Manning & Napier Investor Presentation June 2014 The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC ( Manning & Napier ). Manning & Napier Investor Services, Inc. and affiliate of Manning & Napier, is the distributor of the Fund shares.
Forward Looking Statements This presentation contains forward-looking statements. Such statements can be identified by the use of forward-looking terminology such as believes, expects, may, estimates, will, should, intends, plans or anticipates or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. You are cautioned that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Prospective investors are cautioned not to place undue reliance on forward-looking statements. All written and oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by those cautionary statements. Any forward-looking statements which we make in this presentation speak only as of the dates of such statements, and we undertake no obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained in this presentation to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data. 2
Corporate Overview 3
Corporate Profile At Manning & Napier we are committed to helping our clients achieve long-term financial security by solving their investment and benefit needs. Firm Highlights Financial Highlights Recent Developments Founded in 1970 in Rochester, NY $52.9 billion in assets under management as of 4/30/14 A comprehensive suite of consultative products & services: o 33 separate account composites o 37 mutual funds o Services such as family wealth management, retirement planning and liability modeling Over 80 investment and 170 client service and sales personnel as of 3/31/14 Revenue of more than $380 million for the 12 months ending 3/31/14; more than $375 million for 12 months ending 12/31/13 Economic income of more than $170 million for the 12 months ended 3/31/14; more than $165 million for 12 months ended 12/31/13 Enterprise value of $1.4 billion as of 3/31/14 NYSE traded: Symbol MN o 87,827,272 adjusted shares outstanding as of 3/31/14 o Public ownership of $229 million, 13,648,169 outstanding shares as of 3/31/14 Completed acquisition of the business and operations of a global alternatives manager, 2100 Xenon Group on May 23, 2014. More than 15 seeded products totaling approximately $30 million $30.3 million accretive share repurchase from legacy shareholders in Q1 2014 4
AUM Evolution 18% annualized growth rate in assets under management since 2003 has been attributable to: Organic Growth of approximately $18 billion since 2008 Historical retention rates consistently in excess of 90% Strong absolute and relative returns AUM Development (in $B), 2003-2014 $50.8 $52.9 $38.8 $40.2 $45.2 $28.3 $7.8 $9.8 $11.3 $14.7 $18.8 $16.2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 4/30/2014 5
Enhancing Shareholder Value Investment Capabilities Our focus on delivering investment excellence has allowed us to maintain a 98% separate account retention rate as of Q1 2014. Active management of portfolios producing excess returns for our clients through both the Tech Wreck and the Financial Crisis Our solutions-based investing and active management have resulted in organic growth of approximately $18 billion since 2008 Products, Services & Distribution Corporate Performance Enhanced product offerings, including: Target Date Funds have recently achieved a five year track record, while many of our Target Date Collective Trusts have 10 year track records Emerging Markets Fund achieved a two year track record in November Offer an array of consultative services including: Family Wealth Management, Retirement Planning, 401(k) Plan Design, Actuarial Services & Benefits Consulting Expanded coverage in key distribution channels and geographies Maintain a presence on all major platforms We have maintained a healthy, debt-free balance sheet with over $100 million in cash Current dividend yield of 3.8% compared with an industry average of 2.25% 1 Since our November 2011 IPO, Manning & Napier Group has returned approximately $297 million to its members, including the May 1, 2014 dividend payment Product seeding portfolio totals approximately $30 million $30.3 million accretive share repurchase from legacy shareholders in Q1 2014 1 Industry comprises BLK, CNS, EV, JNS, TROW, WDR and excludes one-time special dividends 6
Investment Capabilities 7
Our Team-Based Research Engine Senior Research Group (13 Senior Analysts) Highly experienced research staff average tenure of the Senior Research Group is 19 years Proven fundamental and quantitative investment strategies Supports both existing and new products Overview Groups 3 Portfolio Groups 5 Sector Groups 5 (17 members) Global Strategies Quantitative Strategies Themes & Overviews (29 members) Alternative Strategies Emerging Growth Equity Income Focused Opportunities Fixed Income (34 members) Capital Goods Consumer Life Sciences Services Technology MORE THAN 80 Economists, Strategists, Analysts, Associates and Assistants (1) As of 3/31/14 8
