total from investment operations | 0.63 | 0.56 | 0.07 | 0.26 | (0.09 | ) | ||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.10 | ) | (0.20 | ) | (0.15 | ) | (0.14 | ) | (0.12 | ) | ||||||||||
From net realized gain on investments | (0.09 | ) | (0.12 | ) | — | — | — | |||||||||||||
Total distributions to shareholders | ||||||||||||||||||||
(0.19 | ) | (0.32 | ) | (0.15 | ) | (0.14 | ) | (0.12 | ) | |||||||||||
Net asset value - End of year | $11.58 | $11.14 | $10.90 | $10.98 | $10.86 | |||||||||||||||
Net assets - End of year (000’s omitted) | $2,324 | $4,394 | $297,814 | $278,329 | $316,386 | |||||||||||||||
Total return2 | 5.73% | 5.10% | 0.65% | 2.37% | (0.83% | ) | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Expenses | 0.61% | 0.58% | 0.59% | 0.58% | 0.57% | |||||||||||||||
Net investment income | 1.35% | 1.62% | 1.42% | 1.22% | 1.01% | |||||||||||||||
Series portfolio turnover | 41% | 29% | 12% | 4% | 16% |
1Calculated based on average shares outstanding during the years.
2Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions.
The accompanying notes are an integral part of the financial statements.
15
Diversified Tax Exempt Series
Financial Highlights - Class W
FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/191 TO 12/31/19 | |||||||
Per share data (for a share outstanding throughout each period): | ||||||||
Net asset value - Beginning of period | $11.15 | $11.01 | ||||||
Income from investment operations: | ||||||||
Net investment income2 | 0.21 | 0.20 | ||||||
Net realized and unrealized gain (loss) on investments | 0.48 | 0.31 | ||||||
Total from investment operations | 0.69 | 0.51 | ||||||
Less distributions to shareholders: | ||||||||
From net investment income | (0.16 | ) | (0.25 | ) | ||||
From net realized gain on investments | (0.09 | ) | (0.12 | ) | ||||
Total distributions to shareholders | (0.25 | ) | (0.37 | ) | ||||
Net asset value - End of period | $11.59 | $11.15 | ||||||
Net assets - End of period (000’s omitted) | $253,941 | $189,336 | ||||||
Total return3 | 6.23% | 4.61% | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses* | 0.11% | 0.11% | 4 | |||||
Net investment income | 1.79% | 2.14% | 4 | |||||
Series portfolio turnover | 41% | 29% | ||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||
0.50 | % | 0.50 | %4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
16
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 Series is authorized to issue two classes of shares (Class A and Class W). While each class of shares is substantially the same, each class has its own investment eligibility criteria and cost structure.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of December 31, 2020, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Diversified Tax Exempt Series Class A common stock and 50 million have been designated as Diversified Tax Exempt Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Board. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input
17
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of December 31, 2020 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Debt securities: | ||||||||||||||||
Municipal Bonds | $ | 246,681,008 | $ | — | $ | 246,681,008 | $ | — | ||||||||
U.S. Treasury and other U.S. | ||||||||||||||||
Government agencies | 1,144,455 | — | 1,144,455 | — | ||||||||||||
Short-Term Investment | 5,381,840 | 5,381,840 | — | — | ||||||||||||
Total assets | $ | 253,207,303 | $ | 5,381,840 | $ | 247,825,463 | $ | — |
There were no Level 3 securities held by the Series as of December 31, 2019 or December 31, 2020.
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, 2020, 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, 2017 through December 31, 2020. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
18
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Distributions of Income and Gains
Distributions to shareholders of net investment income are made quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.50% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets (excluding Target Series); 0.0075% on the next $15 billion of average daily net assets (excluding Target Series); and 0.0065% of average daily net assets in excess of $40 billion (excluding Target Series); plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.85% of the average daily net assets of the Class A shares and 0.35% of the average daily net assets of the Class W shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the
19
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $1,186,244 in management fees for Class W shares for the year ended December 31, 2020. This amount is included as a reduction of expenses on the Statement of Operations. In addition, pursuant to the separate expense limitation agreement, the Advisor did not waive or reimburse expenses for Class A and Class W for the year ended December 31, 2020. For the year ended December 31, 2020, there were no previously waived or reimbursed expenses eligible to be recouped, therefore the Advisor did not recoup any expenses.
4. | Purchases and Sales of Securities |
For the year ended December 31, 2020, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $142,911,607 and $86,120,087, respectively. Purchases and sales of U.S. Government securities, other than short-term securities, were $6,005,376 and $8,012,303, respectively.
5. | Capital Stock Transactions |
Transactions in shares of Class A and Class W of Diversified Tax Exempt Series were:
CLASS A | FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 82,203 | $ | 893,427 | 604,801 | $ | 6,700,600 | ||||||||||
Reinvested | 3,999 | 45,891 | 22,708 | 251,634 | ||||||||||||
Repurchased | (279,889 | ) | (3,192,964 | ) | (27,558,330 | ) | (303,551,588 | ) | ||||||||
Total | (193,687 | ) | $ | (2,253,646 | ) | (26,930,821 | ) | $ | (296,599,354 | ) |
CLASS W | FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/19 (COMMENCEMENT OF OPERATIONS) TO 12/31/19 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 10,351,481 | $ | 118,837,178 | 27,664,974 | $ | 304,969,924 | ||||||||||
Reinvested | 424,534 | 4,884,034 | 541,092 | 6,036,584 | ||||||||||||
Repurchased | (5,850,618 | ) | (65,974,239 | ) | (11,220,003 | ) | (125,968,406 | ) | ||||||||
Total | 4,925,397 | $ | 57,746,973 | 16,986,063 | $ | 185,038,102 |
Over 90% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund (with the exception of Credit Series) may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses
20
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
6. | Line of Credit (continued) |
in the Statement of Operations for each series. The line of credit expires in August 2021 unless extended or renewed. During the year ended December 31, 2020, the Series did not borrow under the line of credit.
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of December 31, 2020.
8. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing book and tax treatments in the timing and/or treatment of the recognition of net investment income or gains and losses, including market discount on investments. 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, 2020, amounts were reclassified within the capital accounts to decrease Additional Paid in Capital by $10,172 and increase Total Distributable Earnings (Loss) by $10,172. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
FOR THE YEAR | FOR THE YEAR | |||||||
ENDED 12/31/20 | ENDED 12/31/19 | |||||||
Ordinary income | $ | 1,270,851 | $ | 941,373 | ||||
Tax exempt income | $ | 3,455,906 | $ | 4,853,907 | ||||
Long-term capital gains | $ | 754,633 | $ | 1,153,456 |
At December 31, 2020, 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 | $ | 241,393,604 | ||
Unrealized appreciation | 11,833,076 | |||
Unrealized depreciation | (19,377 | ) | ||
Net unrealized appreciation | $ | 11,813,699 | ||
Undistributed tax exempt income | $ | 1,049,775 | ||
Undistributed ordinary income | $ | 23,537 | ||
Undistributed long-term capital gains | $ | 130,856 |
9. | Market Event |
In March 2020, the World Health Organization declared COVID-19 (a novel coronavirus) to be a pandemic. The situation is dynamic. Global financial markets have experienced and may continue to experience significant volatility resulting from the spread of COVID-19. The outbreak of COVID-19 has resulted in travel and border restrictions, quarantines, supply chain disruptions,
21
Diversified Tax Exempt Series
Notes to Financial Statements (continued)
9. | Market Event (continued) |
lower consumer demand and general market uncertainty. The global economy, the economies of certain nations and individual issuers have been and may continue to be adversely affected by COVID-19, particularly in light of the interconnectivity between economies and financial markets, all of which may negatively impact the Series’ performance. In addition, COVID-19 and governmental responses to COVID-19 may negatively impact the capabilities of the Series’ service providers and disrupt the Series’ operations. Management of the Series will continue to monitor the impact of COVID-19.
22
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
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of Diversified Tax Exempt Series (one of the series constituting Manning & Napier Fund, Inc., referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, 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 ended December 31, 2020 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
New York, New York
February 17, 2021
We have served as the auditor of one or more investment companies in Manning & Napier Mutual Funds since 1992.
23
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 $3,455,906 as tax exempt dividends for the year ended December 31, 2020. It is the intention of the Series to designate the maximum allowable under tax law.
The Series designates $929,763 as Long-Term Capital Gain dividends pursuant to Section 852(b)(3) of the Internal Revenue Code for the fiscal year ended December 31, 2020.
24
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.manning-napier.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 directors and officers, 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 and Officer
Name: | Paul Battaglia* |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 42 |
Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1 & Length of Time Served: | Indefinite – Chairman and Director since November 2018 |
Principal Occupation(s) During Past 5 Years: | Chief Financial Officer since 2018; Vice President of Finance (2016 – 2018); Director of Finance (2011 – 2016); Financial Analyst/Internal Auditor (2004- 2006) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various subsidiaries and affiliates: Chief Financial Officer |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | N/A |
Independent Directors
Name: | Stephen B. Ashley |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 80 |
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 and Director since 1997; Chief Executive Officer (1997-2019) - Ashley Companies (property management and investment) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Ashley Companies since 1997 |
Name: | Paul A. Brooke |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 75 |
Current Position(s) Held with Fund: | Lead Independent Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since 2007; Governance & Nominating Committee Chairman since 2016; Lead Independent Director since 2017 |
Principal Occupation(s) During Past 5 Years: | Managing Member since 1991 - PMSV Holdings LLC (investments); Managing Member (2010-2016) - Venbio (investments).. |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Incyte Corp. (biotech) (2000-2020); PureEarth (non-profit) since 2012; Cerus (biomedical) since 2016; Caelum BioSciences (biomedical) since 2018; Cheyne Capital International (investment)(2000-2017); |
25
Diversified Tax Exempt Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Peter L. Faber2 |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 82 |
Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Since 1987 |
Principal Occupation(s) During Past 5 Years: | Partner (1995-2006 & 2013-2018); Senior Counsel (2006-2012) - McDermott, Will & Emery LLP (law firm) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Boston Early Music Festival (non-profit) since 2007; Amherst Early Music, Inc. (non-profit) since 2009; Gotham Early Music Scene, Inc. (non-profit) since 2009; S’Cool Sounds, Inc. (non-profit) since 2017 |
Name: | Harris H. Rusitzky2 |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 85 |
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 since 1994 - The Greening Group (business consultants); Partner since 2006 - The Restaurant Group (restaurants) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (university) since 1972; Culinary Institute of America (non-profit college) since 1985; George Eastman Museum (museum) since 1988; National Restaurant Association (restaurant trade organization) (1978-2020) |
Name: | Russell O. Vernon |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 63 |
Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since April 2020; Governance & Nominating Committee Chairman since November 2020 |
Principal Occupation(s) During Past 5 Years: | Founder and General Partner (2009-2019) – BVM Capital Management (economic development) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Board Member, Vice Chairman and President since 2010 – Newburgh Armory Unity Center (military); Board Member and Executive Director since 2020 – National Purple Heart Honor Mission, Inc. (military); Board Member, Vice Chairman (2015-2020) – National Purple Heart Hall of Honor, Inc. (military) |
26
Diversified Tax Exempt Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Chester N. Watson |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 70 |
Current Position(s) Held with Fund: | Director, Audit Committee Chairman, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member Since 2012; Audit Committee Chairman since 2013 |
Principal Occupation(s) During Past 5 Years: | General Auditor (2003-2011) - General Motors Company (auto manufacturer) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (University) since 2005; Hudson Valley Center for Innovation, Inc. (New Business and Economic Development) since 2019; Town of Greenburgh, NY Planning Board (Municipal Government) (2015-2019); |
Officers:
Name: | Elizabeth Craig |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 33 |
Current Position(s) Held with Fund: | Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2016 |
Principal Occupation(s) During Past 5 Years: | Fund Regulatory Administration Manager since 2018; Fund Administration Manager (2015-2018); Mutual Fund Compliance Specialist (2009-2015) - Manning & Napier Advisors, LLC; Assistant Corporate Secretary (2011-2016) - Manning & Napier Fund, Inc.; Corporate Secretary, Director since 2019– Manning & Napier Investor Services, Inc. |
Name: | Samantha Larew |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 40 |
Current Position(s) Held with Fund: | Chief Compliance Officer and Anti-Money Laundering Compliance Officer |
Term of Office1 & Length of Time Served: | Chief Compliance Officer since 2019; Anti-Money Laundering Compliance Officer since 2018 |
Principal Occupation(s) During Past 5 Years: | Co-Director of Compliance since 2018; Compliance Communications Supervisor (2014-2018); Compliance Supervisor (2013-2014); Broker-Dealer Compliance Supervisor (2011-2013); Broker-Dealer Compliance Analyst (2010-2011) - Manning & Napier Advisors, LLC & Affiliates; Broker-Dealer Chief Compliance Officer since 2013; Broker-Dealer Assistant Corporate Secretary since 2011 – Manning & Napier Investor Services, Inc.; Compliance Analyst (2007-2009) – Wall Street Financial Group; Compliance Specialist (2003-2007) – Manning & Napier Advisors, LLC & Affiliates |
Name: | Scott Morabito |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 33 |
Current Position(s) Held with Fund: | Vice President |
Term of Office1 & Length of Time Served: | Vice President since 2019; Assistant Vice President (2017-2019) |
Principal Occupation(s) During Past 5 Years: | Managing Director of Operations since 2019; Director of Funds Group (2017-2019); Fund Product and Strategy Manager (2014-2017); Senior Product and Strategy Analyst (2013-2014); Product and Strategy Analyst (2011-2013) - Manning & Napier Advisors, LLC; President, Director since 2018 – Manning & Napier Investor Services, Inc. |
27
Diversified Tax Exempt Series
Directors’ and Officers’ Information
(unaudited)
Officers: (continued)
Name: | Troy Statczar |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 49 |
Current Position(s) Held with Fund: | Principal Financial Officer, Treasurer |
Term of Office1 & Length of Time Served: | Principal Financial Officer and Treasurer since 2020 |
Principal Occupation(s) During Past 5 Years: | Senior Director, Foreside Treasurer Services since 2020 - Foreside Financial Group; Director of Fund Administration (2017-2019) - Thornburg Investment Management, Inc.; Director of U.S. Operations (2008-2017) - Henderson Global Investors N.A., Inc. |
Name: | Sarah Turner |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 38 |
Current Position(s) Held with Fund: | Chief Legal Officer; Assistant Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2018 |
Principal Occupation(s) During Past 5 Years: | Attorney since 2018 - Manning & Napier Advisors, LLC and affiliates; Counsel (2017-2018) – Harter Secrest and Emery LLP; Legal Counsel (2010-2017) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various affiliates: Corporate Secretary, General Counsel |
*Interested Director, within the meaning of the 1940 Act by reason of his positions with the Fund’s Advisor, Manning & Napier Advisors, LLC, and Distributor, Manning & Napier Investor Services, Inc.
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.
2 Effective December 31, 2020, Peter L. Faber and Harris Rusitzky have each retired as a Director of the Fund in accordance with the Board’s existing Board retirement policy.
28
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29
Diversified Tax Exempt Series
Literature Requests
(unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the Securities and Exchange Commission’s (SEC) web site | http://www.sec.gov |
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling (800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. | Fund Holdings - Month-End |
2. | Fund Holdings - Quarter-End |
3. | Shareholder Report - Annual |
4. | Shareholder Report - Semi-Annual |
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNDTE-12/20-AR
30
Manning & Napier Fund, Inc.
New York Tax Exempt Series
Paper copies of the Series’ shareholder reports are no longer sent by mail, unless you specifically request them from the Series or from your financial intermediary, such as a broker-dealer or bank. Shareholder reports are available online. Each time a report is posted on the Series’ website you will be provided with a link to access the report online, either by mail (hard copy notice) or by email, if you have already signed up for electronic delivery of shareholder reports.
You may elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies. If you invest directly with the Fund, you can inform the Fund that you wish to continue receiving paper copies by visiting www.manning-napier.com or calling 1-800-466-3863. Your election to receive reports in paper will apply to all funds held with your financial intermediary if you invest through a financial intermediary or all series of the Fund if you invest directly with the Fund.
Additionally, If you have not yet signed up for electronic delivery of shareholder reports and other Fund communications, you may do so by contacting your financial intermediary or, if you are a direct investor, by visiting www.manning-napier.com or calling 1-800-466-3863.
Independent Perspective | Real-World Solutions |
A Note from Our CEO
Dear Shareholder,
2020. What a momentous year.
Political change, social unrest, the pandemic, economic shutdowns, and, of course, the fastest stock market selloff and recovery in history, all describe what has been a remarkably tumultuous and challenging time.
Maybe it should come as no surprise that after a year of such change, we yearn for a return of convention, clarity, facts, and perhaps, less drama.
This desire for normalcy is understandable, but we cannot hide our heads in the sand. The profound challenges we face are not going to simply go away.
If anything, many of the structural issues that brought us to where we are today, technological progress, the information age, a shifting economy and culture, may very well accelerate from here. Whether we want it or not, change is coming.
As investors, logically and rationally deciphering an uncertain future is one of our most existential tasks. Particularly in times like these, it is too easy to get caught up in the turbulence—to let emotion get the best of us—to fail to see the forest for the trees.
This is why the key question we must ask ourselves today is, what is the best way for us to understand and invest upon the paths that lie before us?
We believe the answer is, in many ways, an evergreen one, and we hope it offers you a helpful perspective.
It is to invest for the long-term, not speculate on short-term developments. It is to take an active, hands-on approach to investment decisions. It is to be patient, disciplined, and confident when the right investment opportunities present themselves. And it is to be constantly attentive to risk, particularly the most significant risks, permanent loss of capital and the risk of falling short of long-term needs and goals.
These are the same investing principles that we have been successfully implementing for clients since our founding more than 50 years ago.
Whether you are an individual investor, a financial advisor, or an institutional investor making decisions on behalf of others, you can trust that we are well equipped to handle whatever challenges the markets have in store for us next.
We wish you safety and good health, and we appreciate your continued confidence in our firm and our approach.
Sincerely,
Marc Mayer Chief Executive Officer |
Corporate Headquarters | 290 Woodcliff Drive | Fairport, NY 14450 | (585) 325-6880 phone | (800) 551-0224 toll free | www.manning-napier.com
1
New York Tax Exempt Series
Fund Commentary
(unaudited)
Investment Objective
To provide as high a level of current income exempt from federal income tax and New York State personal income tax as the Advisor believes is consistent with the preservation of capital. The Series invests primarily in municipal bonds that provide income exempt from federal income tax and New York State personal income tax.
Performance Commentary
The municipal bond market posted positive returns for the twelve-month period ending December 31, 2020. Despite significant volatility at points during the year, specifically in the first quarter as the global pandemic upended markets and the ensuing rebound, yields ended the year lower and credit spreads tightened. The highest returning areas of the market included water/sewer and hospital bonds from a sector perspective, longer-dated issuances from a maturity perspective, and higher quality issuances when looking at it from a quality perspective.
The New York Tax-Exempt Series Class A shares delivered positive absolute and relative returns, returning 4.73% during the year versus 4.02% for the benchmark (i.e., the Intercontinental (ICE) Bank of America (BofA) 1-12 Year Municipal Bond Index).
Relative outperformance was primarily driven by longer duration positioning, as well an overweight to essential service revenue bonds (e.g., water/sewer and utilities). Alternatively, an underweight allocation to middle tier credits, specifically BBB-rated issuances, detracted from relative returns.
In terms of positioning, we continue to have a positive view of revenue bonds and, within general obligations (GOs), we have a relatively higher quality tilt as a result of our selectivity within the sector. While both yields and spreads have compressed, we are finding select opportunities in longer-dated issuances (i.e., those 12+ years) and middle-tier credits.
While 2020 was a strong year for municipal bonds, we believe investor return expectations for the coming year should be tempered as the fixed income landscape remains challenging due to low starting rates. That stated, we believe a flexible approach with the ability to adapt to changing environments (e.g., uncovering risks and opportunities) will remain essential to achieving investor objectives.
Performance for the New York Tax Exempt Series Class A shares is provided above. Performance for other shares classes will differ based on each class’ underlying expenses.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than that quoted; investors can obtain the most recent month-end performance at www.manning-napier.com or by calling (800) 466-3863.
Additional information and associated disclosures can be found on the Performance Update page of this report.
All investments involve risks, including possible loss of principal. There is an inverse relationship between bond prices and interest rates; as interest rates rise, bond prices (and therefore the value of bond funds) fall. Likewise, as interest rates fall, bond prices and the value of bond funds rise. The income earned by the Series may be subject to the Alternative Minimum Tax (AMT), depending on your tax situation.
2
New York Tax Exempt Series
Performance Update as of December 31, 2020
(unaudited)
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2020 | |||
ONE YEAR1 | FIVE YEAR | TEN YEAR | |
New York Tax Exempt Series - Class A2 | 4.73% | 2.30% | 2.40% |
New York Tax Exempt Series - Class W2,3 | 5.33% | 2.51% | 2.51% |
Intercontinental Exchange (ICE) Bank of America (BofA) 1-12 Year Municipal Bond Index4 | 4.02% | 2.88% | 3.17% |
The following graph compares the value of a $10,000 investment in the New York Tax Exempt Series - Class A for the ten years ended December 31, 2020 to the Intercontinental Exchange (ICE) Bank of America (BofA) 1-12 Year Municipal Bond Index.
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.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2020, this net expense ratio was 0.67% for Class A and 0.17% for Class W. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.67% for Class A and 0.67% for Class W for the year ended December 31, 2020.
3For periods through March 1, 2019 (the inception date of the Class W shares), performance for the Class W shares is based on the historical performance of the Class A shares. Because the Class W shares invest in the same portfolio of securities as the Class A shares, performance will be different only to the extent that the Class A shares have a higher expense ratio.
4The Intercontinental Exchange (ICE) Bank of America (BofA) 1-12 Year Municipal Bond Index is a subset of the ICE BofA U.S. Municipal Securities Index. The Index includes all U.S. dollar denominated investment grade tax-exempt debt with a remaining term to final maturity greater than one year, but less than twelve years. Qualifying securities must have at least 18 months to final maturity at the time of issuance and a fixed coupon schedule. The Index returns do not reflect any fees or expenses. Index returns provided by Interactive Data. Index data referenced herein is the property of ICE Data Indices, LLC, its affiliates (ICE Data) and/or its Third Party Suppliers and has been licensed for use by Manning & Napier. ICE Data and its Third Party Suppliers accept no liability in connection with its use.
3
New York Tax Exempt Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested in each class at the beginning of the period and held for the entire period (July 1, 2020 to December 31, 2020).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the Actual line for the Class in which you have invested under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The Hypothetical lines of each class in the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ACCOUNT VALUE 7/1/20 | ENDING ACCOUNT VALUE 12/31/20 | EXPENSES PAID DURING PERIOD* 7/1/20 - 12/31/20 | ANNUALIZED EXPENSE RATIO | |
Class A | ||||
Actual | $1,000.00 | $1,019.10 | $3.40 | 0.67% |
Hypothetical | ||||
(5% return before expenses) | $1,000.00 | $1,021.77 | $3.40 | 0.67% |
Class W | ||||
Actual | $1,000.00 | $1,022.00 | $0.86 | 0.17% |
Hypothetical | ||||
(5% return before expenses) | $1,000.00 | $1,024.28 | $0.87 | 0.17% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data. The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
4
New York Tax Exempt Series
Portfolio Composition as of December 31, 2020
(unaudited)
Sector Allocation1 |
1 As a percentage of net assets. |
5
New York Tax Exempt Series
Investment Portfolio - December 31, 2020
PRINCIPAL | VALUE | |||
AMOUNT1/ | ||||
SHARES | (NOTE 2) | |||
NEW YORK MUNICIPAL BONDS - 96.6% | ||||
Albany County, Nursing Homes, Various | ||||
Purposes Impt., Series A, G.O. Bond, | ||||
5.000%, 9/15/2026 | 375,000 | $ | 472,819 | |
Amherst Central School District, G.O. | ||||
Bond, 5.000%, 6/15/2026 | 200,000 | 250,612 | ||
Babylon, Various Purposes, Public | ||||
Impt., Series B, G.O. Bond, 2.250%, | ||||
12/1/2026 | 705,000 | 764,347 | ||
Bath Central School District, G.O. Bond, | ||||
4.000%, 6/15/2025 | 750,000 | 876,833 | ||
Beacon City School District, G.O. Bond, | ||||
2.000%, 6/15/2024 | 390,000 | 410,986 | ||
Briarcliff Manor, Public Impt., G.O. Bond, | ||||
5.000%, 2/1/2023 | 400,000 | 440,216 | ||
Brighton Central School District, G.O. | ||||
Bond, 2.125%, 6/15/2025 | 500,000 | 533,885 | ||
Brookhaven, Public Impt., Recreational | ||||
Facility Impt., G.O. Bond, 4.000%, | ||||
3/15/2025 | 400,000 | 449,416 | ||
Brookhaven-Comsewogue Union Free | ||||
School District | ||||
School Impt., G.O. Bond, 2.250%, | ||||
5/15/2024 | 500,000 | 526,660 | ||
School Impt., G.O. Bond, 2.250%, | ||||
5/15/2026 | 500,000 | 537,160 | ||
Buffalo, Public Impt., Recreational | ||||
Facility Impt., Series A, G.O. Bond, | ||||
5.000%, 4/1/2024 | 250,000 | 286,248 | ||
Buffalo Municipal Water Finance | ||||
Authority | ||||
Series A, Revenue Bond, 4.000%, | ||||
7/1/2022 | 300,000 | 316,248 | ||
Series A, Revenue Bond, 5.000%, | ||||
7/1/2023 | 300,000 | 334,074 | ||
Water Utility Impt., Series A, Revenue | ||||
Bond, AGM, 5.000%, 7/1/2039 | 250,000 | 300,705 | ||
Water Utility Impt., Series A, Revenue | ||||
Bond, AGM, 5.000%, 7/1/2043 | 600,000 | 718,866 | ||
Water Utility Impt., Series A, Revenue | ||||
Bond, AGM, 5.000%, 7/1/2048 | 250,000 | 298,650 | ||
Canandaigua, Public Impt., G.O. Bond, | ||||
3.000%, 12/15/2028 | 570,000 | 635,043 | ||
Canandaigua City School District, G.O. | ||||
Bond, 2.125%, 6/15/2026 | 540,000 | 576,331 | ||
Colonie | ||||
G.O. Bond, AGM, 2.000%, 3/1/2021 | 1,400,000 | 1,403,766 | ||
G.O. Bond, AGM, 2.000%, 3/1/2026 | 555,000 | 590,986 | ||
Depew Union Free School District, G.O. | ||||
Bond, 5.000%, 6/1/2021 | 820,000 | 836,113 | ||
Dutchess County, Highway Impt., G.O. | ||||
Bond, 2.000%, 3/15/2021 | 1,000,000 | 1,003,420 | ||
Erie County Fiscal Stability Authority, | ||||
Series D Revenue Bond, 5.000%, | ||||
9/1/2038 | 1,000,000 | 1,254,910 | ||
Gates Chili Central School District, | ||||
School Impt., G.O. Bond, 2.000%, | ||||
6/15/2026 | 500,000 | 531,650 |
PRINCIPAL | VALUE | |||
AMOUNT1/ | ||||
SHARES | (NOTE 2) | |||
NEW YORK MUNICIPAL BONDS (continued) | ||||
Greece Central School District, G.O. | ||||
Bond, BAM, 2.500%, 6/15/2023 | 620,000 | $ | 653,542 | |
Hempstead, Natural Gas Utility Impt., | ||||
Public Impt. Series A, G.O. Bond, | ||||
5.000%, 6/15/2026 | 400,000 | 496,336 | ||
Hicksville Water District | ||||
Water Utility Impt., Series A, G.O. | ||||
Bond, 2.000%, 3/1/2027 | 325,000 | 349,843 | ||
Water Utility Impt., Series A, G.O. | ||||
Bond, 2.000%, 3/1/2028 | 330,000 | 353,981 | ||
Irvington Union Free School District, | ||||
G.O. Bond, 5.000%, 4/1/2021 | 250,000 | 252,912 | ||
Kings Park Central School District, | ||||
School Impt., G.O. Bond, 2.000% | ||||
9/1/2024 | 415,000 | 441,307 | ||
Metropolitan Transportation Authority | ||||
Transit Impt., Green Bond, Series C-1, | ||||
Revenue Bond, 4.750%, 11/15/2045 | 2,000,000 | 2,344,120 | ||
Transit Impt., Prerefunded Balance, | ||||
Series A, Revenue Bond, 5.000% | ||||
11/15/2041 | 925,000 | 963,924 | ||
New York City | ||||
Public Impt., Subseries D1, G.O. | ||||
Bond, 4.000%, 12/1/2041 | 1,650,000 | 1,916,953 | ||
Series 1, G.O. Bond, 5.000%, | ||||
8/1/2023 | 2,700,000 | 3,023,379 | ||
Series C, G.O. Bond, 5.000%, | ||||
8/1/2031 | 1,500,000 | 1,907,265 | ||
New York City Transitional Finance | ||||
Authority, Building Aid | ||||
Public Impt., Series S-2, Revenue | ||||
Bond, 5.000%, 7/15/2023 | 2,000,000 | 2,240,380 | ||
Series S-1, Revenue Bond, 5.000%, | ||||
7/15/2023 | 820,000 | 918,556 | ||
Series S-2A, Revenue Bond, 5.000%, | ||||
7/15/2033 | 1,000,000 | 1,270,920 | ||
Subseries S-3, Revenue Bond, | ||||
5.000%, 7/15/2027 | 750,000 | 963,990 | ||
New York City Transitional Finance | ||||
Authority, Future Tax Secured | ||||
Public Impt., Series A-1, Revenue | ||||
Bond, 3.250%, 8/1/2035 | 1,000,000 | 1,076,950 | ||
Public Impt., Series C-1, Revenue | ||||
Bond, 4.000%, 11/1/2042 | 1,680,000 | 1,964,222 | ||
Public Impt., Series E-1, Revenue | ||||
Bond, 5.000%, 2/1/2026 | 475,000 | 562,077 | ||
Series B, Revenue Bond, 5.000%, | ||||
11/1/2024 | 3,000,000 | 3,260,460 | ||
New York City Water & Sewer System | ||||
Series A, Revenue Bond, 3.000%, | ||||
6/15/2036 | 1,250,000 | 1,344,125 | ||
Water Utility Impt., Series DD, | ||||
Revenue Bond, 5.000%, 6/15/2047 | 3,000,000 | 3,713,400 | ||
Water Utility Impt., Subseries BB-1, | ||||
Revenue Bond, 5.000%, 6/15/2046 | 2,000,000 | 2,472,520 |
The accompanying notes are an integral part of the financial statements.
6
New York Tax Exempt Series
Investment Portfolio - December 31, 2020
PRINCIPAL | VALUE | |||
AMOUNT1/ | ||||
SHARES | (NOTE 2) | |||
NEW YORK MUNICIPAL BONDS (continued) | ||||
New York State | ||||
Highway Impt., Series A, G.O. Bond, | ||||
5.000%, 3/15/2023 | 510,000 | $ | 564,264 | |
Water Utility Impt., Series A, G.O. | ||||
Bond, 5.000%, 3/1/2027 | 500,000 | 551,810 | ||
Water Utility Impt., Series E, G.O. | ||||
Bond, 4.250%, 12/15/2041 | 480,000 | 494,453 | ||
New York State Dormitory Authority | ||||
Income Tax Revenue, Prerefunded | ||||
Balance, Series A, Revenue Bond, | ||||
5.000%, 2/15/2043 | 3,630,000 | 4,001,748 | ||
Income Tax Revenue, Series E, | ||||
Revenue Bond, 3.500%, 3/15/2037 | 850,000 | 918,553 | ||
Public Impt., Series A, Revenue Bond, | ||||
5.000%, 3/15/2029 | 750,000 | 927,503 | ||
School Impt., Series A, Revenue | ||||
Bond, 5.000%, 3/15/2030 | 1,500,000 | 1,882,455 | ||
School Impt., Series A, Revenue | ||||
Bond, 4.000%, 10/1/2037 | 1,000,000 | 1,140,750 | ||
School Impt., Series A, Revenue | ||||
Bond, 4.000%, 10/1/2038 | 1,000,000 | 1,137,610 | ||
School Impt., Series A, Revenue | ||||
Bond, 5.000%, 3/15/2045 | 1,680,000 | 2,080,008 | ||
School Impt., Series A, Revenue | ||||
Bond, 4.000%, 3/15/2047 | 1,050,000 | 1,176,682 | ||
School Impt., Series A, Revenue | ||||
Bond, 4.000%, 3/15/2048 | 1,950,000 | 2,217,828 | ||
School Impt., Series E, Revenue | ||||
Bond, AGM, 5.000%, 10/1/2025 | 1,000,000 | 1,125,330 | ||
Unrefunded Balance, Series A, | ||||
Revenue Bond, 5.000%, 2/15/2030 | 1,500,000 | 1,876,905 | ||
New York State Environmental Facilities | ||||
Corp. | ||||
Water and Sewer, Series A, Revenue | ||||
Bond, 5.000%, 6/15/2025 | 300,000 | 335,820 | ||
Water and Sewer, Series D, Revenue | ||||
Bond, 5.000%, 3/15/2026 | 340,000 | 409,023 | ||
Water Utility Impt., Revenue Bond, | ||||
5.000%, 6/15/2025 | 1,000,000 | 1,021,720 | ||
Water Utility Impt., Series B, Revenue | ||||
Bond, 4.000%, 8/15/2046 | 2,000,000 | 2,276,820 | ||
Water Utility Impt., Series B, Revenue | ||||
Bond, 4.000%, 6/15/2049 | 1,000,000 | 1,187,560 | ||
New York State Thruway Authority, | ||||
Series B, Revenue Bond, 4.000%, | ||||
1/1/2038 | 1,000,000 | 1,193,410 | ||
New York State Urban Development | ||||
Corp. | ||||
Economic Impt., Correctional Facility | ||||
Impt., Series A, Revenue Bond, | ||||
4.000%, 3/15/2046 | 2,000,000 | 2,337,280 | ||
Highway Impt., Series A, Revenue | ||||
Bond, 5.000%, 3/15/2037 | 500,000 | 592,685 | ||
Public Impt., Series A-1, Revenue | ||||
Bond, 5.000%, 3/15/2026 | 3,000,000 | 3,301,050 |
PRINCIPAL | VALUE | |||
AMOUNT1/ | ||||
SHARES | (NOTE 2) | |||
NEW YORK MUNICIPAL BONDS (continued) | ||||
New York State Urban Development | ||||
Corp. (continued) | ||||
Series A, Revenue Bond, 5.000%, | ||||
3/15/2027 | 1,250,000 | $ | 1,536,537 | |
Niagara Falls Public Water Authority, | ||||
Series A, Revenue Bond, 5.000%, | ||||
7/15/2026 | 415,000 | 506,097 | ||
Niagara-Wheatfield Central School | ||||
District, G.O. Bond, 2.000%, | ||||
3/15/2026 | 640,000 | 679,968 | ||
Onondaga County | ||||
Public Impt., Correctional Facility | ||||
Impt., G.O. Bond, 3.000%, 6/1/2035 | 1,000,000 | 1,062,350 | ||
Public Impt., Telecommunications | ||||
Impt., G.O. Bond, 5.000%, | ||||
5/15/2023 | 1,000,000 | 1,112,100 | ||
Public Impt., Water Utility Impt., G.O. | ||||
Bond, 2.125%, 6/15/2030 | 715,000 | 740,161 | ||
Perinton | ||||
G.O. Bond, 3.000%, 12/15/2021 | 210,000 | 215,504 | ||
G.O. Bond, 4.000%, 12/15/2022 | 210,000 | 225,223 | ||
G.O. Bond, 4.000%, 12/15/2023 | 160,000 | 177,395 | ||
Pittsford, Public Impt., G.O. Bond, | ||||
2.000%, 11/1/2026 | 595,000 | 638,625 | ||
Port Authority of New York & New Jersey | ||||
Airport & Marina Impt., Consolidated | ||||
Series 175, Revenue Bond, 5.000%, | ||||
12/1/2021 | 435,000 | 454,001 | ||
Airport & Marina Impt., Consolidated | ||||
Series 189, Revenue Bond, 5.000%, | ||||
5/1/2024 | 800,000 | 921,224 | ||
Airport & Marina Impt., Series 179, | ||||
Revenue Bond, 5.000%, 12/1/2024 | 765,000 | 866,355 | ||
Consolidated Series 184, Revenue | ||||
Bond, 5.000%, 9/1/2025 | 2,500,000 | 2,914,250 | ||
Rochester, School Impt., Series A, G.O. | ||||
Bond, AMBAC, 5.000%, 8/15/2022 | 95,000 | 102,219 | ||
Rockland County, Series B, G.O. Bond, | ||||
AGM, 5.000%, 4/1/2028 | 840,000 | 1,097,578 | ||
Sachem Central School District, G.O. | ||||
Bond, 5.000%, 10/15/2023 | 250,000 | 283,482 | ||
Schenectady, School Impt., G.O. Bond, | ||||
2.000%, 12/15/2024 | 1,485,000 | 1,570,729 | ||
Smithtown | ||||
Public Impt., Recreational Facility | ||||
Impt., G.O. Bond, 2.000%, | ||||
2/15/2022 | 675,000 | 688,554 | ||
Public Impt., Recreational Facility | ||||
Impt., G.O. Bond, 2.000%, | ||||
2/15/2023 | 435,000 | 450,830 | ||
Public Impt., Recreational Facility | ||||
Impt., G.O. Bond, 2.000%, | ||||
2/15/2026 | 430,000 | 464,946 | ||
Public Impt., Recreational Facility | ||||
Impt., G.O. Bond, 2.000%, | ||||
2/15/2028 | 600,000 | 648,708 |
The accompanying notes are an integral part of the financial statements.
7
New York Tax Exempt Series
Investment Portfolio - December 31, 2020
PRINCIPAL | VALUE | |||
AMOUNT1/ | ||||
SHARES | (NOTE 2) | |||
NEW YORK MUNICIPAL BONDS (continued) | ||||
Southold Union Free School District, | ||||
School Impt., G.O. Bond, 3.000%, | ||||
6/15/2028 | 435,000 | $ | 479,379 | |
Suffolk County Water Authority | ||||
Prerefunded Balance, Revenue Bond, | ||||
4.000%, 6/1/2022 | 200,000 | 207,010 | ||
Sullivan County, Public Impt., G.O. Bond, | ||||
3.000%, 11/15/2023 | 500,000 | 535,355 | ||
Triborough Bridge & Tunnel Authority | ||||
Highway Impt., Series A, Revenue | ||||
Bond, 5.000%, 11/15/2023 | 350,000 | 397,071 | ||
Highway Impt., Series A, Revenue | ||||
Bond, 4.000%, 11/15/2044 | 500,000 | 582,290 | ||
Series A, Revenue Bond, 5.000%, | ||||
11/15/2024 | 650,000 | 766,948 | ||
Series B, Revenue Bond, 5.000%, | ||||
11/15/2024 | 1,000,000 | 1,087,280 | ||
Series B, Revenue Bond, 5.000%, | ||||
11/15/2029 | 360,000 | 454,079 | ||
Ulster County, Public Impt., G.O. Bond, | ||||
3.000%, 11/15/2027 | 425,000 | 484,802 | ||
Vestal Central School District, G.O. | ||||
Bond, 2.000%, 6/15/2025 | 685,000 | 735,800 |
PRINCIPAL | VALUE | ||||
AMOUNT1/ | |||||
SHARES | (NOTE 2) | ||||
NEW YORK MUNICIPAL BONDS (continued) | |||||
Victor Central School District, G.O. | |||||
Bond, 5.000%, 6/15/2021 | 275,000 | $ | 280,962 | ||
Warren County | |||||
G.O. Bond, 4.000%, 12/1/2033 | 500,000 | 628,710 | |||
G.O. Bond, 4.000%, 12/1/2034 | 350,000 | 439,624 | |||
Webster Central School District, School | |||||
Impt., G.O. Bond, 2.000%, 10/15/2021 | 315,000 | 319,602 | |||
TOTAL MUNICIPAL BONDS | |||||
104,348,121 | |||||
(Identified Cost $99,460,527) | |||||
U.S. GOVERNMENT AGENCIES - 0.5% | |||||
Other Agencies - 0.5% | |||||
Freddie Mac Multifamily ML Certificates, | |||||
Series 2019-ML05, Class AUS, 3.40%, | |||||
1/25/2036 | |||||
(Identified Cost $492,636) | 485,115 | 573,391 | |||
SHORT-TERM INVESTMENT - 1.7% | |||||
Dreyfus Government Cash | |||||
Management, Institutional Shares, | |||||
0.03%2 | |||||
(Identified Cost $1,854,877) | 1,854,877 | 1,854,877 | |||
TOTAL INVESTMENTS - 98.8% | |||||
106,776,389 | |||||
(Identified Cost $101,808,040) | |||||
OTHER ASSETS, LESS LIABILITIES - 1.2% | 1,261,279 | ||||
NET ASSETS - 100.0% | $ | 108,037,668 |
KEY:
G.O. Bond - General Obligation Bond
Impt. - Improvement
Scheduled principal and interest payments are guaranteed by:
AGM (Assurance Guaranty Municipal Corp.)
AMBAC (AMBAC Assurance Corp.)
BAM (Build America Mutual Assurance Co.)
The insurance does not guarantee the market value of the municipal bonds.
1Amount is stated in USD unless otherwise noted.
2Rate shown is the current yield as of December 31, 2020.
The accompanying notes are an integral part of the financial statements.
8
New York Tax Exempt Series
Statement of Assets and Liabilities
December 31, 2020
ASSETS: | ||||
Investments, at value(identified cost $101,808,040) (Note 2) | $ | 106,776,389 | ||
Interest receivable | 1,007,513 | |||
Receivable for fund shares sold | 293,525 | |||
Dividends receivable | 28 | |||
Prepaid and other expenses | 1,475 | |||
TOTAL ASSETS | 108,078,930 | |||
LIABILITIES: | ||||
Accrued fund accounting and administration fees (Note 3) | 16,708 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 1,503 | |||
Accrued management fees (Note 3) | 759 | |||
Audit fees payable | 10,766 | |||
Accrued printing and postage fees payable | 5,861 | |||
ICI membership dues payable | 2,599 | |||
Other payables and accrued expenses | 3,066 | |||
TOTAL LIABILITIES | 41,262 | |||
TOTAL NET ASSETS | $ | 108,037,668 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 99,708 | ||
Additional paid-in-capital | 102,476,972 | |||
Total distributable earnings (loss) | 5,460,988 | |||
TOTAL NET ASSETS | $ | 108,037,668 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class A ($1,797,154/165,981 shares) | $ | 10.83 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W ($106,240,514/9,804,855 shares) | $ | 10.84 |
The accompanying notes are an integral part of the financial statements.
9
New York Tax Exempt Series
Statement of Operations
For the Year Ended December 31, 2020
INVESTMENT INCOME:
Interest | $ | 1,987,998 | ||
Dividends | 10,082 | |||
Total Investment Income | 1,998,080 | |||
EXPENSES: | ||||
Management fees (Note 3) | 514,078 | |||
Fund accounting and administration fees (Note 3) | 62,956 | |||
Directors’ fees (Note 3) | 12,920 | |||
Chief Compliance Officer service fees (Note 3) | 3,784 | |||
Audit fees | 46,683 | |||
Custodian fees | 4,761 | |||
Miscellaneous | 44,060 | |||
Total Expenses | 689,242 | |||
Less reduction of expenses (Note 3) | (504,856 | ) | ||
Net Expenses | 184,386 | |||
NET INVESTMENT INCOME | 1,813,694 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | 563,820 | |||
Net change in unrealized appreciation (depreciation) on investments | 2,107,540 | |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 2,671,360 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 4,485,054 |
The accompanying notes are an integral part of the financial statements.
10
New York Tax Exempt Series
Statements of Changes in Net Assets
FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | |||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||
OPERATIONS: | ||||||
Net investment income | $ | 1,813,694 | $ | 2,297,215 | ||
Net realized gain (loss) on investments | 563,820 | 1,577,854 | ||||
Net change in unrealized appreciation (depreciation) on investments | 2,107,540 | 2,835,962 | ||||
Net increase (decrease) from operations | 4,485,054 | 6,711,031 | ||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | ||||||
Class A | (26,106 | ) | (113,686 | ) | ||
Class W | (2,011,775 | ) | (3,626,022 | ) | ||
Total distributions to shareholders | (2,037,881 | ) | (3,739,708 | ) | ||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||
Net increase (decrease) from capital share transactions (Note 5) | 15,917,482 | (51,992,335 | ) | |||
Net increase (decrease) in net assets | 18,364,655 | (49,021,012 | ) | |||
NET ASSETS: | ||||||
Beginning of year | 89,673,013 | 138,694,025 | ||||
End of year | $ | 108,037,668 | $ | 89,673,013 |
The accompanying notes are an integral part of the financial statements.
11
New York Tax Exempt Series
Financial Highlights - Class A
FOR THE YEAR ENDED | |||||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |||||||
Per share data (for a share outstanding throughout each year): | |||||||||||
Net asset value - Beginning of year | $10.49 | $10.34 | $10.43 | $10.31 | $10.50 | ||||||
Income (loss) from investment operations: | |||||||||||
Net investment income1 | 0.14 | 0.16 | 0.14 | 0.12 | 0.10 | ||||||
Net realized and unrealized gain (loss) on investments | 0.36 | 0.34 | (0.08 | ) | 0.11 | (0.18 | ) | ||||
Total from investment operations | 0.50 | 0.50 | 0.06 | 0.23 | (0.08 | ) | |||||
Less distributions to shareholders: | |||||||||||
From net investment income | (0.10 | ) | (0.18 | ) | (0.15 | ) | (0.11 | ) | (0.11 | ) | |
From net realized gain on investments | (0.06 | ) | (0.17 | ) | — | (0.00 | )2 | (0.00 | )2 | ||
Total distributions to shareholders | (0.16 | ) | (0.35 | ) | (0.15 | ) | (0.11 | ) | (0.11 | ) | |
Net asset value - End of year | $10.83 | $10.49 | $10.34 | $10.43 | $10.31 | ||||||
Net assets - End of year (000’s omitted) | $1,797 | $1,952 | $138,694 | $154,018 | $161,292 | ||||||
Total return3 | 4.73% | 4.86% | 0.54% | 2.27% | (0.79% | ) | |||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||
Expenses | 0.67% | 0.63% | 0.62% | 0.60% | 0.60% | ||||||
Net investment income | 1.29% | 1.56% | 1.39% | 1.12% | 0.93% | ||||||
Series portfolio turnover | 35% | 24% | 21% | 9% | 19% |
1Calculated based on average shares outstanding during the years.
2Less than $0.01 per share.
3Represents aggregate total return for the years indicated, and assumes reinvestment of all distributions.
The accompanying notes are an integral part of the financial statements.
12
New York Tax Exempt Series
Financial Highlights - Class W
FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/191 TO 12/31/19 | ||||
Per share data (for a share outstanding throughout each period): | |||||
Net asset value - Beginning of period. | $10.49 | $10.45 | |||
Income from investment operations: | |||||
Net investment income2 | 0.19 | 0.19 | |||
Net realized and unrealized gain (loss) on investments | 0.37 | 0.25 | |||
Total from investment operations | 0.56 | 0.44 | |||
Less distributions to shareholders: | |||||
From net investment income.. | (0.15) | (0.23 | ) | ||
From net realized gain on investments | (0.06) | (0.17 | ) | ||
Total distributions to shareholders | (0.21) | (0.40 | ) | ||
Net asset value - End of period | $10.84 | $10.49 | |||
Net assets - End of period (000’s omitted) | $106,241 | $87,721 | |||
Total return3 | 5.33% | 4.23% | |||
Ratios (to average net assets)/Supplemental Data: | |||||
Expenses* | 0.17% | 0.16% | 4 | ||
Net investment income | 1.77% | 2.09% | 4 | ||
Series portfolio turnover | 35% | 24% |
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts:
0.50% | 0.50% | 4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
13
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 Series is authorized to issue two classes of shares (Class A and Class W). While each class of shares is substantially the same, each class has its own investment eligibility criteria and cost structure.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of December 31, 2020, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as New York Tax Exempt Series Class A common stock and 50 million have been designated as New York Tax Exempt Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Municipal securities will normally be valued on the basis of market valuations provided by an independent pricing service (the “Service”). The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Board. Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input
14
New York Tax Exempt Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of December 31, 2020 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | |||||||
Assets: | |||||||||||
Debt securities: | |||||||||||
New York Municipal Bonds | $ | 104,348,121 | $ | — | $ | 104,348,121 | $ | — | |||
U.S. Treasury and other U.S. Government agencies | 573,391 | — | 573,391 | — | |||||||
Short-Term Investment | 1,854,877 | 1,854,877 | — | — | |||||||
Total assets | $ | 106,776,389 | $ | 1,854,877 | $ | 104,921,512 | $ | — |
There were no Level 3 securities held by the Series as of December 31, 2019 or December 31, 2020.
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, 2020, 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, 2017 through December 31, 2020. 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.
15
New York Tax Exempt Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Distributions of Income and Gains
Distributions to shareholders of net investment income are made quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.50% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The services of Manning & Napier Investor Services, Inc. are provided at no additional cost to the Series.
Pursuant to a master services agreement dated February 13, 2020 as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets (excluding Target Series); 0.0075% on the next $15 billion of average daily net assets (excluding Target Series); and 0.0065% of average daily net assets in excess of $40 billion (excluding Target Series); plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.85% of the average daily net assets of the Class A shares and 0.35% of the average daily net assets of the Class W shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the
16
New York Tax Exempt Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $504,856 in management fees for Class W shares for the year ended December 31, 2020. This amount is included as a reduction of expenses on the Statement of Operations. In addition, pursuant to the separate expense limitation agreement, the Advisor did not waive or reimburse expenses for Class A and Class W for the year ended December 31, 2020. For the year ended December 31, 2020, there were no previously waived or reimbursed expenses eligible to be recouped, therefore the Advisor did not recoup any expenses.
4. | Purchases and Sales of Securities |
For the year ended December 31, 2020, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $43,955,208 and $30,969,695, respectively. Purchases and sales of U.S. Government securities, other than short-term securities, were $2,002,915 and $2,003,076, respectively.
5. | Capital Stock Transactions |
Transactions in shares of Class A and Class W of New York Tax Exempt Series were:
CLASS A | FOR THE YEAR ENDED | FOR THE YEAR ENDED | |||||||
12/31/20 | 12/31/19 | ||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||
Sold | 5,832 | $ | 62,775 | 62,199 | $ | 669,305 | |||
Reinvested | 2,264 | 24,242 | 10,504 | 110,162 | |||||
Repurchased | (28,204 | ) | (301,366) | (13,303,270 | ) | (139,046,760) | |||
Total | (20,108 | ) | $ | (214,349) | (13,230,567 | ) | $ | (138,267,293) | |
CLASS W | FOR THE PERIOD 3/1/19 | ||||||||
FOR THE YEAR ENDED | (COMMENCEMENT OF OPERATIONS) | ||||||||
12/31/20 | TO 12/31/19 | ||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||
Sold | 3,744,691 | $ | 40,315,465 | 13,074,577 | $ | 136,695,987 | |||
Reinvested | 178,564 | 1,913,476 | 332,040 | 3,497,097 | |||||
Repurchased | (2,476,935 | ) | (26,097,110) | (5,048,082 | ) | (53,918,126) | |||
Total | 1,446,320 | $ | 16,131,831 | 8,358,535 | $ | 86,274,958 |
Over 90% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund (with the exception of Credit Series) may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses
17
New York Tax Exempt Series
Notes to Financial Statements (continued)
6. | Line of Credit (continued) |
in the Statement of Operations for each series. The line of credit expires in August 2021 unless extended or renewed. During the year ended December 31, 2020, the Series did not borrow under the line of credit.
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of December 31, 2020.
8. | Concentration of Credit |
The Series primarily invests in debt obligations issued by the State of New York and its political subdivisions, agencies and public authorities to obtain funds for various public purposes. The Series is more susceptible to factors adversely affecting issues of New York municipal securities than is a municipal bond fund that is not concentrated in these issues to the same extent.
9. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing book and tax treatments in the timing and/or treatment of the recognition of net investment income or gains and losses including redesignation of distributions paid and market discount on investments. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
FOR THE YEAR | FOR THE YEAR | |||
ENDED 12/31/20 | ENDED 12/31/19 | |||
Ordinary income | $ 448,308 | $ 322,102 | ||
Tax exempt income | $1,457,001 | $2,265,415 | ||
Long-term capital gains | $ 132,572 | $1,152,191 |
At December 31, 2020, 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 | $ | 101,783,743 | ||
Unrealized appreciation | 5,006,251 | |||
Unrealized depreciation | (13,605 | ) | ||
Net unrealized appreciation | $ | 4,992,646 | ||
Undistributed tax exempt income | $ | 467,674 |
10. Market Event
In March 2020, the World Health Organization declared COVID-19 (a novel coronavirus) to be a pandemic. The situation is dynamic. Global financial markets have experienced and may continue to experience significant volatility resulting from the spread
18
New York Tax Exempt Series
Notes to Financial Statements (continued)
10. Market Event (continued)
of COVID-19. The outbreak of COVID-19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand and general market uncertainty. The global economy, the economies of certain nations and individual issuers have been and may continue to be adversely affected by COVID-19, particularly in light of the interconnectivity between economies and financial markets, all of which may negatively impact the Series’ performance. In addition, COVID-19 and governmental responses to COVID-19 may negatively impact the capabilities of the Series’ service providers and disrupt the Series’ operations. Management of the Series will continue to monitor the impact of COVID-19.
19
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
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of New York Tax Exempt Series (one of the series constituting Manning & Napier Fund, Inc., referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, 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 ended December 31, 2020 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
New York, New York
February 17, 2021
We have served as the auditor of one or more investment companies in Manning & Napier Mutual Funds since 1992.
20
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 $1,457,001 as tax exempt dividends for the year ended December 31, 2020. It is the intention of the Series to designate the maximum allowable under tax law.
The Series designates $139,202 as Long-Term Capital Gain dividends pursuant to Section 852(b)(3) of the Internal Revenue Code for the fiscal year ended December 31, 2020.
21
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.manning-napier.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 directors and officers, 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 and Officer
Name: | Paul Battaglia* |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 42 |
Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1 & Length of Time Served: | Indefinite – Chairman and Director since November 2018 |
Principal Occupation(s) During Past 5 Years: | Chief Financial Officer since 2018; Vice President of Finance (2016 – 2018); Director of Finance (2011 – 2016); Financial Analyst/Internal Auditor (2004-2006) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various subsidiaries and affiliates: Chief Financial Officer |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | N/A |
Independent Directors
Name: | Stephen B. Ashley |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 80 |
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 and Director since 1997; Chief Executive Officer (1997-2019) - Ashley Companies (property management and investment) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Ashley Companies since 1997 |
Name: | Paul A. Brooke |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 75 |
Current Position(s) Held with Fund: | Lead Independent Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since 2007; Governance & Nominating Committee Chairman since 2016; Lead Independent Director since 2017 |
Principal Occupation(s) During Past 5 Years: | Managing Member since 1991 - PMSV Holdings LLC (investments); Managing Member (2010-2016) - Venbio (investments).. |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Incyte Corp. (biotech) (2000-2020); PureEarth(non-profit) since 2012; Cerus (biomedical) since 2016; Caelum BioSciences (biomedical) since 2018; Cheyne Capital International (investment)(2000-2017); |
22
New York Tax Exempt Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Peter L. Faber2 |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 82 |
Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Since 1987 |
Principal Occupation(s) During Past 5 Years: | Partner (1995-2006 & 2013-2018); Senior Counsel (2006-2012) - McDermott, Will & Emery LLP (law firm) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Boston Early Music Festival (non-profit) since 2007; Amherst Early Music, Inc. (non-profit) since 2009; Gotham Early Music Scene, Inc. (non-profit) since 2009; S’Cool Sounds, Inc. (non-profit) since 2017 |
Name: | Harris H. Rusitzky2 |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 85 |
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 since 1994 - The Greening Group (business consultants); Partner since 2006 - The Restaurant Group (restaurants) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (university) since 1972; Culinary Institute of America (non-profit college) since 1985; George Eastman Museum (museum) since 1988; National Restaurant Association (restaurant trade organization) (1978-2020) |
Name: | Russell O. Vernon |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 63 |
Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since April 2020; Governance & Nominating Committee Chairman since November 2020 |
Principal Occupation(s) During Past 5 Years: | Founder and General Partner (2009-2019) – BVM Capital Management (economic development) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Board Member, Vice Chairman and President since 2010 – Newburgh Armory Unity Center (military); Board Member and Executive Director since 2020 – National Purple Heart Honor Mission, Inc. (military); Board Member, Vice Chairman (2015-2020) – National Purple Heart Hall of Honor, Inc. (military) |
23
New York Tax Exempt Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Chester N. Watson |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 70 |
Current Position(s) Held with Fund: | Director, Audit Committee Chairman, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member Since 2012; Audit Committee Chairman since 2013 |
Principal Occupation(s) During Past 5 Years: | General Auditor (2003-2011) - General Motors Company (auto manufacturer) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (University) since 2005; Hudson Valley Center for Innovation, Inc. (New Business and Economic Development) since 2019; Town of Greenburgh, NY Planning Board (Municipal Government) (2015-2019); |
Officers:
Name: | Elizabeth Craig |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 33 |
Current Position(s) Held with Fund: | Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2016 |
Principal Occupation(s) During Past 5 Years: | Fund Regulatory Administration Manager since 2018; Fund Administration Manager (2015-2018); Mutual Fund Compliance Specialist (2009-2015) - Manning & Napier Advisors, LLC; Assistant Corporate Secretary (2011-2016) - Manning & Napier Fund, Inc.; Corporate Secretary, Director since 2019– Manning & Napier Investor Services, Inc. |
Name: | Samantha Larew |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 40 |
Current Position(s) Held with Fund: | Chief Compliance Officer and Anti-Money Laundering Compliance Officer |
Term of Office1 & Length of Time Served: | Chief Compliance Officer since 2019; Anti-Money Laundering Compliance |
Officer since 2018 | |
Principal Occupation(s) During Past 5 Years: | Co-Director of Compliance since 2018; Compliance Communications Supervisor (2014-2018); Compliance Supervisor (2013-2014); Broker-Dealer Compliance Supervisor (2011-2013); Broker-Dealer Compliance Analyst (2010-2011) - Manning & Napier Advisors, LLC & Affiliates; Broker-Dealer Chief Compliance Officer since 2013; Broker-Dealer Assistant Corporate Secretary since 2011 – Manning & Napier Investor Services, Inc.; Compliance Analyst (2007-2009) – Wall Street Financial Group; Compliance Specialist (2003-2007) – Manning & Napier Advisors, LLC & Affiliates |
Name: | Scott Morabito |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 33 |
Current Position(s) Held with Fund: | Vice President |
Term of Office1 & Length of Time Served: | Vice President since 2019; Assistant Vice President (2017-2019) |
Principal Occupation(s) During Past 5 Years: | Managing Director of Operations since 2019; Director of Funds Group (2017-2019); Fund Product and Strategy Manager (2014-2017); Senior Product and Strategy Analyst (2013-2014); Product and Strategy Analyst (2011-2013) - Manning & Napier Advisors, LLC; President, Director since 2018 – Manning & Napier Investor Services, Inc. |
24
New York Tax Exempt Series
Directors’ and Officers’ Information
(unaudited)
Officers: (continued)
Name: | Troy Statczar |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 49 |
Current Position(s) Held with Fund: | Principal Financial Officer, Treasurer |
Term of Office1 & Length of Time Served: | Principal Financial Officer and Treasurer since 2020 |
Principal Occupation(s) During Past 5 Years: | Senior Director, Foreside Treasurer Services since 2020 - Foreside Financial Group; Director of Fund Administration (2017-2019) - Thornburg Investment Management, Inc.; Director of U.S. Operations (2008-2017) - Henderson Global Investors N.A., Inc. |
Name: | Sarah Turner |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 38 |
Current Position(s) Held with Fund: | Chief Legal Officer; Assistant Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2018 |
Principal Occupation(s) During Past 5 Years: | Attorney since 2018 - Manning & Napier Advisors, LLC and affiliates; Counsel (2017-2018) – Harter Secrest and Emery LLP; Legal Counsel (2010-2017) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various affiliates: Corporate Secretary, General Counsel |
*Interested Director, within the meaning of the 1940 Act by reason of his positions with the Fund’s Advisor, Manning & Napier Advisors, LLC, and Distributor, Manning & Napier Investor Services, Inc.
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.
2Effective December 31, 2020, Peter L. Faber and Harris Rusitzky have each retired as a Director of the Fund in accordance with the Board’s existing Board retirement policy.
25
New York Tax Exempt Series
Literature Requests
(unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the Securities and Exchange
Commission’s (SEC) web site | http://www.sec.gov |
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling (800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. | Fund Holdings - Month-End |
2. | Fund Holdings - Quarter-End |
3. | Shareholder Report - Annual |
4. | Shareholder Report - Semi-Annual |
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNNYT-12/20-AR
26
Manning & Napier Fund, Inc.
Core Bond Series
Paper copies of the Series’ shareholder reports are no longer sent by mail, unless you specifically request them from the Series or from your financial intermediary, such as a broker-dealer or bank. Shareholder reports are available online. Each time a report is posted on the Series’ website you will be provided with a link to access the report online, either by mail (hard copy notice) or by email, if you have already signed up for electronic delivery of shareholder reports.
You may elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies. If you invest directly with the Fund, you can inform the Fund that you wish to continue receiving paper copies by visiting www.manning-napier.com or calling 1-800-466-3863. Your election to receive reports in paper will apply to all funds held with your financial intermediary if you invest through a financial intermediary or all series of the Fund if you invest directly with the Fund.
Additionally, If you have not yet signed up for electronic delivery of shareholder reports and other Fund communications, you may do so by contacting your financial intermediary or, if you are a direct investor, by visiting www.manning-napier.com or calling 1-800-466-3863.
Independent Perspective | Real-World Solutions |
A Note from Our CEO
Dear Shareholder,
2020. What a momentous year.
Political change, social unrest, the pandemic, economic shutdowns, and, of course, the fastest stock market selloff and recovery in history, all describe what has been a remarkably tumultuous and challenging time.
Maybe it should come as no surprise that after a year of such change, we yearn for a return of convention, clarity, facts, and perhaps, less drama.
This desire for normalcy is understandable, but we cannot hide our heads in the sand. The profound challenges we face are not going to simply go away.
If anything, many of the structural issues that brought us to where we are today, technological progress, the information age, a shifting economy and culture, may very well accelerate from here. Whether we want it or not, change is coming.
As investors, logically and rationally deciphering an uncertain future is one of our most existential tasks. Particularly in times like these, it is too easy to get caught up in the turbulence—to let emotion get the best of us—to fail to see the forest for the trees.
This is why the key question we must ask ourselves today is, what is the best way for us to understand and invest upon the paths that lie before us?
We believe the answer is, in many ways, an evergreen one, and we hope it offers you a helpful perspective.
It is to invest for the long-term, not speculate on short-term developments. It is to take an active, hands-on approach to investment decisions. It is to be patient, disciplined, and confident when the right investment opportunities present themselves. And it is to be constantly attentive to risk, particularly the most significant risks, permanent loss of capital and the risk of falling short of long-term needs and goals.
These are the same investing principles that we have been successfully implementing for clients since our founding more than 50 years ago.
Whether you are an individual investor, a financial advisor, or an institutional investor making decisions on behalf of others, you can trust that we are well equipped to handle whatever challenges the markets have in store for us next.
We wish you safety and good health, and we appreciate your continued confidence in our firm and our approach.
Sincerely, | |
Marc Mayer | |
Chief Executive Officer |
Corporate Headquarters | 290 Woodcliff Drive | Fairport, NY 14450 | (585) 325-6880 phone | (800) 551-0224 toll free | www.manning-napier.com
1
Core Bond Series
Fund Commentary
(unaudited)
Investment Objective
To provide long-term total return by investing primarily in fixed income securities. Under normal circumstances, at least 80% of the Series’ assets will be invested in investment-grade bonds and other financial instruments with economic characteristics similar to bonds. Holdings will consist of US dollar denominated securities. The Series is not subject to maturity or duration restrictions.
Performance Commentary
Fixed income markets posted strong, positive returns for the twelve-month period ending December 31, 2020. Despite significant volatility at points during the year, specifically in the first quarter as the global pandemic upended markets and the ensuing rebound, yields ended the year lower and credit spreads tightened. The highest returning areas of the market included Treasury Inflation Protected Securities and corporate bonds from a sector perspective, longer-dated issuances from a maturity perspective, and higher quality issuances when looking at it from a quality perspective.
The Core Bond Series Class S shares delivered both positive absolute and relative returns for 2020, returning 8.67% vs. 7.51% for the benchmark (i.e., the Bloomberg Barclays US Aggregate Bond Index).
Relative outperformance was driven by a combination of factors (e.g., duration, yield curve, sector positioning, and selection) with sector positioning and selection being the strongest. This was especially true within corporate bonds where the Series benefitted from an overweight allocation to the sector coupled with strong selection. Other notable contributors included strong selection within the securitized sector and exposure to longer dated Treasuries. Alternatively, a small allocation to cash detracted from relative returns.
In terms of positioning, the market continues to look rich from a valuation perspective; however, we continue to find select opportunities. Specifically, we continue to find opportunities within the corporate sector, particularly within communications and cyclicals, and, despite tightening valuations, in BBB-rated issuances from a bottom-up perspective. Additionally, we continue to view commercial mortgage backed and asset-backed securities as relatively attractive and are focusing on securities with seniority in the capital structure that are backed by asset classes with high quality fundamentals and low credit risk.
While 2020 was a very strong year for fixed income, we believe investor return expectations for the coming year should be tempered as the fixed income landscape remains challenging due to low starting rates. That stated, we believe a flexible approach with the ability to adapt to changing environments while uncovering risks and opportunities will remain essential to achieving investor objectives.
Performance for the Core Bond Series Class S shares is provided above. Performance for other shares classes will differ based on each class’ underlying expenses.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than that quoted; investors can obtain the most recent month-end performance at www.manning- napier.com or by calling (800) 466-3863.
Additional information and associated disclosures can be found on the Performance Update page of this report.
All investments involve risks, including possible loss of principal. There is an inverse relationship between bond prices and interest rates; as interest rates rise, bond prices (and therefore the value of bond funds) fall. Likewise, as interest rates fall, bond prices and the value of bond funds rise. Investments in derivatives can be highly volatile and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk. Also, the use of leverage increases exposure to the market and may magnify potential losses.
2
Core Bond Series
Performance Update as of December 31, 2020
(unaudited)
AVERAGE ANNUAL TOTAL RETURNS | |||
AS OF DECEMBER 31, 2020 | |||
ONE YEAR1 | FIVE YEAR | TEN YEAR | |
Core Bond Series - Class S2 | 8.67% | 4.25% | 3.96% |
Core Bond Series - Class I2,3 | 8.93% | 4.47% | 4.09% |
Core Bond Series - Class W2,4 | 9.31% | 4.49% | 4.08% |
Core Bond Series - Class Z2,4 | 9.02% | 4.39% | 4.03% |
Bloomberg Barclays U.S. Aggregate Bond Index5 | 7.51% | 4.44% | 3.84% |
The following graph compares the value of a $10,000 investment in the Core Bond Series - Class S for the ten years ended December 31, 2020 to the Bloomberg Barclays U.S. Aggregate Bond Index.
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.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2020, this net expense ratio was 0.64% for Class S, 0.45% for Class I, 0.05% for Class W and 0.30% for Class Z. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.64% for Class S, 0.46% for Class I, 0.37% for Class W and 0.37% for Class Z for the year ended December 31, 2020.
3For periods through August 3, 2015 (the inception date of the Class I shares), performance for the Class I shares is based on historical performance of the Class S shares. Because the Class I shares invest in the same portfolio of securities as Class S, performance will only be different to the extent that the Class S shares have a higher expense ratio.
4For periods through March 1, 2019 (the inception date of the Class W and Class Z shares), performance for the Class W and Class Z shares is based on the historical performance of the Class S shares. Because the Class W and Class Z shares invest in the same portfolio of securities as the Class S shares, performance will be different only to the extent that the Class S shares have a higher expense ratio.
5The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged, market-value weighted index of U.S. domestic investment-grade debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of one year or more. Index returns do not reflect any fees or expenses. Index returns provided by Interactive Data.
3
Core Bond Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested in each class at the beginning of the period and held for the entire period (July 1, 2020 to December 31, 2020).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the Actual line for the Class in which you have invested under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The Hypothetical lines of each class in the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ACCOUNT VALUE 7/1/20 | ENDING ACCOUNT VALUE 12/31/20 | EXPENSES PAID DURING PERIOD* 7/1/20 - 12/31/20 | ANNUALIZED EXPENSE RATIO | |
Class S | ||||
Actual | $1,000.00 | $1,026.50 | $3.21 | 0.63% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.97 | $3.20 | 0.63% |
Class I | ||||
Actual | $1,000.00 | $1,027.00 | $2.34 | 0.46% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.82 | $2.34 | 0.46% |
Class W | ||||
Actual | $1,000.00 | $1,029.50 | $0.26 | 0.05% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.89 | $0.25 | 0.05% |
Class Z | ||||
Actual | $1,000.00 | $1,027.60 | $1.53 | 0.30% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,023.63 | $1.53 | 0.30% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data. The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
4
Core Bond Series
Portfolio Composition as of December 31, 2020
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. 2A U.S. Treasury Bond is a long-term obligation of the U.S. Treasury issued with a maturity period of more than ten years. 3A U.S. Treasury Note is an intermediate long-term obligation of the U.S. Treasury issued with a maturity period between one and ten years. |
5
Core Bond Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS - 29.9% | ||||||||
Non-Convertible Corporate Bonds- 29.9% | ||||||||
Communication Services - 4.3% | ||||||||
Diversified Telecommunication Services - 1.9% | ||||||||
AT&T, Inc., 4.25%, 3/1/2027 | 1,440,000 | $ | 1,684,416 | |||||
Verizon Communications, Inc., 4.272%, 1/15/2036 | 4,130,000 | 5,122,358 | ||||||
6,806,774 | ||||||||
Interactive Media & Services - 1.1% | ||||||||
Tencent Holdings Ltd. (China), 3.975%, 4/11/20292 | 3,510,000 | 3,999,230 | ||||||
Media - 1.3% | ||||||||
Comcast Corp., 3.25%, 11/1/2039 | 3,890,000 | 4,416,651 | ||||||
Total Communication Services | 15,222,655 | |||||||
Consumer Discretionary - 4.8% | ||||||||
Automobiles - 0.7% | ||||||||
Volkswagen Group of America Finance LLC (Germany), 3.35%, 5/13/20252 | 2,350,000 | 2,583,484 | ||||||
Internet & Direct Marketing Retail - 3.6% | ||||||||
Alibaba Group Holding Ltd. (China), 3.40%, 12/6/2027 | 5,040,000 | 5,642,287 | ||||||
Booking Holdings, Inc., 3.60%, 6/1/2026 | 4,510,000 | 5,125,864 | ||||||
Expedia Group, Inc., 6.25%, 5/1/20252. | 1,550,000 | 1,796,606 | ||||||
12,564,757 | ||||||||
Textiles, Apparel & Luxury Goods - 0.5% | ||||||||
NIKE, Inc., 3.375%, 3/27/2050 | 1,330,000 | 1,645,399 | ||||||
Total Consumer Discretionary | 16,793,640 | |||||||
Energy - 5.0% | ||||||||
Oil, Gas & Consumable Fuels - 5.0% | ||||||||
Energy Transfer Operating LP, 6.50%, 2/1/2042 | 3,590,000 | 4,379,749 | ||||||
Kinder Morgan Energy Partners LP, 6.95%, 1/15/2038 | 3,240,000 | 4,433,323 | ||||||
Sabine Pass Liquefaction LLC, 5.875%, 6/30/2026 | 4,360,000 | 5,271,686 | ||||||
The Williams Companies, Inc., 3.75%, 6/15/2027 | 3,060,000 | 3,491,572 | ||||||
Total Energy | 17,576,330 | |||||||
Financials - 3.4% | ||||||||
Banks - 2.9% | ||||||||
Bank of America Corp., 4.00%, 1/22/2025 | 2,200,000 | 2,472,099 | ||||||
Citigroup, Inc., 4.45%, 9/29/2027 | 2,910,000 | 3,440,022 | ||||||
JP Morgan Chase & Co., (U.S. Secured Overnight Financing Rate + 2.515%), 2.956%, 5/13/20313 | 3,890,000 | 4,265,739 | ||||||
10,177,860 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Financials (continued) | ||||||||
Capital Markets - 0.5% | ||||||||
Owl Rock Technology Finance Corp., 3.75%, 6/17/20262 | 1,680,000 | $ | 1,689,119 | |||||
Total Financials | 11,866,979 | |||||||
Health Care - 1.2% | ||||||||
Health Care Providers & Services - 0.7% | ||||||||
HCA, Inc., 4.125%, 6/15/2029 | 2,220,000 | 2,575,381 | ||||||
Pharmaceuticals - 0.5% | ||||||||
Pfizer, Inc., 2.625%, 4/1/2030 | 1,470,000 | 1,640,738 | ||||||
Total Health Care | 4,216,119 | |||||||
Industrials - 5.2% | ||||||||
Airlines - 1.0% | ||||||||
Southwest Airlines Co., 5.25%, 5/4/2025 | 3,140,000 | 3,636,625 | ||||||
Industrial Conglomerates - 0.9% | ||||||||
General Electric Co., (3 mo. LIBOR US +3.330%), 5.00%3,4 | 3,190,000 | 2,967,498 | ||||||
Trading Companies & Distributors - 3.3% | ||||||||
AerCap Ireland Capital DAC - AerCap Global Aviation Trust (Ireland), 4.45%, 10/1/2025 | 4,100,000 | 4,566,896 | ||||||
Air Lease Corp. | ||||||||
3.75%, 6/1/2026 | 2,160,000 | 2,375,951 | ||||||
3.625%, 4/1/2027 | 880,000 | 943,089 | ||||||
Ashtead Capital, Inc. (United Kingdom), | ||||||||
4.00%, 5/1/20282 | 1,580,000 | 1,678,181 | ||||||
Avolon Holdings Funding Ltd. | ||||||||
(Ireland), 4.375%, 5/1/20262 | 890,000 | 964,133 | ||||||
(Ireland), 3.25%, 2/15/20272 | 1,060,000 | 1,081,537 | ||||||
11,609,787 | ||||||||
Total Industrials | 18,213,910 | |||||||
Information Technology - 1.1% | ||||||||
IT Services - 1.1% | ||||||||
Visa, Inc., 2.70%, 4/15/2040 | 3,490,000 | 3,809,794 | ||||||
Real Estate - 4.2% | ||||||||
Equity Real Estate Investment Trusts (REITS) - 4.2% | ||||||||
American Tower Corp., 3.80%, 8/15/2029 | 4,320,000 | 5,022,595 | ||||||
Camden Property Trust, 2.80%, 5/15/2030 | 3,070,000 | 3,409,416 | ||||||
Crown Castle International Corp., 3.10%, 11/15/2029 | 4,510,000 | 4,969,722 | ||||||
SBA Tower Trust, 2.328%, 1/15/20282 | 1,300,000 | 1,310,293 | ||||||
Total Real Estate | 14,712,026 |
The accompanying notes are an integral part of the financial statements.
6
Core Bond Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Utilities - 0.7% | ||||||||
Electric Utilities - 0.7% | ||||||||
Dominion Energy, Inc., 3.375%, 4/1/2030 | 2,250,000 | $ | 2,562,964 | |||||
TOTAL CORPORATE BONDS (Identified Cost $96,534,896) | 104,974,417 | |||||||
ASSET-BACKED SECURITIES - 17.3% | ||||||||
AMSR Trust, Series 2020-SFR4, Class A, 1.355%, 11/17/20372 | 2,700,000 | 2,722,842 | ||||||
CarMax Auto Owner Trust, Series 2020-2, Class A4, 2.05%, 5/15/2025. | 3,000,000 | 3,118,931 | ||||||
Cazenovia Creek Funding II LLC, Series 2018-1A, Class A, 3.561%, 7/15/20302 | 126,641 | 127,179 | ||||||
CCG Receivables Trust, Series 2019-1, Class A2, 2.80%, 9/14/20262 | 1,001,953 | 1,017,422 | ||||||
CF Hippolyta LLC | ||||||||
Series 2020-1, Class A2, 1.99%, 7/15/20602 | 1,263,994 | 1,280,133 | ||||||
Series 2020-1, Class B1, 2.28%, 7/15/20602 | 1,574,725 | 1,599,085 | ||||||
Chesapeake Funding II LLC, Series 2017-4A, Class A1 (Canada), 2.12%, 11/15/20292 | 86,664 | 87,159 | ||||||
CNH Equipment Trust, Series 2020-A, Class A3, 1.16%, 6/16/2025 | 1,000,000 | 1,013,748 | ||||||
Commonbond Student Loan Trust, Series 2019-AGS, Class A1, 2.54%, 1/25/20472 | 1,001,283 | 1,026,522 | ||||||
CoreVest American Finance Trust, Series 2020-3, Class A, 1.358%, 8/15/20532 | 1,495,525 | 1,510,274 | ||||||
Credit Acceptance Auto Loan Trust Series 2020-1A, Class A, 2.01%, 2/15/20292 | 500,000 | 511,205 | ||||||
Series 2020-1A, Class B, 2.39%, 4/16/20292 | 600,000 | 614,186 | ||||||
Series 2020-3A, Class A, 1.24%, 10/15/20292 | 4,500,000 | 4,549,942 | ||||||
Ford Credit Auto Owner Trust, Series 2020-A, Class A4, 1.35%, 7/15/2025 | 1,750,000 | 1,797,800 | ||||||
Goodgreen Trust, Series 2020-1A, Class A, 2.63%, 4/15/20552 | 2,344,260 | 2,379,409 | ||||||
Home Partners of America Trust, Series 2019-1, Class A, 2.908%, 9/17/20392 | 946,813 | 995,787 | ||||||
Honda Auto Receivables Owner Trust, Series 2020-2, Class A4, 1.09%, 10/15/2026. | 2,000,000 | 2,040,548 | ||||||
Invitation Homes Trust | ||||||||
Series 2017-SFR2, Class A, (1 mo. LIBOR US + 0.850%), 1.003%, 12/17/20362,5 | 139,432 | 139,092 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
Invitation Homes Trust (continued) | ||||||||
Series 2017-SFR2, Class B, (1 mo. LIBOR US + 1.150%), 1.303%, 12/17/20362,5 | 115,000 | $ | 114,721 | |||||
Navient Private Education Loan Trust | ||||||||
Series 2014-1, Class A3, (1 mo. LIBOR US + 0.510%), 0.658%, 6/25/20315 | 925,172 | 904,643 | ||||||
Series 2015-BA, Class A3, (1 mo. LIBOR US + 1.450%), 1.609%, 7/16/20402,5 | 1,619,811 | 1,641,007 | ||||||
Series 2019-EA, Class A2A, 2.64%, 5/15/20682 | 1,000,000 | 1,030,815 | ||||||
Nelnet Student Loan Trust | ||||||||
Series 2013-5A, Class A, (1 mo. LIBOR US + 0.630%), 0.778%, 1/25/20372,5 | 1,110,791 | 1,098,048 | ||||||
Series 2015-2A, Class A2, (1 mo. LIBOR US + 0.600%), 0.748%, 9/25/20472,5 | 2,938,701 | 2,888,799 | ||||||
OCP CLO Ltd., Series 2020-8RA, Class A1, (3 mo. LIBOR US + 1.220%) | ||||||||
(Cayman Islands), 1/17/20322,5,6... | 2,500,000 | 2,500,000 | ||||||
Oxford Finance Funding LLC | ||||||||
Series 2019-1A, Class A2, 4.459%, 2/15/20272 | 1,050,000 | 1,086,356 | ||||||
Series 2020-1A, Class A2, 3.101%, 2/15/20282 | 1,835,000 | 1,878,121 | ||||||
Progress Residential Trust | ||||||||
Series 2019-SFR2, Class A, 3.147%, 5/17/20362 | 903,903 | 933,331 | ||||||
Series 2019-SFR4, Class A, 2.687%, 10/17/20362 | 800,000 | 825,018 | ||||||
Series 2020-SFR2, Class A, 2.078%, 6/17/20372 | 1,000,000 | 1,025,377 | ||||||
SMB Private Education Loan Trust, | ||||||||
Series 2020-A, Class A2A, 2.23%, 9/15/20372 | 1,285,000 | 1,333,569 | ||||||
SoFi Consumer Loan Program Trust | ||||||||
Series 2019-2, Class A, 3.01%, 4/25/20282 | 183,069 | 184,912 | ||||||
Series 2019-3, Class A, 2.90%, 5/25/20282 | 290,704 | 293,761 | ||||||
SoFi Professional Loan Program LLC | ||||||||
Series 2016-E, Class A2B, 2.49%, 1/25/20362 | 348,821 | 353,247 | ||||||
Series 2017-F, Class A2FX, 2.84%, 1/25/20412 | 2,791,824 | 2,853,630 | ||||||
Series 2018-C, Class A1FX, 3.08%, 1/25/20482 | 3,207 | 3,213 | ||||||
Series 2020-A, Class A2FX, 2.54%, 5/15/20462 | 820,000 | 847,286 | ||||||
Series 2020-C, Class AFX, 1.95%, 2/15/20462 | 829,671 | 847,471 | ||||||
Tax Ease Funding LLC, Series 2016-1A, | ||||||||
Class A, 3.131%, 6/15/20282 | 30,417 | 30,485 |
The accompanying notes are an integral part of the financial statements.
7
Core Bond Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
TCI-Flatiron CLO Ltd., Series 2016-1A, Class CR2, (3 mo. LIBOR US +2.200%) (Cayman Islands), 2.437%, 1/17/20325,7 | 1,500,000 | $ | 1,500,000 | |||||
Towd Point Mortgage Trust | ||||||||
Series 2016-5, Class A1, 2.50%, 10/25/20562,8 | 300,642 | 306,487 | ||||||
Series 2017-1, Class A1, 2.75%, 10/25/20562,8 | 254,846 | 261,192 | ||||||
Series 2019-HY1, Class A1, (1 mo. LIBOR US + 1.000%), 1.148%, 10/25/20482,5 | 243,483 | 244,429 | ||||||
Toyota Auto Loan Extended Note Trust, | ||||||||
Series 2020-1A, Class A, 1.35%, 5/25/20332 | 3,000,000 | 3,089,061 | ||||||
Tricon American Homes, Series 2020-SFR1, Class B, 2.049%, 7/17/20382 | 1,300,000 | 1,334,238 | ||||||
Vantage Data Centers LLC, Series 2020-1A, Class A2, 1.645%, 9/15/20452 | 1,750,000 | 1,761,993 | ||||||
VB-S1 Issuer LLC | ||||||||
Series 2020-1A, Class C2, 3.031%, 6/15/20502 | 375,000 | 392,863 | ||||||
Series 2020-2A, Class A, 2.636%, 9/15/20502 | 2,250,000 | 2,270,884 | ||||||
Volkswagen Auto Loan Enhanced Trust, | ||||||||
Series 2020-1, Class A3, 0.98%, 11/20/2024. | 410,000 | 414,297 | ||||||
TOTAL ASSET-BACKED SECURITIES (Identified Cost $59,826,605) | 60,780,518 | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES - 6.2% | ||||||||
BWAY Mortgage Trust, Series 2015-1740, Class A, 2.917%, 1/10/20352 | 400,000 | 408,004 | ||||||
CIM Trust, Series 2019-INV1, Class A1, 4.00%, 2/25/20492,8 | 128,976 | 132,584 | ||||||
Credit Suisse Mortgage Capital Trust | ||||||||
Series 2013-6, Class 2A1, 3.50%, 8/25/20432,8 | 430,754 | 438,494 | ||||||
Series 2013-IVR2, Class A2, 3.00%, 4/25/20432,8 | 529,289 | 544,714 | ||||||
Series 2013-IVR3, Class A1, 2.50%, 5/25/20432,8 | 125,024 | 127,268 | ||||||
Series 2013-TH1, Class A1, 2.13%, 2/25/20432,8 | 81,069 | 82,536 | ||||||
Fannie Mae REMICS, Series 2018-31, Class KP, 3.50%, 7/25/2047 | 211,490 | 219,063 | ||||||
Fontainebleau Miami Beach Trust, | ||||||||
Series 2019-FBLU, Class A, 3.144%, 12/10/20362 | 1,050,000 | 1,100,259 | ||||||
Freddie Mac Multifamily Structured Pass-Through Certificates | ||||||||
Series K014, Class X1 (IO), 1.178%, 4/25/20218 | 5,109,084 | 5,966 | ||||||
Series K016, Class X1 (IO), 1.481%, 10/25/20218 | 985,001 | 5,070 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
Freddie Mac Multifamily Structured | ||||||||
Pass-Through Certificates (continued) | ||||||||
Series K021, Class X1 (IO), 1.404%, 6/25/20228 | 8,571,022 | $ | 126,598 | |||||
Series K030, Class X1 (IO), 0.170%, 4/25/20238 | 12,724,858 | 44,611 | ||||||
Series K032, Class X1 (IO), 0.089%, 5/25/20238 | 7,483,474 | 18,827 | ||||||
Freddie Mac REMICS | ||||||||
Series 4791, Class BA, 4.00%, 3/15/2044 | 203,189 | 205,605 | ||||||
Series 4801, Class BA, 4.50%, 5/15/2044 | 98,497 | 99,331 | ||||||
FREMF Mortgage Trust | ||||||||
Series 2011-K15, Class B, 4.965%, 8/25/20442,8 | 170,000 | 173,314 | ||||||
Series 2015-K42, Class B, 3.850%, 12/25/20242,8 | 380,000 | 413,183 | ||||||
Series 2015-K720, Class B, 3.393%, 7/25/20222,8 | 340,000 | 351,351 | ||||||
Government National Mortgage Association, Series 2017-54, Class AH, 2.60%, 12/16/2056 | 342,696 | 359,624 | ||||||
GS Mortgage-Backed Securities Corp. Trust, Series 2020-PJ3, Class A14, 3.00%, 10/25/20502,8 | 1,608,827 | 1,652,481 | ||||||
JP Morgan Chase Commercial Mortgage Securities Trust, Series 2010-C2, Class A3, 4.070%, 11/15/20432 | 80,839 | 80,760 | ||||||
JP Morgan Mortgage Trust | ||||||||
Series 2013-1, Class 1A2, 3.00%, 3/25/20432,8 | 60,082 | 60,937 | ||||||
Series 2013-2, Class A2, 3.50%, 5/25/20432,8 | 66,871 | 68,190 | ||||||
Series 2014-2, Class 1A1, 3.00%, 6/25/20292,8 | 106,507 | 108,932 | ||||||
Series 2017-3, Class 1A5, 3.50%, 8/25/20472,8 | 86,631 | 86,688 | ||||||
Series 2017-6, Class A3, 3.50%, 12/25/20482,8 | 111,229 | 113,421 | ||||||
Morgan Stanley Capital I Trust, | ||||||||
Series 2018-H3, Class A5, 4.177%, 7/15/2051 | 1,423,000 | 1,697,360 | ||||||
New Residential Mortgage Loan Trust | ||||||||
Series 2014-1A, Class A, 3.75%, 1/25/20542,8 | 183,165 | 194,722 | ||||||
Series 2014-3A, Class AFX3, 3.75%, 11/25/20542,8 | 84,801 | 90,853 | ||||||
Series 2015-2A, Class A1, 3.75%, 8/25/20552,8 | 170,957 | 182,175 | ||||||
Series 2016-4A, Class A1, 3.75%, 11/25/20562,8 | 157,019 | 167,308 | ||||||
PMT Loan Trust, Series 2013-J1, Class A9, 3.50%, 9/25/20432,8 | 443,021 | 453,018 |
The accompanying notes are an integral part of the financial statements.