The Value of Active Management Funds with a Morningstar (1) Star Rating (as of 4/30/14) Manning & Napier Number of Funds Rated 22 Number of 4 and 5 Star Funds 7 % of Funds Rated 4 and 5 Stars 32% Total AUM Rated (BN) $22.0 % of AUM in 4 and 5 Star Funds 27% % of AUM in 3, 4 and 5 Star Funds 98% Pro-Blend Moderate Term Series Annualized Returns Net of Fees vs. Benchmark 3.1% 2.5% YTD 4/30/14 9.5% 6.8% 6.9% 6.7% 6.8% 5.5% 12 months ended 4/30/14 Pro-Blend Moderate Term Series 3 years ended 4/30/14 1/1/00-4/30/14 30% Russell 3000, 10% ACWI xus, 60% BAB World Opportunities Series Annualized Returns Net of Fees vs. Benchmark Equity Series Annualized Returns Net of Fees vs. Benchmark 23.5% 20.8% 15.1% 13.5% 3.0% 1.8% 9.8% 2.9% 8.0% 3.0% 3.9% 3.8% 2.1% 11.1% 7.4% 4.3% YTD 4/30/14 12 months ended 4/30/14 3 years ended 4/30/14 1/1/00-4/30/14 YTD 4/30/14 12 months ended 4/30/14 3 years ended 4/30/14 1/1/00-4/30/14 World Opportunities Series ACWIxUS Equity Series Russell 3000 (1) Morningstar 2014. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied, adapted or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past financial performance is no guarantee of future results. 9 * Past performance is not a guarantee of future results
Product & Service Offerings 10
4o+ Year Record of Product Innovation & Market Leadership Our Approach to New Product Seeding 1 2 Meets client needs Addresses actual risks and provides appropriate protection 3 Adheres to our core beliefs and investment philosophies 11
History of Product Innovation 1990s 2000s 2010s 1992 International Series is our first top-down managed product 1993 Pro Blend Moderate and Extended Term funds are our first life cycle mutual funds 1994 Tax Exempt Fund launched to promote tax efficient strategies The 90s represented our early introduction of life cycle strategies to the DC market, which led to us being labeled a pioneer. We also focused this decade on finding ways to enhance our relationships with clients. 2003 Manning Yield is a fundamentals based alternative to indexing While we launched our first top-down managed product in the 90s, product development beyond bottom-up stock picking began in earnest in the 2000s. We also expanded on concepts built by Client Analytics Group in the 90s, by finding new ways to be consultative with clients. 2010 Global Equity Inflation Focus and Global Quality seize global opportunities and address inflation risk 2006 Global Equity is launched to further enhance topdown product offerings 2011 Emerging Markets focuses on long-term growth opportunities in developing market countries 2008 Target Date offerings launched 2012 Strategic Income addresses client demand for income-oriented products, GOAL Target Dates further enhance target date options with actively managed ETFs We have continued to focus on product diversification across team skill sets and in response to market trends over the past few years. 12
Upcoming 3-Year Track Records Manning & Napier has several new strategies that will reach 3-Year track records starting in 2014, starting with our Global Quality Plus and Emerging Market equity products. As of 4/30/14 Global Quality Plus 3 Year Track Record Achieved Return Since Inception Benchmark Since Inception 8/1/14 16.0% 12.2% Equity Emerging Markets 11/1/14 10.3% 3.9% Objectives-based (Balanced) Strategic Income - Conservative Strategic Income - Moderate 8/1/15 6.2% 6.2% 8/1/15 9.0% 9.8% Fixed Income Global Fixed Income 10/1/15 3.0% 0.2% 13 * Past performance is not a guarantee of future results
MN Xenon Strategies On May 23, 2014, Manning & Napier announced that it completed the acquisition of the business and operations of 2100 Xenon Group LLC. The completion of this acquisition has enhanced Manning & Napier s alternative capabilities and provide increased product diversification to clients. Current strategies offered by Manning & Napier Xenon include: Program Name MN Xenon Managed Futures (2x) Fund is offered in multiple leveraged share classes Inception Date Jun-06 Volatility Target 15 30% depending on share class MN Xenon Managed Futures Aug-04 7.5 10% MN Xenon Global Fixed Income (2x) May-10 15 20% MN Xenon Global Fixed Income Aug-04 7.5 10% MN Xenon Futures Alpha Jun-13 9-14% 14
Downside Risk Management: S&P 500 vs. MN Xenon Managed Futures (2x) S&P Down Month Analysis Average Monthly Returns 25% 6% 20% 15% 4% 3.5% 10% 5% 0% -5% -10% -15% S&P 500 Total Return MN Xenon Managed Futures (2x) Month Returns 2% 0% -2% -4% -6% 0.48% 0.43% -4.2% 1.1% -20% 10/08 02/09 09/08 06/08 01/09 05/10 11/08 09/11 01/08 05/12 08/11 06/10 11/07 08/10 01/10 07/07 02/08 08/13-8% Overall Return Average Return When S&P is Negative -7.1% Average Return When S&P down over 3.5% S&P 500 Total Return MN Xenon Managed Futures (2x) Source: Bloomberg. Analysis: Manning & Napier. Note: Data presented from June 2006 March 2014 15