8
Core Bond Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
Sequoia Mortgage Trust | ||||||||
Series 2012-3, Class A1, 3.50%, 7/25/20428 | 151,721 | $ | 154,386 | |||||
Series 2013-6, Class A2, 3.00%, 5/25/20438 | 1,074,832 | 1,091,959 | ||||||
Series 2013-7, Class A2, 3.00%, 6/25/20438 | 74,524 | 75,712 | ||||||
Series 2013-8, Class A1, 3.00%, 6/25/20438 | 216,521 | 219,982 | ||||||
Series 2016-3, Class A10, 3.50%, 11/25/20462,8 | 534,782 | 539,701 | ||||||
Series 2020-1, Class A4, 3.50%, 2/25/20502,8 | 378,223 | 381,717 | ||||||
Sutherland Commercial Mortgage Trust, Series 2019-SBC8, Class A, 2.86%, 4/25/20412,8 | 754,162 | 761,271 | ||||||
UBS Commercial Mortgage Trust, Series 2017-C7, Class A4, 3.679%, 12/15/2050 | 1,000,000 | 1,148,984 | ||||||
Waikiki Beach Hotel Trust, Series 2019-WBM, Class A, (1 mo. LIBOR US + 1.050%), 1.209%, 12/15/20332,5 | 415,000 | 403,615 | ||||||
Wells Fargo Commercial Mortgage Trust, Series 2015-C30, Class A4, 3.664%, 9/15/2058 | 3,000,000 | 3,362,877 | ||||||
WFRBS Commercial Mortgage Trust, Series 2014-C19, Class A5, 4.101%, 3/15/2047 | 2,000,000 | 2,200,688 | ||||||
WinWater Mortgage Loan Trust | ||||||||
Series 2015-1, Class A1, 3.50%, 1/20/20452,8 | 50,466 | 51,787 | ||||||
Series 2015-2, Class A11, 3.50%, 2/20/20452,8 | 1,573,984 | 1,610,444 | ||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES (Identified Cost $21,231,006) | 21,816,370 | |||||||
MUNICIPAL BONDS - 1.9% | ||||||||
Clark County, Public Impt., Series A, G.O. Bond, 1.15%, 11/1/2026 | 3,410,000 | 3,419,650 | ||||||
Hawaii, Series GC, G.O. Bond, 2.682%, 10/1/2038 | 95,000 | 98,942 | ||||||
King County, Series B, G.O. Bond, 1.30%, 12/1/2028 | 1,675,000 | 1,689,974 | ||||||
New York City Transitional Finance Authority, Future Tax Secured, Public Impt., Revenue Bond, 1.58%, 5/1/2024 | 910,000 | 937,491 | ||||||
South Carolina Public Service Authority, Series B, Revenue Bond, 2.329%, 12/1/2028 | 600,000 | 627,750 | ||||||
TOTAL MUNICIPAL BONDS (Identified Cost $6,715,635) | 6,773,807 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
U.S. TREASURY SECURITIES - 25.7% | ||||||||
U.S. Treasury Bonds - 7.3% | ||||||||
U.S. Treasury Bond | ||||||||
3.875%, 8/15/2040 | 3,560,000 | $ | 5,102,203 | |||||
2.50%, 2/15/2045 | 8,712,000 | 10,389,400 | ||||||
3.00%, 5/15/2047 | 7,702,000 | 10,086,311 | ||||||
Total U.S. Treasury Bonds (Identified Cost $25,550,082) | 25,577,914 | |||||||
U.S. Treasury Notes - 18.4% | ||||||||
U.S. Treasury Inflation Indexed Note, | ||||||||
0.125%, 4/15/2025 | 8,180,569 | 8,800,077 | ||||||
U.S. Treasury Note | ||||||||
2.50%, 5/15/2024 | 6,510,000 | 7,015,034 | ||||||
2.125%, 5/15/2025 | 13,145,000 | 14,187,357 | ||||||
1.625%, 5/15/2026 | 13,297,000 | 14,158,188 | ||||||
2.375%, 5/15/2027 | 12,320,000 | 13,742,094 | ||||||
2.875%, 5/15/2028 | 6,060,000 | 7,021,078 | ||||||
Total U.S. Treasury Notes (Identified Cost $64,601,054) | 64,923,828 | |||||||
TOTAL U.S. TREASURY SECURITIES (Identified Cost $90,151,136) | 90,501,742 | |||||||
U.S. GOVERNMENT AGENCIES - 17.9% | ||||||||
Mortgage-Backed Securities - 13.9% | ||||||||
Fannie Mae | ||||||||
Pool #888468, UMBS, 5.50%, 9/1/2021 | 3,129 | 3,141 | ||||||
Pool #995233, UMBS, 5.50%, 10/1/2021 | 10 | 10 | ||||||
Pool #888017, UMBS, 6.00%, 11/1/2021 | 860 | 867 | ||||||
Pool #995329, UMBS, 5.50%, 12/1/2021 | 1,487 | 1,496 | ||||||
Pool #888136, UMBS, 6.00%, 12/1/2021 | 1,331 | 1,345 | ||||||
Pool #888810, UMBS, 5.50%, 11/1/2022 | 3,981 | 4,002 | ||||||
Pool #AD0462, UMBS, 5.50%, 10/1/2024 | 3,711 | 3,917 | ||||||
Pool #MA3463, UMBS, 4.00%, 9/1/2033 | 291,761 | 309,313 | ||||||
Pool #MA1834, UMBS, 4.50%, 2/1/2034 | 53,066 | 58,661 | ||||||
Pool #FM1158, UMBS, 3.50%, 6/1/2034 | 837,726 | 887,770 | ||||||
Pool #828377, UMBS, 5.50%, 6/1/2035 | 214,833 | 252,533 | ||||||
Pool #MA2587, UMBS, 3.50%, 4/1/2036 | 390,818 | 419,595 | ||||||
Pool #889494, UMBS, 5.50%, 1/1/2037 | 204,798 | 240,421 | ||||||
Pool #MA3215, UMBS, 3.50%, 12/1/2037 | 1,424,822 | 1,514,441 |
The accompanying notes are an integral part of the financial statements.
9
Core Bond Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
U.S. GOVERNMENT AGENCIES (continued) | ||||||||
Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae (continued) | ||||||||
Pool #FM2568, UMBS, 3.00%, 5/1/2038 | 799,552 | $ | 839,385 | |||||
Pool #889624, UMBS, 5.50%, 5/1/2038 | 30,883 | 36,298 | ||||||
Pool #995876, UMBS, 6.00%, 11/1/2038 | 93,143 | 110,291 | ||||||
Pool #AD0307, UMBS, 5.50%, 1/1/2039 | 30,654 | 36,037 | ||||||
Pool #MA3988, UMBS, 3.00%, 4/1/2040 | 891,885 | 934,767 | ||||||
Pool #MA4204, UMBS, 2.00%, 12/1/2040 | 4,435,531 | 4,608,003 | ||||||
Pool #MA4203, UMBS, 2.50%, 12/1/2040 | 4,378,067 | 4,623,682 | ||||||
Pool #AI5172, UMBS, 4.00%, 8/1/2041 | 74,437 | 82,045 | ||||||
Pool #AH3858, UMBS, 4.50%, 8/1/2041 | 306,130 | 343,744 | ||||||
Pool #AL7729, UMBS, 4.00%, 6/1/2043 | 96,849 | 105,786 | ||||||
Pool #AX1685, UMBS, 3.50%, 11/1/2044 | 827,137 | 904,234 | ||||||
Pool #AS4103, UMBS, 4.50%, 12/1/2044 | 205,999 | 228,538 | ||||||
Pool #AY8604, UMBS, 3.50%, 4/1/2045 | 153,936 | 166,119 | ||||||
Pool #AZ4750, UMBS, 3.50%, 10/1/2045 | 1,074,917 | 1,162,892 | ||||||
Pool #AZ9215, UMBS, 4.00%, 10/1/2045 | 534,328 | 577,609 | ||||||
Pool #BC6764, UMBS, 3.50%, 4/1/2046 | 73,484 | 78,548 | ||||||
Pool #BC8677, UMBS, 4.00%, 5/1/2046 | 62,966 | 68,006 | ||||||
Pool #BD2179, UMBS, 4.00%, 7/1/2046 | 162,997 | 176,231 | ||||||
Pool #AS7660, UMBS, 2.50%, 8/1/2046 | 4,056,927 | 4,289,630 | ||||||
Pool #BD1191, UMBS, 3.50%, 1/1/2047 | 340,435 | 362,983 | ||||||
Pool #BE7845, UMBS, 4.50%, 2/1/2047 | 78,941 | 86,370 | ||||||
Pool #MA3007, UMBS, 3.00%, 4/1/2047 | 1,325,692 | 1,394,485 | ||||||
Pool #FM3157, UMBS, 3.50%, 1/1/2048 | 2,210,656 | 2,354,942 | ||||||
Pool #MA3238, UMBS, 3.50%, 1/1/2048 | 1,375,717 | 1,458,752 | ||||||
Pool #BM5526, UMBS, 3.50%, 2/1/2048 | 1,515,158 | 1,604,093 | ||||||
Pool #FM2232, UMBS, 4.00%, 6/1/2048 | 271,114 | 289,265 | ||||||
Pool #AL8674, 5.641%, 1/1/2049 | 438,339 | 513,827 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
U.S. GOVERNMENT AGENCIES (continued) | ||||||||
Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae (continued) | ||||||||
Pool #FM0030, UMBS, 3.00%, 2/1/2049 | 3,479,035 | $ | 3,637,831 | |||||
Freddie Mac | ||||||||
Pool #G12610, 6.00%, 3/1/2022 | 1,988 | 2,016 | ||||||
Pool #G12655, 6.00%, 5/1/2022 | 1,498 | 1,524 | ||||||
Pool #G12988, 6.00%, 1/1/2023 | 1,722 | 1,774 | ||||||
Pool #G13078, 6.00%, 3/1/2023 | 2,610 | 2,685 | ||||||
Pool #D98711, 4.50%, 7/1/2031 | 84,465 | 93,379 | ||||||
Pool #C91746, 4.50%, 12/1/2033 | 71,377 | 78,921 | ||||||
Pool #C91771, 4.50%, 6/1/2034 | 83,148 | 91,937 | ||||||
Pool #C91780, 4.50%, 7/1/2034 | 93,363 | 103,230 | ||||||
Pool #QN0349, UMBS, 3.00%, 8/1/2034 | 718,377 | 754,029 | ||||||
Pool #C91832, 3.50%, 6/1/2035 | 417,593 | 451,534 | ||||||
Pool #G07655, 5.50%, 12/1/2035 | 60,706 | 71,220 | ||||||
Pool #K93731, 3.00%, 11/1/2036 | 2,382,876 | 2,514,682 | ||||||
Pool #G08268, 5.00%, 5/1/2038 | 444,118 | 514,054 | ||||||
Pool #G05275, 5.50%, 2/1/2039 | 144,519 | 168,481 | ||||||
Pool #G05900, 6.00%, 3/1/2040 | 27,988 | 33,014 | ||||||
Pool #A92889, 4.50%, 7/1/2040 | 190,645 | 214,121 | ||||||
Pool #A93451, 4.50%, 8/1/2040 | 555,448 | 623,858 | ||||||
Pool #G60513, 5.00%, 7/1/2041 | 504,158 | 585,450 | ||||||
Pool #G60071, 4.50%, 7/1/2042 | 208,081 | 233,552 | ||||||
Pool #Q17513, 3.50%, 4/1/2043 | 140,918 | 152,826 | ||||||
Pool #G60183, 4.00%, 12/1/2044 | 210,208 | 229,096 | ||||||
Pool #Q37592, 4.00%, 12/1/2045 | 503,761 | 551,500 | ||||||
Pool #Q37857, 4.00%, 12/1/2045 | 408,505 | 442,344 | ||||||
Pool #G60855, 4.50%, 12/1/2045 | 199,599 | 223,596 | ||||||
Pool #Q38388, 4.00%, 1/1/2046 | 580,193 | 636,131 | ||||||
Pool #Q47544, 4.00%, 3/1/2047 | 490,968 | 533,396 | ||||||
Pool #Q47130, 4.50%, 4/1/2047 | 86,696 | 95,034 | ||||||
Pool #G08786, 4.50%, 10/1/2047 | 183,719 | 200,565 | ||||||
Pool #QA9848, UMBS, 2.50%, 5/1/2050 | 3,655,821 | 3,857,134 | ||||||
Pool #SD8107, UMBS, 2.50%, 11/1/2050 | 396,069 | 417,879 | ||||||
Total Mortgage-Backed Securities (Identified Cost $47,808,767) | 48,650,867 | |||||||
Other Agencies - 4.0% | ||||||||
Federal National Mortgage Association, 0.75%, 10/8/2027 | ||||||||
(Identified Cost $14,148,572) | 14,105,000 | 14,159,854 | ||||||
TOTAL U.S. GOVERNMENT AGENCIES | ||||||||
(Identified Cost $61,957,339) | 62,810,721 |
The accompanying notes are an integral part of the financial statements.
10
Core Bond Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
SHORT-TERM INVESTMENT - 1.8% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 0.03%9 | ||||||||
(Identified Cost $6,357,507) | 6,357,507 | $ | 6,357,507 | |||||
TOTAL INVESTMENTS - 100.7% | ||||||||
(Identified Cost $342,774,124) | 354,015,082 | |||||||
LIABILITIES, LESS OTHER ASSETS - (0.7%) | (2,312,842 | ) | ||||||
NET ASSETS - 100% | $ | 351,702,240 |
CLO - Collateralized Loan Obligation
G.O. Bond - General Obligation Bond
Impt. - Improvement
IO - Interest only
LIBOR - London Interbank Offered Rate
REMICS - Real Estate Mortgage Investment Conduits
UMBS - Uniform Mortgage-Backed Securities
1Amount is stated in USD unless otherwise noted.
2Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be liquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2020 was $75,872,861, which represented 21.6% of the Series’ Net Assets.
3Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of December 31, 2020.
4Security is perpetual in nature and has no stated maturity date.
5Floating rate security. Rate shown is the rate in effect as of December 31, 2020.
6Fully Unfunded CLO – No period end interest rate will be disclosed.
7Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The security was acquired on December 22, 2020 at a cost of $1,500,000. The value of the security at December 31, 2020 was $1,500,000, or 0.4% of the Series’ Net Assets.
8Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of December 31, 2020.
9Rate shown is the current yield as of December 31, 2020.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
11
Core Bond Series
Statement of Assets and Liabilities
December 31, 2020
ASSETS: | ||||
Investments, at value (identified cost $342,774,124) (Note 2 ) | $ | 354,015,082 | ||
Receivable from Advisor (Note 3) | 18,935 | |||
Interest receivable | 1,389,100 | |||
Receivable for fund shares sold | 352,160 | |||
Dividends receivable | 68 | |||
Prepaid and other expenses | 22,646 | |||
TOTAL ASSETS | 355,797,991 | |||
LIABILITIES: | ||||
Accrued fund accounting and administration fees (Note 3) | 29,038 | |||
Accrued sub-transfer agent fees (Note 3) | 1,711 | |||
Accrued Chief Compliance Officer service fees (Note 3 ) | 1,503 | |||
Accrued distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 1,184 | |||
Payable for securities purchased | 4,000,000 | |||
Payable for fund shares repurchased | 30,936 | |||
Other payables and accrued expenses | 31,379 | |||
TOTAL LIABILITIES | 4,095,751 | |||
TOTAL NET ASSETS | $ | 351,702,240 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 314,069 | ||
Additional paid-in-capital | 339,699,753 | |||
Total distributable earnings (loss) | 11,688,418 | |||
TOTAL NET ASSETS | $ | 351,702,240 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S | ||||
($5,760,415/510,800 shares) | $ | 11.28 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I | ||||
($4,386,960/424,678 shares) | $ | 10.33 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W | ||||
($321,288,415/28,513,752 shares) | $ | 11.27 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class Z | ||||
($20,266,450/1,957,686 shares) | $ | 10.35 |
The accompanying notes are an integral part of the financial statements.
12
Core Bond Series
Statement of Operations
For the Year Ended December 31, 2020
INVESTMENT INCOME: | ||||
Interest | $ | 5,705,684 | ||
Dividends | 14,256 | |||
Total Investment Income | 5,719,940 | |||
EXPENSES: | ||||
Management fees (Note 3 ) | 707,080 | |||
Fund accounting and administration fees (Note 3 ) | 107,196 | |||
Directors’ fees (Note 3) | 36,993 | |||
Distribution and service (Rule 12b-1) fees (Class S) (Note 3). | 13,412 | |||
Sub-transfer agent fees (Note 3) | 6,198 | |||
Chief Compliance Officer service fees (Note 3 ) | 3,784 | |||
Registration and filing fees | 55,304 | |||
Custodian fees | 16,541 | |||
Miscellaneous | 110,293 | |||
Total Expenses | 1,056,801 | |||
Less reduction of expenses (Note 3) | (823,605 | ) | ||
Net Expenses | 233,196 | |||
NET INVESTMENT INCOME | 5,486,744 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | 13,271,334 | |||
Net change in unrealized appreciation (depreciation) on investments | 5,938,257 | |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 19,209,591 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 24,696,335 |
The accompanying notes are an integral part of the financial statements.
13
Core Bond Series
Statements of Changes in Net Assets
FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 5,486,744 | $ | 5,605,798 | ||||
Net realized gain (loss) on investments | 13,271,334 | 3,729,448 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 5,938,257 | 7,432,018 | ||||||
Net increase (decrease) from operations | 24,696,335 | 16,767,264 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | ||||||||
Class S | (273,050 | ) | (100,742 | ) | ||||
Class I | (250,900 | ) | (173,998 | ) | ||||
Class W | (16,916,170 | ) | (4,883,965 | ) | ||||
Class Z | (1,079,320 | ) | (561,811 | ) | ||||
Total distributions to shareholders | (18,519,440 | ) | (5,720,516 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5 ) | 134,963,968 | 21,439,998 | ||||||
Net increase (decrease) in net assets | 141,140,863 | 32,486,746 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 210,561,377 | 178,074,631 | ||||||
End of year | $ | 351,702,240 | $ | 210,561,377 |
The accompanying notes are an integral part of the financial statements.
14
Core Bond Series
Financial Highlights - Class S
FOR THE YEAR ENDED | ||||||||||||||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | ||||||||||||||||
Per share data (for a share outstanding throughout each year): | ||||||||||||||||||||
Net asset value - Beginning of year | $10.92 | $10.30 | $10.62 | $10.52 | $10.48 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.16 | 0.23 | 0.24 | 0.20 | 0.17 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.78 | 0.61 | (0.32 | ) | 0.10 | 0.10 | ||||||||||||||
Total from investment operations | 0.94 | 0.84 | (0.08 | ) | 0.30 | 0.27 | ||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.16 | ) | (0.22 | ) | (0.24 | ) | (0.19 | ) | (0.17 | ) | ||||||||||
From net realized gain on investments | (0.42 | ) | — | — | (0.01 | ) | (0.06 | ) | ||||||||||||
Total distributions to shareholders | (0.58 | ) | (0.22 | ) | (0.24 | ) | (0.20 | ) | (0.23 | ) | ||||||||||
Net asset value - End of year | $11.28 | $10.92 | $10.30 | $10.62 | $10.52 | |||||||||||||||
Net assets - End of year (000’s omitted) | $5,760 | $2,382 | $101,314 | $119,137 | $117,559 | |||||||||||||||
Total return2 | 8.67% | 8.18% | (0.75% | ) | 2.91% | 2.53% | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Expenses* | 0.64% | 0.69% | 0.70% | 0.70% | 0.70% | |||||||||||||||
Net investment income | 1.38% | 2.27% | 2.35% | 1.86% | 1.61% | |||||||||||||||
Series portfolio turnover | 110% | 66% | 78% | 48% | 75% | |||||||||||||||
*For certain years presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some years may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||||||||||
N/A | 0.07% | 0.08% | 0.07% | 0.06% |
1Calculated based on average shares outstanding during the years.
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.
The accompanying notes are an integral part of the financial statements.
15
Core Bond Series
Financial Highlights - Class I
FOR THE YEAR ENDED | ||||||||||||||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | ||||||||||||||||
Per share data (for a share outstanding throughout each year): | ||||||||||||||||||||
Net asset value - Beginning of year | $10.04 | $9.52 | $9.84 | $9.77 | $9.75 | |||||||||||||||
Income (loss) from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.17 | 0.24 | 0.25 | 0.21 | 0.18 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.72 | 0.55 | (0.31 | ) | 0.09 | 0.10 | ||||||||||||||
Total from investment operations | 0.89 | 0.79 | (0.06 | ) | 0.30 | 0.28 | ||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.18 | ) | (0.27 | ) | (0.26 | ) | (0.22 | ) | (0.20 | ) | ||||||||||
From net realized gain on investments | (0.42 | ) | — | — | (0.01 | ) | (0.06 | ) | ||||||||||||
Total distributions to shareholders | (0.60 | ) | (0.27 | ) | (0.26 | ) | (0.23 | ) | (0.26 | ) | ||||||||||
Net asset value - End of year | $10.33 | $10.04 | $9.52 | $9.84 | $9.77 | |||||||||||||||
Net assets - End of year (000’s omitted) | $4,387 | $5,416 | $76,761 | $76,407 | $64,763 | |||||||||||||||
Total return2 | 8.93% | 8.38% | (0.53% | ) | 3.10% | 2.80% | ||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Expenses* | 0.45% | 0.45% | 0.45% | 0.45% | 0.45% | |||||||||||||||
Net investment income | 1.67% | 2.53% | 2.60% | 2.12% | 1.86% | |||||||||||||||
Series portfolio turnover | 110% | 66% | 78% | 48% | 75% | |||||||||||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the years, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||||||||||
0.01% | 0.06% | 0.08% | 0.07% | 0.06% |
1Calculated based on average shares outstanding during the years.
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 the years.
The accompanying notes are an integral part of the financial statements.
16
Core Bond Series
Financial Highlights - Class W
FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/191 TO 12/31/19 | |||||||
Per share data (for a share outstanding throughout each period): | ||||||||
Net asset value - Beginning of period | $10.90 | $10.40 | ||||||
Income from investment operations: | ||||||||
Net investment income2 | 0.22 | 0.26 | ||||||
Net realized and unrealized gain (loss) on investments | 0.78 | 0.54 | ||||||
Total from investment operations | 1.00 | 0.80 | ||||||
Less distributions to shareholders: | ||||||||
From net investment income | (0.21 | ) | (0.30 | ) | ||||
From net realized gain on investments | (0.42 | ) | — | |||||
Total distributions to shareholders | (0.63 | ) | (0.30 | ) | ||||
Net asset value - End of period | $11.27 | $10.90 | ||||||
Net assets - End of period (000’s omitted) | $321,288 | $192,391 | ||||||
Total return3 | 9.31% | 7.74% | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses * | 0.05% | 0.05% | 4 | |||||
Net investment income | 1.97% | 2.87% | 4 | |||||
Series portfolio turnover | 110% | 66% | ||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||
0.32% | 0.34% | 4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
17
Core Bond Series
Financial Highlights - Class Z
FOR THE | FOR THE | |||||||
YEAR | PERIOD | |||||||
ENDED | 3/1/191 TO | |||||||
12/31/20 | 12/31/19 | |||||||
Per share data (for a share outstanding throughout each period): | ||||||||
Net asset value - Beginning of period | $10.06 | $9.62 | ||||||
Income from investment operations: | ||||||||
Net investment income2 | 0.18 | 0.22 | ||||||
Net realized and unrealized gain (loss) on investments | 0.72 | 0.50 | ||||||
Total from investment operations | 0.90 | 0.72 | ||||||
Less distributions to shareholders: | ||||||||
From net investment income | (0.19 | ) | (0.28 | ) | ||||
From net realized gain on investments | (0.42 | ) | — | |||||
Total distributions to shareholders | (0.61 | ) | (0.28 | ) | ||||
Net asset value - End of period | $10.35 | $10.06 | ||||||
Net assets - End of period (000’s omitted) | $20,266 | $10,372 | ||||||
Total return3 | 9.02% | 7.50% | ||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses * | 0.30% | 0.30% | 4 | |||||
Net investment income | 1.75% | 2.64% | 4 | |||||
Series portfolio turnover | 110% | 66% | ||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||
0.07% | 0.09% | 4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
18
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 Series is authorized to issue four classes of shares (Class S, I, W, and Z). Each class of shares is substantially the same, except that class specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of December 31, 2020, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Core Bond Series Class I common stock, 125 million have been designated as Core Bond Series Class S common stock, 150 million have been designated as Core Bond Series Class W common stock and Core Bond Series Class Z common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market are valued at the latest quoted sales price of the exchange on which the security is primarily traded. Securities not traded on valuation date or securities not listed on an exchange are valued at the latest quoted bid price provided by the Fund’s pricing service. Securities listed on the NASDAQ Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Debt securities, including government bonds, foreign bonds, asset-backed securities, structured notes, supranational obligations, sovereign bonds, corporate bonds and mortgage-backed securities will normally be valued on the basis of evaluated bid prices provided directly by an independent pricing service (the “Service”). The pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Certain investments in securities held by the Series may be valued on a basis of a price provided directly by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
Municipal securities will normally be valued on the basis of market valuations provided by the Service. The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
19
Core Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board of Directors (the “Board”). Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of December 31, 2020 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Debt securities: | ||||||||||||||||
U.S. Treasury and other U.S. Government agencies | $ | 153,312,463 | $ | — | $ | 153,312,463 | $ | — | ||||||||
States and political subdivisions (municipals) | 6,773,807 | — | 6,773,807 | — | ||||||||||||
Corporate debt: | ||||||||||||||||
Communication Services | 15,222,655 | — | 15,222,655 | — | ||||||||||||
Consumer Discretionary | 16,793,640 | — | 16,793,640 | — | ||||||||||||
Energy | 17,576,330 | — | 17,576,330 | — | ||||||||||||
Financials | 11,866,979 | — | 11,866,979 | — | ||||||||||||
Health Care | 4,216,119 | — | 4,216,119 | — | ||||||||||||
Industrials | 18,213,910 | — | 18,213,910 | — | ||||||||||||
Information Technology | 3,809,794 | — | 3,809,794 | — | ||||||||||||
Real Estate | 14,712,026 | — | 14,712,026 | — | ||||||||||||
Utilities | 2,562,964 | — | 2,562,964 | — | ||||||||||||
Asset-backed securities | 60,780,518 | — | 60,780,518 | — | ||||||||||||
Commercial mortgage-backed securities | 21,816,370 | — | 21,816,370 | — | ||||||||||||
Short-Term Investment | 6,357,507 | 6,357,507 | — | — | ||||||||||||
Total assets | $ | 354,015,082 | $ | 6,357,507 | $ | 347,657,575 | $ | — |
There were no Level 3 securities held by the Series as of December 31, 2019 or December 31, 2020.
20
Core Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Other Market and Credit Risk
Certain debt securities, derivatives and other financial instruments utilize the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark rate for variable interest rate calculations. In July 2017, the UK Financial Conduct Authority announced a desire to phase out the use of LIBOR by the end of 2021, suggesting that LIBOR may cease to be published after that time. Regulators and financial industry groups have begun planning for a transition to the use of a different benchmark, but there are obstacles and a lack of global consensus, and the process for amending existing contracts or instruments to transition away from LIBOR remains unclear. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates, a reduction in the values of some LIBOR-based investments, and reduced effectiveness of certain hedging strategies, which may adversely affect a Series’ performance or net asset value. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021. In addition, the alternative reference or benchmark rate may be an ineffective substitute resulting in prolonged adverse market conditions for a Portfolio.
Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
Expenses are recorded on an accrual basis. Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund’s Board, taking into consideration, among other things, the nature and type of expense. Income, expenses (other than shareholder services fees), and realized and unrealized gains and losses are prorated among the classes based on the relative net assets of each class. Class specific expenses are directly charged to that Class.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
Foreign Currency Translation
The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series does not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the fair value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized foreign currency gains and losses represent foreign currency gains and losses between trade date and settlement date on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.
Asset-Backed Securities
The Series may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e. loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Series may subsequently
21
Core Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Asset-Backed Securities (continued)
have to reinvest the proceeds at lower interest rates. If the Series has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
Mortgage-Backed Securities
The Series may invest in mortgage-backed securities (“MBS” or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the Series to the periodic payments of principal and interest from those mortgages. MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. For MBS there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury. Non- agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Inflation-Indexed Bonds
The Series may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation- indexed bonds will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
Securities Purchased on a When-Issued Basis or Forward Commitment
The Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss. No such investments were held by the Series on December 31, 2020.
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, 2020.
22
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, 2020, 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, 2017 through December 31, 2020. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation transactions for foreign jurisdictions in which it invests, the Series will provide for foreign taxes, and where appropriate, deferred foreign tax.
Distributions of Income and Gains
Distributions to shareholders of net investment income are made quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.25% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among
23
Core Bond Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
The Fund may enter into agreements with financial intermediaries pursuant to which the Fund may pay financial intermediaries for non-distribution related sub-transfer agency, administrative, sub-accounting, and other shareholder services in an annual amount not to exceed 0.15% of the average daily net assets of the Class I and Class S shares of the Series. Payments made pursuant to such agreements are generally based on the current assets and/or number of accounts of the Series attributable to the financial intermediary. Any payments made pursuant to such agreements may be in addition to, rather than in lieu of, any Distribution and Shareholder Services Fee payable under the Rule 12b-1 plan of the Fund. For the year ended December 31, 2020, the sub- transfer agency expenses incurred by Class S and Class I were $1,202 and $4,996, respectively.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The Series compensates the distributor for distributing and servicing the Series’ Class S shares pursuant to a distribution plan adopted under Rule 12b-1 of the 1940 Act, regardless of expenses actually incurred. Under the agreement, the Series pays distribution and service fees to the distributor at an annual rate of 0.25% of average daily net assets attributable to Class S shares. There are no distribution and service fees on the Class I, Class W or Class Z shares. The fees are accrued daily and paid monthly.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets (excluding Target Series); 0.0075% on the next $15 billion of average daily net assets (excluding Target Series); and 0.0065% of average daily net assets in excess of $40 billion (excluding Target Series); plus a base fee of $30,400 per series. Additionally, certain transaction and out- of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the shareholder services fee and/or distribution and service (12b-1) fees and waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.45% of the average daily net assets of the Class S and Class I shares, 0.05% of the average daily net assets of the Class W shares, and 0.30% of the average daily net assets of the Class Z shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $641,684 in management fees for Class W shares for the year ended December 31, 2020. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $448, $171,244 and $10,229 for Class I, Class W and Class Z shares, respectively, for the year ended December 31, 2020. These amounts are included as a reduction of expenses on the Statement of Operations.
24
Core Bond Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
As of December 31, 2020, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, | |||||
2022 | 2023 | Total | ||||
Class I | $– | $448 | $448 | |||
Class W | 136,322 | 171,244 | 307,566 | |||
Class Z | 17,743 | 10,229 | 27,972 |
For the year ended December 31, 2020, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
The Series may participate in securities purchase and sale transactions with other Series or accounts advised by Manning & Napier (cross trades), in accordance with procedures adopted by the Fund’s Board and Securities and Exchange Commission rules, which require, among other things, that such purchase and sale cross trades be effected at the independent current market price of the security. Sales cross trades aggregated $22,390,059 with a net realized gain of $453,331 for the year ended December 31, 2020.
4. | Purchases and Sales of Securities |
For the year ended December 31, 2020, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $182,194,811 and $76,244,187, respectively. Purchases and sales of U.S. Government securities, other than short-term securities, were $246,190,578 and $227,164,022, respectively.
5. | Capital Stock Transactions |
Transactions in Class S, Class I, Class W and Class Z shares of Core Bond Series were:
CLASS S | FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | ||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||
Sold | 577,999 | $ | 6,500,636 | 129,995 | $ | 1,424,512 | ||||||||
Reinvested | 23,896 | 269,234 | 9,371 | 99,394 | ||||||||||
Repurchased | (309,325 | ) | (3,559,363 | ) | (9,760,167 | ) | (101,821,543 | ) | ||||||
Total | 292,570 | $ | 3,210,507 | (9,620,801 | ) | $ | (100,297,637 | ) |
CLASS I | FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | ||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||
Sold | 275,463 | $ | 2,832,664 | 744,741 | $ | 7,267,770 | ||||||||
Reinvested | 22,732 | 234,637 | 15,644 | 154,418 | ||||||||||
Repurchased | (412,865 | ) | (4,319,430 | ) | (8,284,544 | ) | (79,804,759 | ) | ||||||
Total | (114,670 | ) | $ | (1,252,129 | ) | (7,524,159 | ) | $ | (72,382,571 | ) |
25
Core Bond Series
Notes to Financial Statements (continued)
5. | Capital Stock Transactions (continued) |
CLASS W | FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/19 (COMMENCEMENT OF OPERATIONS) TO 12/31/19 | ||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||
Sold | 19,775,065 | $ | 224,513,766 | 18,446,163 | $ | 193,480,853 | ||||||||
Reinvested | 1,451,618 | 16,338,440 | 425,973 | 4,607,516 | ||||||||||
Repurchased | (10,370,089 | ) | (117,579,218 | ) | (1,214,978 | ) | (13,122,933 | ) | ||||||
Total | 10,856,594 | $ | 123,272,988 | 17,657,158 | $ | 184,965,436 |
CLASS Z | FOR THE PERIOD 3/1/19 | |||||||||||||
FOR THE YEAR ENDED | (COMMENCEMENT OF OPERATIONS) | |||||||||||||
12/31/20 | TO 12/31/19 | |||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||
Sold | 823,153 | $ | 8,664,897 | 3,403,661 | $ | 33,173,552 | ||||||||
Reinvested | 104,383 | 1,079,320 | 22,135 | 221,314 | ||||||||||
Repurchased | (1,096 | ) | (11,615 | ) | (2,394,550 | ) | (24,240,096 | ) | ||||||
Total | 926,440 | $ | 9,732,602 | 1,031,246 | $ | 9,154,770 |
Over 90% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund (with the exception of Credit Series) may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in August 2021 unless extended or renewed. During the year ended December 31, 2020, the Series did not borrow under the line of credit.
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of December 31, 2020.
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.
26
Core Bond Series
Notes to Financial Statements (continued)
9. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing book and tax treatments in the timing and/or treatment of the recognition of net investment income or gains and losses including redesignation of distributions paid and wash sales. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. For the year ended December 31, 2020, amounts were reclassified within the capital accounts to increase Additional Paid in Capital by $8,195, and decrease Total Distributable Earnings (Loss) by $8,195. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | |||||||
Ordinary income | $10,657,577 | $5,662,797 | ||||||
Long-term capital gains | $7,861,863 | $57,719 |
At December 31, 2020, 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 | $ | 342,868,886 | ||
Unrealized appreciation | 11,717,719 | |||
Unrealized depreciation | (571,523 | ) | ||
Net unrealized appreciation | $ | 11,146,196 | ||
Undistributed ordinary income | $ | 542,223 |
10. | Market Event |
In March 2020, the World Health Organization declared COVID-19 (a novel coronavirus) to be a pandemic. The situation is dynamic. Global financial markets have experienced and may continue to experience significant volatility resulting from the spread of COVID-19. The outbreak of COVID-19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand and general market uncertainty. The global economy, the economies of certain nations and individual issuers have been and may continue to be adversely affected by COVID-19, particularly in light of the interconnectivity between economies and financial markets, all of which may negatively impact the Series’ performance. In addition, COVID-19 and governmental responses to COVID-19 may negatively impact the capabilities of the Series’ service providers and disrupt the Series’ operations. Management of the Series will continue to monitor the impact of COVID-19.
27
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
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of Core Bond Series (one of the series constituting Manning & Napier Fund, Inc., referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, 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 ended December 31, 2020 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
New York, New York
February 17, 2021
We have served as the auditor of one or more investment companies in Manning & Napier Mutual Funds since 1992.
28
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.
The Series designates $7,995,518 as Long-Term Capital Gain dividends pursuant to Section 852(b)(3) of the Internal Revenue Code for the fiscal year ended December 31, 2020.
29
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.manning-napier.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 directors and officers, 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 and Officer
Name: | Paul Battaglia* |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 42 |
Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1 & Length of Time Served: | Indefinite – Chairman and Director since November 2018 |
Principal Occupation(s) During Past 5 Years: | Chief Financial Officer since 2018; Vice President of Finance (2016 – 2018); Director of Finance (2011 – 2016); Financial Analyst/Internal Auditor (2004-2006) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various subsidiaries and affiliates: Chief Financial Officer |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | N/A |
Independent Directors
Name: | Stephen B. Ashley |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 80 |
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 and Director since 1997; Chief Executive Officer (1997-2019) - Ashley Companies (property management and investment) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Ashley Companies since 1997 |
Name: | Paul A. Brooke |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 75 |
Current Position(s) Held with Fund: | Lead Independent Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since 2007; Governance & Nominating Committee Chairman since 2016; Lead Independent Director since 2017 |
Principal Occupation(s) During Past 5 Years: | Managing Member since 1991 - PMSV Holdings LLC (investments); Managing Member (2010-2016) - Venbio (investments). |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Incyte Corp. (biotech) (2000-2020); PureEarth (non-profit) since 2012; Cerus(biomedical) since 2016; Caelum BioSciences (biomedical) since 2018; Cheyne Capital International (investment)(2000-2017); |
30
Core Bond Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Peter L. Faber2 |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 82 |
Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Since 1987 |
Principal Occupation(s) During Past 5 Years: | Partner (1995-2006 & 2013-2018); Senior Counsel (2006-2012) - McDermott, Will & Emery LLP (law firm) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Boston Early Music Festival (non-profit) since 2007; Amherst Early Music, Inc. (non-profit) since 2009; Gotham Early Music Scene, Inc. (non-profit) since 2009; S’Cool Sounds, Inc. (non-profit) since 2017 |
Name: | Harris H. Rusitzky2 |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 85 |
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 since 1994 - The Greening Group (business consultants); Partner since 2006 - The Restaurant Group (restaurants) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (university) since 1972; Culinary Institute of America (non-profit college) since 1985; George Eastman Museum (museum) since 1988; National Restaurant Association (restaurant trade organization) ( 1978-2020) |
Name: | Russell O. Vernon |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 63 |
Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since April 2020;Goverance & Nominating Committee Chairman since November 2020 |
Principal Occupation(s) During Past 5 Years: | Founder and General Partner (2009-2019) – BVM Capital Management (economic development) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Board Member, Vice Chairman and President since 2010 – Newburgh Armory Unity Center (military); Board Member and Executive Director since2020 – National Purple Heart Honor Mission, Inc. (military); Board Member, Vice Chairman (2015-2020) – National Purple Heart Hall of Honor, Inc. (military) |
31
Core Bond Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Chester N. Watson |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 70 |
Current Position(s) Held with Fund: | Director, Audit Committee Chairman, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member Since 2012; Audit Committee Chairman since 2013 |
Principal Occupation(s) During Past 5 Years: | General Auditor (2003-2011) - General Motors Company (auto manufacturer) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (University) since 2005; Hudson Valley Center for Innovation, Inc. (New Business and Economic Development) since 2019; Town of Greenburgh, NY Planning Board (Municipal Government) (2015-2019); |
Officers: | |
Name: | Elizabeth Craig |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 33 |
Current Position(s) Held with Fund: | Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2016 |
Principal Occupation(s) During Past 5 Years: | Fund Regulatory Administration Manager since 2018; Fund Administration Manager (2015-2018); Mutual Fund Compliance Specialist (2009-2015) - Manning & Napier Advisors, LLC; Assistant Corporate Secretary (2011-2016) - Manning & Napier Fund, Inc.; Corporate Secretary, Director since 2019– Manning & Napier Investor Services, Inc. |
Name: | Samantha Larew |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 40 |
Current Position(s) Held with Fund: | Chief Compliance Officer and Anti-Money Laundering Compliance Officer |
Term of Office1 & Length of Time Served: | Chief Compliance Officer since 2019; Anti-Money Laundering Compliance Officer since 2018 |
Principal Occupation(s) During Past 5 Years: | Co-Director of Compliance since 2018; Compliance Communications Supervisor (2014-2018); Compliance Supervisor (2013-2014); Broker- Dealer Compliance Supervisor (2011-2013); Broker-Dealer Compliance Analyst (2010-2011) - Manning & Napier Advisors, LLC & Affiliates; Broker- Dealer Chief Compliance Officer since 2013; Broker-Dealer Assistant Corporate Secretary since 2011 – Manning & Napier Investor Services, Inc.; Compliance Analyst (2007-2009) – Wall Street Financial Group; Compliance Specialist (2003-2007) – Manning & Napier Advisors, LLC & Affiliates |
Name: | Scott Morabito |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 33 |
Current Position(s) Held with Fund: | Vice President |
Term of Office1 & Length of Time Served: | Vice President since 2019; Assistant Vice President (2017-2019) |
Principal Occupation(s) During Past 5 Years: | Managing Director of Operations since 2019; Director of Funds Group (2017-2019); Fund Product and Strategy Manager (2014-2017); Senior Product and Strategy Analyst (2013-2014); Product and Strategy Analyst (2011-2013) - Manning & Napier Advisors, LLC; President, Director since 2018 – Manning & Napier Investor Services, Inc. |
32
Core Bond Series
Directors’ and Officers’ Information
(unaudited)
Officers: (continued)
Name: | Troy Statczar |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 49 |
Current Position(s) Held with Fund: | Principal Financial Officer, Treasurer |
Term of Office1 & Length of Time Served: | Principal Financial Officer and Treasurer since 2020 |
Principal Occupation(s) During Past 5 Years: | Senior Director, Foreside Treasurer Services since 2020 - Foreside Financial Group; Director of Fund Administration (2017-2019) - Thornburg Investment Management, Inc.; Director of U.S. Operations (2008-2017) - Henderson Global Investors N.A., Inc. |
Name: | Sarah Turner |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 38 |
Current Position(s) Held with Fund: | Chief Legal Officer; Assistant Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2018 |
Principal Occupation(s) During Past 5 Years: | Attorney since 2018 - Manning & Napier Advisors, LLC and affiliates; Counsel (2017-2018) – Harter Secrest and Emery LLP; Legal Counsel (2010-2017) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various affiliates: Corporate Secretary, General Counsel |
*Interested Director, within the meaning of the 1940 Act by reason of his positions with the Fund’s Advisor, Manning & Napier Advisors, LLC, and Distributor, Manning & Napier Investor Services, Inc.
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.
2 Effective December 31, 2020, Peter L. Faber and Harris Rusitzky have each retired as a Director of the Fund in accordance with the Board’s existing Board retirement policy.
33
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-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning- napier.com or by calling (800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End
2. Fund Holdings - Quarter-End
3. Shareholder Report - Annual
4. Shareholder Report - Semi-Annual
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNCOB-12/20-AR
34
Manning & Napier Fund, Inc. |
Credit Series |
Paper copies of the Series’ shareholder reports are no longer sent by mail, unless you specifically request them from the Series or from your financial intermediary, such as a broker-dealer or bank. Shareholder reports are available online. Each time a report is posted on the Series’ website you will be provided with a link to access the report online, either by mail (hard copy notice) or by email, if you have already signed up for electronic delivery of shareholder reports.
You may elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies. If you invest directly with the Fund, you can inform the Fund that you wish to continue receiving paper copies by visiting www.manning-napier.com or calling 1-800-466-3863. Your election to receive reports in paper will apply to all funds held with your financial intermediary if you invest through a financial intermediary or all series of the Fund if you invest directly with the Fund.
Additionally, If you have not yet signed up for electronic delivery of shareholder reports and other Fund communications, you may do so by contacting your financial intermediary or, if you are a direct investor, by visiting www.manning-napier.com or calling 1-800-466-3863.
Independent Perspective | Real-World Solutions |
A Note from Our CEO
Dear Shareholder,
2020. What a momentous year.
Political change, social unrest, the pandemic, economic shutdowns, and, of course, the fastest stock market selloff and recovery in history, all describe what has been a remarkably tumultuous and challenging time.
Maybe it should come as no surprise that after a year of such change, we yearn for a return of convention, clarity, facts, and perhaps, less drama.
This desire for normalcy is understandable, but we cannot hide our heads in the sand. The profound challenges we face are not going to simply go away.
If anything, many of the structural issues that brought us to where we are today, technological progress, the information age, a shifting economy and culture, may very well accelerate from here. Whether we want it or not, change is coming.
As investors, logically and rationally deciphering an uncertain future is one of our most existential tasks. Particularly in times like these, it is too easy to get caught up in the turbulence—to let emotion get the best of us—to fail to see the forest for the trees.
This is why the key question we must ask ourselves today is, what is the best way for us to understand and invest upon the paths that lie before us?
We believe the answer is, in many ways, an evergreen one, and we hope it offers you a helpful perspective.
It is to invest for the long-term, not speculate on short-term developments. It is to take an active, hands-on approach to investment decisions. It is to be patient, disciplined, and confident when the right investment opportunities present themselves. And it is to be constantly attentive to risk, particularly the most significant risks, permanent loss of capital and the risk of falling short of long-term needs and goals.
These are the same investing principles that we have been successfully implementing for clients since our founding more than 50 years ago.
Whether you are an individual investor, a financial advisor, or an institutional investor making decisions on behalf of others, you can trust that we are well equipped to handle whatever challenges the markets have in store for us next.
We wish you safety and good health, and we appreciate your continued confidence in our firm and our approach.
Sincerely,
Marc Mayer Chief Executive Officer |
Corporate Headquarters | 290 Woodcliff Drive | Fairport, NY 14450 | (585) 325-6880 phone | (800) 551-0224 toll free | www.manning-napier.com
1
Credit Series
Fund Commentary
(unaudited)
Investment Objective
To provide long-term total return. Under normal circumstances, at least 80% of the Series’ assets will be invested in credit- related instruments and other financial instruments, principally derivative instruments and exchange-traded funds, with economic characteristics similar to credit-related instruments.
Performance Commentary
The Credit Series was launched on 4/14/2020. Since that time, the Series has earned a return of 8.77% compared to 7.15% for the benchmark (i.e., the Bloomberg Barclays US Intermediate Credit Index).
The Series was created specifically to provide Manning & Napier’s separately managed multi-asset class clients with desired credit exposure (e.g., corporates, asset-backed, and commercial mortgage-backed securities).
The Series officially launched in April as management sought to opportunistically increase credit exposure in client accounts as spreads had materially widened following the global pandemic and subsequent economic downturn. The result has been strong absolute returns as credit related securities, particularly corporate bonds, have rebounded significantly. This has been in part due to unprecedented levels of global fiscal and monetary stimulus, as well as announcements of COVID-19 vaccine approvals and distribution efforts.
Outperformance relative to the benchmark has largely been attributable to strong selection within corporate bonds. In contrast, an underweight allocation to corporates, coupled with an out of benchmark allocation to securitized credit, detracted from relative returns.
In terms of positioning, the market continues to look rich from a valuation perspective; however, we continue to find select opportunities. Specifically, we continue to find opportunities within the corporate sector, particularly within communications and cyclicals, and, despite tightening valuations, in BBB-rated issuances from a bottom-up perspective. Additionally, we continue to view commercial mortgage backed and asset-backed securities as relatively attractive and are focusing on securities with seniority in the capital structure that are backed by asset classes with high quality fundamentals and low credit risk.
While 2020 was a very strong year for fixed income, we believe investor return expectations for the coming year should be tempered as the fixed income landscape remains challenging due to low starting rates and relatively tight credit spreads. That stated, we believe a flexible approach with the ability to adapt to changing environments while uncovering risks and opportunities will remain essential to achieving investor objectives.
Performance for the Credit Series Class W shares is provided above.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than that quoted; investors can obtain the most recent month-end performance at www.manning- napier.com or by calling (800) 466-3863.
Additional information and associated disclosures can be found on the Performance Update page of this report.
All investments involve risks, including possible loss of principal. There is an inverse relationship between bond prices and interest rates; as interest rates rise, bond prices (and therefore the value of bond funds) fall. Likewise, as interest rates fall, bond prices and the value of bond funds rise. Investments in derivatives can be highly volatile and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk. Also, the use of leverage increases exposure to the market and may magnify potential losses.
2
Credit Series
Performance Update as of December 31, 2020
(unaudited)
TOTAL RETURN SINCE INCEPTION1,2 | ||
Credit Series - Class W3 | 8.77% | |
Bloomberg Barclays U.S. Intermediate Credit Index4 | 7.15% |
The following graph compares the value of a $10,000 investment in the Credit Series - Class W from its inception (April 14, 2020) to present (December 31, 2020) to the Bloomberg Barclays U.S. Intermediate Credit Index.
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 are calculated from April 14, 2020, 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, 2020, this annualized net expense ratio was 0.10% for Class W. The annualized gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.43% for Class W for the period ended December 31, 2020. |
4The Bloomberg Barclays U.S. Intermediate Credit Index is an unmanaged, market-value weighted index of investment-grade U.S. dollar-denominated, fixed-rate, taxable corporate and government-related debt with less than ten years to maturity. It is composed of a corporate and non-corporate component that includes non-US agencies, sovereigns, supranationals and local authorities. Index returns do not reflect any fees or expenses. Index returns provided by Interactive Data. |
3
Credit Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 1, 2020 to December 31, 2020).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the Actual line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The Hypothetical line in the table below provides information about hypothetical account values and hypothetical expenses based on the Series’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Series’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in a class of the Series and other funds. To do so, compare this 5% hypothetical example for the class in which you have invested with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ACCOUNT VALUE 7/1/20 | ENDING ACCOUNT VALUE 12/31/20 | EXPENSES PAID DURING PERIOD* 7/1/20 - 12/31/20 | ANNUALIZED EXPENSE RATIO | |||||
Class W | ||||||||
Actual | $1,000.00 | $1,050.10 | $0.52 | 0.10% | ||||
Hypothetical | ||||||||
(5% return before expenses) | $1,000.00 | $1,024.63 | $0.51 | 0.10% |
*Expenses are equal to each Series’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data. The Series’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
4
Credit Series
Portfolio Composition as of December 31, 2020
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
5
Credit Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS - 56.8% | ||||||||
Non-Convertible Corporate Bonds- 56.8% | ||||||||
Communication Services - 8.2% | ||||||||
Diversified Telecommunication Services - 3.8% | ||||||||
AT&T, Inc., 4.25%, 3/1/2027 | 1,600,000 | $ | 1,871,573 | |||||
Verizon Communications, Inc., 4.272%, 1/15/2036 | 4,430,000 | 5,494,443 | ||||||
7,366,016 | ||||||||
Interactive Media & Services - 1.9% | ||||||||
Tencent Holdings Ltd. (China), 3.975%, 4/11/20292 | 3,230,000 | 3,680,203 | ||||||
Media - 2.5% | ||||||||
Comcast Corp., 3.25%, 11/1/2039 | 4,120,000 | 4,677,790 | ||||||
Total Communication Services | 15,724,009 | |||||||
Consumer Discretionary - 9.6% | ||||||||
Automobiles - 1.2% | ||||||||
Volkswagen Group of America Finance LLC (Germany), 3.35%, 5/13/20252 | 2,150,000 | 2,363,613 | ||||||
Internet & Direct Marketing Retail - 7.4% | ||||||||
Alibaba Group Holding Ltd. (China), 3.40%, 12/6/2027 | 4,670,000 | 5,228,071 | ||||||
Booking Holdings, Inc. | ||||||||
4.10%, 4/13/2025 | 3,750,000 | 4,252,838 | ||||||
3.60%, 6/1/2026 | 1,200,000 | 1,363,867 | ||||||
Expedia Group, Inc. | ||||||||
6.25%, 5/1/20252 | 1,620,000 | 1,877,743 | ||||||
5.00%, 2/15/2026 | 1,300,000 | 1,456,414 | ||||||
14,178,933 | ||||||||
Textiles, Apparel & Luxury Goods - 1.0% | ||||||||
NIKE, Inc., 3.375%, 3/27/2050 | 1,490,000 | 1,843,342 | ||||||
Total Consumer Discretionary | 18,385,888 | |||||||
Energy - 9.4% | ||||||||
Oil, Gas & Consumable Fuels - 9.4% | ||||||||
Energy Transfer Operating LP, 6.50%, 2/1/2042 | 3,920,000 | 4,782,344 | ||||||
Kinder Morgan Energy Partners LP, 6.95%, 1/15/2038 | 3,430,000 | 4,693,302 | ||||||
Sabine Pass Liquefaction LLC, 5.875%, 6/30/2026 | 4,050,000 | 4,896,864 | ||||||
The Williams Companies, Inc., 3.75%, 6/15/2027 | 3,300,000 | 3,765,421 | ||||||
Total Energy | 18,137,931 | |||||||
Financials - 6.7% | ||||||||
Banks - 5.7% | ||||||||
Bank of America Corp., 4.00%, 1/22/2025 | 2,500,000 | 2,809,204 | ||||||
Citigroup, Inc., 4.45%, 9/29/2027 | 2,940,000 | 3,475,486 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Financials (continued) | ||||||||
Banks (continued) | ||||||||
JP Morgan Chase & Co., (U.S. Secured Overnight Financing Rate + 2.515%), 2.956%, 5/13/20313 | 4,310,000 | $ | 4,726,307 | |||||
11,010,997 | ||||||||
Capital Markets - 1.0% | ||||||||
Owl Rock Technology Finance Corp., 3.75%, 6/17/20262 | 1,890,000 | 1,900,259 | ||||||
Total Financials | 12,911,256 | |||||||
Health Care - 2.1% | ||||||||
Health Care Providers & Services - 1.3% | ||||||||
HCA, Inc., 4.125%, 6/15/2029 | 2,080,000 | 2,412,970 | ||||||
Pharmaceuticals - 0.8% | ||||||||
Pfizer, Inc., 2.625%, 4/1/2030 | 1,470,000 | 1,640,738 | ||||||
Total Health Care | 4,053,708 | |||||||
Industrials - 9.7% | ||||||||
Airlines - 1.9% | ||||||||
Southwest Airlines Co., 5.125%, 6/15/2027 | 3,100,000 | 3,687,806 | ||||||
Industrial Conglomerates - 1.4% | ||||||||
General Electric Co., (3 mo. LIBOR US + 3.330%), 5.00%3,4 | 3,010,000 | 2,800,053 | ||||||
Trading Companies & Distributors - 6.4% | ||||||||
AerCap Ireland Capital DAC - AerCap Global Aviation Trust (Ireland), 4.45%, 10/1/2025 | 4,040,000 | 4,500,064 | ||||||
Air Lease Corp. | ||||||||
3.75%, 6/1/2026 | 510,000 | 560,988 | ||||||
3.625%, 4/1/2027 | 3,000,000 | 3,215,076 | ||||||
Ashtead Capital, Inc. (United Kingdom), 4.00%, 5/1/20282 | 1,780,000 | 1,890,609 | ||||||
Avolon Holdings Funding Ltd. (Ireland), 4.375%, 5/1/20262 | 1,900,000 | 2,058,260 | ||||||
12,224,997 | ||||||||
Total Industrials | 18,712,856 | |||||||
Information Technology - 2.0% | ||||||||
IT Services - 2.0% | ||||||||
Visa, Inc., 2.70%, 4/15/2040 | 3,470,000 | 3,787,961 | ||||||
Real Estate - 7.6% | ||||||||
Equity Real Estate Investment Trusts (REITS) - 7.6% | ||||||||
American Tower Corp., 3.80%, 8/15/2029 | 4,090,000 | 4,755,188 | ||||||
Camden Property Trust, 2.80%, 5/15/2030 | 3,200,000 | 3,553,789 | ||||||
Crown Castle International Corp. 3.80%, 2/15/2028 | 3,120,000 | 3,595,884 |
The accompanying notes are an integral part of the financial statements.
6
Credit Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Real Estate (continued) | ||||||||
Equity Real Estate Investment Trusts (REITS) (continued) | ||||||||
Crown Castle International Corp. (continued) 3.10%, 11/15/2029 | 1,105,000 | $ | 1,217,637 | |||||
SBA Tower Trust, 2.328%, 1/15/20282 | 1,400,000 | 1,411,084 | ||||||
Total Real Estate | 14,533,582 | |||||||
Utilities - 1.5% | ||||||||
Electric Utilities - 1.5% | ||||||||
Dominion Energy, Inc., 3.375%, 4/1/2030 | 2,460,000 | 2,802,173 | ||||||
TOTAL CORPORATE BONDS | ||||||||
(Identified Cost $101,411,053) | 109,049,364 | |||||||
ASSET-BACKED SECURITIES - 20.7% | ||||||||
AMSR Trust, Series 2020-SFR4, Class A, 1.355%, 11/17/20372 | 1,425,000 | 1,437,055 | ||||||
CF Hippolyta LLC | ||||||||
Series 2020-1, Class A2, 1.99%, 7/15/20602 | 712,779 | 721,880 | ||||||
Series 2020-1, Class B1, 2.28%, 7/15/20602 | 2,242,790 | 2,277,484 | ||||||
Commonbond Student Loan Trust, Series 2020-AGS, Class A, 1.98%, 8/25/20502 | 1,560,567 | 1,597,641 | ||||||
Credit Acceptance Auto Loan Trust | ||||||||
Series 2018-1A, Class A, 3.01%, 2/16/20272 | 69,157 | 69,215 | ||||||
Series 2020-3A, Class A, 1.24%, 10/15/20292 | 1,600,000 | 1,617,757 | ||||||
Dell Equipment Finance Trust, Series 2020-1, Class A3, 2.24%, 2/22/20232 | 2,000,000 | 2,055,279 | ||||||
Enterprise Fleet Financing LLC, Series 2017-3, Class A3, 2.36%, 5/20/20232 | 712,856 | 719,020 | ||||||
GM Financial Consumer Automobile Receivables Trust, Series 2020-2, Class A4, 1.74%, 8/18/2025 | 1,500,000 | 1,555,138 | ||||||
Goodgreen Trust, Series 2020-1A, Class A, 2.63%, 4/15/20552 | 1,269,807 | 1,288,846 | ||||||
Invitation Homes Trust, Series 2017- SFR2, Class A, (1 mo. LIBOR US + 0.850%), 1.003%, 12/17/20362,5 | 1,799,123 | 1,794,734 | ||||||
Navient Private Education Refi Loan Trust | ||||||||
Series 2017-2A, Class A, (1 mo. LIBOR US + 1.050%), 1.198%, 12/27/20662,5 | 2,124,638 | 2,151,241 | ||||||
Series 2020-DA, Class A, 1.69%, 5/15/20692 | 1,592,082 | 1,622,239 | ||||||
Nelnet Student Loan Trust, Series 2012-3A, Class A, (1 mo. LIBOR US + 0.700%), 0.848%, 2/25/20452,5 | 1,213,402 | 1,198,135 |
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
Oxford Finance Funding LLC, Series 2019-1A, Class A2, 4.459%, 2/15/20272 | 1,600,000 | $ | 1,655,399 | |||||
Progress Residential Trust, Series 2020-SFR2, Class A, 2.078%, 6/17/20372 | 500,000 | 512,688 | ||||||
Santander Retail Auto Lease Trust | ||||||||
Series 2019-A, Class A2, 2.72%, 1/20/20222 | 320,087 | 320,710 | ||||||
Series 2019-B, Class A2A, 2.29%, 4/20/20222 | 746,993 | 751,243 | ||||||
SLM Student Loan Trust | ||||||||
Series 2011-2, Class A2, (1 mo. LIBOR US + 1.200%), 1.348%, 10/25/20345 | 880,000 | 893,068 | ||||||
Series 2013-6, Class A3, (1 mo. LIBOR US + 0.650%), 0.798%, 6/25/20555 | 1,829,763 | 1,808,650 | ||||||
SMB Private Education Loan Trust | ||||||||
Series 2017-B, Class A2A, 2.82%, 10/15/20352 | 339,155 | 351,725 | ||||||
Series 2017-B, Class A2B, (1 mo. | ||||||||
LIBOR US + 0.750%), 0.909%, 10/15/20352,5 | 1,706,011 | 1,705,634 | ||||||
SoFi Professional Loan Program LLC | ||||||||
Series 2017-F, Class A2FX, 2.84%, 1/25/20412 | 1,780,046 | 1,819,453 | ||||||
Series 2018-B, Class A2FX, 3.34%, 8/25/20472 | 482,422 | 496,531 | ||||||
Store Master Funding I-VII, Series 2018-1A, Class A1, 3.96%, 10/20/20482 | 1,435,516 | 1,499,652 | ||||||
Toyota Auto Loan Extended Note Trust, Series 2020-1A, Class A, 1.35%, 5/25/20332 | 2,500,000 | 2,574,218 | ||||||
Tricon American Homes | ||||||||
Series 2017-SFR2, Class A, 2.928%, 1/17/20362 | 1,239,681 | 1,278,001 | ||||||
Series 2020-SFR1, Class A, 1.499%, 7/17/20382 | 1,400,000 | 1,414,916 | ||||||
Vantage Data Centers LLC, Series 2020-1A, Class A2, 1.645%, 9/15/20452 | 1,750,000 | 1,761,993 | ||||||
VB-S1 Issuer LLC, Series 2020-1A, Class C2, 3.031%, 6/15/20502 | 775,000 | 811,916 | ||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||
(Identified Cost $38,823,280) | 39,761,461 | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES - 11.8% | ||||||||
Credit Suisse Mortgage Capital Certificates | ||||||||
Series 2012-CIM3, Class A1, 2.50%, 11/25/20422,6 | 606,139 | 620,272 | ||||||
Series 2013-7, Class A6, 3.50%, 8/25/20432,6 | 634,432 | 647,958 |
The accompanying notes are an integral part of the financial statements.
7
Credit Series
Investment Portfolio - December 31, 2020
PRINCIPAL AMOUNT1/ SHARES | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
Freddie Mac Multifamily Structured | ||||||||
Pass-Through Certificates | ||||||||
Series K072, Class A2, 3.444%, 12/25/2027 | 1,000,000 | $ | 1,162,236 | |||||
Series K106, Class X1 (IO), 1.355%, 1/25/20306 | 15,983,836 | 1,706,279 | ||||||
FREMF Mortgage Trust | ||||||||
Series 2014-K715, Class B, 3.972%, 2/25/20462,6 | 465,000 | 464,570 | ||||||
Series 2015-K43, Class B, 3.733%, 2/25/20482,6 | 400,000 | 436,881 | ||||||
Series 2015-K720, Class B, 3.393%, 7/25/20222,6 | 2,500,000 | 2,583,461 | ||||||
GS Mortgage Securities Corp. Trust, Series 2019-70P, Class A, (1 mo. LIBOR US + 1.000%), 1.159%, 10/15/20362,5 | 1,500,000 | 1,462,380 | ||||||
GS Mortgage-Backed Securities Corp. Trust, Series 2020-PJ3, Class A14, 3.00%, 10/25/20502,6 | 804,414 | 826,241 | ||||||
J.P. Morgan Chase Commercial Mortgage Securities Trust, Series 2019-ICON, Class A, 3.884%, 1/5/20342 | 2,000,000 | 2,093,976 | ||||||
JP Morgan Mortgage Trust, Series 2017-6, Class A5, 3.50%, 12/25/20482,6 | 88,349 | 88,608 | ||||||
JPMDB Commercial Mortgage Securities Trust, Series 2017-C5, Class A5, 3.694%, 3/15/2050 | 1,496,000 | 1,705,790 | ||||||
Morgan Stanley Bank of America Merrill Lynch Trust, Series 2014-C19, Class A4, 3.526%, 12/15/2047 | 965,361 | 1,057,576 | ||||||
Morgan Stanley Capital I Trust | ||||||||
Series 2016-UB11, Class A4, 2.782%, 8/15/2049 | 500,000 | 538,321 | ||||||
Series 2018-H3, Class A5, 4.177%, 7/15/2051 | 1,000,000 | 1,192,804 | ||||||
Series 2020-CNP, Class A, 2.428%, 4/5/20422,6 | 1,000,000 | 1,054,649 | ||||||
Sequoia Mortgage Trust, Series 2013-5, Class A1, 2.50%, 5/25/20432,6 | 1,077,673 | 1,104,318 |
PRINCIPAL | VALUE | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
UBS Commercial Mortgage Trust, Series 2017-C7, Class A4, 3.679%, 12/15/2050 | 1,000,000 | $ | 1,148,984 | |||||
Wells Fargo Commercial Mortgage Trust | ||||||||
Series 2015-C30, Class A4, 3.664%, 9/15/2058 | 1,500,000 | 1,681,439 | ||||||
Series 2015-NXS4, Class A4, 3.718%, 12/15/2048 | 1,000,000 | 1,126,805 | ||||||
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES | ||||||||
(Identified Cost $21,962,304) | 22,703,548 | |||||||
MUNICIPAL BONDS - 4.0% | ||||||||
Hawaii | ||||||||
Series GC, G.O. Bond, 1.112%, 10/1/2026 | 1,900,000 | 1,935,644 | ||||||
Series GC, G.O. Bond, 2.632%, 10/1/2037 | 2,240,000 | 2,335,670 | ||||||
New York City Transitional Finance Authority, Future Tax Secured, Public Impt., Revenue Bond, 1.58%, 5/1/2024 | 985,000 | 1,014,757 | ||||||
South Carolina Public Service Authority,Series B, Revenue Bond, 2.329%, 12/1/2028 | 1,355,000 | 1,417,669 | ||||||
Tampa-Hillsborough County Expressway Authority, Series B, Revenue Bond, BAM, 1.892%, 7/1/2029 | 1,000,000 | 1,001,170 | ||||||
TOTAL MUNICIPAL BONDS | ||||||||
(Identified Cost $7,597,262) | 7,704,910 | |||||||
MUTUAL FUND - 2.8% | ||||||||
iShares Broad USD Investment Grade Corporate Bond ETF | ||||||||
(Identified Cost $5,353,705) | 87,415 | 5,417,108 | ||||||
SHORT-TERM INVESTMENT - 3.2% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 0.03%7 | ||||||||
(Identified Cost $6,150,935) | 6,150,935 | 6,150,935 | ||||||
TOTAL INVESTMENTS - 99.3% | ||||||||
(Identified Cost $181,298,539) | 190,787,326 | |||||||
OTHER ASSETS, LESS LIABILITIES - 0.7% | 1,339,231 | |||||||
NET ASSETS - 100% | $ | 192,126,557 |
The accompanying notes are an integral part of the financial statements.
8
Credit Series
Investment Portfolio - December 31, 2020
ETF - Exchange-Traded Fund
G.O. Bond - General Obligation Bond
Impt. - Improvement
IO - Interest only
LIBOR - London Interbank Offered Rate
Scheduled principal and interest payments are guaranteed by:
BAM (Build America Mutual Assurance Co.)
The insurance does not guarantee the market value of the municipal bonds.
1Amount is stated in USD unless otherwise noted. |
2Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be liquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2020 was $62,069,690, which represented 32.3% of the Series’ Net Assets. |
3Variable rate security. Security may be issued at a fixed coupon rate, which converts to a variable rate at a specified date. Rate shown is the rate in effect as of December 31, 2020. |
4Security is perpetual in nature and has no stated maturity date. |
5Floating rate security. Rate shown is the rate in effect as of December 31, 2020. |
6Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of December 31, 2020. |
7Rate shown is the current yield as of December 31, 2020. |
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
9
Credit Series
Statement of Assets and Liabilities
December 31, 2020
ASSETS: | ||||
Investments, at value (identified cost $181,298,539) (Note 2) | $ | 190,787,326 | ||
Receivable from Advisor (Note 3) | 3,726 | |||
Interest receivable | 1,013,343 | |||
Receivable for fund shares sold | 351,414 | |||
Dividends receivable | 71 | |||
Prepaid and other expenses | 18,709 | |||
TOTAL ASSETS | 192,174,589 | |||
LIABILITIES: | ||||
Accrued fund accounting and administration fees (Note 3) | 15,998 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 1,503 | |||
Audit fees payable | 11,259 | |||
Accrued printing and postage fees payable | 8,006 | |||
Payable for fund shares repurchased | 6,042 | |||
Other payables and accrued expenses | 5,224 | |||
TOTAL LIABILITIES | 48,032 | |||
TOTAL NET ASSETS | $ | 192,126,557 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 181,322 | ||
Additional paid-in-capital | 181,907,498 | |||
Total distributable earnings (loss) | 10,037,737 | |||
TOTAL NET ASSETS | $ | 192,126,557 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W | ||||
($192,126,557/18,132,235 shares) | $ | 10.60 |
The accompanying notes are an integral part of the financial statements.
10
Credit Series
Statement of Operations
For the Period April 14, 20201 to December 31, 2020
INVESTMENT INCOME: | ||||
Interest | $ | 3,079,712 | ||
Dividends | 160,292 | |||
Total Investment Income | 3,240,004 | |||
EXPENSES: | ||||
Management fees (Note 3) | 308,850 | |||
Fund accounting and administration fees (Note 3) | 41,966 | |||
Directors’ fees (Note 3) | 17,753 | |||
Chief Compliance Officer service fees (Note 3) | 3,007 | |||
Offering and Organizational expenses | 67,631 | |||
Audit fees | 50,159 | |||
Custodian fees | 6,666 | |||
Miscellaneous | 30,166 | |||
Total Expenses | 526,198 | |||
Less reduction of expenses (Note 3) | (402,659 | ) | ||
Net Expenses | 123,539 | |||
NET INVESTMENT INCOME | 3,116,465 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | 2,137,540 | |||
Net change in unrealized appreciation (depreciation) on investments | 9,488,787 | |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 11,626,327 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 14,742,792 |
1Commencement of operations.
The accompanying notes are an integral part of the financial statements.
11
Credit Series
Statements of Changes in Net Assets
FOR THE PERIOD 4/14/201 TO 12/31/20 | ||||
INCREASE (DECREASE) IN NET ASSETS: | ||||
OPERATIONS: | ||||
Net investment income | $ | 3,116,465 | ||
Net realized gain (loss) on investments | 2,137,540 | |||
Net change in unrealized appreciation (depreciation) on investments | 9,488,787 | |||
Net increase (decrease) from operations | 14,742,792 | |||
DISTRIBUTIONS TO SHAREHOLDERS (Note 8): | ||||
Class W | (4,705,055 | ) | ||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||
Net increase (decrease) from capital share transactions (Note 5) | 182,088,820 | |||
Net increase (decrease) in net assets | 192,126,557 | |||
NET ASSETS: | ||||
Beginning of period | — | |||
End of period | $ | 192,126,557 |
1Commencement of operations.
The accompanying notes are an integral part of the financial statements.
12
Credit Series
Financial Highlights - Class W
FOR THE PERIOD 4/14/201 TO 12/31/20 | |||
Per share data (for a share outstanding throughout the period): | |||
Net asset value - Beginning of period | $10.00 | ||
Income from investment operations: | |||
Net investment income2 | 0.19 | ||
Net realized and unrealized gain (loss) on investments | 0.68 | ||
Total from investment operations | 0.87 | ||
Less distributions to shareholders: | |||
From net investment income | (0.18 | ) | |
From net realized gain on investments | (0.09 | ) | |
Total distributions to shareholders | (0.27 | ) | |
Net asset value - End of period | $10.60 | ||
Net assets - End of period (000’s omitted) | $192,127 | ||
Total return3 | 8.77% | ||
Ratios (to average net assets)/Supplemental Data: | |||
Expenses*4 | 0.10% | ||
Net investment income4 | 2.52% | ||
Series portfolio turnover | 44% | ||
*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 amount4: | |||
0.33% |
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 or reimbursed during the period. Periods less than one year are not annualized. |
4Annualized. |
The accompanying notes are an integral part of the financial statements.
13
Credit Series
Notes to Financial Statements
1. | Organization |
Credit Series (the “Series”) is a no-load non-diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series’ investment objective is to provide long-term total return by investing primarily in fixed income securities.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares are only offered to discretionary investment accounts and other funds managed by the Advisor. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of December 31, 2020, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Credit Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market are valued at the latest quoted sales price of the exchange on which the security is primarily traded. Securities not traded on valuation date or securities not listed on an exchange are valued at the latest quoted bid price provided by the Fund’s pricing service. Securities listed on the NASDAQ Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Debt securities, including government bonds, foreign bonds, asset-backed securities, structured notes, supranational obligations, sovereign bonds, corporate bonds and mortgage-backed securities will normally be valued on the basis of evaluated bid prices provided directly by an independent pricing service (the “Service”). The pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Certain investments in securities held by the Series may be valued on a basis of a price provided directly by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
Municipal securities will normally be valued on the basis of market valuations provided by the Service. The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
14
Credit 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, 2020 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) | $ | 7,704,910 | $ | — | $ | 7,704,910 | $ | — | ||||||||
Corporate debt: | ||||||||||||||||
Communication Services | 15,724,009 | — | 15,724,009 | — | ||||||||||||
Consumer Discretionary | 18,385,888 | — | 18,385,888 | — | ||||||||||||
Energy | 18,137,931 | — | 18,137,931 | — | ||||||||||||
Financials | 12,911,256 | — | 12,911,256 | — | ||||||||||||
Health Care | 4,053,708 | — | 4,053,708 | — | ||||||||||||
Industrials | 18,712,856 | — | 18,712,856 | — | ||||||||||||
Information Technology | 3,787,961 | — | 3,787,961 | — | ||||||||||||
Real Estate | 14,533,582 | — | 14,533,582 | — | ||||||||||||
Utilities | 2,802,173 | — | 2,802,173 | — | ||||||||||||
Asset-backed securities | 39,761,461 | — | 39,761,461 | — | ||||||||||||
Commercial mortgage-backed securities | 22,703,548 | — | 22,703,548 | — | ||||||||||||
Mutual fund | 5,417,108 | 5,417,108 | — | — | ||||||||||||
Short-Term Investment | 6,150,935 | 6,150,935 | — | — | ||||||||||||
Total assets | $ | 190,787,326 | $ | 11,568,043 | $ | 179,219,283 | $ | — |
There were no Level 3 securities held by the Series as December 31, 2020.
Other Market and Credit Risk
Certain debt securities, derivatives and other financial instruments utilize the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark rate for variable interest rate calculations. In July 2017, the UK Financial Conduct Authority announced a desire to phase out the use of LIBOR by the end of 2021, suggesting that LIBOR may cease to be published after that time. Regulators and financial industry groups have begun planning for a transition to the use of a different benchmark, but there are obstacles and a lack of global consensus, and the process for amending existing contracts or instruments to transition away from LIBOR remains unclear. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates, a reduction in the values of some LIBOR-based investments, and reduced effectiveness of certain hedging strategies, which may adversely affect a Series’ performance or net asset value. Since the usefulness of LIBOR
15
Credit Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Other Market and Credit Risk (continued)
as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021. In addition, the alternative reference or benchmark rate may be an ineffective substitute resulting in prolonged adverse market conditions for a Portfolio.
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.
Organization and Offering Costs
Upon commencement of operations, organization costs associated with the establishment of the Series were expensed by the Series. Offering costs are amortized over a 12-month period beginning with the commencement of operations.
Foreign Currency Translation
The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series does not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the fair value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized foreign currency gains and losses represent foreign currency gains and losses between trade date and settlement date on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.
Asset-Backed Securities
The Series may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e. loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Series may subsequently have to reinvest the proceeds at lower interest rates. If the Series has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
Mortgage-Backed Securities
The Series may invest in mortgage-backed securities (“MBS” or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the Series to the periodic payments of principal and interest from those mortgages.
16
Credit Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Mortgage-Backed Securities (continued)
MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. For MBS there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury. Non- agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Inflation-Indexed Bonds
The Series may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation- indexed bonds will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
Securities Purchased on a When-Issued Basis or Forward Commitment
The Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss. No such investments were held by the Series on December 31, 2020.
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, 2020.
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.
17
Credit 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, 2020, the Series has recorded no liability for net unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns.
The Series files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions, as required. No income tax returns are currently under investigation. The statute of limitations on the Series’ tax returns remains open for the period ended December 31, 2020. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation transactions for foreign jurisdictions in which it invests, the Series will provide for foreign taxes, and where appropriate, deferred foreign tax.
Distributions of Income and Gains
Distributions to shareholders of net investment income are made quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.25% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director who each receive an additional annual stipend for these roles.
18
Credit Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. There are no distribution and service fees on the Class W shares.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets (excluding Target Series); 0.0075% on the next $15 billion of average daily net assets (excluding Target Series); and 0.0065% of average daily net assets in excess of $40 billion (excluding Target Series); plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.10% of the average daily net assets of the Class W shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $308,850 in management fees for Class W shares for the period ended December 31, 2020. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $93,809 for Class W shares for the period ended December 31, 2020. These amounts are included as a reduction of expenses on the Statement of Operations.
As of December 31, 2020, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, 2023 | |||
Class W | $93,809 |
For the period ended December 31, 2020, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
The Series may participate in securities purchase and sale transactions with other Series or accounts advised by Manning & Napier (cross trades), in accordance with procedures adopted by the Fund’s Board and Securities and Exchange Commission rules, which require, among other things, that such purchase and sale cross trades be effected at the independent current market price of the security. Purchases cross trades aggregated $22,390,059 for the period ended December 31, 2020.
4. | Purchases and Sales of Securities |
For the period ended December 31, 2020, purchases and sales of securities, other than U.S. Government securities and short- term securities, were $232,865,683 and $65,685,757, respectively. Purchases and sales of U.S. Government securities, other than short-term securities, were $15,150,231 and $8,772,165, respectively.
19
Credit Series
Notes to Financial Statements (continued)
5. | Capital Stock Transactions |
Transactions in Class W shares of Credit Series were:
CLASS W | FOR THE PERIOD 4/14/20 (COMMENCEMENT OF OPERATIONS) TO 12/31/20 | |||||||
SHARES | AMOUNT | |||||||
Sold | 19,012,780 | $ | 191,266,907 | |||||
Reinvested | 434,202 | 4,557,331 | ||||||
Repurchased | (1,314,747 | ) | (13,735,418 | ) | ||||
Total | 18,132,235 | $ | 182,088,820 |
Over 90% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of December 31, 2020.
7. | Foreign Securities |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the U.S. Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the U.S. Government.
8. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing book and tax treatments in the timing and/or treatment of the recognition of net investment income or gains and losses and wash sales. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net assets.
The tax character of distributions paid were as follows:
FOR THE PERIOD ENDED 12/31/20 | ||||
Ordinary income | $ | 4,705,055 |
20
Credit Series
Notes to Financial Statements (continued)
8. | Federal Income Tax Information (continued) |
At December 31, 2020, 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 | $ | 181,341,517 | ||
Unrealized appreciation | 9,482,122 | |||
Unrealized depreciation | (36,313 | ) | ||
Net unrealized appreciation | $ | 9,445,809 | ||
Undistributed ordinary income | $ | 593,333 |
9. | Market Event |
In March 2020, the World Health Organization declared COVID-19 (a novel coronavirus) to be a pandemic. The situation is dynamic. Global financial markets have experienced and may continue to experience significant volatility resulting from the spread of COVID-19. The outbreak of COVID-19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand and general market uncertainty. The global economy, the economies of certain nations and individual issuers have been and may continue to be adversely affected by COVID-19, particularly in light of the interconnectivity between economies and financial markets, all of which may negatively impact the Series’ performance. In addition, COVID-19 and governmental responses to COVID-19 may negatively impact the capabilities of the Series’ service providers and disrupt the Series’ operations. Management of the Series will continue to monitor the impact of COVID-19.
21
Credit Series
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Credit Series
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of Credit Series (one of the series constituting Manning & Napier Fund, Inc., referred to hereafter as the “Fund”) as of December 31, 2020, and the related statements of operations and changes in net assets, including the related notes, and the financial highlights for the period April 14, 2020 (commencement of operations) through December 31, 2020 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, and the results of its operations, changes in its net assets, and the financial highlights for the period April 14, 2020 (commencement of operations) through December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion.
New York, New York
February 17, 2021
We have served as the auditor of one or more investment companies in Manning & Napier Mutual Funds since 1992.
22
Credit 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.manning-napier.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 directors and officers, 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 and Officer
Name: | Paul Battaglia* |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 42 |
Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1 & Length of Time Served: | Indefinite – Chairman and Director since November 2018 |
Principal Occupation(s) During Past 5 Years: | Chief Financial Officer since 2018; Vice President of Finance (2016 – 2018); Director of Finance (2011 – 2016); Financial Analyst/Internal Auditor (2004-2006) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various subsidiaries and affiliates: Chief Financial Officer |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | N/A |
Independent Directors
Name: | Stephen B. Ashley |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 80 |
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 and Director since 1997; Chief Executive Officer (1997-2019) - Ashley Companies (property management and investment) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Ashley Companies since 1997 |
Name: | Paul A. Brooke |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 75 |
Current Position(s) Held with Fund: | Lead Independent Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since 2007; Governance & Nominating Committee Chairman since 2016; Lead Independent Director since 2017 |
Principal Occupation(s) During Past 5 Years: | Managing Member since 1991 - PMSV Holdings LLC (investments); Managing Member (2010-2016) - Venbio (investments). |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Incyte Corp. (biotech) (2000-2020); PureEarth (non-profit) since 2012; Cerus (biomedical) since 2016; Caelum BioSciences (biomedical) since 2018; Cheyne Capital International (investment)(2000-2017); |
23
Credit Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Peter L. Faber2 |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 82 |
Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Since 1987 |
Principal Occupation(s) During Past 5 Years: | Partner (1995-2006 & 2013-2018); Senior Counsel (2006-2012) - McDermott, Will & Emery LLP (law firm) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Boston Early Music Festival (non-profit) since 2007; Amherst Early Music, Inc. (non-profit) since 2009; Gotham Early Music Scene, Inc. (non-profit) since 2009; S’Cool Sounds, Inc. (non-profit) since 2017 |
Name: | Harris H. Rusitzky2 |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 85 |
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 since 1994 - The Greening Group (business consultants); Partner since 2006 - The Restaurant Group (restaurants) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (university) since 1972; Culinary Institute of America (non-profit college) since 1985; George Eastman Museum (museum) since 1988; National Restaurant Association (restaurant trade organization) ( 1978-2020) |
Name: | Russell O. Vernon |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 63 |
Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since April 2020; Governance & Nominating Committee Chairman since November 2020 |
Principal Occupation(s) During Past 5 Years: | Founder and General Partner (2009-2019) – BVM Capital Management (economic development) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Board Member, Vice Chairman and President since 2010 – Newburgh Armory Unity Center (military); Board Member and Executive Director since 2020 – National Purple Heart Honor Mission, Inc. (military); Board Member, Vice Chairman (2015-2020) – National Purple Heart Hall of Honor, Inc. (military) |
24
Credit Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Chester N. Watson |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 70 |
Current Position(s) Held with Fund: | Director, Audit Committee Chairman, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member Since 2012; Audit Committee Chairman since 2013 |
Principal Occupation(s) During Past 5 Years: | General Auditor (2003-2011) - General Motors Company (auto manufacturer) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (University) since 2005; Hudson Valley Center for Innovation, Inc. (New Business and Economic Development) since 2019; Town of Greenburgh, NY Planning Board (Municipal Government) (2015-2019); |
Officers:
Name: | Elizabeth Craig |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 33 |
Current Position(s) Held with Fund: | Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2016 |
Principal Occupation(s) During Past 5 Years: | Fund Regulatory Administration Manager since 2018; Fund Administration Manager (2015-2018); Mutual Fund Compliance Specialist (2009-2015) - Manning & Napier Advisors, LLC; Assistant Corporate Secretary (2011- 2016) - Manning & Napier Fund, Inc.; Corporate Secretary, Director since 2019– Manning & Napier Investor Services, Inc. |
Name: | Samantha Larew |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 40 |
Current Position(s) Held with Fund: | Chief Compliance Officer and Anti-Money Laundering Compliance Officer |
Term of Office1 & Length of Time Served: | Chief Compliance Officer since 2019; Anti-Money Laundering Compliance Officer since 2018 |
Principal Occupation(s) During Past 5 Years: | Co-Director of Compliance since 2018; Compliance Communications Supervisor (2014-2018); Compliance Supervisor (2013-2014); Broker- Dealer Compliance Supervisor (2011-2013); Broker-Dealer Compliance Analyst (2010-2011) - Manning & Napier Advisors, LLC & Affiliates; Broker- Dealer Chief Compliance Officer since 2013; Broker-Dealer Assistant Corporate Secretary since 2011 – Manning & Napier Investor Services, Inc.; Compliance Analyst (2007-2009) – Wall Street Financial Group; Compliance Specialist (2003-2007) – Manning & Napier Advisors, LLC & Affiliates |
Name: | Scott Morabito |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 33 |
Current Position(s) Held with Fund: | Vice President |
Term of Office1 & Length of Time Served: | Vice President since 2019; Assistant Vice President (2017-2019) |
Principal Occupation(s) During Past 5 Years: | Managing Director of Operations since 2019; Director of Funds Group (2017-2019); Fund Product and Strategy Manager (2014-2017); Senior Product and Strategy Analyst (2013-2014); Product and Strategy Analyst (2011-2013) - Manning & Napier Advisors, LLC; President, Director since 2018 – Manning & Napier Investor Services, Inc. |
25
Credit Series
Directors’ and Officers’ Information
(unaudited)
Officers: (continued)
Name: | Troy Statczar |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 49 |
Current Position(s) Held with Fund: | Principal Financial Officer, Treasurer |
Term of Office1 & Length of Time Served: | Principal Financial Officer and Treasurer since 2020 |
Principal Occupation(s) During Past 5 Years: | Senior Director, Foreside Treasurer Services since 2020 - Foreside Financial Group; Director of Fund Administration (2017-2019) - Thornburg Investment Management, Inc.; Director of U.S. Operations (2008-2017) - Henderson Global Investors N.A., Inc. |
Name: | Sarah Turner |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 38 |
Current Position(s) Held with Fund: | Chief Legal Officer; Assistant Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2018 |
Principal Occupation(s) During Past 5 Years: | Attorney since 2018 - Manning & Napier Advisors, LLC and affiliates; Counsel (2017-2018) – Harter Secrest and Emery LLP; Legal Counsel (2010-2017) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various affiliates: Corporate Secretary, General Counsel |
*Interested Director, within the meaning of the 1940 Act by reason of his positions with the Fund’s Advisor, Manning & Napier Advisors, LLC, and Distributor, Manning & Napier Investor Services, Inc.
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.
2 Effective December 31, 2020, Peter L. Faber and Harris Rusitzky have each retired as a Director of the Fund in accordance with the Board’s existing Board retirement policy.
26
Credit Series
Literature Requests
(unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone | 1-800-466-3863 | |
On the Securities and Exchange Commission’s (SEC) web site | http://www.sec.gov | |
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone | 1-800-466-3863 | |
On the SEC’s web site | http://www.sec.gov |
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 | |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling (800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End |
2. Fund Holdings - Quarter-End |
3. Shareholder Report - Annual |
4. Shareholder Report - Semi-Annual |
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNCRE-12/20-AR
27
Manning & Napier Fund, Inc.
High Yield Bond Series
Paper copies of the Series’ shareholder reports are no longer sent by mail, unless you specifically request them from the Series or from your financial intermediary, such as a broker-dealer or bank. Shareholder reports are available online. Each time a report is posted on the Series’ website you will be provided with a link to access the report online, either by mail (hard copy notice) or by email, if you have already signed up for electronic delivery of shareholder reports.
You may elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies. If you invest directly with the Fund, you can inform the Fund that you wish to continue receiving paper copies by visiting www.manning-napier.com or calling 1-800-466-3863. Your election to receive reports in paper will apply to all funds held with your financial intermediary if you invest through a financial intermediary or all series of the Fund if you invest directly with the Fund.
Additionally, If you have not yet signed up for electronic delivery of shareholder reports and other Fund communications, you may do so by contacting your financial intermediary or, if you are a direct investor, by visiting www.manning-napier.com or calling 1-800-466-3863.
Independent Perspective | Real-World Solutions |
A Note from Our CEO
Dear Shareholder,
2020. What a momentous year.
Political change, social unrest, the pandemic, economic shutdowns, and, of course, the fastest stock market selloff and recovery in history, all describe what has been a remarkably tumultuous and challenging time.
Maybe it should come as no surprise that after a year of such change, we yearn for a return of convention, clarity, facts, and perhaps, less drama.
This desire for normalcy is understandable, but we cannot hide our heads in the sand. The profound challenges we face are not going to simply go away.
If anything, many of the structural issues that brought us to where we are today, technological progress, the information age, a shifting economy and culture, may very well accelerate from here. Whether we want it or not, change is coming.
As investors, logically and rationally deciphering an uncertain future is one of our most existential tasks. Particularly in times like these, it is too easy to get caught up in the turbulence—to let emotion get the best of us—to fail to see the forest for the trees.
This is why the key question we must ask ourselves today is, what is the best way for us to understand and invest upon the paths that lie before us?
We believe the answer is, in many ways, an evergreen one, and we hope it offers you a helpful perspective.
It is to invest for the long-term, not speculate on short-term developments. It is to take an active, hands-on approach to investment decisions. It is to be patient, disciplined, and confident when the right investment opportunities present themselves. And it is to be constantly attentive to risk, particularly the most significant risks, permanent loss of capital and the risk of falling short of long-term needs and goals.
These are the same investing principles that we have been successfully implementing for clients since our founding more than 50 years ago.
Whether you are an individual investor, a financial advisor, or an institutional investor making decisions on behalf of others, you can trust that we are well equipped to handle whatever challenges the markets have in store for us next.
We wish you safety and good health, and we appreciate your continued confidence in our firm and our approach.
Sincerely,
Marc Mayer Chief Executive Officer |
Corporate Headquarters | 290 Woodcliff Drive | Fairport, NY 14450 | (585) 325-6880 phone | (800) 551-0224 toll free | www.manning-napier.com
1
High Yield Bond Series
Fund Commentary
(unaudited)
Investment Objective
To provide a high level of long-term total return, which is a combination of income and capital appreciation. Under normal circumstances, the Series will invest at least 80% of its assets in bonds that are rated below investment-grade (junk bonds), and/or securities that are designed to track the performance of non-investment grade securities, principally exchange-traded funds.
Performance Commentary
Fixed income markets posted strong, positive returns for the twelve-month period ending December 31, 2020. Despite the significant spread widening that occurred during the first quarter and simultaneous drawdown, high yield markets fully recovered and ended the year positive amid unprecedented monetary and fiscal stimulus, as well as optimism regarding COVID-19 vaccines and distribution. Overall, higher-quality issuances within the below investment grade market tended to rebound more quickly than lower quality issuances, causing higher quality issuances to outperform for the year.
The High Yield Bond Series Class S shares delivered a positive absolute return of 6.28% for the year, but modestly underperformed its benchmark, the Intercontinental Exchange (ICE) Bank of America (BofA) BB-B U.S. Cash Pay High Yield Index, which returned 6.49%.
When viewed on a gross-of-fee basis, the Series’ relative outperformance was driven by strong selection, most notably within Financial Services and Capital Goods. In contrast, selection within Energy, as well as an allocation to cash, detracted from relative returns.
Going forward, we believe that selection will be key to achieving investor objectives. We continue to focus on good businesses that generate positive free cash flow that either pay down debt or focus on improving their business with good relative value. From a quality perspective, we continue to see the most attractive valuations in single B rated issues. Within CCC, we remain selective as many issuers are sub-optimal businesses and therefore will not pass our primary evaluation criteria (i.e., strategy fit and in-depth credit analysis).
As always, we believe that a select, disciplined approach focused on current valuations and conditions will be key to navigating any challenges and opportunities that arise and ultimately helping investors achieve their objectives.
Performance for the High Yield Bond Series Class S shares is provided above. Performance for other shares classes will differ based on each class’ underlying expenses.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than that quoted; investors can obtain the most recent month-end performance at www.manning-napier.com or by calling (800) 466-3863.
Additional information and associated disclosures can be found on the Performance Update page of this report.
All investments involve risks, including possible loss of principal. There is an inverse relationship between bond prices and interest rates; as interest rates rise, bond prices (and therefore the value of bond funds) fall. Likewise, as interest rates fall, bond prices and the value of bond funds rise. Investments in higher-yielding, lower-rated securities involve additional risks, including a higher risk of default and loss of principal. Investments in derivatives can be highly volatile and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk. Also, the use of leverage increases exposure to the market and may magnify potential losses.
2
High Yield Bond Series
Performance Update as of December 31, 2020
(unaudited)
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2020 | |||
ONE | FIVE | TEN | |
YEAR1 | YEAR | YEAR | |
High Yield Bond Series - Class S2 | 6.28% | 8.02% | 6.44% |
High Yield Bond Series - Class I2,3 | 6.60% | 8.28% | 6.67% |
High Yield Bond Series - Class W2,4 | 7.11% | 8.35% | 6.61% |
High Yield Bond Series - Class Z2,4 | 6.59% | 8.17% | 6.52% |
Intercontinental Exchange (ICE) Bank of America (BofA) BB-B U.S. Cash Pay High Yield Index5 | 6.49% | 8.07% | 6.66% |
Intercontinental Exchange (ICE) Bank of America (BofA) U.S. Cash Pay High Yield Index6 | 6.21% | 8.41% | 6.61% |
The following graph compares the value of a $10,000 investment in the High Yield Bond Series - Class S for the ten years ended (December 31, 2020) to the Intercontinental Exchange (ICE) Bank of America (BofA) BB-B U.S. Cash Pay High Yield Index and Intercontinental Exchange (ICE) Bank of America (BofA) U.S. Cash Pay High Yield Index.
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.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2020, this net expense ratio was 0.90% for Class S, 0.65% for Class I, 0.10% for Class W and 0.50% for Class Z. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 1.03% for Class S, 0.75% for Class I, 0.64% for Class W and 0.64% for Class Z for the year ended December 31, 2020.
3For periods through August 1, 2012 (the inception date of the Class I shares), performance for the Class I shares is based on historical performance of the Class S shares. Because the Class I shares invest in the same portfolio of securities as Class S, performance will only be different to the extent that the Class S shares have a higher expense ratio.
4For periods through March 1, 2019 (the inception date of the Class W and Class Z shares), performance for the Class W and Class Z shares is based on the historical performance of the Class S shares. Because the Class W and Class Z shares invest in the same portfolio of securities as the Class S shares, performance will be different only to the extent that the Class S shares have a higher expense ratio.
3
High Yield Bond Series
Performance Update as of December 31, 2020
(unaudited)
5The Intercontinental Exchange (ICE) Bank of America (BofA) BB-B U.S. Cash Pay High Yield Index is a subset of the ICE BofA U.S. Cash Pay High Yield Index. The Index includes all U.S. dollar denominated below investment grade corporate debt securities currently in a coupon paying period rated BB1 through B3. Qualifying securities must have at least one year remaining term to final maturity, at least 18 months to final maturity at point of issuance, a fixed coupon schedule, and a minimum amount outstanding of $250 million. The Index returns do not reflect any fees or expenses. Index returns provided by Bloomberg. Index data referenced herein is the property of ICE Data Indices, LLC, its affiliates (ICE Data) and/or its Third Party Suppliers and has been licensed for use by Manning & Napier. ICE Data and its Third Party Suppliers accept no liability in connection with its use.
6The Intercontinental Exchange (ICE) Bank of America (BofA) U.S. Cash Pay High Yield Index tracks the performance of U.S. dollar denominated below investment grade corporate debt, currently in a coupon paying period, issued in the U.S. domestic market. Qualifying securities must have at least one year remaining term to final maturity as of the rebalancing date, at least 18 months to final maturity at the time of issuance, a fixed coupon schedule, and a minimum amount outstanding of $250 million. The Index returns do not reflect any fees or expenses. Index returns provided by Bloomberg. Index data referenced herein is the property of ICE Data Indices, LLC, its affiliates (ICE Data) and/or its Third Party Suppliers and has been licensed for use by Manning & Napier. ICE Data and its Third Party Suppliers accept no liability in connection with its use.
4
High Yield Bond Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested in each class at the beginning of the period and held for the entire period (July 1, 2020 to December 31, 2020).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the Actual line for the Class in which you have invested under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The Hypothetical lines of each class in the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ACCOUNT VALUE 7/1/20 | ENDING ACCOUNT VALUE 12/31/20 | EXPENSES PAID DURING PERIOD* 7/1/20 - 12/31/20 | ANNUALIZED EXPENSE RATIO | |
Class S | ||||
Actual | $1,000.00 | $1,130.10 | $4.82 | 0.90% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.61 | $4.57 | 0.90% |
Class I | ||||
Actual | $1,000.00 | $1,132.40 | $3.48 | 0.65% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.87 | $3.30 | 0.65% |
Class W | ||||
Actual | $1,000.00 | $1,135.20 | $0.54 | 0.10% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.63 | $0.51 | 0.10% |
Class Z | ||||
Actual | $1,000.00 | $1,131.50 | $2.68 | 0.50% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.62 | $2.54 | 0.50% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data. The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
5
High Yield Bond Series
Portfolio Composition as of December 31, 2020
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
6
High Yield Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
COMMON STOCKS - 0.8% | ||||||||
Energy - 0.8% | ||||||||
Oil, Gas & Consumable Fuels - 0.8% | ||||||||
Jonah Energy Parent LLC*2 | 65,341 | $ | 980,115 | |||||
Lonestar Resources US, Inc.* | 91,008 | 165,635 | ||||||
TOTAL COMMON STOCKS (Identified Cost $1,988,443) | 1,145,750 | |||||||
CORPORATE BONDS - 95.2% | ||||||||
Non-Convertible Corporate Bonds- 95.2% | ||||||||
Communication Services - 1.2% | ||||||||
Media - 1.2% | ||||||||
TEGNA, Inc., 4.625%, 3/15/20283 | 750,000 | 766,875 | ||||||
Townsquare Media, Inc., 6.875%, 2/1/20263 | 1,000,000 | 1,047,330 | ||||||
Total Communication Services | 1,814,205 | |||||||
Consumer Discretionary - 10.8% | ||||||||
Automobiles - 3.9% | ||||||||
Ford Motor Co., 9.00%, 4/22/2025 | 1,200,000 | 1,471,212 | ||||||
Ford Motor Credit Co. LLC, 4.389%, 1/8/2026 | 2,100,000 | 2,204,328 | ||||||
PM General Purchaser LLC, 9.50%, 10/1/20283 | 2,160,000 | 2,392,200 | ||||||
6,067,740 | ||||||||
Diversified Consumer Services - 1.4% | ||||||||
GEMS MENASA Cayman Ltd. - GEMS Education Delaware LLC (United Arab Emirates), 7.125%, 7/31/20263 | 1,985,000 | 2,069,363 | ||||||
Hotels, Restaurants & Leisure - 0.9% | ||||||||
Affinity Gaming, 6.875%, 12/15/20273 | 1,370,000 | 1,435,472 | ||||||
Household Durables - 4.6% | ||||||||
FXI Holdings, Inc., 12.25%, 11/15/20263 | 1,695,000 | 1,932,300 | ||||||
STL Holding Co. LLC, 7.50%, 2/15/20263 | 2,830,000 | 2,936,125 | ||||||
TRI Pointe Group, Inc. - TRI Pointe Homes, Inc., 5.875%, 6/15/2024 | 2,010,000 | 2,193,915 | ||||||
7,062,340 | ||||||||
Total Consumer Discretionary | 16,634,915 | |||||||
Consumer Staples - 3.3% | ||||||||
Food & Staples Retailing - 3.3% | ||||||||
C&S Group Enterprises LLC, 5.00%, 12/15/20283 | 2,270,000 | 2,263,372 | ||||||
KeHE Distributors LLC - KeHE Finance Corp., 8.625%, 10/15/20263 | 2,490,000 | 2,795,025 | ||||||
Total Consumer Staples | 5,058,397 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Energy - 19.5% | ||||||||
Energy Equipment & Services - 1.2% | ||||||||
Oceaneering International, Inc., 6.00%, 2/1/2028 | 2,065,000 | $ | 1,845,594 | |||||
Oil, Gas & Consumable Fuels - 18.3% | ||||||||
Antero Midstream Partners LP - Antero | ||||||||
Midstream Finance Corp. | ||||||||
7.875%, 5/15/20263 | 605,000 | 624,711 | ||||||
5.75%, 3/1/20273 | 1,905,000 | 1,871,662 | ||||||
5.75%, 1/15/20283 | 1,470,000 | 1,411,494 | ||||||
Ascent Resources Utica Holdings LLC - ARU Finance Corp., 8.25%, 12/31/20283 | 1,470,000 | 1,466,325 | ||||||
Brooge Petroleum and Gas Investment Co. FZE (United Arab Emirates), 8.50%, 9/24/20253 | 2,800,000 | 2,661,810 | ||||||
Bruin E&P Partners LLC, 8.875%, 8/1/20234,5 | 4,253,000 | 425 | ||||||
CNX Midstream Partners LP - CNX Midstream Finance Corp., 6.50%, 3/15/20263 | 1,256,000 | 1,277,980 | ||||||
DCP Midstream Operating LP, 8.125%, 8/16/2030 | 1,708,000 | 2,181,970 | ||||||
EQT Corp., 8.75%, 2/1/20306 | 1,830,000 | 2,241,750 | ||||||
Indigo Natural Resources LLC, 6.875%, 2/15/20263 | 1,390,000 | 1,421,275 | ||||||
Moss Creek Resources Holdings, Inc., 7.50%, 1/15/20263 | 2,070,000 | 1,573,200 | ||||||
Navigator Holdings Ltd., 8.00%, 9/10/20253 | 2,750,000 | 2,832,500 | ||||||
New Fortress Energy, Inc., 6.75%, 9/15/20253 | 2,725,000 | 2,894,441 | ||||||
NGL Energy Partners LP - NGL Energy Finance Corp., 7.50%, 11/1/2023 | 2,030,000 | 1,437,494 | ||||||
Occidental Petroleum Corp., 8.875%, 7/15/2030 | 1,375,000 | 1,613,906 | ||||||
PDC Energy, Inc., 5.75%, 5/15/2026 | 1,335,000 | 1,378,387 | ||||||
Talos Production, Inc., 12.00%, 1/15/20263 | 1,505,000 | 1,464,320 | ||||||
28,353,650 | ||||||||
Total Energy | 30,199,244 | |||||||
Financials - 24.6% | ||||||||
Capital Markets - 5.7% | ||||||||
Advisor Group Holdings, Inc., 10.75%, 8/1/20273 | 2,057,000 | 2,272,985 | ||||||
LPL Holdings, Inc., 4.625%, 11/15/20273 | 1,530,000 | 1,583,550 | ||||||
Owl Rock Technology Finance Corp., 4.75%, 12/15/20253 | 1,975,000 | 2,062,383 | ||||||
StoneX Group, Inc., 8.625%, 6/15/20253 | 2,646,000 | 2,877,525 | ||||||
8,796,443 | ||||||||
Consumer Finance - 6.6% | ||||||||
Navient Corp., 6.75%, 6/25/2025 | 1,940,000 | 2,109,750 |
The accompanying notes are an integral part of the financial statements.
7
High Yield Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Financials (continued) | ||||||||
Consumer Finance (continued) | ||||||||
OneMain Finance Corp., 7.125%, 3/15/2026 | 1,375,000 | $ | 1,625,938 | |||||
PRA Group, Inc., 7.375%, 9/1/20253 | 1,955,000 | 2,111,400 | ||||||
SLM Corp. | ||||||||
5.125%, 4/5/2022 | 1,483,000 | 1,516,367 | ||||||
4.20%, 10/29/2025 | 2,740,000 | 2,894,125 | ||||||
10,257,580 | ||||||||
Diversified Financial Services - 3.7% | ||||||||
FS Energy & Power Fund, 7.50%, 8/15/20233 | 2,070,000 | 1,974,263 | ||||||
Owl Rock Capital Corp., 3.40%, 7/15/2026 | 2,270,000 | 2,302,503 | ||||||
Oxford Finance LLC - Oxford Finance Co-Issuer II, Inc., 6.375%, 12/15/20223 | 1,480,000 | 1,476,300 | ||||||
5,753,066 | ||||||||
Insurance - 2.0% | ||||||||
Genworth Mortgage Holdings, Inc., 6.50%, 8/15/20253 | 2,830,000 | 3,063,475 | ||||||
Mortgage Real Estate Investment Trusts (REITS) - 3.2% | ||||||||
Ladder Capital Finance Holdings LLLP - Ladder Capital Finance Corp., 5.25%, 10/1/20253 | 2,850,000 | 2,842,875 | ||||||
Starwood Property Trust, Inc., 4.75%, 3/15/2025 | 2,040,000 | 2,091,000 | ||||||
4,933,875 | ||||||||
Thrifts & Mortgage Finance - 3.4% | ||||||||
MGIC Investment Corp., 5.25%, 8/15/2028 | 2,060,000 | 2,204,200 | ||||||
Radian Group, Inc., 4.875%, 3/15/2027 | 2,775,000 | 3,047,505 | ||||||
5,251,705 | ||||||||
Total Financials | 38,056,144 | |||||||
Health Care - 6.7% | ||||||||
Health Care Equipment & Supplies - 1.4% | ||||||||
AdaptHealth LLC, 6.125%, 8/1/20283 | 2,030,000 | 2,179,712 | ||||||
Health Care Providers & Services - 1.5% | ||||||||
Prime Healthcare Services, Inc., 7.25%, 11/1/20253 | 2,150,000 | 2,284,375 | ||||||
Pharmaceuticals - 3.8% | ||||||||
Bausch Health Companies, Inc., 5.00%, 1/30/20283 | 2,100,000 | 2,164,134 | ||||||
P&L Development LLC - PLD Finance Corp., 7.75%, 11/15/20253 | 2,150,000 | 2,311,250 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Health Care (continued) | ||||||||
Pharmaceuticals (continued) | ||||||||
Teva Pharmaceutical Finance Netherlands III B.V. (Israel), 6.75%, 3/1/2028 | 1,200,000 | $ | 1,357,500 | |||||
5,832,884 | ||||||||
Total Health Care | 10,296,971 | |||||||
Industrials - 14.6% | ||||||||
Aerospace & Defense - 0.9% | ||||||||
Howmet Aerospace, Inc., 6.875%, 5/1/2025 | 1,235,000 | 1,444,950 | ||||||
Airlines - 1.9% | ||||||||
Alaska Airlines Pass-Through Trust, Series 2020-1, Class B, 8.00%, 8/15/20253 | 2,770,000 | 3,008,919 | ||||||
Commercial Services & Supplies - 2.9% | ||||||||
GFL Environmental, Inc. (Canada), 3.75%, 8/1/20253 | 529,000 | 542,225 | ||||||
Matthews International Corp., 5.25%, 12/1/20253 | 2,310,000 | 2,333,100 | ||||||
Prime Security Services Borrower LLC - Prime Finance, Inc., 5.75%, 4/15/20263 | 1,530,000 | 1,675,350 | ||||||
4,550,675 | ||||||||
Construction & Engineering - 2.2% | ||||||||
Tutor Perini Corp., 6.875%, 5/1/20253 | 3,395,000 | 3,327,100 | ||||||
Electrical Equipment - 0.4% | ||||||||
EnerSys, 4.375%, 12/15/20273 | 564,000 | 596,430 | ||||||
Machinery - 1.1% | ||||||||
Hillenbrand, Inc., 5.00%, 9/15/2026 | 1,460,000 | 1,637,025 | ||||||
Marine - 4.2% | ||||||||
American Tanker, Inc. (Norway), 7.75%, 7/2/2025 | 3,550,000 | 3,557,277 | ||||||
Global Ship Lease, Inc. (United Kingdom), 9.875%, 11/15/20223 | 1,400,000 | 1,435,000 | ||||||
Navios South American Logistics, Inc. - Navios Logistics Finance US, Inc. (Uruguay), 10.75%, 7/1/20253 | 1,380,000 | 1,476,600 | ||||||
6,468,877 | ||||||||
Trading Companies & Distributors - 1.0% | ||||||||
Fortress Transportation and Infrastructure Investors LLC, 9.75%, 8/1/20273 | 1,320,000 | 1,513,050 | ||||||
Total Industrials | 22,547,026 |
The accompanying notes are an integral part of the financial statements.
8
High Yield Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Information Technology - 3.9% | ||||||||
Communications Equipment - 0.9% | ||||||||
Hughes Satellite Systems Corp., 5.25%, 8/1/2026 | 1,305,000 | $ | 1,440,394 | |||||
IT Services - 1.3% | ||||||||
Austin BidCo, Inc., 7.125%, 12/15/20283 | 415,000 | 433,156 | ||||||
Unisys Corp., 6.875%, 11/1/20273 | 1,375,000 | 1,502,188 | ||||||
1,935,344 | ||||||||
Semiconductors & Semiconductor Equipment - 0.9% | ||||||||
ams AG (Austria), 7.00%, 7/31/20253 | 1,340,000 | 1,453,900 | ||||||
Software - 0.8% | ||||||||
LogMeIn, Inc., 5.50%, 9/1/20273 | 1,115,000 | 1,167,962 | ||||||
Total Information Technology | 5,997,600 | |||||||
Materials - 5.5% | ||||||||
Chemicals - 1.0% | ||||||||
WR Grace & Co.-Conn, 5.625%, 10/1/20243 | 1,390,000 | 1,499,463 | ||||||
Metals & Mining - 4.5% | ||||||||
Hudbay Minerals, Inc. (Peru), 6.125%, 4/1/20293 | 1,420,000 | 1,530,050 | ||||||
IAMGOLD Corp. (Burkina Faso), 5.75%, 10/15/20283 | 2,115,000 | 2,146,725 | ||||||
Infrabuild Australia Pty Ltd. (Australia), 12.00%, 10/1/20243 | 1,979,000 | 2,001,264 | ||||||
Joseph T Ryerson & Son, Inc., 8.50%, 8/1/20283 | 1,139,000 | 1,289,917 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Materials (continued) | ||||||||
Metals & Mining (continued) | ||||||||
Northwest Acquisitions ULC - Dominion Finco, Inc., 7.125%, 11/1/20224,7 | 6,535,000 | $ | 44,111 | |||||
7,012,067 | ||||||||
Total Materials | 8,511,530 | |||||||
Real Estate - 3.7% | ||||||||
Equity Real Estate Investment Trusts (REITS) - 2.8% | ||||||||
HAT Holdings I LLC - HAT Holdings II LLC, 3.75%, 9/15/20303 | 1,400,000 | 1,452,500 | ||||||
Iron Mountain, Inc., 4.50%, 2/15/20313 | 1,385,000 | 1,450,788 | ||||||
MGM Growth Properties Operating Partnership LP - MGP Finance Co-Issuer, Inc., 3.875%, 2/15/20293 | 1,470,000 | 1,503,075 | ||||||
4,406,363 | ||||||||
Real Estate Management & Development - 0.9% | ||||||||
Forestar Group, Inc., 5.00%, 3/1/20283 | 1,275,000 | 1,316,437 | ||||||
Total Real Estate | 5,722,800 | |||||||
Utilities - 1.4% | ||||||||
Electric Utilities - 1.4% | ||||||||
NRG Energy, Inc., 3.625%, 2/15/20313 | 1,000,000 | 1,028,800 | ||||||
Talen Energy Supply LLC, 6.50%, 6/1/2025 | 1,465,000 | 1,193,975 | ||||||
Total Utilities | 2,222,775 | |||||||
TOTAL CORPORATE BONDS (Identified Cost $139,515,685) | 147,061,607 | |||||||
SHORT-TERM INVESTMENT - 2.6% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 0.03%8 | ||||||||
(Identified Cost $4,070,824) | 4,070,824 | 4,070,824 | ||||||
TOTAL INVESTMENTS - 98.6% (Identified Cost $145,574,952). | 152,278,181 | |||||||
OTHER ASSETS, LESS LIABILITIES - 1.4% | 2,222,008 | |||||||
NET ASSETS - 100% | $ | 154,500,189 |
*Non-income producing security.
1Amount is stated in USD unless otherwise noted.
2Security has been valued using significant unobservable inputs.
3Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be liquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2020 was $102,026,006, which represented 66.0% of the Series’ Net Assets.
4Issuer filed for bankruptcy and/or is in default of interest payments.
The accompanying notes are an integral part of the financial statements.
9
High Yield Bond Series
Investment Portfolio - December 31, 2020
5Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The security was acquired on January 17, 2019 and dates between March 26, 2020 and June 17, 2020 at an aggregate cost of $858,630. The value of the security at December 31, 2020 was $425, or less than 0.1% of the Series’ Net Assets.
6Step coupon rate security - Rate steps up/down by 25 basis points upon rating downgrade/upgrade by Moody’s and S&P rating agencies (Subject to a maximum of 100 basis points per agency, 200 basis points maximum).
7Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The security was acquired on October 10, 2017, September 6, 2018 and dates between May 8, 2020 and May 15, 2020 at an aggregate cost of $1,518,841. The value of the security at December 31, 2020 was $44,111, or less than 0.1% of the Series’ Net Assets.
8Rate shown is the current yield as of December 31, 2020.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
10
High Yield Bond Series
Statement of Assets and Liabilities
December 31, 2020
ASSETS: | ||||
Investments, at value (identified cost $145,574,952) (Note 2) | $ | 152,278,181 | ||
Receivable for securities sold | 3,065,013 | |||
Interest receivable | 2,611,265 | |||
Receivable for fund shares sold | 474,941 | |||
Dividends receivable | 77 | |||
Prepaid and other expenses | 18,939 | |||
TOTAL ASSETS | 158,448,416 | |||
LIABILITIES: | ||||
Accrued fund accounting and administration fees (Note 3) | 19,694 | |||
Accrued sub-transfer agent fees (Note 3) | 8,955 | |||
Accrued distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 2,206 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 1,503 | |||
Accrued management fees (Note 3) | 553 | |||
Payable for securities purchased | 3,869,536 | |||
Payable for fund shares repurchased | 8,211 | |||
Other payables and accrued expenses | 37,569 | |||
TOTAL LIABILITIES | 3,948,227 | |||
TOTAL NET ASSETS | $ | 154,500,189 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 156,218 | ||
Additional paid-in-capital | 147,813,981 | |||
Total distributable earnings (loss) | 6,529,990 | |||
TOTAL NET ASSETS | $ | 154,500,189 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S ($10,196,917/1,000,707 shares) | $ | 10.19 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I ($22,477,060/2,608,420 shares) | $ | 8.62 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W ($119,895,397/11,788,800 shares) | $ | 10.17 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class Z ($1,930,815/223,916 shares) | $ | 8.62 |
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, 2020
INVESTMENT INCOME: | ||||
Interest | $ | 8,311,409 | ||
Dividends | 84,076 | |||
Total Investment Income | 8,395,485 | |||
EXPENSES: | ||||
Management fees (Note 3) | 490,070 | |||
Fund accounting and administration fees (Note 3) | 73,803 | |||
Sub-transfer agent fees (Note 3) | 34,852 | |||
Distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 26,172 | |||
Directors’ fees (Note 3) | 15,393 | |||
Chief Compliance Officer service fees (Note 3) | 3,784 | |||
Audit fees | 59,933 | |||
Registration and filing fees | 56,770 | |||
Custodian fees | 10,330 | |||
Miscellaneous | 71,698 | |||
Total Expenses | 842,805 | |||
Less reduction of expenses (Note 3) | (528,409 | ) | ||
Net Expenses | 314,396 | |||
NET INVESTMENT INCOME | 8,081,089 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
Net realized gain (loss) on investments | 5,573,961 | |||
Net change in unrealized appreciation (depreciation) on investments | 7,395,942 | |||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | 12,969,903 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 21,050,992 |
The accompanying notes are an integral part of the financial statements.
12
High Yield Bond Series
Statements of Changes in Net Assets
FOR THE | FOR THE | |||||||
YEAR ENDED | YEAR ENDED | |||||||
12/31/20 | 12/31/19 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 8,081,089 | $ | 6,096,894 | ||||
Net realized gain (loss) on investments | 5,573,961 | 673,081 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 7,395,942 | 6,238,038 | ||||||
Net increase (decrease) from operations | 21,050,992 | 13,008,013 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | ||||||||
Class S | (509,115 | ) | (869,975 | ) | ||||
Class I | (1,217,048 | ) | (1,548,134 | ) | ||||
Class W | (6,305,940 | ) | (3,127,762 | ) | ||||
Class Z | (110,904 | ) | (599,127 | ) | ||||
Total distributions to shareholders | (8,143,007 | ) | (6,144,998 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | 75,515,629 | (56,147,752 | ) | |||||
Net increase (decrease) in net assets | 88,423,614 | (49,284,737 | ) | |||||
NET ASSETS: | ||||||||
Beginning of year | 66,076,575 | 115,361,312 | ||||||
End of year | $ | 154,500,189 | $ | 66,076,575 |
The accompanying notes are an integral part of the financial statements.
13
High Yield Bond Series
Financial Highlights - Class S
FOR THE YEAR ENDED | |||||||||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |||||||||||
Per share data (for a share outstanding throughout each year): | |||||||||||||||
Net asset value - Beginning of year | $10.10 | $9.47 | $10.09 | $9.79 | $9.21 | ||||||||||
Income (loss) from investment operations: | |||||||||||||||
Net investment income1 | 0.57 | 0.57 | 0.53 | 0.54 | 0.56 | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.03 | 0.73 | (0.65 | ) | 0.28 | 0.66 | |||||||||
Total from investment operations | 0.60 | 1.30 | (0.12 | ) | 0.82 | 1.22 | |||||||||
Less distributions to shareholders: | |||||||||||||||
From net investment income | (0.51 | ) | (0.67 | ) | (0.50 | ) | (0.51 | ) | (0.64 | ) | |||||
From return of capital | — | — | — | (0.01 | ) | — | |||||||||
Total distributions to shareholders. | (0.51 | ) | (0.67 | ) | (0.50 | ) | (0.52 | ) | (0.64 | ) | |||||
Net asset value - End of year | $10.19 | $10.10 | $9.47 | $10.09 | $9.79 | ||||||||||
Net assets - End of year (000’s omitted) | $10,197 | $13,113 | $82,399 | $94,533 | $89,921 | ||||||||||
Total return2 | 6.28% | 13.97% | (1.31% | ) | 8.49% | 13.41% | |||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||
Expenses* | 0.90% | 0.90% | 0.90% | 0.90% | 0.94% | ||||||||||
Net investment income | 5.91% | 5.90% | 5.32% | 5.31% | 5.82% | ||||||||||
Series portfolio turnover | 208% | 143% | 100% | 106% | 77% | ||||||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the years, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | |||||||||||||||
0.13% | 0.12% | 0.08% | 0.07% | 0.02% |
1Calculated based on average shares outstanding during the years.
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 the years.
The accompanying notes are an integral part of the financial statements.
14
High Yield Bond Series
Financial Highlights - Class I
FOR THE YEAR ENDED | |||||||||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | |||||||||||
Per share data (for a share outstanding throughout each year): | |||||||||||||||
Net asset value - Beginning of year | $8.63 | $8.20 | $8.80 | $8.61 | $8.18 | ||||||||||
Income (loss) from investment operations: | |||||||||||||||
Net investment income1 | 0.51 | 0.53 | 0.49 | 0.49 | 0.52 | ||||||||||
Net realized and unrealized gain (loss) on investments | 0.02 | 0.61 | (0.57 | ) | 0.25 | 0.57 | |||||||||
Total from investment operations | 0.53 | 1.14 | (0.08 | ) | 0.74 | 1.09 | |||||||||
Less distributions to shareholders: | |||||||||||||||
From net investment income | (0.54 | ) | (0.71 | ) | (0.52 | ) | (0.54 | ) | (0.66 | ) | |||||
From net realized gain on investments | — | — | — | (0.01 | ) | — | |||||||||
Total distributions to shareholders. | (0.54 | ) | (0.71 | ) | (0.52 | ) | (0.55 | ) | (0.66 | ) | |||||
Net asset value - End of year | $8.62 | $8.63 | $8.20 | $8.80 | $8.61 | ||||||||||
Net assets - End of year (000’s omitted) | $22,477 | $20,974 | $32,962 | $26,459 | $22,658 | ||||||||||
Total return2 | 6.60% | 14.24% | (0.98% | ) | 8.68% | 13.60% | |||||||||
Ratios (to average net assets)/Supplemental Data: | |||||||||||||||
Expenses* | 0.65% | 0.65% | 0.65% | 0.65% | 0.68% | ||||||||||
Net investment income | 6.17% | 6.17% | 5.63% | 5.57% | 6.04% | ||||||||||
Series portfolio turnover | 208% | 143% | 100% | 106% | 77% | ||||||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the years, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | |||||||||||||||
0.10% | 0.13% | 0.08% | 0.07% | 0.02% |
1Calculated based on average shares outstanding during the years.
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 the years.
The accompanying notes are an integral part of the financial statements.
15
High Yield Bond Series
Financial Highlights - Class W
FOR THE | FOR THE | |||
YEAR | PERIOD | |||
ENDED | 3/1/191 TO | |||
12/31/20 | 12/31/19 | |||
Per share data (for a share outstanding throughout each period): | ||||
Net asset value - Beginning of period | $10.08 | $10.01 | ||
Income from investment operations: | ||||
Net investment income2 | 0.64 | 0.56 | ||
Net realized and unrealized gain (loss) on investments | 0.03 | 0.27 | ||
Total from investment operations | 0.67 | 0.83 | ||
Less distributions to shareholders: | ||||
From net investment income | (0.58) | (0.76) | ||
Net asset value - End of period | $10.17 | $10.08 | ||
Net assets - End of period (000’s omitted) | $119,895 | $30,363 | ||
Total return3 | 7.11% | 8.63% | ||
Ratios (to average net assets)/Supplemental Data: | ||||
Expenses* | 0.10% | 0.10%4 | ||
Net investment income | 6.76% | 6.66%4 | ||
Series portfolio turnover | 208% | 143% | ||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||
0.54% | 0.59%4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
16
High Yield Bond Series
Financial Highlights - Class Z
FOR THE | FOR THE | |||
YEAR | PERIOD | |||
ENDED | 3/1/191 TO | |||
12/31/20 | 12/31/19 | |||
Per share data (for a share outstanding throughout each period): | ||||
Net asset value - Beginning of period | $8.64 | $8.67 | ||
Income from investment operations: | ||||
Net investment income2 | 0.52 | 0.46 | ||
Net realized and unrealized gain (loss) on investments | 0.01 | 0.23 | ||
Total from investment operations | 0.53 | 0.69 | ||
Less distributions to shareholders: | ||||
From net investment income | (0.55) | (0.72) | ||
Net asset value - End of period | $8.62 | $8.64 | ||
Net assets - End of period (000’s omitted) | $1,931 | $1,627 | ||
Total return3 | 6.59% | 8.26% | ||
Ratios (to average net assets)/Supplemental Data: | ||||
Expenses* | 0.50% | 0.50%4 | ||
Net investment income | 6.32% | 6.26%4 | ||
Series portfolio turnover | 208% | 143% | ||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||
0.14% | 0.19%4 |
1Commencement of operations.
2Calculated based on average shares outstanding during the periods.
3Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized.
4Annualized.
The accompanying notes are an integral part of the financial statements.
17
High Yield Bond Series
Notes to Financial Statements
1. | Organization |
High Yield Bond Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series’ investment objective is to provide a high level of long-term total return by investing principally in non-investment grade fixed income securities that are issued by government and corporate entities.
The Series is authorized to issue four classes of shares (Class S, I, W, and Z). Each class of shares is substantially the same, except that class specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of December 31, 2020, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as High Yield Bond Series Class I common stock and High Yield Bond Series Class Z common stock, 125 million have been designated as High Yield Bond Series Class S common stock and 50 million have been designated as High Yield Bond Series Class W common stock.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”)
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market are valued at the latest quoted sales price of the exchange on which the security is primarily traded. Securities not traded on valuation date or securities not listed on an exchange are valued at the latest quoted bid price provided by the Fund’s pricing service. Securities listed on the NASDAQ Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Debt securities, including government bonds, foreign bonds, asset-backed securities, structured notes, supranational obligations, sovereign bonds, corporate bonds, loan assignments, and mortgage-backed securities will normally be valued on the basis of evaluated bid prices provided directly by an independent pricing service. The pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Certain investments in securities held by the Series may be valued on a basis of a price provided directly by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
The fair value of loan assignments is estimated using recently executed transactions, market price quotations, credit/market events, and cross-asset pricing. Inputs are generally observable market inputs obtained from independent sources. Loan assignments are generally categorized in Level 2 of the fair value hierarchy, unless key inputs are unobservable, in which case they would be categorized in Level 3.
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
18
High Yield Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board of Directors (the “Board”). Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of December 31, 2020 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Equity securities: | ||||||||||||||||
Energy | $ | 1,145,750 | $ | — | $ | 165,635 | $ | 980,115 | ||||||||
Debt securities: | ||||||||||||||||
Corporate debt: | ||||||||||||||||
Communication Services | 1,814,205 | — | 1,814,205 | — | ||||||||||||
Consumer Discretionary | 16,634,915 | — | 16,634,915 | — | ||||||||||||
Consumer Staples | 5,058,397 | — | 5,058,397 | — | ||||||||||||
Energy | 30,199,244 | — | 30,199,244 | — | ||||||||||||
Financials | 38,056,144 | — | 38,056,144 | — | ||||||||||||
Health Care | 10,296,971 | — | 10,296,971 | — | ||||||||||||
Industrials | 22,547,026 | — | 22,547,026 | — | ||||||||||||
Information Technology | 5,997,600 | — | 5,997,600 | — | ||||||||||||
Materials | 8,511,530 | — | 8,511,530 | — | ||||||||||||
Real Estate | 5,722,800 | — | 5,722,800 | — | ||||||||||||
Utilities | 2,222,775 | — | 2,222,775 | — | ||||||||||||
Short-Term Investment | 4,070,824 | 4,070,824 | — | — | ||||||||||||
Total assets | $ | 152,278,181 | $ | 4,070,824 | $ | 147,227,242 | $ | 980,115 |
There were no Level 3 securities held by the Series as of December 31, 2019.
Other Market and Credit Risk
Certain debt securities, derivatives and other financial instruments utilize the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark rate for variable interest rate calculations. In July 2017, the UK Financial Conduct Authority announced
19
High Yield Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Other Market and Credit Risk (continued)
a desire to phase out the use of LIBOR by the end of 2021, suggesting that LIBOR may cease to be published after that time. Regulators and financial industry groups have begun planning for a transition to the use of a different benchmark, but there are obstacles and a lack of global consensus, and the process for amending existing contracts or instruments to transition away from LIBOR remains unclear. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates, a reduction in the values of some LIBOR-based investments, and reduced effectiveness of certain hedging strategies, which may adversely affect a Series’ performance or net asset value. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021. In addition, the alternative reference or benchmark rate may be an ineffective substitute resulting in prolonged adverse market conditions for a Portfolio.
Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
Expenses are recorded on an accrual basis. Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund’s Board, taking into consideration, among other things, the nature and type of expense. Income, expenses (other than shareholder services fees), and realized and unrealized gains and losses are prorated among the classes based on the relative net assets of each class. Class specific expenses are directly charged to that Class.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
Foreign Currency Translation
The books and records of the Series are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the current exchange rates. Purchases and sales of investment securities and income and expenses are translated on the respective dates of such transactions. The Series does not isolate realized and unrealized gains and losses attributable to changes in the exchange rates from gains and losses that arise from changes in the fair value of investments. Such fluctuations are included with net realized and unrealized gain or loss on investments. Net realized foreign currency gains and losses represent foreign currency gains and losses between trade date and settlement date on securities transactions, gains and losses on disposition of foreign currencies and the difference between the amount of income and foreign withholding taxes recorded on the books of the Series and the amounts actually received or paid.
Securities Purchased on a When-Issued Basis or Forward Commitment
The Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss. No such investments were held by the Series on December 31, 2020.
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
20
High Yield Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Securities Purchased on a When-Issued Basis or Forward Commitment (continued)
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, 2020.
Asset-Backed Securities
The Series may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e. loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Series may subsequently have to reinvest the proceeds at lower interest rates. If the Series has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
Mortgage-Backed Securities
The Series may invest in mortgage-backed securities (“MBS” or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the Series to the periodic payments of principal and interest from those mortgages. MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. For MBS, there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury. Non-agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
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, 2020, 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.
21
High Yield Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Federal Taxes (continued)
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, 2017 through December 31, 2020. The Series is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation transactions for foreign jurisdictions in which it invests, the Series will provide for foreign taxes, and where appropriate, deferred foreign tax.
Distributions of Income and Gains
Distributions to shareholders of net investment income are made quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.40% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
The Fund may enter into agreements with financial intermediaries pursuant to which the Fund may pay financial intermediaries for non-distribution related sub-transfer agency, administrative, sub-accounting, and other shareholder services in an annual amount not to exceed 0.15% of the average daily net assets of the Class I and Class S shares of the Series. Payments made pursuant to such agreements are generally based on the current assets and/or number of accounts of the Series attributable to the financial intermediary. Any payments made pursuant to such agreements may be in addition to, rather than in lieu of, any Distribution and Shareholder Services Fee payable under the Rule 12b-1 plan of the Fund. For the year ended December 31, 2020, the sub-
22
High Yield Bond Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
transfer agency expenses incurred by Class S and Class I were $14,895 and $19,957, respectively. In addition, $17 was waived on Class S shares. This amount 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 Series compensates the distributor for distributing and servicing the Series’ Class S shares pursuant to a distribution plan adopted under Rule 12b-1 of the 1940 Act, regardless of expenses actually incurred. Under the agreement, the Series pays distribution and service fees to the distributor at an annual rate of 0.25% of average daily net assets attributable to Class S shares. There are no distribution and service fees on the Class I, Class W or Class Z shares. The fees are accrued daily and paid monthly.
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets (excluding Target Series); 0.0075% on the next $15 billion of average daily net assets (excluding Target Series); and 0.0065% of average daily net assets in excess of $40 billion (excluding Target Series); plus a base fee of $30,400 per series. Additionally, certain transaction and out-of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the shareholder services fee and/or distribution and service (12b-1) fees and waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.65% of the average daily net assets of the Class S and Class I shares, 0.10% of the average daily net assets of the Class W shares, and 0.50% of the average daily net assets of the Class Z shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $367,798 in management fees for Class W for the year ended December 31, 2020. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $13,633, $17,756, $126,979 and $2,226 for Class S, Class I, Class W, and Class Z, respectively, for the year ended December 31, 2020. These amounts are included as a reduction of expenses on the Statement of Operations.
As of December 31, 2020, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, | Total | |
2022 | 2023 | ||
Class S | $18,519 | $13,633 | $32,152 |
Class I | 22,088 | 17,756 | 39,844 |
Class W | 82,483 | 126,979 | 209,462 |
Class Z | 14,052 | 2,226 | 16,278 |
For the year ended December 31, 2020, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
23
High Yield Bond Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
The Series may participate in securities purchase and sale transactions with other Series or accounts advised by Manning & Napier (cross trades), in accordance with procedures adopted by the Fund’s Board and Securities and Exchange Commission rules, which require, among other things, that such purchase and sale cross trades be effected at the independent current market price of the security. Sales cross trades aggregated $2,268,079 with a net realized loss of $16,277 for the year ended December 31, 2020.
4. | Purchases and Sales of Securities |
For the year ended December 31, 2020, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $312,527,186 and $237,424,594, respectively. There were no purchases or sales of U.S. Government securities.
During the year ended December 31, 2020, the Advisor reimbursed the Series $7,602 related to a trade processing error. The amount is included in the realized gain (loss) on investments on the Statement of Operations.
5. | Capital Stock Transactions |
Transactions in Class S, Class I, Class W and Class Z shares of High Yield Bond Series were:
CLASS S | FOR THE YEAR ENDED | FOR THE YEAR ENDED | ||||||||||||||
12/31/20 | 12/31/19 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 1,374,004 | $ | 13,470,435 | 1,642,995 | $ | 16,381,730 | ||||||||||
Reinvested | 43,968 | 426,693 | 70,733 | 706,281 | ||||||||||||
Repurchased | (1,715,055 | ) | (16,444,271 | ) | (9,114,775 | ) | (91,206,439 | ) | ||||||||
Total | (297,083 | ) | $ | (2,547,143 | ) | (7,401,047 | ) | $ | (74,118,428 | ) |
CLASS I | FOR THE YEAR ENDED | FOR THE YEAR ENDED | ||||||||||||||
12/31/20 | 12/31/19 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 1,549,016 | $ | 12,741,074 | 1,671,447 | $ | 14,404,572 | ||||||||||
Reinvested | 143,819 | 1,184,486 | 180,138 | 1,544,925 | ||||||||||||
Repurchased | (1,513,585 | ) | (12,480,382 | ) | (3,441,929 | ) | (29,641,919 | ) | ||||||||
Total | 179,250 | $ | 1,445,178 | (1,590,344 | ) | $ | (13,692,422 | ) |
CLASS W | FOR THE PERIOD 3/1/19 | |||||||||||||||
FOR THE YEAR ENDED | (COMMENCEMENT OF OPERATIONS) | |||||||||||||||
12/31/20 | TO 12/31/19 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 9,470,532 | $ | 82,557,027 | 7,954,385 | $ | 79,582,220 | ||||||||||
Reinvested | 617,247 | 5,999,867 | 296,675 | 2,958,361 | ||||||||||||
Repurchased | (1,311,183 | ) | (12,237,390 | ) | (5,238,856 | ) | (52,565,362 | ) | ||||||||
Total | 8,776,596 | $ | 76,319,504 | 3,012,204 | $ | 29,975,219 |
24
High Yield Bond Series
Notes to Financial Statements (continued)
5. | Capital Stock Transactions (continued) |
CLASS Z | FOR THE PERIOD 3/1/19 | |||||||||||||||
FOR THE YEAR ENDED | (COMMENCEMENT OF OPERATIONS) | |||||||||||||||
12/31/20 | TO 12/31/19 | |||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | |||||||||||||
Sold | 27,724 | $ | 236,362 | 1,423,915 | $ | 12,339,574 | ||||||||||
Reinvested | 13,462 | 110,904 | 13,020 | 111,657 | ||||||||||||
Repurchased | (5,700 | ) | (49,176 | ) | (1,248,505 | ) | (10,763,352 | ) | ||||||||
Total | 35,486 | $ | 298,090 | 188,430 | $ | 1,687,879 |
Approximately 77% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund (with the exception of Credit Series) may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in August 2021 unless extended or renewed. During the year ended December 31, 2020, the Series did not borrow under the line of credit.
7. | Financial Instruments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. No such investments were held by the Series as of December 31, 2020.
The Series may invest in a loan assignment of all or a portion of the loans. The Series has direct rights against the borrower on a loan when it purchases an assignment; however, the Series’ rights may be more limited than the lender from which it acquired the assignment and the Series may be able to enforce its rights only through an administrative agent. Loan assignments are vulnerable to market conditions and may become illiquid due to economic conditions or other events may reduce the demand for loan assignments and certain loan assignments which were liquid when purchased may become illiquid. No such investments were held by the Series as of December 31, 2020.
8. | Foreign Securities |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the U.S. Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the U.S. Government.
9. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing book and tax treatments in
25
High Yield Bond Series
Notes to Financial Statements (continued)
9. | Federal Income Tax Information (continued) |
the timing and/or treatment of the recognition of net investment income or gains and losses including redesignation of distributions paid, GAAP interest and callable bond adjustments. 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, 2020, amounts were reclassified within the capital accounts to decrease Additional Paid in Capital by $12,695 and increase Total Distributable Earnings (Loss) by $12,695. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | |||||||
Ordinary income | $ | 8,143,007 | $ | 6,144,998 |
At December 31, 2020, 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 | $ | 145,581,835 | ||
Unrealized appreciation | 9,985,876 | |||
Unrealized depreciation | (3,289,530 | ) | ||
Net unrealized appreciation | $ | 6,696,346 | ||
Capital loss carryforwards | $ | (166,357 | ) |
At December 31, 2020, the capital loss carryover utilized in the current year was $5,489,465.
As of December 31, 2020, the Series had net long-term capital loss carryforwards of $166,357, which may be carried forward indefinitely.
10. | Market Event |
In March 2020, the World Health Organization declared COVID-19 (a novel coronavirus) to be a pandemic. The situation is dynamic. Global financial markets have experienced and may continue to experience significant volatility resulting from the spread of COVID-19. The outbreak of COVID-19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand and general market uncertainty. The global economy, the economies of certain nations and individual issuers have been and may continue to be adversely affected by COVID-19, particularly in light of the interconnectivity between economies and financial markets, all of which may negatively impact the Series’ performance. In addition, COVID-19 and governmental responses to COVID-19 may negatively impact the capabilities of the Series’ service providers and disrupt the Series’ operations. Management of the Series will continue to monitor the impact of COVID-19.
26
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
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of High Yield Bond Series (one of the series constituting Manning & Napier Fund, Inc., referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, 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 ended December 31, 2020 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, issuers of privately offered securities and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
New York, New York
February 17, 2021
We have served as the auditor of one or more investment companies in Manning & Napier Mutual Funds since 1992.
27
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.manning-napier.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 directors and officers, 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 and Officer | |
Name: | Paul Battaglia* |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 42 |
Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1 & Length of Time Served: | Indefinite – Chairman and Director since November 2018 |
Principal Occupation(s) During Past 5 Years: | Chief Financial Officer since 2018; Vice President of Finance (2016 – 2018); Director of Finance (2011 – 2016); Financial Analyst/Internal Auditor (2004-2006) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various subsidiaries and affiliates: Chief Financial Officer |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | N/A |
Independent Directors | |
Name: | Stephen B. Ashley |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 80 |
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 and Director since 1997; Chief Executive Officer (1997-2019) - Ashley Companies (property management and investment) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Ashley Companies since 1997 |
Name: | Paul A. Brooke |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 75 |
Current Position(s) Held with Fund: | Lead Independent Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since 2007; Governance & Nominating Committee Chairman since 2016; Lead Independent Director since 2017 |
Principal Occupation(s) During Past 5 Years: | Managing Member since 1991 - PMSV Holdings LLC (investments); Managing Member (2010-2016) - Venbio (investments).. |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Incyte Corp. (biotech) (2000-2020); PureEarth (non-profit) since 2012; Cerus(biomedical) since 2016; Caelum BioSciences (biomedical) since 2018; Cheyne Capital International (investment)(2000-2017); |
28
High Yield Bond Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued) | |
Name: | Peter L. Faber2 |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 82 |
Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Since 1987 |
Principal Occupation(s) During Past 5 Years: | Partner (1995-2006 & 2013-2018); Senior Counsel (2006-2012) - McDermott, Will & Emery LLP (law firm) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Boston Early Music Festival (non-profit) since 2007; Amherst Early Music, Inc. (non-profit) since 2009; Gotham Early Music Scene, Inc. (non-profit) since 2009; S’Cool Sounds, Inc. (non-profit) since 2017 |
Name: | Harris H. Rusitzky2 |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 85 |
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 since 1994 - The Greening Group (business consultants); Partner since 2006 - The Restaurant Group (restaurants) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (university) since 1972; Culinary Institute of America (non-profit college) since 1985; George Eastman Museum(museum) since 1988; National Restaurant Association (restaurant trade organization) (1978-2020) |
Name: | Russell O. Vernon |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 63 |
Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since April 2020; Governance & Nominating Committee Chairman since November 2020 |
Principal Occupation(s) During Past 5 Years: | Founder and General Partner (2009-2019) – BVM Capital Management(economic development) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Board Member, Vice Chairman and President since 2010 – Newburgh Armory Unity Center (military); Board Member and Executive Director since2020 – National Purple Heart Honor Mission, Inc. (military); Board Member, Vice Chairman (2015-2020) – National Purple Heart Hall of Honor, Inc. (military) |
29
High Yield Bond Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued) | |
Name: | Chester N. Watson |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 70 |
Current Position(s) Held with Fund: | Director, Audit Committee Chairman, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member Since 2012; Audit Committee Chairman since 2013 |
Principal Occupation(s) During Past 5 Years: | General Auditor (2003-2011) - General Motors Company (auto manufacturer) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (University) since 2005; Hudson Valley Center for Innovation, Inc. (New Business and Economic Development) since 2019; Town of Greenburgh, NY Planning Board (Municipal Government) (2015-2019); |
Officers: | |
Name: | Elizabeth Craig |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 33 |
Current Position(s) Held with Fund: | Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2016 |
Principal Occupation(s) During Past 5 Years: | Fund Regulatory Administration Manager since 2018; Fund Administration Manager (2015-2018); Mutual Fund Compliance Specialist (2009-2015) - Manning & Napier Advisors, LLC; Assistant Corporate Secretary (2011-2016) - Manning & Napier Fund, Inc.; Corporate Secretary, Director since2019– Manning & Napier Investor Services, Inc. |
Name: | Samantha Larew |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 40 |
Current Position(s) Held with Fund: | Chief Compliance Officer and Anti-Money Laundering Compliance Officer |
Term of Office1 & Length of Time Served: | Chief Compliance Officer since 2019; Anti-Money Laundering Compliance Officer since 2018 |
Principal Occupation(s) During Past 5 Years: | Co-Director of Compliance since 2018; Compliance Communications Supervisor (2014-2018); Compliance Supervisor (2013-2014); Broker-Dealer Compliance Supervisor (2011-2013); Broker-Dealer Compliance Analyst (2010-2011) - Manning & Napier Advisors, LLC & Affiliates; Broker-Dealer Chief Compliance Officer since 2013; Broker-Dealer Assistant Corporate Secretary since 2011 – Manning & Napier Investor Services, Inc.; Compliance Analyst (2007-2009) – Wall Street Financial Group; Compliance Specialist (2003-2007) – Manning & Napier Advisors, LLC & Affiliates |
Name: | Scott Morabito |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 33 |
Current Position(s) Held with Fund: | Vice President |
Term of Office1 & Length of Time Served: | Vice President since 2019; Assistant Vice President (2017-2019) |
Principal Occupation(s) During Past 5 Years: | Managing Director of Operations since 2019; Director of Funds Group (2017-2019); Fund Product and Strategy Manager (2014-2017); Senior Product and Strategy Analyst (2013-2014); Product and Strategy Analyst (2011-2013) - Manning & Napier Advisors, LLC; President, Director since 2018 – Manning & Napier Investor Services, Inc. |
30
High Yield Bond Series
Directors’ and Officers’ Information
(unaudited)
Officers: (continued) | |
Name: | Troy Statczar |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 49 |
Current Position(s) Held with Fund: | Principal Financial Officer, Treasurer |
Term of Office1 & Length of Time Served: | Principal Financial Officer and Treasurer since 2020 |
Principal Occupation(s) During Past 5 Years: | Senior Director, Foreside Treasurer Services since 2020 - Foreside Financial Group; Director of Fund Administration (2017-2019) - Thornburg Investment Management, Inc.; Director of U.S. Operations (2008-2017) - Henderson Global Investors N.A., Inc. |
Name: | Sarah Turner |
Address: | 290 Woodcliff Drive Fairport, NY 14450 |
Age: | 38 |
Current Position(s) Held with Fund: | Chief Legal Officer; Assistant Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2018 |
Principal Occupation(s) During Past 5 Years: | Attorney since 2018 - Manning & Napier Advisors, LLC and affiliates; Counsel (2017-2018) – Harter Secrest and Emery LLP; Legal Counsel (2010-2017) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various affiliates: Corporate Secretary, General Counsel |
*Interested Director, within the meaning of the 1940 Act by reason of his positions with the Fund’s Advisor, Manning & Napier Advisors, LLC, and Distributor, Manning & Napier Investor Services, Inc.
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.
2Effective December 31, 2020, Peter L. Faber and Harris Rusitzky have each retired as a Director of the Fund in accordance with the Board’s existing Board retirement policy.
31
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32
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33
High Yield Bond Series
Literature Requests
(unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the Securities and Exchange Commission’s (SEC) web site | http://www.sec.gov |
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling (800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. Fund Holdings - Month-End
2. Fund Holdings - Quarter-End
3. Shareholder Report - Annual
4. Shareholder Report - Semi-Annual
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNHYB-12/20-AR
34
Manning & Napier Fund, Inc.
Unconstrained Bond Series
Paper copies of the Series’ shareholder reports are no longer sent by mail, unless you specifically request them from the Series or from your financial intermediary, such as a broker-dealer or bank. Shareholder reports are available online. Each time a report is posted on the Series’ website you will be provided with a link to access the report online, either by mail (hard copy notice) or by email, if you have already signed up for electronic delivery of shareholder reports.
You may elect to receive all future shareholder reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive paper copies. If you invest directly with the Fund, you can inform the Fund that you wish to continue receiving paper copies by visiting www.manning-napier.com or calling 1-800-466-3863. Your election to receive reports in paper will apply to all funds held with your financial intermediary if you invest through a financial intermediary or all series of the Fund if you invest directly with the Fund.
Additionally, If you have not yet signed up for electronic delivery of shareholder reports and other Fund communications, you may do so by contacting your financial intermediary or, if you are a direct investor, by visiting www.manning-napier.com or calling 1-800-466-3863.
Independent Perspective | Real-World Solutions |
A Note from Our CEO
Dear Shareholder,
2020. What a momentous year.
Political change, social unrest, the pandemic, economic shutdowns, and, of course, the fastest stock market selloff and recovery in history, all describe what has been a remarkably tumultuous and challenging time.
Maybe it should come as no surprise that after a year of such change, we yearn for a return of convention, clarity, facts, and perhaps, less drama.
This desire for normalcy is understandable, but we cannot hide our heads in the sand. The profound challenges we face are not going to simply go away.
If anything, many of the structural issues that brought us to where we are today, technological progress, the information age, a shifting economy and culture, may very well accelerate from here. Whether we want it or not, change is coming.
As investors, logically and rationally deciphering an uncertain future is one of our most existential tasks. Particularly in times like these, it is too easy to get caught up in the turbulence—to let emotion get the best of us—to fail to see the forest for the trees.
This is why the key question we must ask ourselves today is, what is the best way for us to understand and invest upon the paths that lie before us?
We believe the answer is, in many ways, an evergreen one, and we hope it offers you a helpful perspective.
It is to invest for the long-term, not speculate on short-term developments. It is to take an active, hands-on approach to investment decisions. It is to be patient, disciplined, and confident when the right investment opportunities present themselves. And it is to be constantly attentive to risk, particularly the most significant risks, permanent loss of capital and the risk of falling short of long-term needs and goals.
These are the same investing principles that we have been successfully implementing for clients since our founding more than 50 years ago.
Whether you are an individual investor, a financial advisor, or an institutional investor making decisions on behalf of others, you can trust that we are well equipped to handle whatever challenges the markets have in store for us next.
We wish you safety and good health, and we appreciate your continued confidence in our firm and our approach.
Sincerely,
Marc Mayer Chief Executive Officer |
Corporate Headquarters | 290 Woodcliff Drive | Fairport, NY 14450 | (585) 325-6880 phone | (800) 551-0224 toll free | www.manning-napier.com
1
Unconstrained Bond Series
Fund Commentary
(unaudited)
Investment Objective
Primarily to provide long-term total return, with a secondary objective of preservation of capital. Under normal circumstances, at least 80% of the Series’ assets will be invested in bonds and other financial instruments with economic characteristics similar to bonds. Up to 50% of the Series may be invested in below investment-grade securities and/or in non-US dollar denominated securities, including securities issued by companies located in emerging markets. Derivatives, such as futures, options, swaps, and forwards, may also be used to manage interest rate exposure, duration, or currency risk.
Performance Commentary
Fixed income markets posted strong, positive returns for the twelve-month period ending December 31, 2020. Despite significant volatility at points during the year, specifically in the first quarter as the global pandemic upended markets and the ensuing rebound, yields ended the year lower and credit spreads tightened. The highest returning areas of the market included Treasury Inflation Protected Securities & corporate bonds from a sector perspective, longer-dated issuances from a maturity perspective, and higher quality issuances from a quality perspective.
The Unconstrained Bond Series Class S shares delivered positive absolute returns during 2020, returning 7.54%, and outperformed its benchmark, the FTSE 3-Month Treasury Bill Index, which returned 0.58%.
Relative outperformance is attributable to the Series’ longer duration as interest rates broadly fell for the year, as well as its notable allocation to credit-related securities as spreads tightened.
Although the market in general continues to look rich from a valuation perspective, we continue to find select opportunities. Specifically, we continue to find opportunities within the corporate sector, particularly within communications and cyclicals, and, despite tightening valuations, in BBB-rated issuances from a bottom-up perspective. Additionally, we continue to view commercial mortgage backed and asset-backed securities as relatively attractive and are focusing on securities with seniority in the capital structure and are backed by asset classes with high quality fundamentals and low credit risk. Finally, we’re seeing select opportunities in high yield, collateralized loan obligations, and non-US dollar denominated securities.
While 2020 was a very strong year for fixed income, we believe investor return expectations for the coming year should be tempered as the fixed income landscape remains challenging due to low starting rates. That stated, we believe our “go anywhere” solution provides the flexibility to find positive absolute returns during different phases of the market and economic cycle by allowing us to target specific risks as valuations and conditions warrant.
Performance for the Unconstrained Bond Series Class S shares is provided above. Performance for other shares classes will differ based on each class’ underlying expenses.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than that quoted; investors can obtain the most recent month-end performance at www.manning-napier.com or by calling (800) 466-3863.
Additional information and associated disclosures can be found on the Performance Update page of this report.
All investments involve risks, including possible loss of principal. There is an inverse relationship between bond prices and interest rates; as interest rates rise, bond prices (and therefore the value of bond funds) fall. Likewise, as interest rates fall, bond prices and the value of bond funds rise. Investments in higher-yielding, lower-rated securities involve additional risks, including a higher risk of default and loss of principal. Funds that invest in foreign countries may be subject to the risks of adverse changes in foreign economic, political, regulatory and other conditions as well as risks related to the use of different financial standards. Investments in emerging markets may be more volatile than investments in more developed markets. Investments in derivatives can be highly volatile and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk. Also, the use of leverage increases exposure to the market and may magnify potential losses.
2
Unconstrained Bond Series
Performance Update as of December 31, 2020
(unaudited)
AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 2020 | |||
ONE YEAR1 | FIVE YEAR | TEN YEAR | |
Unconstrained Bond Series - Class S2 | 7.54% | 3.98% | 3.76% |
Unconstrained Bond Series - Class I2,3 | 7.74% | 4.23% | 3.94% |
Unconstrained Bond Series - Class W2,4 | 8.29% | 4.26% | 3.90% |
FTSE 3-Month Treasury Bill Index5 | 0.58% | 1.16% | 0.60% |
Bloomberg Barclays U.S. Aggregate Bond Index6 | 7.51% | 4.44% | 3.84% |
The following graph compares the value of a $10,000 investment in the Unconstrained Bond Series - Class S for the ten years ended December 31, 2020 to the FTSE 3-Month Treasury Bill Index and Bloomberg Barclays U.S. Aggregate Bond Index.
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.
2The Series’ performance does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of shares. The Series’ performance is historical and may not be indicative of future results. The performance returns shown are inclusive of the net expense ratio of the Series. For the year ended December 31, 2020, this net expense ratio was 0.73% for Class S, 0.49% for Class I and 0.05% for Class W. The gross expense ratio, which does not account for any voluntary or contractual waivers currently in effect, was 0.73% for Class S, 0.49% for Class I and 0.37% for Class W for the year ended December 31, 2020.
3For periods through August 1, 2013 (the inception date of the Class I shares), performance for the Class I shares is based on the historical performance of the Class S shares. Because the Class I shares invest in the same portfolio of securities as Class S, performance will only be different to the extent that the Class S shares have a higher expense ratio.
4For periods through March 1, 2019 (the inception date of the Class W shares), performance for the Class W shares is based on the historical performance of the Class S shares. Because the Class W shares invest in the same portfolio of securities as the Class S shares, performance will be different only to the extent that the Class S shares have a higher expense ratio.
5The FTSE 3-Month Treasury Bill Index is an unmanaged index based on 3-Month U.S. treasury bills. The Index measures the monthly return equivalents of yield averages that are not marked to market. The Index returns do not reflect any fees or expenses. Index returns provided by Interactive Data.
6The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged, market-value weighted index of U.S. domestic investment-grade debt issues, including government, corporate, asset-backed, and mortgage-backed securities, with maturities of one year or more. Index returns do not reflect any fees or expenses. Index returns provided by Interactive Data.
3
Unconstrained Bond Series
Shareholder Expense Example
(unaudited)
As a shareholder of the Series, you incur ongoing costs, including management fees, shareholder service fees and other Series expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Series and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested in each class at the beginning of the period and held for the entire period (July 1, 2020 to December 31, 2020).
Actual Expenses
The Actual lines of the table below provide information about actual account values and actual expenses. You may use the information in these lines, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the Actual line for the Class in which you have invested under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The Hypothetical lines of each class in the table below provide information about hypothetical account values and hypothetical expenses based on the Class’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in a class of the Series and other funds. To do so, compare this 5% hypothetical example for the Class in which you have invested with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads), redemption fees, or exchange fees that you may incur in other mutual funds. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ACCOUNT VALUE 7/1/20 | ENDING ACCOUNT VALUE 12/31/20 | EXPENSES PAID DURING PERIOD* 7/1/20 - 12/31/20 | ANNUALIZED EXPENSE RATIO | |
Class S | ||||
Actual | $1,000.00 | $1,062.70 | $3.73 | 0.72% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.52 | $3.66 | 0.72% |
Class I | ||||
Actual | $1,000.00 | $1,063.80 | $2.59 | 0.50% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.62 | $2.54 | 0.50% |
Class W | ||||
Actual | $1,000.00 | $1,066.70 | $0.26 | 0.05% |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.89 | $0.25 | 0.05% |
*Expenses are equal to each Class’ annualized expense ratio (for the six-month period), multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). Expenses are based on the most recent fiscal half year; therefore, the expense ratios stated above may differ from the expense ratios stated in the financial highlights, which are based on one-year data. The Class’ total return would have been lower had certain expenses not been waived or reimbursed during the period.
4
Unconstrained Bond Series
Portfolio Composition as of December 31, 2020
(unaudited)
Sector Allocation1 |
1As a percentage of net assets. |
5
Unconstrained Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
COMMON STOCKS - 0.2% | ||||||||
Energy - 0.2% | ||||||||
Oil, Gas & Consumable Fuels - 0.2% | ||||||||
Jonah Energy Parent LLC*2 | 85,915 | $ | 1,288,725 | |||||
Lonestar Resources US, Inc.* | 133,824 | 243,560 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Identified Cost $4,370,787) | 1,532,285 | |||||||
LOAN ASSIGNMENTS - 0.7% | ||||||||
Tutor Perini Corp., Term Loan, 5.75%, 8/18/20273 | ||||||||
(Identified Cost $4,891,958) | 4,987,500 | 4,999,969 | ||||||
CORPORATE BONDS - 51.4% | ||||||||
Non-Convertible Corporate Bonds- 51.4% | ||||||||
Communication Services - 3.9% | ||||||||
Diversified Telecommunication Services - 2.3% | ||||||||
AT&T, Inc., 4.25%, 3/1/2027 | 9,000,000 | 10,527,599 | ||||||
Verizon Communications, Inc., 4.272%, 1/15/2036 | 4,000,000 | 4,961,122 | ||||||
15,488,721 | ||||||||
Media - 0.8% | ||||||||
DISH DBS Corp., 6.75%, 6/1/2021 | 820,000 | 836,572 | ||||||
NBCUniversal Media LLC, 6.40%, 4/30/2040 | 2,640,000 | 4,162,345 | ||||||
TEGNA, Inc., 4.625%, 3/15/20284 | 500,000 | 511,250 | ||||||
5,510,167 | ||||||||
Wireless Telecommunication Services - 0.8% | ||||||||
Sprint Corp., 7.25%, 9/15/2021 | 4,918,000 | 5,117,179 | ||||||
Total Communication Services | 26,116,067 | |||||||
Consumer Discretionary - 5.4% | ||||||||
Automobiles - 2.2% | ||||||||
Ford Motor Co. | ||||||||
8.50%, 4/21/2023 | 2,000,000 | 2,251,020 | ||||||
9.00%, 4/22/2025 | 1,360,000 | 1,667,374 | ||||||
Ford Motor Credit Co. LLC | ||||||||
3.219%, 1/9/2022 | 950,000 | 958,812 | ||||||
2.979%, 8/3/2022 | 2,050,000 | 2,084,235 | ||||||
4.389%, 1/8/2026 | 2,375,000 | 2,492,990 | ||||||
PM General Purchaser LLC, 9.50%, 10/1/20284 | 2,515,000 | 2,785,362 | ||||||
Volkswagen Group of America Finance LLC (Germany), 3.35%, 5/13/20254 | 2,250,000 | 2,473,549 | ||||||
14,713,342 | ||||||||
Diversified Consumer Services - 0.3% | ||||||||
GEMS MENASA Cayman Ltd. - GEMS Education Delaware LLC (United Arab Emirates), 7.125%, 7/31/20264 | 2,080,000 | 2,168,400 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Consumer Discretionary (continued) | ||||||||
Hotels, Restaurants & Leisure - 0.2% | ||||||||
Affinity Gaming, 6.875%, 12/15/20274 | 1,520,000 | $ | 1,592,641 | |||||
Household Durables - 1.0% | ||||||||
FXI Holdings, Inc., 12.25%, 11/15/20264 | 1,420,000 | 1,618,800 | ||||||
STL Holding Co. LLC, 7.50%, 2/15/20264 | 3,195,000 | 3,314,813 | ||||||
TRI Pointe Group, Inc. - TRI Pointe Homes, Inc., 5.875%, 6/15/2024 | 1,552,000 | 1,694,008 | ||||||
6,627,621 | ||||||||
Internet & Direct Marketing Retail - 1.3% | ||||||||
Booking Holdings, Inc., 3.60%, 6/1/2026 | 7,450,000 | 8,467,336 | ||||||
Specialty Retail - 0.4% | ||||||||
The TJX Companies, Inc., 3.50%, 4/15/2025 | 2,750,000 | 3,070,352 | ||||||
Total Consumer Discretionary | 36,639,692 | |||||||
Consumer Staples - 0.7% | ||||||||
Food & Staples Retailing - 0.7% | ||||||||
C&S Group Enterprises LLC, 5.00%, 12/15/20284 | 2,300,000 | 2,293,284 | ||||||
KeHE Distributors LLC - KeHE Finance Corp., 8.625%, 10/15/20264 | 2,400,000 | 2,694,000 | ||||||
Total Consumer Staples | 4,987,284 | |||||||
Energy - 10.0% | ||||||||
Energy Equipment & Services - 0.3% | ||||||||
Oceaneering International, Inc., 6.00%, 2/1/2028 | 2,430,000 | 2,171,813 | ||||||
Oil, Gas & Consumable Fuels - 9.7% | ||||||||
Antero Midstream Partners LP - Antero Midstream Finance Corp. | ||||||||
7.875%, 5/15/20264 | 640,000 | 660,851 | ||||||
5.75%, 3/1/20274 | 2,200,000 | 2,161,500 | ||||||
5.75%, 1/15/20284 | 1,555,000 | 1,493,111 | ||||||
Ascent Resources Utica Holdings LLC - ARU Finance Corp., 8.25%, 12/31/20284 | 1,475,000 | 1,471,313 | ||||||
Brooge Petroleum and Gas Investment Co. FZE (United Arab Emirates), 8.50%, 9/24/20254 | 5,500,000 | 5,228,556 | ||||||
Bruin E&P Partners LLC, 8.875%, 8/1/20235,6 | 4,940,000 | 494 | ||||||
CNX Midstream Partners LP - CNX Midstream Finance Corp., 6.50%, 3/15/20264 | 1,150,000 | 1,170,125 | ||||||
DCP Midstream Operating LP | ||||||||
4.75%, 9/30/20214 | 6,637,000 | 6,736,555 | ||||||
8.125%, 8/16/2030 | 1,975,000 | 2,523,062 | ||||||
EQT Corp., 8.75%, 2/1/20307 | 1,710,000 | 2,094,750 | ||||||
Indigo Natural Resources LLC, 6.875%, 2/15/20264 | 1,635,000 | 1,671,787 |
The accompanying notes are an integral part of the financial statements.
6
Unconstrained Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Energy (continued) | ||||||||
Oil, Gas & Consumable Fuels (continued) | ||||||||
Ithaca Energy North Sea plc (United Kingdom), 9.375%, 7/15/20244 | 1,200,000 | $ | 1,174,968 | |||||
Moss Creek Resources Holdings, Inc., 7.50%, 1/15/20264 | 2,395,000 | 1,820,200 | ||||||
Navigator Holdings Ltd., 8.00%, 9/10/20254 | 3,150,000 | 3,244,500 | ||||||
New Fortress Energy, Inc., 6.75%, 9/15/20254 | 3,175,000 | 3,372,422 | ||||||
NGL Energy Partners LP - NGL Energy Finance Corp., 7.50%, 11/1/2023 | 2,095,000 | 1,483,522 | ||||||
Occidental Petroleum Corp., 8.875%, 7/15/2030 | 1,545,000 | 1,813,444 | ||||||
PDC Energy, Inc., 5.75%, 5/15/2026 | 1,510,000 | 1,559,075 | ||||||
Sabine Pass Liquefaction LLC, 5.75%, 5/15/2024 | 7,000,000 | 8,003,047 | ||||||
Talos Production, Inc., 12.00%, 1/15/20264 | 1,405,000 | 1,367,023 | ||||||
Tennessee Gas Pipeline Co. LLC 7.00%, 3/15/2027 | 6,775,000 | 8,453,926 | ||||||
7.00%, 10/15/2028 | 2,225,000 | 2,900,418 | ||||||
The Williams Companies, Inc., 3.75%, 6/15/2027 | 4,000,000 | 4,564,146 | ||||||
64,968,795 | ||||||||
Total Energy | 67,140,608 | |||||||
Financials - 13.3% | ||||||||
Banks - 3.1% | ||||||||
Bank of America Corp. | ||||||||
4.00%, 1/22/2025 | 7,000,000 | 7,865,771 | ||||||
(3 mo. LIBOR US + 0.760%), 0.976%, 9/15/20263 | 3,561,000 | 3,489,815 | ||||||
CIT Group, Inc., 5.00%, 8/15/2022 | 990,000 | 1,049,400 | ||||||
Citigroup, Inc., 4.45%, 9/29/2027 | 3,700,000 | 4,373,911 | ||||||
JPMorgan Chase & Co., 8.00%, 4/29/2027 | 3,000,000 | 4,194,169 | ||||||
Popular, Inc. (Puerto Rico), 6.125%, 9/14/2023 | 100,000 | 108,000 | ||||||
21,081,066 | ||||||||
Capital Markets - 3.1% | ||||||||
Advisor Group Holdings, Inc., 10.75%, 8/1/20274 | 2,414,000 | 2,667,470 | ||||||
Drawbridge Special Opportunities Fund LP - Drawbridge Special Opportunities Finance, 5.00%, 8/1/20214 | 3,725,000 | 3,760,847 | ||||||
Gladstone Capital Corp., 5.125%, 1/31/2026 | 3,000,000 | 3,120,000 | ||||||
LPL Holdings, Inc., 4.625%, 11/15/20274 | 1,562,000 | 1,616,670 | ||||||
Owl Rock Technology Finance Corp. | ||||||||
4.75%, 12/15/20254 | 2,280,000 | 2,380,878 | ||||||
3.75%, 6/17/20264 | 3,000,000 | 3,016,284 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Financials (continued) | ||||||||
Capital Markets (continued) | ||||||||
StoneX Group, Inc., 8.625%, 6/15/20254 | 3,664,000 | $ | 3,984,600 | |||||
20,546,749 | ||||||||
Consumer Finance - 3.3% | ||||||||
Navient Corp. | ||||||||
6.625%, 7/26/2021 | 3,717,000 | 3,795,986 | ||||||
5.50%, 1/25/2023 | 990,000 | 1,034,550 | ||||||
6.75%, 6/25/2025 | 1,410,000 | 1,533,375 | ||||||
OneMain Finance Corp. | ||||||||
7.75%, 10/1/2021 | 3,000,000 | 3,157,500 | ||||||
7.125%, 3/15/2026 | 1,535,000 | 1,815,138 | ||||||
PRA Group, Inc., 7.375%, 9/1/20254 | 2,270,000 | 2,451,600 | ||||||
SLM Corp. | ||||||||
5.125%, 4/5/2022 | 5,336,000 | 5,456,060 | ||||||
4.20%, 10/29/2025 | 3,130,000 | 3,306,062 | ||||||
22,550,271 | ||||||||
Diversified Financial Services - 1.5% | ||||||||
FS Energy & Power Fund, 7.50%, 8/15/20234 | 2,430,000 | 2,317,612 | ||||||
Owl Rock Capital Corp., 3.40%, 7/15/2026 | 6,300,000 | 6,390,207 | ||||||
Oxford Finance LLC - Oxford Finance Co-Issuer II, Inc., 6.375%, 12/15/20224 | 1,695,000 | 1,690,763 | ||||||
10,398,582 | ||||||||
Insurance - 0.5% | ||||||||
Genworth Mortgage Holdings, Inc., 6.50%, 8/15/20254 | 2,930,000 | 3,171,725 | ||||||
Mortgage Real Estate Investment Trusts (REITS) - 1.0% | ||||||||
Ladder Capital Finance Holdings LLLP - Ladder Capital Finance Corp., 5.25%, 10/1/20254 | 2,940,000 | 2,932,650 | ||||||
Starwood Property Trust, Inc. | ||||||||
5.00%, 12/15/2021 | 1,150,000 | 1,169,285 | ||||||
4.75%, 3/15/2025 | 2,400,000 | 2,460,000 | ||||||
6,561,935 | ||||||||
Thrifts & Mortgage Finance - 0.8% | ||||||||
MGIC Investment Corp., 5.25%, 8/15/2028 | 2,405,000 | 2,573,350 | ||||||
Radian Group, Inc., 4.875%, 3/15/2027 | 2,778,000 | 3,050,800 | ||||||
5,624,150 | ||||||||
Total Financials | 89,934,478 | |||||||
Health Care - 1.8% | ||||||||
Health Care Equipment & Supplies - 0.4% | ||||||||
AdaptHealth LLC, 6.125%, 8/1/20284 | 2,375,000 | 2,550,156 | ||||||
Health Care Providers & Services - 0.4% | ||||||||
Prime Healthcare Services, Inc., 7.25%, 11/1/20254 | 2,455,000 | 2,608,438 |
The accompanying notes are an integral part of the financial statements.
7
Unconstrained Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Health Care (continued) | ||||||||
Pharmaceuticals - 1.0% | ||||||||
Bausch Health Companies, Inc., 5.00%, 1/30/20284 | 2,425,000 | $ | 2,499,059 | |||||
P&L Development LLC - PLD Finance Corp., 7.75%, 11/15/20254 | 2,455,000 | 2,639,125 | ||||||
Teva Pharmaceutical Finance Netherlands III B.V. (Israel), 6.75%, 3/1/2028 | 1,600,000 | 1,810,000 | ||||||
6,948,184 | ||||||||
Total Health Care | 12,106,778 | |||||||
Industrials - 6.5% | ||||||||
Aerospace & Defense - 0.2% | ||||||||
Howmet Aerospace, Inc., 6.875%, 5/1/2025 | 1,250,000 | 1,462,500 | ||||||
Airlines - 1.0% | ||||||||
Alaska Airlines Pass-Through Trust, Series 2020-1, Class B, 8.00%, 8/15/20254 | 3,165,000 | 3,437,988 | ||||||
Southwest Airlines Co., 5.25%, 5/4/2025 | 3,000,000 | 3,474,483 | ||||||
6,912,471 | ||||||||
Commercial Services & Supplies - 0.6% | ||||||||
Matthews International Corp., 5.25%, 12/1/20254 | 2,275,000 | 2,297,750 | ||||||
Prime Security Services Borrower LLC - Prime Finance, Inc., 5.75%, 4/15/20264 | 1,565,000 | 1,713,675 | ||||||
4,011,425 | ||||||||
Construction & Engineering - 0.6% | ||||||||
Tutor Perini Corp., 6.875%, 5/1/20254 | 4,340,000 | 4,253,200 | ||||||
Electrical Equipment - 0.1% | ||||||||
EnerSys, 4.375%, 12/15/20274 | 305,000 | 322,538 | ||||||
Machinery - 0.3% | ||||||||
Hillenbrand, Inc., 5.00%, 9/15/20267 | 1,494,000 | 1,675,147 | ||||||
Marine - 1.0% | ||||||||
American Tanker, Inc. (Norway), 7.75%, 7/2/2025 | 3,590,000 | 3,597,359 | ||||||
Global Ship Lease, Inc. (United Kingdom), 9.875%, 11/15/20224 | 1,659,000 | 1,700,475 | ||||||
Navios South American Logistics, Inc. - Navios Logistics Finance US, Inc. (Uruguay), 10.75%, 7/1/20254 | 1,560,000 | 1,669,200 | ||||||
6,967,034 | ||||||||
Trading Companies & Distributors - 2.7% | ||||||||
Ashtead Capital, Inc. (United Kingdom), 4.00%, 5/1/20284 | 1,500,000 | 1,593,210 | ||||||
Aviation Capital Group LLC, 6.75%, 4/6/20214 | 3,750,000 | 3,800,201 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Industrials (continued) | ||||||||
Trading Companies & Distributors (continued) | ||||||||
Avolon Holdings Funding Ltd. (Ireland), 3.25%, 2/15/20274 | 9,000,000 | $ | 9,182,864 | |||||
Fortress Transportation and Infrastructure Investors LLC | ||||||||
6.50%, 10/1/20254 | 1,605,000 | 1,677,402 | ||||||
9.75%, 8/1/20274 | 1,520,000 | 1,742,300 | ||||||
17,995,977 | ||||||||
Total Industrials | 43,600,292 | |||||||
Information Technology - 1.4% | ||||||||
Communications Equipment - 0.3% | ||||||||
Hughes Satellite Systems Corp., 5.25%, 8/1/2026 | 1,535,000 | 1,694,256 | ||||||
IT Services - 0.6% | ||||||||
Austin BidCo, Inc., 7.125%, 12/15/20284 | 415,000 | 433,156 | ||||||
Unisys Corp., 6.875%, 11/1/20274 | 1,555,000 | 1,698,838 | ||||||
Visa, Inc. | ||||||||
2.70%, 4/15/2040 | 1,215,000 | 1,326,332 | ||||||
4.30%, 12/14/2045 | 635,000 | 869,784 | ||||||
4,328,110 | ||||||||
Semiconductors & Semiconductor Equipment - 0.3% | ||||||||
ams AG (Austria), 7.00%, 7/31/20254 | 1,565,000 | 1,698,025 | ||||||
Software - 0.2% | ||||||||
LogMeIn, Inc., 5.50%, 9/1/20274 | 1,310,000 | 1,372,225 | ||||||
Total Information Technology | 9,092,616 | |||||||
Materials - 1.4% | ||||||||
Chemicals - 0.0%## | ||||||||
WR Grace & Co.-Conn, 5.625%, 10/1/20244 | 192,000 | 207,120 | ||||||
Metals & Mining - 1.4% | ||||||||
Hudbay Minerals, Inc. (Peru), 6.125%, 4/1/20294 | 1,490,000 | 1,605,475 | ||||||
IAMGOLD Corp. (Burkina Faso), 5.75%, 10/15/20284 | 2,475,000 | 2,512,125 | ||||||
Infrabuild Australia Pty Ltd. (Australia), 12.00%, 10/1/20244 | 3,425,000 | 3,463,531 | ||||||
Joseph T Ryerson & Son, Inc., 8.50%, 8/1/20284 | 1,350,000 | 1,528,875 | ||||||
Northwest Acquisitions ULC - Dominion Finco, Inc., 7.125%, 11/1/20225,8 | 5,870,000 | 39,623 | ||||||
9,149,629 | ||||||||
Total Materials | 9,356,749 | |||||||
Real Estate - 5.0% | ||||||||
Equity Real Estate Investment Trusts (REITS) - 4.8% | ||||||||
American Tower Corp., 3.80%, 8/15/2029 | 8,250,000 | 9,591,760 |
The accompanying notes are an integral part of the financial statements.
8
Unconstrained Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
CORPORATE BONDS (continued) | ||||||||
Non-Convertible Corporate Bonds (continued) | ||||||||
Real Estate (continued) | ||||||||
Equity Real Estate Investment Trusts (REITS) (continued) | ||||||||
Camden Property Trust, 2.80%, 5/15/2030 | 3,225,000 | $ | 3,581,553 | |||||
Crown Castle International Corp. | ||||||||
3.10%, 11/15/2029 | 5,000,000 | 5,509,670 | ||||||
3.30%, 7/1/2030 | 1,850,000 | 2,070,666 | ||||||
HAT Holdings I LLC - HAT Holdings II LLC, 3.75%, 9/15/20304 | 1,640,000 | 1,701,500 | ||||||
Iron Mountain, Inc., 4.50%, 2/15/20314 | 1,645,000 | 1,723,137 | ||||||
MGM Growth Properties Operating Partnership LP - MGP Finance Co-Issuer, Inc., 3.875%, 2/15/20294 | 1,520,000 | 1,554,200 | ||||||
SBA Tower Trust | ||||||||
2.836%, 1/15/20254 | 3,500,000 | 3,726,271 | ||||||
1.884%, 1/15/20264 | 2,750,000 | 2,819,678 | ||||||
32,278,435 | ||||||||
Real Estate Management & Development - 0.2% | ||||||||
Forestar Group, Inc., 5.00%, 3/1/20284 | 1,565,000 | 1,615,863 | ||||||
Total Real Estate | 33,894,298 | |||||||
Utilities - 2.0% | ||||||||
Electric Utilities - 1.7% | ||||||||
Alexander Funding Trust, 1.841%, 11/15/20234 | 10,000,000 | 10,113,825 | ||||||
Talen Energy Supply LLC, 6.50%, 6/1/2025 | 1,450,000 | 1,181,750 | ||||||
11,295,575 | ||||||||
Multi-Utilities - 0.3% | ||||||||
Virginia Electric and Power Co., 8.875%, 11/15/2038 | 1,350,000 | 2,503,110 | ||||||
Total Utilities | 13,798,685 | |||||||
TOTAL CORPORATE BONDS | ||||||||
(Identified Cost $330,356,957) | 346,667,547 | |||||||
ASSET-BACKED SECURITIES - 23.6% | ||||||||
AMSR Trust, Series 2020-SFR4, Class A, 1.355%, 11/17/20374 | 4,833,000 | 4,873,887 | ||||||
CarMax Auto Owner Trust, Series 2017-3, Class A3, 1.97%, 4/15/2022 | 347,448 | 348,023 | ||||||
Cazenovia Creek Funding II LLC, Series 2018-1A, Class A, 3.561%, 7/15/20304 | 2,054,931 | 2,063,660 | ||||||
CCG Receivables Trust, Series 2019-1, Class A2, 2.80%, 9/14/20264 | 3,098,824 | 3,146,665 | ||||||
CF Hippolyta LLC | ||||||||
Series 2020-1, Class A1, 1.69%, 7/15/20604 | 3,912,953 | 3,985,793 | ||||||
Series 2020-1, Class B1, 2.28%, 7/15/20604 | 1,908,758 | 1,938,285 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
Chesapeake Funding II LLC, Series 2017-2A, Class A1 (Canada), 1.99%, 5/15/20294 | 117,219 | $ | 117,321 | |||||
Commonbond Student Loan Trust, Series 2019-AGS, Class A1, 2.54%, 1/25/20474 | 4,338,891 | 4,448,261 | ||||||
Corevest American Finance Trust Series 2019-1, Class A, 3.324%, 3/15/20524 | 4,864,127 | 5,180,534 | ||||||
Series 2019-3, Class A, 2.705%, 10/15/20524 | 3,163,480 | 3,333,940 | ||||||
Series 2020-3, Class A, 1.358%, 8/15/20534 | 1,994,033 | 2,013,698 | ||||||
Series 2020-4, Class A, 1.174%, 12/15/20524 | 1,250,000 | 1,254,370 | ||||||
Credit Acceptance Auto Loan Trust Series 2018-1A, Class A, 3.01%, 2/16/20274 | 471,829 | 472,224 | ||||||
Series 2018-2A, Class A, 3.47%, 5/17/20274 | 2,735,658 | 2,751,596 | ||||||
Series 2019-1A, Class A, 3.33%, 2/15/20284 | 4,050,000 | 4,125,133 | ||||||
Dell Equipment Finance Trust, Series 2019-1, Class A2, 2.78%, 8/23/20214 | 385,138 | 385,729 | ||||||
DT Auto Owner Trust Series 2019-2A, Class A, 2.85%, 9/15/20224 | 110,715 | 110,823 | ||||||
Series 2019-3A, Class A, 2.55%, 8/15/20224 | 226,769 | 227,152 | ||||||
EDvestinU Private Education Loan Issue No. 1 LLC, Series 2019-A, Class A, 3.58%, 11/25/20384,9 | 3,210,965 | 3,416,454 | ||||||
Enterprise Fleet Financing LLC Series 2018-2, Class A2, 3.14%, 2/20/20244 | 1,501,502 | 1,511,881 | ||||||
Series 2019-1, Class A2, 2.98%, 10/20/20244 | 1,324,723 | 1,347,099 | ||||||
GLS Auto Receivables Issuer Trust, Series 2019-2A, Class A, 3.06%, 4/17/20234 | 574,369 | 578,147 | ||||||
Goodgreen Trust, Series 2020-1A, Class A, 2.63%, 4/15/20554 | 4,883,874 | 4,957,102 | ||||||
Hertz Fleet Lease Funding LP, Series 2018-1, Class A2, 3.23%, 5/10/20324 | 2,677,436 | 2,692,480 | ||||||
InSite Issuer LLC, Series 2020-1A, Class A, 1.496%, 9/15/20504 | 2,500,000 | 2,511,537 | ||||||
Invitation Homes Trust | ||||||||
Series 2017-SFR2, Class A, (1 mo. LIBOR US + 0.850%), 1.003%, 12/17/20363,4 | 449,781 | 448,683 | ||||||
Series 2017-SFR2, Class B, (1 mo. LIBOR US + 1.150%), 1.303%, 12/17/20363,4 | 400,000 | 399,032 | ||||||
Laurel Road Prime Student Loan Trust, Series 2019-A, Class A2FX, 2.73%, 10/25/20484 | 1,533,656 | 1,569,433 |
The accompanying notes are an integral part of the financial statements.
9
Unconstrained Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
Marlette Funding Trust, Series 2019-2A, Class A, 3.13%, 7/16/20294 | 1,028,517 | $ | 1,037,378 | |||||
Navient Private Education Loan Trust | ||||||||
Series 2014-1, Class A3, (1 mo. LIBOR US + 0.510%), 0.658%, 6/25/20313 | 5,237,796 | 5,121,571 | ||||||
Series 2015-BA, Class A3, (1 mo. LIBOR US + 1.450%), 1.609%, 7/16/20403,4 | 2,879,664 | 2,917,345 | ||||||
Series 2017-2A, Class A, (1 mo. LIBOR US + 1.050%), 1.198%, 12/27/20663,4 | 3,552,712 | 3,597,196 | ||||||
Series 2019-2A, Class A2, (1 mo. LIBOR US + 1.000%), 1.148%, 2/27/20683,4 | 3,900,000 | 3,941,009 | ||||||
Series 2019-BA, Class A1, (1 mo. LIBOR US + 0.400%), 0.559%, 12/15/20593,4 | 551,744 | 551,505 | ||||||
Series 2019-CA, Class A1, 2.82%, 2/15/20684 | 334,790 | 335,577 | ||||||
Series 2019-EA, Class A1, 2.39%, 5/15/20684 | 1,767,961 | 1,774,971 | ||||||
Series 2020-1A, Class A1B, (1 mo. LIBOR US + 1.050%), 1.198%, 6/25/20693,4 | 2,932,282 | 2,969,926 | ||||||
Series 2020-GA, Class A, 1.17%, 9/16/20694 | 1,580,440 | 1,592,336 | ||||||
NYCTL Trust, Series 2018-A, Class A, 3.22%, 11/10/20314 | 441,262 | 444,703 | ||||||
OCP CLO Ltd., Series 2020-8RA, Class A1, (3 mo. LIBOR US + 1.220%) (Cayman Islands), 1/17/20323,4,10 | 3,500,000 | 3,500,000 | ||||||
Oxford Finance Funding LLC | ||||||||
Series 2019-1A, Class A2, 4.459%, 2/15/20274 | 7,235,000 | 7,485,506 | ||||||
Series 2020-1A, Class A2, 3.101%, 2/15/20284 | 6,300,000 | 6,448,046 | ||||||
Series 2020-1A, Class B, 4.037%, 2/15/20284 | 3,700,000 | 3,783,466 | ||||||
Progress Residential Trust | ||||||||
Series 2019-SFR2, Class A, 3.147%, 5/17/20364 | 8,552,309 | 8,830,752 | ||||||
Series 2019-SFR4, Class A, 2.687%, 10/17/20364 | 3,800,000 | 3,918,833 | ||||||
SMB Private Education Loan Trust | ||||||||
Series 2019-B, Class A2A, 2.84%, 6/15/20374 | 4,350,000 | 4,593,372 | ||||||
Series 2020-B, Class A1A, 1.29%, 7/15/20534 | 2,735,453 | 2,744,723 | ||||||
SoFi Consumer Loan Program LLC | ||||||||
Series 2017-3, Class A, 2.77%, 5/25/20264 | 206,779 | 207,385 | ||||||
Series 2017-4, Class A, 2.50%, 5/26/20264 | 110,222 | 110,633 | ||||||
Series 2019-1, Class A, 3.24%, 2/25/20284 | 751,116 | 756,411 |
|
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
ASSET-BACKED SECURITIES (continued) | ||||||||
SoFi Consumer Loan Program LLC (continued) | ||||||||
Series 2019-2, Class A, 3.01%, 4/25/20284 | 927,234 | $ | 936,569 | |||||
Series 2019-3, Class A, 2.90%, 5/25/20284 | 670,634 | 677,686 | ||||||
SoFi Professional Loan Program LLC | ||||||||
Series 2016-C, Class A2B, 2.36%, 12/27/20324 | 173,789 | 176,015 | ||||||
Series 2017-F, Class A2FX, 2.84%, 1/25/20414 | 534,014 | 545,836 | ||||||
Series 2019-B, Class A1FX, 2.78%, 8/17/20484 | 473,324 | 474,496 | ||||||
Store Master Funding I-VII and XIV, Series 2019-1, Class A1, 2.82%, 11/20/20494 | 2,444,255 | 2,450,037 | ||||||
Tax Ease Funding LLC, Series 2016-1A, Class A, 3.131%, 6/15/20284 | 126,346 | 126,629 | ||||||
TCI-Flatiron CLO Ltd., Series 2016-1A, Class CR2, (3 mo. LIBOR US + 2.200%) (Cayman Islands), 2.437%, 1/17/20323,11 | 2,500,000 | 2,500,000 | ||||||
Towd Point Mortgage Trust | ||||||||
Series 2016-5, Class A1, 2.50%, 10/25/20564,9 | 848,872 | 865,374 | ||||||
Series 2017-1, Class A1, 2.75%, 10/25/20564,9 | 2,856,403 | 2,927,532 | ||||||
Series 2018-2, Class A1, 3.25%, 3/25/20584,9 | 1,213,126 | 1,269,833 | ||||||
Series 2019-HY1, Class A1, (1 mo. LIBOR US + 1.000%), 1.148%, 10/25/20483,4 | 2,900,152 | 2,911,424 | ||||||
Tricon American Homes, Series 2020-SFR1, Class C, 2.249%, 7/17/20384 | 2,500,000 | 2,532,392 | ||||||
Trinity Rail Leasing 2018 LLC, Series 2020-1A, Class A, 1.96%, 10/17/20504 | 2,939,187 | 2,973,424 | ||||||
Vantage Data Centers LLC, Series 2020-1A, Class A2, 1.645%, 9/15/20454 | 6,500,000 | 6,544,547 | ||||||
Vertical Bridge Holdings LLC, Series 2020-2A, Class A, 2.636%, 9/15/20504 | 4,000,000 | 4,037,128 | ||||||
Volvo Financial Equipment LLC Series, Series 2019-1A, Class A2, 2.90%, 11/15/20214 | 69 | 69 | ||||||
World Omni Auto Receivables Trust, Series 2019-B, Class A2, 2.63%, 6/15/2022 | 246,863 | 247,086 | ||||||
World Omni Automobile Lease Securitization Trust, Series 2019-A, Class A2, 2.89%, 11/15/2021 | 13,836 | 13,850 | ||||||
TOTAL ASSET-BACKED SECURITIES | ||||||||
(Identified Cost $156,370,428) | 159,081,513 | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES - 10.2% | ||||||||
CIM Trust, Series 2019-INV1, Class A1, 4.00%, 2/25/20494,9 | 524,736 | 539,417 |
The accompanying notes are an integral part of the financial statements.
10
Unconstrained Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||
Citigroup Commercial Mortgage Trust, Series 2019-SST2, Class A, (1 mo. LIBOR US + 0.920%), 1.079%, 12/15/20363,4 | 7,000,000 | $ | 7,002,198 | |||||
Credit Suisse Mortgage Capital Trust, Series 2013-TH1, Class A1, 2.13%, 2/25/20434,9 | 282,404 | 287,515 | ||||||
Fannie Mae REMICS, Series 2018-31, Class KP, 3.50%, 7/25/2047 | 987,980 | 1,023,361 | ||||||
Fontainebleau Miami Beach Trust, Series 2019-FBLU, Class A, 3.144%, 12/10/20364 | 4,480,000 | 4,694,439 | ||||||
Freddie Mac Multifamily Structured Pass-Through Certificates | ||||||||
Series K014, Class X1 (IO), 1.178%, 4/25/20219 | 5,168,815 | 6,036 | ||||||
Series K016, Class X1 (IO), 1.481%, 10/25/20219 | 4,151,904 | 21,371 | ||||||
Series K017, Class X1 (IO), 1.286%, 12/25/20219 | 29,586,303 | 202,876 | ||||||
Series K021, Class X1 (IO), 1.404%, 6/25/20229 | 16,011,223 | 236,492 | ||||||
Series K030, Class X1 (IO), 0.170%, 4/25/20239 | 53,636,904 | 188,040 | ||||||
Series K032, Class X1 (IO), 0.089%, 5/25/20239 | 31,543,800 | 79,358 | ||||||
Series K106, Class X1 (IO), 1.355%, 1/25/20309 | 53,945,447 | 5,758,693 | ||||||
Freddie Mac REMICS | ||||||||
Series 4791, Class BA, 4.00%, 3/15/2044 | 916,557 | 927,457 | ||||||
Series 4801, Class BA, 4.50%, 5/15/2044 | 460,368 | 464,266 | ||||||
FREMF Mortgage Trust | ||||||||
Series 2013-K28, Class X2A (IO), 0.10%, 6/25/20464 | 83,103,973 | 131,628 | ||||||
Series 2014-K715, Class B, 3.972%, 2/25/20464,9 | 2,185,000 | 2,182,980 | ||||||
Series 2014-K716, Class B, 3.929%, 8/25/20474,9 | 2,550,000 | 2,576,986 | ||||||
Series 2015-K42, Class B, 3.850%, 12/25/20244,9 | 1,900,000 | 2,065,916 | ||||||
Series 2015-K43, Class B, 3.733%, 2/25/20484,9 | 1,500,000 | 1,638,303 | ||||||
Series 2018-K156, Class B, 4.068%, 7/25/20364,9 | 4,000,000 | 3,724,111 | ||||||
Series 2018-K159, Class B, 4.361%, 11/25/20334,9 | 3,500,000 | 3,359,052 | ||||||
JP Morgan Chase Commercial Mortgage Securities Trust, Series 2010-C2, Class A3, 4.070%, 11/15/20434 | 303,145 | 302,849 | ||||||
JP Morgan Mortgage Trust Series 2013-1, Class 1A2, 3.00%, 3/25/20434,9 | 209,297 | 212,277 | ||||||
Series 2013-2, Class A2, 3.50%, 5/25/20434,9 | 246,124 | 250,976 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||||
COMMERCIAL MORTGAGE-BACKED SECURITIES (continued) | ||||||||||
JP Morgan Mortgage Trust (continued) | ||||||||||
Series 2014-2, Class 1A1, 3.00%, 6/25/20294,9 | 479,282 | $ | 490,192 | |||||||
Series 2017-3, Class 1A5, 3.50%, 8/25/20474,9 | 333,195 | 333,415 | ||||||||
Metlife Securitization Trust, Series 2019-1A, Class A, 3.75%, 4/25/20584,9 | 1,470,687 | 1,618,557 | ||||||||
New Residential Mortgage Loan Trust Series 2014-3A, Class AFX3, 3.75%, 11/25/20544,9 | 421,657 | 451,750 | ||||||||
Series 2015-2A, Class A1, 3.75%, 8/25/20554,9 | 626,841 | 667,974 | ||||||||
Series 2019-2A, Class A1, 4.25%, 12/25/20574,9 | 3,303,082 | 3,557,476 | ||||||||
PSMC Trust, Series 2019-3, Class A3, 3.50%, 11/25/20494,9 | 1,527,080 | 1,540,098 | ||||||||
Sequoia Mortgage Trust Series 2013-2, Class A, 1.874%, 2/25/20439 | 331,891 | 335,074 | ||||||||
Series 2013-6, Class A2, 3.00%, 5/25/20439 | 3,075,792 | 3,124,803 | ||||||||
Series 2013-7, Class A2, 3.00%, 6/25/20439 | 274,141 | 278,512 | ||||||||
Series 2013-8, Class A1, 3.00%, 6/25/20439 | 369,252 | 375,155 | ||||||||
Series 2020-1, Class A4, 3.50%, 2/25/20504,9 | 1,470,866 | 1,484,455 | ||||||||
Starwood Retail Property Trust, Series 2014-STAR, Class A, (1 mo. LIBOR US + 1.470%), 1.629%, 11/15/20273,4 | 1,777,115 | 1,172,896 | ||||||||
Sutherland Commercial Mortgage Trust, Series 2019-SBC8, Class A, 2.86%, 4/25/20414,9 | 3,263,203 | 3,293,960 | ||||||||
Toorak Mortgage Corp. Ltd., Series 2019-1, Class A1, 4.458%, 3/25/20224,12 | 5,000,000 | 5,077,274 | ||||||||
Waikiki Beach Hotel Trust, Series 2019-WBM, Class A, (1 mo. LIBOR US + 1.050%), 1.209%, 12/15/20333,4 | 7,000,000 | 6,807,963 | ||||||||
WinWater Mortgage Loan Trust, Series 2015-1, Class A1, 3.50%, 1/20/20454,9 | 252,331 | 258,934 | ||||||||
TOTAL COMMERCIAL MORTGAGE- | ||||||||||
BACKED SECURITIES | ||||||||||
(Identified Cost $65,077,288) | 68,745,085 | |||||||||
FOREIGN GOVERNMENT BONDS - 3.1% | ||||||||||
Brazilian Government International Bond (Brazil), 4.25%, 1/7/2025 | 1,300,000 | 1,426,100 | ||||||||
Mexican Government Bond (Mexico), 6.50%, 6/9/2022. | MXN | 126,000,000 | 6,518,732 | |||||||
Mexico Government International Bond (Mexico), 4.125%, 1/21/2026 | 1,800,000 | 2,067,750 |
The accompanying notes are an integral part of the financial statements.
11
Unconstrained Bond Series
Investment Portfolio - December 31, 2020
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
FOREIGN GOVERNMENT BONDS (continued) | ||||||||
Republic of Italy Government International Bond (Italy), 2.375%, 10/17/2024 | 9,000,000 | $ | 9,464,061 | |||||
Saudi Government International Bond (Saudi Arabia), 2.90%, 10/22/20254 | 1,000,000 | 1,077,350 | ||||||
TOTAL FOREIGN GOVERNMENT BONDS | ||||||||
(Identified Cost $22,542,849) | 20,553,993 | |||||||
MUNICIPAL BONDS - 0.9% | ||||||||
Hawaii, Series GC, G.O. Bond, 2.632%, 10/1/2037 | 3,905,000 | 4,071,783 | ||||||
Utah Transit Authority, Series B, Revenue Bond, 2.97%, 12/15/2039 | 2,000,000 | 2,085,460 | ||||||
TOTAL MUNICIPAL BONDS | ||||||||
(Identified Cost $6,157,423) | 6,157,243 | |||||||
MUTUAL FUND - 3.0% | ||||||||
VanEck Vectors J.P. Morgan EM Local Currency Bond ETF | ||||||||
(Identified Cost $20,043,401) | 609,000 | 20,261,430 | ||||||
U.S. GOVERNMENT AGENCIES - 0.8% | ||||||||
Mortgage-Backed Securities - 0.8% | ||||||||
Fannie Mae | ||||||||
Pool #888468, UMBS, 5.50%, 9/1/2021 | 7,590 | 7,618 | ||||||
Pool #995233, UMBS, 5.50%, 10/1/2021 | 27 | 27 | ||||||
Pool #888017, UMBS, 6.00%, 11/1/2021 | 2,091 | 2,108 | ||||||
Pool #995329, UMBS, 5.50%, 12/1/2021 | 3,615 | 3,638 | ||||||
Pool #888136, UMBS, 6.00%, 12/1/2021 | 3,223 | 3,258 | ||||||
Pool #888810, UMBS, 5.50%, 11/1/2022 | 9,657 | 9,710 |
SHARES/ PRINCIPAL AMOUNT1 | VALUE (NOTE 2) | |||||||
U.S. GOVERNMENT AGENCIES (continued) | ||||||||
Mortgage-Backed Securities (continued) | ||||||||
Fannie Mae (continued) | ||||||||
Pool #AD0462, UMBS, 5.50%, 10/1/2024 | 9,014 | $ | 9,515 | |||||
Pool #MA0115, UMBS, 4.50%, 7/1/2029 | 50,850 | 55,574 | ||||||
Pool #MA1834, UMBS, 4.50%, 2/1/2034 | 205,520 | 227,188 | ||||||
Pool #918516, UMBS, 5.50%, 6/1/2037 | 76,834 | 90,310 | ||||||
Pool #889624, UMBS, 5.50%, 5/1/2038 | 119,608 | 140,579 | ||||||
Pool #995876, UMBS, 6.00%, 11/1/2038 | 328,038 | 388,432 | ||||||
Pool #AD0307, UMBS, 5.50%, 1/1/2039 | 118,718 | 139,566 | ||||||
Pool #AA7236, UMBS, 4.00%, 6/1/2039 | 581,245 | 635,694 | ||||||
Pool #AW5338, UMBS, 4.50%, 6/1/2044 | 715,153 | 801,575 | ||||||
Pool #AS3878, UMBS, 4.50%, 11/1/2044 | 627,266 | 700,509 | ||||||
Pool #BE7845, UMBS, 4.50%, 2/1/2047 | 219,282 | 239,918 | ||||||
Freddie Mac | ||||||||
Pool #G12610, 6.00%, 3/1/2022 | 4,825 | 4,892 | ||||||
Pool #G12655, 6.00%, 5/1/2022 | 3,638 | 3,701 | ||||||
Pool #G12988, 6.00%, 1/1/2023 | 4,186 | 4,314 | ||||||
Pool #G13078, 6.00%, 3/1/2023 | 6,326 | 6,508 | ||||||
Pool #G13331, 5.50%, 10/1/2023 | 3,694 | 3,825 | ||||||
Pool #C91359, 4.50%, 2/1/2031 | 134,447 | 148,631 | ||||||
Pool #D98711, 4.50%, 7/1/2031 | 384,785 | 425,393 | ||||||
Pool #C91746, 4.50%, 12/1/2033 | 315,927 | 349,319 | ||||||
Pool #G07655, 5.50%, 12/1/2035 | 307,299 | 360,526 | ||||||
Pool #G04176, 5.50%, 5/1/2038 | 135,516 | 159,364 | ||||||
Pool #A78227, 5.50%, 6/1/2038 | 151,774 | 178,089 | ||||||
Pool #G05900, 6.00%, 3/1/2040 | 53,815 | 63,479 | ||||||
TOTAL U.S. GOVERNMENT AGENCIES | ||||||||
(Identified Cost $4,843,397) | 5,163,260 | |||||||
SHORT-TERM INVESTMENT - 5.6% | ||||||||
Dreyfus Government Cash Management, Institutional Shares, 0.03%13 | ||||||||
(Identified Cost $37,881,718) | 37,881,718 | 37,881,718 | ||||||
TOTAL INVESTMENTS - 99.5% | ||||||||
(Identified Cost $652,536,206) | 671,044,043 | |||||||
OTHER ASSETS, LESS LIABILITIES - 0.5% | 3,138,222 | |||||||
NET ASSETS - 100% | $ | 674,182,265 |
The accompanying notes are an integral part of the financial statements.
12
Unconstrained Bond Series
Investment Portfolio - December 31, 2020
FUTURES CONTRACTS: LONG POSITIONS OPEN AT DECEMBER 31, 2020 | |||||
CONTRACTS PURCHASED | ISSUE | EXCHANGE | EXPIRATION | NOTIONAL VALUE 1 | VALUE/UNREALIZED APPRECIATION |
266 | U.S. Treasury Notes (5 Year) | CBOT | March 2021 | 33,559,641 | $35,327 |
TOTAL LONG POSITIONS | $35,327 |
FUTURES CONTRACTS: SHORT POSITIONS OPEN AT DECEMBER 31, 2020 | |||||
CONTRACTS SOLD | ISSUE | EXCHANGE | EXPIRATION | NOTIONAL VALUE 1 | VALUE/UNREALIZED APPRECIATION/ (DEPRECIATION) |
2,200 | EURO-SCHATZ | Eurex | March 2021 | 301,753,658 | $184,936 |
167 | U.S. Treasury Notes (10 Year) | CBOT | March 2021 | 23,059,047 | (36,531) |
103 | U.S. Ultra (10 Year) | CBOT | March 2021 | 16,105,016 | (46,672) |
36 | U.S. Ultra Treasury Bonds (30 Year) | CBOT | March 2021 | 7,688,250 | 106,517 |
TOTAL SHORT POSITIONS | $208,250 |
CBOT - Chicago Board of Trade
CLO - Collateralized Loan Obligation
ETF - Exchange-Traded Fund
EUREX - Eurex Exchange
G.O. Bond - General Obligation Bond
IO - Interest only
LIBOR - London Interbank Offered Rate
MXN - Mexican Peso
No. - Number
REMICS - Real Estate Mortgage Investment Conduits
UMBS - Uniform Mortgage-Backed Securities
*Non-income producing security.
## Less than 0.1%.
1Amount is stated in USD unless otherwise noted.
2Security has been valued using significant unobservable inputs.
3Floating rate security. Rate shown is the rate in effect as of December 31, 2020.
4Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be liquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The aggregate value of these securities at December 31, 2020 was $370,129,458, which represented 54.9% of the Series’ Net Assets.
5Issuer filed for bankruptcy and/or is in default of interest payments.
6Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The security was acquired on dates between March 26, 2020 and June 1, 2020 at an aggregate cost of $263,400. The value of the security at December 31, 2020 was $494, or less than 0.1% of the Series’ Net Assets.
7Step coupon rate security - Rate steps up/down by 25 basis points upon rating downgrade/upgrade by Moody’s and S&P rating agencies (Subject to a maximum of 100 basis points per agency, 200 basis points maximum).
8Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The security was acquired on on dates between October 6, 2017 and October 10, 2017 and on September 12, 2019 at an aggregate cost of $4,353,936. The value of the security at December 31, 2020 was $39,623, or less than 0.1% of the Series’ Net Assets.
9Variable or floating rate security, the interest rate of which adjusts periodically based on changes in current interest rates and prepayments on the underlying pool of assets. Rate shown is the rate in effect as of December 31, 2020.
10Fully Unfunded CLO – No period end interest rate will be disclosed.
11Security purchased or received in a transaction exempt from registration under the Securities Act of 1933, as amended (the “1933 Act”) and determined to be illiquid under the Fund’s Liquidity Risk Management Program. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. The security was acquired on December 22, 2020 at a cost of $2,500,000. The value of the security at December 31, 2020 was $2,500,000, or 0.4% of the Series’ Net Assets.
12Represents a step-up bond that pays initial coupon rate for the first period and then a higher coupon rate for the following periods. Rate shown reflects the current coupon as of December 31, 2020.
13Rate shown is the current yield as of December 31, 2020.
The accompanying notes are an integral part of the financial statements.
13
Unconstrained Bond Series
Investment Portfolio - December 31, 2020
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of MSCI Inc. (MSCI) and Standard & Poor’s, a division of S&P Global Inc. (S&P), and is licensed for use by Manning & Napier when referencing GICS sectors. Neither MSCI, S&P, nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification, nor shall any such party have any liability therefrom.
The accompanying notes are an integral part of the financial statements.
14
Unconstrained Bond Series
Statement of Assets and Liabilities
December 31, 2020
ASSETS: | ||||
Investments in securities, at value (identified cost $652,536,206) (Note 2) | $ | 671,044,043 | ||
Foreign currency, at value (identified cost $1,612,588) | 1,758,838 | |||
Receivable from investment advisor (Note 3) | 429 | |||
Interest receivable | 5,517,767 | |||
Deposits at broker for futures contracts | 4,580,609 | |||
Receivable for fund shares sold | 883,369 | |||
Dividends receivable | 79,216 | |||
Futures variation margin receivable | 12,467 | |||
Prepaid and other expenses | 17,237 | |||
TOTAL ASSETS | 683,893,975 | |||
LIABILITIES: | ||||
Accrued fund accounting and administration fees (Note 3) | 36,388 | |||
Accrued sub-transfer agent fees (Note 3) | 12,479 | |||
Accrued distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 4,389 | |||
Accrued Chief Compliance Officer service fees (Note 3) | 1,503 | |||
Payable for securities purchased | 9,513,168 | |||
Futures variation margin payable | 67,798 | |||
Payable for fund shares repurchased | 14,299 | |||
Other payables and accrued expenses | 61,686 | |||
TOTAL LIABILITIES | 9,711,710 | |||
TOTAL NET ASSETS | $ | 674,182,265 | ||
NET ASSETS CONSIST OF: | ||||
Capital stock | $ | 621,280 | ||
Additional paid-in-capital | 653,283,313 | |||
Total distributable earnings (loss) | 20,277,672 | |||
TOTAL NET ASSETS | $ | 674,182,265 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class S | ||||
($20,925,191/1,913,901 shares) | $ | 10.93 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class I | ||||
($21,687,489/2,246,557 shares) | $ | 9.65 | ||
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE - Class W | ||||
($631,569,585/57,967,539 shares) | $ | 10.90 |
The accompanying notes are an integral part of the financial statements.
15
Unconstrained Bond Series
Statement of Operations
For the Year Ended December 31, 2020
INVESTMENT INCOME: | ||||
Interest | $ | 24,171,766 | ||
Dividends | 143,759 | |||
Total Investment Income | 24,315,525 | |||
EXPENSES: | ||||
Management fees (Note 3) | 2,112,451 | |||
Fund accounting and administration fees (Note 3) | 144,872 | |||
Directors’ fees (Note 3) | 85,985 | |||
Distribution and service (Rule 12b-1) fees (Class S) (Note 3) | 50,119 | |||
Accrued sub-transfer agent fees (Note 3) | 44,534 | |||
Chief Compliance Officer service fees (Note 3) | 3,784 | |||
Custodian fees | 34,603 | |||
Miscellaneous | 239,314 | |||
Total Expenses | 2,715,662 | |||
Less reduction of expenses (Note 3) | (2,143,965 | ) | ||
Net Expenses | 571,697 | |||
NET INVESTMENT INCOME | 23,743,828 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY: | ||||
Net realized gain (loss) on- | ||||
Investments | 9,927,556 | |||
Futures contracts | (3,379,671 | ) | ||
Options written | 272,043 | |||
Foreign currency and translation of other assets and liabilities | (435,536 | ) | ||
6,384,392 | ||||
Net change in unrealized appreciation (depreciation) on- | ||||
Investments | 15,449,351 | |||
Futures contracts | (1,839,935 | ) | ||
Foreign currency and translation of other assets and liabilities | 147,233 | |||
13,756,649 | ||||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY | 20,141,041 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 43,884,869 |
The accompanying notes are an integral part of the financial statements.
16
Unconstrained Bond Series
Statements of Changes in Net Assets
FOR THE YEAR ENDED 12/31/20 | FOR THE YEAR ENDED 12/31/19 | |||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 23,743,828 | $ | 28,814,204 | ||||
Net realized gain (loss) on investments and foreign currency | 6,384,392 | (1,543,329 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments and foreign currency | 13,756,649 | 19,467,724 | ||||||
Net increase (decrease) from operations | 43,884,869 | 46,738,599 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS (Note 9): | ||||||||
Class S | (530,098 | ) | (569,520 | ) | ||||
Class I | (645,381 | ) | (656,971 | ) | ||||
Class W | (21,495,898 | ) | (27,871,927 | ) | ||||
Total distributions to shareholders | (22,671,377 | ) | (29,098,418 | ) | ||||
CAPITAL STOCK ISSUED AND REPURCHASED: | ||||||||
Net increase (decrease) from capital share transactions (Note 5) | (248,841,791 | ) | 170,021,787 | |||||
Net increase (decrease) in net assets | (227,628,299 | ) | 187,661,968 | |||||
NET ASSETS: | ||||||||
Beginning of year | 901,810,564 | 714,148,596 | ||||||
End of year | $ | 674,182,265 | $ | 901,810,564 |
The accompanying notes are an integral part of the financial statements.
17
Unconstrained Bond Series
Financial Highlights - Class S
FOR THE YEAR ENDED | ||||||||||||||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | ||||||||||||||||
Per share data (for a share outstanding throughout each year): | ||||||||||||||||||||
Net asset value - Beginning of year | $10.44 | $10.18 | $10.42 | $10.33 | $10.12 | |||||||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.29 | 0.28 | 0.26 | 0.22 | 0.22 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.48 | 0.23 | (0.24 | ) | 0.11 | 0.19 | ||||||||||||||
Total from investment operations | 0.77 | 0.51 | 0.02 | 0.33 | 0.41 | |||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.28 | ) | (0.25 | ) | (0.25 | ) | (0.23 | ) | (0.20 | ) | ||||||||||
From net realized gain on investments | (0.00 | )2 | — | (0.01 | ) | (0.01 | ) | — | ||||||||||||
Total distributions to shareholders | (0.28 | ) | (0.25 | ) | (0.26 | ) | (0.24 | ) | (0.20 | ) | ||||||||||
Net asset value - End of year | $10.93 | $10.44 | $10.18 | $10.42 | $10.33 | |||||||||||||||
Net assets - End of year (000’s omitted) | $20,925 | $22,884 | $685,649 | $770,824 | $845,043 | |||||||||||||||
Total return3 | 7.54% | 5.01% | 0.20% | 3.19% | 4.08% | |||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Expenses* | 0.73% | 0.75% | 0.75% | 0.75% | 0.75% | |||||||||||||||
Net investment income | 2.74% | 2.80% | 2.56% | 2.08% | 2.18% | |||||||||||||||
Series portfolio turnover | 96% | 75% | 58% | 62% | 56% | |||||||||||||||
*For certain years presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some years may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||||||||||
N/A | 0.01% | 0.01% | 0.00% | 4 | N/A |
1Calculated based on average shares outstanding during the years.
2Less than $(0.01).
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.
18
Unconstrained Bond Series
Financial Highlights - Class I
FOR THE YEAR ENDED | ||||||||||||||||||||
12/31/20 | 12/31/19 | 12/31/18 | 12/31/17 | 12/31/16 | ||||||||||||||||
Per share data (for a share outstanding throughout each year): | ||||||||||||||||||||
Net asset value - Beginning of year | $9.26 | $9.09 | $9.34 | $9.28 | $9.12 | |||||||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.28 | 0.28 | 0.26 | 0.22 | 0.23 | |||||||||||||||
Net realized and unrealized gain (loss) on investments | 0.42 | 0.20 | (0.22 | ) | 0.11 | 0.16 | ||||||||||||||
Total from investment operations | 0.70 | 0.48 | 0.04 | 0.33 | 0.39 | |||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.31 | ) | (0.31 | ) | (0.28 | ) | (0.26 | ) | (0.23 | ) | ||||||||||
From net realized gain on investments | (0.00 | )2 | — | (0.01 | ) | (0.01 | ) | — | ||||||||||||
Total distributions to shareholders | (0.31 | ) | (0.31 | ) | (0.29 | ) | (0.27 | ) | (0.23 | ) | ||||||||||
Net asset value - End of year | $9.65 | $9.26 | $9.09 | $9.34 | $9.28 | |||||||||||||||
Net assets - End of year (000’s omitted) | $21,687 | $19,039 | $28,499 | $66,543 | $49,233 | |||||||||||||||
Total return3 | 7.74% | 5.37% | 0.40% | 3.52% | 4.27% | |||||||||||||||
Ratios (to average net assets)/Supplemental Data: | ||||||||||||||||||||
Expenses* | 0.49% | 0.48% | 0.50% | 0.50% | 0.50% | |||||||||||||||
Net investment income | 2.96% | 3.01% | 2.75% | 2.33% | 2.50% | |||||||||||||||
Series portfolio turnover | 96% | 75% | 58% | 62% | 56% | |||||||||||||||
*For certain years presented, the investment advisor did not impose all or a portion of its management and/or other fees, and in some years may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||||||||||||||
N/A | 0.01% | 0.01% | 0.00% | 4 | N/A |
1Calculated based on average shares outstanding during the years.
2Less than $(0.01).
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.
19
Unconstrained Bond Series
Financial Highlights - Class W
FOR THE YEAR ENDED 12/31/20 | FOR THE PERIOD 3/1/191 TO 12/31/19 | |||||||
Per share data (for a share outstanding throughout each period): | ||||||||
Net asset value - Beginning of period | $10.41 | $10.34 | ||||||
Income from investment operations: | ||||||||
Net investment income2 | 0.36 | 0.30 | ||||||
Net realized and unrealized gain (loss) on investments | 0.49 | 0.12 | ||||||
Total from investment operations | 0.85 | 0.42 | ||||||
Less distributions to shareholders: | ||||||||
From net investment income | (0.36 | ) | (0.35 | ) | ||||
From net realized gain on investments | (0.00 | )3 | — | |||||
Total distributions to shareholders | (0.36 | ) | (0.35 | ) | ||||
Net asset value - End of period | $10.90 | $10.41 | ||||||
Net assets - End of period (000’s omitted) | $631,570 | $859,888 | ||||||
Total return4 | 8.29% | 4.10% | 5 | |||||
Ratios (to average net assets)/Supplemental Data: | ||||||||
Expenses* | 0.05% | 0.05% | 6 | |||||
Net investment income | 3.40% | 3.44% | 6 | |||||
Series portfolio turnover | 96% | 75% | ||||||
*The investment advisor did not impose all or a portion of its management and/or other fees during the periods, and may have paid a portion of the Series’ expenses. If these expenses had been incurred by the Class, the expense ratio (to average net assets) would have increased by the following amounts: | ||||||||
0.32% | 0.31% | 6 |
1Commencement of operations. |
2Calculated based on average shares outstanding during the periods. |
3Less than $(0.01). |
4Represents aggregate total return for the periods indicated, and assumes reinvestment of all distributions. Total return would have been lower had certain expenses not been waived or reimbursed during the periods. Periods less than one year are not annualized. |
5Includes litigation proceeds. Excluding this amount, the Class’ total return is 4.00%. |
6Annualized. |
The accompanying notes are an integral part of the financial statements.
20
Unconstrained Bond Series
Notes to Financial Statements
1. | Organization |
Unconstrained Bond Series (the “Series”) is a no-load diversified series of Manning & Napier Fund, Inc. (the “Fund”). The Fund is organized in Maryland and is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company.
The Series’ investment objective is to provide long-term total return, and its secondary objective is to provide preservation of capital.
The Fund’s advisor is Manning & Napier Advisors, LLC (the “Advisor”). Shares of the Series are offered to investors, clients and employees of the Advisor and its affiliates. The Series is authorized to issue four classes of shares (Class S, I, W, and Z). Each class of shares is substantially the same, except that class specific distribution and shareholder servicing expenses are borne by the specific class of shares to which they relate. The total authorized capital stock of the Fund consists of 15 billion shares of common stock each having a par value of $0.01. As of December 31, 2020, 6.3 billion shares have been designated in total among 15 series, of which 100 million have been designated as Unconstrained Bond Series Class I common stock and Unconstrained Bond Series Class Z common stock, 125 million have been designated as Unconstrained Bond Series Class S common stock and 150 million have been designated as Unconstrained Bond Series Class W common stock. Class Z common stock is not currently offered for sale.
2. | Significant Accounting Policies |
The following is a summary of significant accounting policies followed by the Series. The Series is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 - Investment Companies, which is part of accounting principles generally accepted in the United States of America (“GAAP”).
Security Valuation
Portfolio securities, including domestic equities, foreign equities, warrants and options, listed on an exchange other than the NASDAQ Stock Market are valued at the latest quoted sales price of the exchange on which the security is primarily traded. Securities not traded on valuation date or securities not listed on an exchange are valued at the latest quoted bid price provided by the Fund’s pricing service. Securities listed on the NASDAQ Stock Market are valued in accordance with the NASDAQ Official Closing Price.
Debt securities, including government bonds, foreign bonds, asset-backed securities, structured notes, supranational obligations, sovereign bonds, corporate bonds, loan assignments, and mortgage-backed securities will normally be valued on the basis of evaluated bid prices provided directly by an independent pricing service (the “Service”). The pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, option-adjusted spreads, credit spreads, estimated default rates, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Certain investments in securities held by the Series may be valued on a basis of a price provided directly by a principal market maker. These prices may differ from the value that would have been used had a broader market for securities existed.
The fair value of loan assignments is estimated using recently executed transactions, market price quotations, credit/market events, and cross-asset pricing. Inputs are generally observable market inputs obtained from independent sources. Loan assignments are generally categorized in Level 2 of the fair value hierarchy, unless key inputs are unobservable, in which case they would be categorized in Level 3.
Municipal securities will normally be valued on the basis of market valuations provided by the Service. The Service utilizes the latest price quotations and a matrix system (which considers such factors as security prices of similar securities, yields, maturities and ratings). The Service has been approved by the Fund’s Board of Directors (the “Board”).
21
Unconstrained Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
Short-term investments that mature in sixty days or less may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at their net asset value per share on valuation date.
Volume and level of activity in established markets for an asset or liability are evaluated to determine whether recent transactions and quoted prices are determinative of fair value. Where there have been significant decreases in volume and level of activity, further analysis and adjustment may be necessary to estimate fair value. The Series measures fair value in these instances by the use of inputs and valuation techniques which may be based upon current market prices of securities that are comparable in coupon, rating, maturity and industry and/or expectation of future cash flows. As a result of trading in relatively thin markets and/or markets that experience significant volatility, the prices used by the Series to value these securities may differ from the value that would be realized if these securities were sold, and the differences could be material.
Securities for which representative valuations or prices are not available from the Series’ pricing service may be valued at fair value as determined in good faith by the Advisor under procedures approved by and under the general supervision and responsibility of the Fund’s Board of Directors (the “Board”). Due to the inherent uncertainty of valuations of such securities, the fair value may differ significantly from the values that would have been used had a ready market for such securities existed. If trading or events occurring after the close of the principal market in which securities are traded are expected to materially affect the value of those securities, then they may be valued at their fair value, taking this trading or these events into account.
Various inputs are used in determining the value of the Series’ assets or liabilities carried at fair value. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical assets and liabilities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Level 3 includes significant unobservable inputs (including the Series’ own assumptions in determining the fair value of investments). A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the valuation levels used for major security types as of December 31, 2020 in valuing the Series’ assets or liabilities carried at fair value:
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||||
Assets: | ||||||||||||||||
Equity securities: | ||||||||||||||||
Energy | $ | 1,532,285 | $ | — | $ | 243,560 | $ | 1,288,725 | ||||||||
Debt securities: | ||||||||||||||||
Loan Assignments | 4,999,969 | — | 4,999,969 | — | ||||||||||||
U.S. Treasury and other U.S. | ||||||||||||||||
Government agencies | 5,163,260 | — | 5,163,260 | — | ||||||||||||
States and political subdivisions (municipals) | 6,157,243 | — | 6,157,243 | — | ||||||||||||
Corporate debt: | ||||||||||||||||
Communication Services | 26,116,067 | — | 26,116,067 | — | ||||||||||||
Consumer Discretionary | 36,639,692 | — | 36,639,692 | — | ||||||||||||
Consumer Staples | 4,987,284 | — | 4,987,284 | — | ||||||||||||
Energy | 67,140,608 | — | 67,140,608 | — | ||||||||||||
Financials | 89,934,478 | — | 89,934,478 | — | ||||||||||||
Health Care | 12,106,778 | — | 12,106,778 | — | ||||||||||||
Industrials | 43,600,292 | — | 43,600,292 | — | ||||||||||||
Information Technology | 9,092,616 | — | 9,092,616 | — | ||||||||||||
Materials | 9,356,749 | — | 9,356,749 | — | ||||||||||||
Real Estate | 33,894,298 | — | 33,894,298 | — |
22
Unconstrained Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Security Valuation (continued)
DESCRIPTION | TOTAL | LEVEL 1 | LEVEL 2 | LEVEL 3 | ||||||||||||
Utilities | $ | 13,798,685 | $ | — | $ | 13,798,685 | $ | — | ||||||||
Asset-backed securities | 159,081,513 | — | 159,081,513 | — | ||||||||||||
Commercial mortgage-backed securities | 68,745,085 | — | 68,745,085 | — | ||||||||||||
Foreign government bonds | 20,553,993 | — | 20,553,993 | — | ||||||||||||
Mutual fund | 20,261,430 | 20,261,430 | — | — | ||||||||||||
Short-Term Investment | 37,881,718 | 37,881,718 | — | — | ||||||||||||
Other financial instruments:* | ||||||||||||||||
Interest rate contracts | 326,780 | 326,780 | — | — | ||||||||||||
Total assets | 671,370,823 | 58,469,928 | 611,612,170 | 1,288,725 | ||||||||||||
Liabilities: | ||||||||||||||||
Other financial instruments:* | ||||||||||||||||
Interest rate contracts | (83,203 | ) | (83,203 | ) | — | — | ||||||||||
Total liabilities | (83,203 | ) | (83,203 | ) | — | — | ||||||||||
Total | $ | 671,287,620 | $ | 58,386,725 | $ | 611,612,170 | $ | 1,288,725 |
There were no Level 3 securities held by the Series as of December 31, 2019.
*Other financial instruments are futures (Level 1). Futures are valued at the unrealized appreciation (depreciation) on the instrument.
Other Market and Credit Risk
Certain debt securities, derivatives and other financial instruments utilize the London Interbank Offered Rate (“LIBOR”) as the reference or benchmark rate for variable interest rate calculations. In July 2017, the UK Financial Conduct Authority announced a desire to phase out the use of LIBOR by the end of 2021, suggesting that LIBOR may cease to be published after that time. Regulators and financial industry groups have begun planning for a transition to the use of a different benchmark, but there are obstacles and a lack of global consensus, and the process for amending existing contracts or instruments to transition away from LIBOR remains unclear. The transition process might lead to increased volatility and illiquidity in markets that currently rely on the LIBOR to determine interest rates, a reduction in the values of some LIBOR-based investments, and reduced effectiveness of certain hedging strategies, which may adversely affect a Series’ performance or net asset value. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the end of 2021. In addition, the alternative reference or benchmark rate may be an ineffective substitute resulting in prolonged adverse market conditions for a Portfolio.
Security Transactions, Investment Income and Expenses
Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Series is informed of the ex-dividend date. Non-cash dividends, if any, are recorded at the fair value of the securities received. Interest income, including amortization of premium and accretion of discounts using the effective interest method, is earned from settlement date and accrued daily.
Expenses are recorded on an accrual basis. Most expenses of the Fund can be attributed to a specific series. Expenses which cannot be directly attributed are apportioned among the series in the Fund in such a manner as deemed equitable by the Fund’s Board, taking into consideration, among other things, the nature and type of expense. Income, expenses (other than shareholder services fees), and realized and unrealized gains and losses are prorated among the classes based on the relative net assets of each class. Class specific examples are directly charged to that Class.
The Series uses the identified cost method for determining realized gain or loss on investments for both financial statement and federal income tax reporting purposes.
23
Unconstrained Bond 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 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. The Series’ forward foreign currency exchange contracts are not subject to master netting arrangements (the right to close out all transactions traded with a counterparty, and net amounts owed or due across transactions). No such investments were held by the Series on December 31, 2020.
Futures
The Series may purchase or sell exchange-traded futures contracts, which are contracts that obligate the Series to make or take delivery of a financial instrument or the cash value of a security index at a specified future date at a specified price. The Series may use futures contracts to manage exposure to the bond market or changes in interest rates and currency values, or for gaining exposure to markets. Risks of entering into futures contracts include the possibility that there may be an illiquid market at the time the Advisor to the Series may be attempting to sell some or all the Series’ holdings or that a change in the value of the contract may not correlate with changes in the value of the underlying securities. Upon entering into a futures contract, a Series is required to deposit either cash or securities (initial margin). Subsequent payments (variation margin) are made or received by the Series, generally on a daily basis. The variation margin payments are equal to the daily changes in the contract value and are recorded as unrealized gains or losses. The Series recognize a realized gain or loss when the contract is closed or expires.
Futures transactions involve minimal counterparty risk since futures contracts are guaranteed against default by the exchange on which they trade. The Series’ futures contracts are not subject to master netting arrangements (the right to close out all transactions traded with a counterparty, and net amounts owed or due across transactions).
Option Contracts
The Series may write (sell) or buy call or put options on securities and other financial instruments. When the Series writes a call, the Series gives the purchaser the right to buy the underlying security from the Series at the price specified in the option contract (the “exercise price”) at any time during the option period. When the Series writes a put option, the Series gives the purchaser the right to sell to the Series the underlying security at the exercise price at any time during the option period. The Series will only write options on a “covered basis.” This means that the Series will own the underlying security when the Series writes a call or the
24
Unconstrained Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Option Contracts (continued)
Series will put aside cash, U.S. Government securities, or other liquid assets in an amount not less than the exercise price at all times the put option is outstanding.
When the Series writes an option, an amount equal to the premium received is reflected as a liability and is subsequently marked- to-market to reflect the current market value of the option. The Series, as a writer of an option, has no control over whether the underlying security or financial instrument may be sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the security or financial instrument underlying the written option. There is a risk that the Series may not be able to enter into a closing transaction because of an illiquid market.
The Series may also purchase options in an attempt to hedge against fluctuations in the value of its portfolio and to protect against declines in the value of the securities. The premium paid by the Series for the purchase of an option is reflected as an investment and subsequently marked-to-market to reflect the current market value of the option. The risk associated with purchasing options is limited to the premium paid.
When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Series enters into a closing transaction), the Series realizes a gain or loss on the option to the extent of the premium received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received).
The measurement of the risks associated with option contracts is meaningful only when all related and offsetting transactions are considered.
The following table presents the present value of derivatives held at December 31, 2020 as reflected on the Statement of Assets and Liabilities, and the effect of derivative instruments on the Statement of Operations:
STATEMENT OF ASSETS AND LIABILITIES | ||||||
Derivative | Assets Location | |||||
Interest rate contracts | Net unrealized appreciation1 | $ | 326,780 | |||
Derivative | Liabilities Location | |||||
Interest rate contracts | Net unrealized depreciation1 | $ | (83,203 | ) | ||
STATEMENT OF OPERATIONS | ||||||
Derivative | Location of Gain or (Loss) on Derivatives | Realized Gain (Loss) on Derivatives | ||||
Foreign currency exchange contracts | Net realized gain (loss) on investments2 | $ | (452,997 | ) | ||
Foreign currency exchange contracts | Net realized gain (loss) on futures contracts | $ | (512,006 | ) | ||
Interest rate contracts | Net realized gain (loss) on futures contracts | $ | (2,867,665 | ) | ||
Equity contracts | Net realized gain (loss) on options written | $ | 272,043 |
Derivative | Location of Appreciation (Depreciation) on Derivatives | Unrealized Appreciation (Depreciation) on Derivatives | ||||
Foreign currency exchange contracts | Net change in unrealized appreciation (depreciation) on investments3 | $ | (210,000 | ) | ||
Foreign currency exchange contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | (519,337 | ) | ||
Interest rate contracts | Net change in unrealized appreciation (depreciation) on futures contracts | $ | (1,320,598 | ) |
25
Unconstrained Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Option Contracts (continued)
1Includes cumulative appreciation/depreciation on futures contracts as reported in the Investment Portfolio, and is included within Net Assets as the components of capital are not required to be presented separately on the Statement of Assets and Liabilities. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities.
2Options purchased are included in net realized gain (loss) on investments.
3Options purchased are included in net change in unrealized appreciation (depreciation) on investments.
The average month-end balances for the year ended December 31, 2020 were as follows:
Futures Contracts: | |
Average number of contracts purchased1 | 1,040 |
Average number of contracts sold | 1,515 |
Average notional value of contracts purchased1 | $175,856,150 |
Average notional value of contracts sold | $278,333,035 |
Options: | |
Average number of option contracts purchased2 | 300 |
Average number of option contracts written1 | 3,500 |
Average notional value of option contracts purchased2 | $41,900,000 |
Average notional value of option contracts written1 | $29,361,500 |
1Average notional calculations were performed utilizing the period held rather than 12 months.
2Average notional calculations are for a period less than one month.
Asset-Backed Securities
The Series may invest in asset-backed securities. Asset-backed securities are generally issued as pass-through certificates or as debt instruments. Asset-backed securities issued as pass-through certificates represent undivided fractional ownership interests in an underlying pool of assets. Asset-backed securities issued as debt instruments, which are also known as collateralized obligations, are typically issued as the debt of a special purpose entity organized solely for the purpose of owning such assets and issuing such debt. Asset-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. The yield characteristics of certain asset-backed securities may differ from traditional debt securities. One such major difference is that all or a principal part of the obligations may be prepaid at any time because the underlying assets (i.e. loans) may be prepaid at any time. As a result, a decrease in interest rates in the market may result in increases in the level of prepayments as borrowers, particularly mortgagors, refinance and repay their loans. An increased prepayment rate with respect to an asset-backed security will have the effect of shortening the maturity of the security. In addition, the Series may subsequently have to reinvest the proceeds at lower interest rates. If the Series has purchased such an asset-backed security at a premium, a faster than anticipated prepayment rate could result in a loss of principal to the extent of the premium paid.
Mortgage-Backed Securities
The Series may invest in mortgage-backed securities (“MBS” or pass-through certificates) that represent an interest in a pool of specific underlying mortgage loans and entitle the Series to the periodic payments of principal and interest from those mortgages. MBS may be issued by government agencies or corporations, or private issuers. Most MBS issued by government agencies are guaranteed; however, the degree of protection differs based on the issuer. For MBS there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue mortgage-related securities and among the securities that they issue. For example, mortgage-related securities guaranteed by Ginnie Mae are guaranteed as to the timely payment of principal and interest by Ginnie Mae and such guarantee is backed by the full faith and credit of the United States. However, mortgage-related securities issued by Freddie Mac and Fannie Mae, including Freddie Mac and Fannie Mae guaranteed mortgage pass-through certificates, which are solely the obligations of Freddie Mac and Fannie Mae, are not backed by or entitled to the full faith and credit of the United States, but are supported by the right of the issuer to borrow from the U.S. Treasury. Non- agency mortgage-backed securities are securities issued by non-governmental issuers and have no direct or indirect government guarantees of payment and are subject to various risks. Non-agency mortgage loans are obligations of the borrowers thereunder only and are not typically insured or guaranteed by any other person or entity. The ability of a borrower to repay a loan is
26
Unconstrained Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Mortgage-Backed Securities (continued)
dependent upon the income or assets of the borrower. A number of factors, including a general economic downturn, acts of God, terrorism, social unrest and civil disturbances, may impair a borrower’s ability to repay its loans.
Inflation-Indexed Bonds
The Series may invest in inflation-indexed bonds. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. If the index measuring inflation rises or falls, the principal value of inflation- indexed bonds will be adjusted upward or downward, and consequently the interest payable on these securities (calculated with respect to a larger or smaller principal amount) will be increased or reduced, respectively. Any upward or downward adjustment in the principal amount of an inflation-indexed bond will be included as interest income in the Statement of Operations, even though investors do not receive their principal until maturity. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S. Treasury inflation-indexed bonds. For bonds that do not provide a similar guarantee, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
Securities Purchased on a When-Issued Basis or Forward Commitment
The Series may purchase securities on a when-issued basis or forward commitment. These transactions involve a commitment by the Series to purchase securities for a predetermined price with payment and delivery taking place beyond the customary settlement period. When such purchases are outstanding, the Series will designate liquid assets in an amount sufficient to meet the purchase price. When purchasing a security on a delayed delivery basis, the Series assumes the rights and risks of ownership of the security, including the risk of price and yield fluctuations, and takes such fluctuations into account when determining its net asset value. The Series may sell the when-issued securities before they are delivered, which may result in a capital gain or loss. No such investments were held by the Series on December 31, 2020.
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, 2020.
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, 2020, 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, 2017 through December 31, 2020. 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.
27
Unconstrained Bond Series
Notes to Financial Statements (continued)
2. | Significant Accounting Policies (continued) |
Foreign Taxes
Based on the Series’ understanding of the tax rules and rates related to income, gains and currency purchase/repatriation transactions for foreign jurisdictions in which it invests, the Series will provide for foreign taxes, and where appropriate, deferred foreign tax.
Distributions of Income and Gains
Distributions to shareholders of net investment income are made quarterly. Distributions of net realized gains are made annually. An additional distribution may be necessary to avoid taxation of the Series. Distributions are recorded on the ex-dividend date.
Indemnifications
The Fund’s organizational documents provide former and current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Fund. In the normal course of business, the Fund may also enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would be dependent on future claims that may be made against the Fund. The risk of material loss from such claims is considered remote.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
3. | Transactions with Affiliates |
The Fund has an Investment Advisory Agreement (the “Agreement”) with the Advisor, for which the Series pays a fee, computed daily and payable monthly, at an annual rate of 0.30% of the Series’ average daily net assets.
Under the Agreement, personnel of the Advisor provide the Series with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Series’ organization. The Advisor also provides the Fund with necessary office space and fund administration and support services. The salaries of all officers of the Fund (except a percentage of the Fund’s Chief Compliance Officer’s salary, which is paid by the Fund), and of all Directors who are “affiliated persons” of the Fund, or of the Advisor, and all personnel of the Fund, or of the Advisor, performing services relating to research, statistical and investment activities, are paid by the Advisor. Each “non-affiliated” Director receives an annual stipend, which is allocated among all the active series of the Fund. In addition, these Directors also receive a fee per Board meeting attended plus a fee for each committee meeting attended and are reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. The Fund also has an Audit Committee Chair, Governance & Nominating Committee Chair and Lead Independent Director, who each receive an additional annual stipend for these roles.
The Fund may enter into agreements with financial intermediaries pursuant to which the Fund may pay financial intermediaries for non-distribution related sub-transfer agency, administrative, sub-accounting, and other shareholder services in an annual amount not to exceed 0.15% of the average daily net assets of the Class I and Class S shares of the Series. Payments made pursuant to such agreements are generally based on the current assets and/or number of accounts of the Series attributable to the financial intermediary. Any payments made pursuant to such agreements may be in addition to, rather than in lieu of, any Distribution and Shareholder Services Fee payable under the Rule 12b-1 plan of the Fund. For the year ended December 31, 2020, the sub- transfer agency expenses incurred by Class S and Class I were $21,894 and $22,640, respectively.
Manning & Napier Investor Services, Inc., a registered broker-dealer affiliate of the Advisor, acts as distributor for the Fund’s shares. The Series compensates the distributor for distributing and servicing the Series’ Class S shares pursuant to a distribution plan adopted under Rule 12b-1 of the 1940 Act, regardless of expenses actually incurred. Under the agreement, the Series pays distribution and service fees to the distributor at an annual rate of 0.25% of average daily net assets attributable to Class S shares. There are no distribution and service fees on the Class I, Class W or Class Z shares. The fees are accrued daily and paid monthly.
28
Unconstrained Bond Series
Notes to Financial Statements (continued)
3. | Transactions with Affiliates (continued) |
Pursuant to a master services agreement dated February 13, 2020, as amended, the Fund pays the Advisor an annual fee related to fund accounting and administration of 0.0085% on the first $25 billion of average daily net assets (excluding Target Series); 0.0075% on the next $15 billion of average daily net assets (excluding Target Series); and 0.0065% of average daily net assets in excess of $40 billion (excluding Target Series); plus a base fee of $30,400 per series. Additionally, certain transaction and out- of-pocket expenses, including charges for reporting relating to the Fund’s compliance program, are charged. The Advisor has agreements with BNY Mellon Investment Servicing (U.S.) Inc. (“BNY”) under which BNY serves as sub-accountant services agent.
Pursuant to an advisory fee waiver agreement, the Advisor has contractually agreed to waive the management fee for the Class W shares. The full management fee will be waived under this agreement because Class W shares are only available to discretionary investment accounts and other accounts managed by the Advisor. These clients pay a management fee to the Advisor that is separate from the Fund’s expenses. In addition, pursuant to a separate expense limitation agreement, the Advisor has contractually agreed to limit its fees and reimburse expenses to the extent necessary so that the total direct annual fund operating expenses, exclusive of the shareholder services fee and/or distribution and service (12b-1) fees and waived Class W management fees (collectively, “excluded expenses”), do not exceed 0.50% of the average daily net assets of the Class S and Class I shares, 0.05% of the average daily net assets of the Class W shares, and 0.35% of the average daily net assets of the Class Z shares. These contractual waivers are expected to continue indefinitely, and may not be amended or terminated by the Advisor without the approval of the Series’ Board of Directors. The Advisor may receive from a Class the difference between the Class’s total direct annual fund operating expenses, not including excluded expenses, and the Class’s contractual expense limit to recoup all or a portion of its prior fee waivers (other than Class W management fee waivers) or expense reimbursements made during the rolling three-year period preceding the recoupment if at any point the total direct annual fund operating expenses, not including excluded expenses, are below the contractual expense limit (a) at the time of the fee waiver and/or expense reimbursement and (b) at the time of the recoupment.
Pursuant to the advisory fee waiver, the Advisor waived $1,996,101 in management fees for Class W for the year ended December 31, 2020. In addition, pursuant to the separate expense limitation agreement, the Advisor waived or reimbursed expenses of $147,864 for Class W, respectively, for the year ended December 31, 2020. These amounts are included as a reduction of expenses on the Statement of Operations.
As of December 31, 2020, the class specific waivers or reimbursements subject to possible future recoupment under the expense limitation agreement are as follows:
CLASS | EXPIRING DECEMBER 31, | |||||||||||
2022 | 2023 | Total | ||||||||||
Class W | $84,567 | $147,864 | $232,431 |
For the year ended December 31, 2020, the Advisor did not recoup any expenses that have been previously waived or reimbursed.
The Series may participate in securities purchase and sale transactions with other Series or accounts advised by Manning & Napier (cross trades), in accordance with procedures adopted by the Fund’s Board and Securities and Exchange Commission rules, which require, among other things, that such purchase and sale cross trades be effected at the independent current market price of the security. Purchases cross trades aggregated $2,268,079 for the year ended December 31, 2020.
4. | Purchases and Sales of Securities |
For the year ended December 31, 2020, purchases and sales of securities, other than U.S. Government securities and short-term securities, were $547,853,738 and $564,566,269, respectively. Purchases and sales of U.S. Government securities, other than short-term securities, were $72,999,599 and $271,835,887, respectively.
29
Unconstrained Bond Series
Notes to Financial Statements (continued)
5. | Capital Stock Transactions |
Transactions in Class S, Class I, and Class W shares of Unconstrained Bond Series were:
CLASS S | FOR THE YEAR ENDED | FOR THE YEAR ENDED | |||||||||||||
12/31/20 | 12/31/19 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||||
Sold | 813,870 | $ | 8,534,928 | 1,192,081 | $ | 12,463,772 | |||||||||
Reinvested | 45,323 | 481,149 | 50,716 | 526,853 | |||||||||||
Repurchased | (1,136,891 | ) | (11,884,364 | ) | (66,433,565 | ) | (686,982,994 | ) | |||||||
Total | (277,698 | ) | $ | (2,868,287 | ) | (65,190,768 | ) | $ | (673,992,369 | ) | |||||
CLASS I | FOR THE YEAR ENDED | FOR THE YEAR ENDED | |||||||||||||
12/31/20 | 12/31/19 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||||
Sold | 844,626 | $ | 7,997,823 | 977,242 | $ | 9,028,573 | |||||||||
Reinvested | 43,160 | 405,892 | 43,111 | 397,461 | |||||||||||
Repurchased | (697,988 | ) | (6,374,607 | ) | (2,099,868 | ) | (19,392,391 | ) | |||||||
Total | 189,798 | $ | 2,029,108 | (1,079,515 | ) | $ | (9,966,357 | ) | |||||||
CLASS W | FOR THE PERIOD 3/1/19 | ||||||||||||||
FOR THE YEAR ENDED | (COMMENCEMENT OF OPERATIONS) | ||||||||||||||
12/31/20 | TO 12/31/19 | ||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||||
Sold | 3,946,934 | $ | 41,573,248 | 90,241,283 | $ | 933,240,082 | |||||||||
Reinvested | 1,940,080 | 20,442,493 | 2,596,706 | 26,876,368 | |||||||||||
Repurchased | (30,558,394 | ) | (310,018,353 | ) | (10,199,070 | ) | (106,135,937 | ) | |||||||
Total | (24,671,380 | ) | $ | (248,002,612 | ) | 82,638,919 | $ | 853,980,513 |
Over 90% of the shares outstanding are fiduciary accounts where the Advisor has sole investment discretion.
6. | Line of Credit |
The Fund has entered into a 364-day, $25 million credit agreement (the “line of credit”) with Bank of New York Mellon. Each series of the Fund (with the exception of Credit Series) may borrow under the line of credit for temporary or emergency purposes, including funding shareholder redemptions and other short-term liquidity purposes. The Fund pays an annual fee on the unused commitment amount, payable quarterly, and is allocated among all the series of the Fund and included in miscellaneous expenses in the Statement of Operations for each series. The line of credit expires in August 2021 unless extended or renewed. During the year ended December 31, 2020, the Series did not borrow under the line of credit.
7. | Financial Instruments and Loan Assignments |
The Series may trade in instruments including written and purchased options, forward foreign currency exchange contracts and futures contracts and other derivatives in the normal course of investing activities to assist in managing exposure to various market risks. The Series may be subject to various elements of risk, which may involve, to a varying degree, elements of risk in excess of the amounts recognized for financial statement purposes. These risks include: the risk that changes in the value of a derivative may not correlate perfectly with the underlying asset, rate or index; counterparty credit risk related to over the counter derivative counterparties’ failure to perform under contract terms; liquidity risk related to the lack of a liquid market for these contracts allowing the fund to close out its position(s); and documentation risk relating to disagreement over contract terms. For
30
Unconstrained Bond Series
Notes to Financial Statements (continued)
7. | Financial Instruments and Loan Assignments (continued) |
the year ended December 31, 2020, the Series invested in futures contracts (foreign currency exchange risk and interest rate risk), options purchased (foreign currency exchange risk) and options written (equity risk).
The Series may invest in a loan assignment of all or a portion of the loans. The Series has direct rights against the borrower on a loan when it purchases an assignment; however, the Series’ rights may be more limited than the lender from which it acquired the assignment and the Series may be able to enforce its rights only through an administrative agent. Loan assignments are vulnerable to market conditions and may become illiquid due to economic conditions or other events may reduce the demand for loan assignments and certain loan assignments which were liquid when purchased may become illiquid.
8. | Foreign Securities |
Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in securities of domestic companies and the U.S. Government. These risks include revaluation of currencies and future adverse political and economic developments. Moreover, securities of foreign companies and foreign governments and their markets may be less liquid and their prices more volatile than those of comparable domestic companies and the U.S. Government.
9. | Federal Income Tax Information |
The amount and characterization of certain income and capital gains to be distributed are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing book and tax treatments in the timing and/or treatment of the recognition of net investment income or gains and losses including redesignation of distributions paid, foreign currency gains and losses, GAAP adjustments and the realization for tax purposes of unrealized gains/losses on certain futures. The Series may periodically make reclassifications among its capital accounts to reflect income and gains available for distribution (or available capital loss carryovers) under income tax regulations, without impacting the Series’ net asset value. Any such reclassifications are not reflected in the financial highlights.
The tax character of distributions paid were as follows:
FOR THE YEAR | FOR THE YEAR | |||||||
ENDED 12/31/20 | ENDED 12/31/19 | |||||||
Ordinary income | $ | 22,671,377 | $ | 29,098,418 |
At December 31, 2020, 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 | $ | 652,888,688 | ||
Unrealized appreciation | 30,862,389 | |||
Unrealized depreciation | (12,463,457 | ) | ||
Net unrealized appreciation | $ | 18,398,932 | ||
Undistributed ordinary income | $ | 1,694,046 |
At December 31, 2020, the capital loss carryover utilized in the current year was $4,112,191.
10. | Market Event |
In March 2020, the World Health Organization declared COVID-19 (a novel coronavirus) to be a pandemic. The situation is dynamic. Global financial markets have experienced and may continue to experience significant volatility resulting from the spread of COVID-19. The outbreak of COVID-19 has resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand and general market uncertainty. The global economy, the economies of certain nations and individual
31
Unconstrained Bond Series
Notes to Financial Statements (continued)
10. | Market Event (continued) |
issuers have been and may continue to be adversely affected by COVID-19, particularly in light of the interconnectivity between economies and financial markets, all of which may negatively impact the Series’ performance. In addition, COVID-19 and governmental responses to COVID-19 may negatively impact the capabilities of the Series’ service providers and disrupt the Series’ operations. Management of the Series will continue to monitor the impact of COVID-19.
32
Unconstrained Bond Series
Report of Independent Registered Public Accounting Firm
To the Board of Directors of Manning & Napier Fund, Inc. and Shareholders of Unconstrained Bond Series
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the investment portfolio, of Unconstrained Bond Series (one of the series constituting Manning & Napier Fund, Inc., referred to hereafter as the “Fund”) as of December 31, 2020, the related statement of operations for the year ended December 31, 2020, the statement of changes in net assets for each of the two years in the period ended December 31, 2020, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of December 31, 2020, 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 ended December 31, 2020 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020 by correspondence with the custodian, issuers of privately offered securities, agent banks and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
New York, New York
February 17, 2021
We have served as the auditor of one or more investment companies in Manning & Napier Mutual Funds since 1992.
33
Unconstrained 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.manning-napier.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 directors and officers, 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 and Officer
Name: | Paul Battaglia* |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 42 |
Current Position(s) Held with Fund: | Principal Executive Officer, President, Chairman & Director |
Term of Office1 & Length of Time Served: | Indefinite – Chairman and Director since November 2018 |
Principal Occupation(s) During Past 5 Years: | Chief Financial Officer since 2018; Vice President of Finance (2016 – 2018); Director of Finance (2011 – 2016); Financial Analyst/Internal Auditor (2004-2006) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various subsidiaries and affiliates: Chief Financial Officer |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | N/A |
Independent Directors
Name: | Stephen B. Ashley |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 80 |
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 and Director since 1997; Chief Executive Officer (1997-2019) - Ashley Companies (property management and investment) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Ashley Companies since 1997 |
Name: | Paul A. Brooke |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 75 |
Current Position(s) Held with Fund: | Lead Independent Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since 2007; Governance & Nominating Committee Chairman since 2016; Lead Independent Director since 2017 |
Principal Occupation(s) During Past 5 Years: | Managing Member since 1991 - PMSV Holdings LLC (investments); Managing Member (2010-2016) - Venbio (investments).. |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Incyte Corp. (biotech) (2000-2020); PureEarth (non-profit) since 2012; Cerus (biomedical) since 2016; Caelum BioSciences (biomedical) since 2018; Cheyne Capital International (investment)(2000-2017); |
34
Unconstrained Bond Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Peter L. Faber2 |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 82 |
Current Position(s) Held with Fund: | Director, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Since 1987 |
Principal Occupation(s) During Past 5 Years: | Partner (1995-2006 & 2013-2018); Senior Counsel (2006-2012) - McDermott, Will & Emery LLP (law firm) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Boston Early Music Festival (non-profit) since 2007; Amherst Early Music, Inc. (non-profit) since 2009; Gotham Early Music Scene, Inc. (non-profit) since 2009; S’Cool Sounds, Inc. (non-profit) since 2017 |
Name: | Harris H. Rusitzky2 |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 85 |
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 since 1994 - The Greening Group (business consultants); Partner since 2006 - The Restaurant Group (restaurants) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (university) since 1972; Culinary Institute of America (non-profit college) since 1985; George Eastman Museum (museum) since 1988; National Restaurant Association (restaurant trade organization) (1978-2020) |
Name: | Russell O. Vernon |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 63 |
Current Position(s) Held with Fund: | Director, Audit Committee Member, Governance & Nominating Committee Chairman |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member since April 2020; Governance & Nominating Committee Chairman since November 2020 |
Principal Occupation(s) During Past 5 Years: | Founder and General Partner (2009-2019) – BVM Capital Management (economic development) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Board Member, Vice Chairman and President since 2010 – Newburgh Armory Unity Center (military); Board Member and Executive Director since 2020 – National Purple Heart Honor Mission, Inc. (military); Board Member, Vice Chairman (2015-2020) – National Purple Heart Hall of Honor, Inc. (military) |
35
Unconstrained Bond Series
Directors’ and Officers’ Information
(unaudited)
Independent Directors (continued)
Name: | Chester N. Watson |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 70 |
Current Position(s) Held with Fund: | Director, Audit Committee Chairman, Governance & Nominating Committee Member |
Term of Office & Length of Time Served: | Indefinite – Director, Audit Committee Member, Governance & Nominating Committee Member Since 2012; Audit Committee Chairman since 2013 |
Principal Occupation(s) During Past 5 Years: | General Auditor (2003-2011) - General Motors Company (auto manufacturer) |
Number of Portfolios Overseen within Fund Complex: | 15 |
Other Directorships Held Outside Fund Complex During Past 5 Years: | Rochester Institute of Technology (University) since 2005; Hudson Valley Center for Innovation, Inc. (New Business and Economic Development) since 2019; Town of Greenburgh, NY Planning Board (Municipal Government) (2015-2019); |
Officers:
Name: | Elizabeth Craig |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 33 |
Current Position(s) Held with Fund: | Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2016 |
Principal Occupation(s) During Past 5 Years: | Fund Regulatory Administration Manager since 2018; Fund Administration Manager (2015-2018); Mutual Fund Compliance Specialist (2009-2015) - Manning & Napier Advisors, LLC; Assistant Corporate Secretary (2011-2016) - Manning & Napier Fund, Inc.; Corporate Secretary, Director since 2019– Manning & Napier Investor Services, Inc. |
Name: | Samantha Larew |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 40 |
Current Position(s) Held with Fund: | Chief Compliance Officer and Anti-Money Laundering Compliance Officer |
Term of Office1 & Length of Time Served: | Chief Compliance Officer since 2019; Anti-Money Laundering Compliance Officer since 2018 |
Principal Occupation(s) During Past 5 Years: | Co-Director of Compliance since 2018; Compliance Communications Supervisor (2014-2018); Compliance Supervisor (2013-2014); Broker-Dealer Compliance Supervisor (2011-2013); Broker-Dealer Compliance Analyst (2010-2011) - Manning & Napier Advisors, LLC & Affiliates; Broker-Dealer Chief Compliance Officer since 2013; Broker-Dealer Assistant Corporate Secretary since 2011 – Manning & Napier Investor Services, Inc.; Compliance Analyst (2007-2009) – Wall Street Financial Group; Compliance Specialist (2003-2007) – Manning & Napier Advisors, LLC & Affiliates |
Name: | Scott Morabito |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 33 |
Current Position(s) Held with Fund: | Vice President |
Term of Office1 & Length of Time Served: | Vice President since 2019; Assistant Vice President (2017-2019) |
Principal Occupation(s) During Past 5 Years: | Managing Director of Operations since 2019; Director of Funds Group (2017-2019); Fund Product and Strategy Manager (2014-2017); Senior Product and Strategy Analyst (2013-2014); Product and Strategy Analyst (2011-2013) - Manning & Napier Advisors, LLC; President, Director since 2018 – Manning & Napier Investor Services, Inc. |
36
Unconstrained Bond Series
Directors’ and Officers’ Information
(unaudited)
Officers: (continued)
Name: | Troy Statczar |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 49 |
Current Position(s) Held with Fund: | Principal Financial Officer, Treasurer |
Term of Office1 & Length of Time Served: | Principal Financial Officer and Treasurer since 2020 |
Principal Occupation(s) During Past 5 Years: | Senior Director, Foreside Treasurer Services since 2020 - Foreside Financial Group; Director of Fund Administration (2017-2019) - Thornburg Investment Management, Inc.; Director of U.S. Operations (2008-2017) - Henderson Global Investors N.A., Inc. |
Name: | Sarah Turner |
Address: | 290 Woodcliff Drive |
Fairport, NY 14450 | |
Age: | 38 |
Current Position(s) Held with Fund: | Chief Legal Officer; Assistant Corporate Secretary |
Term of Office1 & Length of Time Served: | Since 2018 |
Principal Occupation(s) During Past 5 Years: | Attorney since 2018 - Manning & Napier Advisors, LLC and affiliates; Counsel (2017-2018) – Harter Secrest and Emery LLP; Legal Counsel (2010-2017) – Manning & Napier Advisors, LLC and affiliates Holds one or more of the following titles for various affiliates: Corporate Secretary, General Counsel |
*Interested Director, within the meaning of the 1940 Act by reason of his positions with the Fund’s Advisor, Manning & Napier Advisors, LLC, and Distributor, Manning & Napier Investor Services, Inc.
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.
2Effective December 31, 2020, Peter L. Faber and Harris Rusitzky have each retired as a Director of the Fund in accordance with the Board’s existing Board retirement policy.
37
Unconstrained Bond Series
Literature Requests
(unaudited)
Proxy Voting Policies and Procedures
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the Securities and Exchange | |
Commission’s (SEC) web site | http://www.sec.gov |
Proxy Voting Record
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Quarterly Portfolio Holdings
The Series’ complete schedule of portfolio holdings for the 1st and 3rd quarters of each fiscal year are provided on Form N-PORT, and are available, without charge, upon request:
By phone | 1-800-466-3863 |
On the SEC’s web site | http://www.sec.gov |
Prospectus and Statement of Additional Information (SAI)
For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus and SAI at www.manning-napier.com or by calling (800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. In addition, this information can be found on the SEC’s web site, http://www.sec.gov.
Additional information available at www.manning-napier.com
1. | Fund Holdings - Month-End |
2. | Fund Holdings - Quarter-End |
3. | Shareholder Report - Annual |
4. | Shareholder Report - Semi-Annual |
The Fund also offers electronic notification or “e-delivery” when certain documents are available on-line to be downloaded or reviewed. Direct shareholders can elect to receive electronic notification when shareholder reports, prospectus updates, and/or statements are available. If you do not currently have on-line access to your account, you can establish access by going to www.manning-napier.com, click on “Login” in the top corner of the page, and follow the prompts to self-enroll. Once enrolled, you can set your electronic notification preferences by clicking on the Account Options tab located within the green toolbar and then select E-Delivery Option. Should you have any questions on either how to establish on-line access or how to update your account settings, please contact Investor Services at 1-800-466-3863.
The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares.
MNCPB-12/20-AR
38
ITEM 1(b):
Not applicable.
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 13(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. |
(e) | Not applicable. |
(f) | A copy of the code of ethics is attached hereto as Exhibit 13(a)(1). |
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, Russell O. Vernon 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
● | Registrant may incorporate the following information by reference, if this information has been disclosed in the registrant’s definitive proxy statement or definitive information statement. The proxy statement or information statement must be filed no later than 120 days after the end of the fiscal year covered by the Annual Report. |
Principal Accountant Fees and Services
Aggregate fees for professional services rendered for the Manning & Napier Fund, Inc. [Real Estate Series, Core Bond Series, Unconstrained Bond Series, High Yield Bond Series, Diversified Tax Exempt Series, New York Tax Exempt Series, and Credit Series] (collectively the “Fund”) by PricewaterhouseCoopers LLP (“PwC”) as of and for the years ended December 31, 2020 and 2019 were:
2020 | 2019 | |||||||
Audit Fees (a) | $ | 288,619 | $ | 235,745 | ||||
Audit Related Fees (b) | $ | 0 | $ | 0 | ||||
Tax Fees (c) | $ | 95,737 | $ | 120,638 | ||||
All Other Fees (d) | $ | 0 | $ | 0 | ||||
$ | 384,355 | $ | 356,382 |
(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 tax services provided by PWC relate to professional services rendered for tax compliance, tax advice, tax planning and shareholder reporting.
(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, 2020 and 2019.
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 provides ongoing services to the Fund. For purposes of disclosure, Manning & Napier Investor Services, Inc. is considered to be a service affiliate. |
2020 | 2019 | |||||||
Audit Related Fees | $ | 115,500 | $ | 0 | ||||
Tax Fees | $ | 0 | $ | 0 | ||||
$ | 115,500 | $ | 0 |
The Audit Related fees for the years ended December 31, 2020 and 2019 were for work related to a fund liquidation and merger. There were no Audit Related fees for the year ended December 31, 2019.
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, 2020 and 2019.
Aggregate Fees
Aggregate fees billed to the Fund for non-audit services for 2020 and 2019 were $95,737 and $120,638, respectively. Aggregate fees billed to the Fund’s advisor and service affiliates for non-audit services were $115,500 and $0, 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 period covered by this report there have been no changes in the Funds’ internal control over financial reporting that the above officers believe to have materially affected, or to be reasonably likely to materially affect, the Funds’ internal control over financial reporting. |
ITEM 12: DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
Item 13: Exhibits
(a)(1) | 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. |
(a)(4) | 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/ Paul J. Battaglia | |
Paul J. Battaglia | |
President & Principal Executive Officer | |
Manning & Napier Fund, Inc. | |
Date: 02/25/2021 |
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.
Manning & Napier Fund, Inc. | |
/s/ Paul J. Battaglia | |
Paul J. Battaglia | |
President & Principal Executive Officer | |
Manning & Napier Fund, Inc. | |
Date: 02/25/2021 | |
/s/ Troy M. Statczar | |
Troy M. Statczar | |
Treasurer and Principal Financial Officer | |
Manning & Napier Fund, Inc. | |
Date: 02/25/2021 |