The Next Frontier in Product Evolution Convergence of Health & Wealth Benefits Just as we advocated life cycle funds as a solution for 401(k) participants in the 1980s, Manning & Napier is now providing solutions to reduce the cost of employer-provided health care benefits while empowering employees to become better consumers of health care. 16
Consultative Selling & Client Service 17
Multi-Channel Distribution We continue to expand our coverage in the direct sales channel while we focus on creating relationships with ultimate advisors, identifying new 401(k) plans, and getting our products on more platforms in our intermediary sales channel. Direct Sales 29 Intermediary Sales 20 Platform & Sub-Advisory 6 Regional Reps Multi-State Reps Taft-Hartley Reps External Wholesalers Internal Wholesalers Key Account Platform Resources Consultant Relations Sub-Advisory (1) As of 3/31/14 18
Direct Sales Channel We Continue to Expand Our Geographic Coverage in the Direct Sales Channel Today (1) : 29 Direct Client Reps 2012: Hired 5 new Direct Client Reps 2013: Hired 3 new Direct Client Reps Current Locations Albany Syracuse Rochester Buffalo Cleveland Pittsburgh Columbus Indianapolis Chicago Atlanta Tampa New Locations New York City New Jersey Illinois Dallas Houston California (1) As of 3/31/14 19
Intermediary Sales Channel National Coverage in Our Intermediary Sales Channel (1) 6 WM External Wholesalers 4 DCIO External Wholesalers 6 Internal Wholesalers 4 Key Account Platform Resources Wealth Management Team Coverage Defined Contribution Team Coverage This Team Focuses on: Relationships with ultimate advisors Identifying those with 401(k) plans More products on more platforms (1) As of 3/31/14 20
Defined Contribution Opportunities DCIO Market: $2.8 trillion market size; expected to grow to $4+ trillion by 2018* Manning & Napier has a long-established presence in the DCIO market: Risk-based products started in 1993 Age-based products since 2008 Both our risk-based and age-based offerings have attractive long-term track records over various market cycles. This presence has enabled us to accumulate meaningful assets under management: Over $12 billion in DC AUM as of March 31, 2014 Over $24 billion in multi-class portfolios as of March 31, 2014 Our dedicated resources allow us to continue to grow our DC presence through multiple distribution channels: Dedicated DCIO Wholesaler Team Distribution through our Direct Sales Force Ongoing expertise and client support through our team of portfolio strategists, our client analytics group, and sales support functions. * Source: Strategic Insight DC Market Sizing & Outlook 2013 21
Financial Performance 22
Historical AUM by Portfolio ($ in billions) Growth in assets under management has historically been driven by client cash flows (over $18 billion since 2008) and high client retention (over 90%). Additional AUM growth was achieved during 2013 as a result of blended market appreciation during the year of nearly 18%. For the year ended December 31, For the quarter ended $1.3 $1.3 $1.3 $1.1 $1.2 $1.2 $1.1 $1.1 $1.1 $20.3 $20.8 $23.5 $26.0 $24.9 $23.4 $25.1 $26.0 $26.5 $17.3 $18.1 $20.5 $23.7 $21.9 $21.7 $22.8 $23.7 $24.5 2010 2011 2012 2013 Total AUM $38.8 $40.2 $45.2 $50.8 Organic Growth $6.5 $4.7 $(0.8) $(2.5) 3/31/13 6/30/13 9/30/13 12/31/13 3/31/2014 Total AUM $48.1 $46.3 $49.1 $50.8 $52.2 Organic Growth $(0.0) $(1.4) $(0.4) $(0.6) $0.1 Blended Asset Equity Fixed Income 23
Historical Revenue & Revenue Rates ($ in millions) Top line margins have remained consistent at approximately 78bps while assets under management have increased. As a result, revenues have increased from $255 million in 2010 to over $375 million for the year ended December 31, 2013. For the year ended December 31, For the quarter ended $330 $339 $376 $90 $93 $95 $98 $98 $255 0.79% 0.78% 0.78% 0.78% 0.78% 0.78% 0.78% 0.78% 0.78% 2010 2011 2012 2013 Average AUM (in billions) $32.3 $42.2 $43.6 $48.3 3/31/13 6/30/13 9/30/13 12/31/13 3/31/2014 Average AUM (in billions) $47.2 $47.8 $48.0 $50.0 $51.1 Revenue Revenue Rates 24
Operating Expense, as adjusted, as a Percentage of Total Revenue Key considerations of our compensation structure: Annual compensation as a percentage of revenue has ranged between 27 and 31%. However, quarterly ranges can be more variable based on recent market trends, with compensation as a percentage of revenue ranging between 24-33% historically. The Investment Team compensation is based on both absolute & relative returns for trailing 1-, 2- and 3-year periods, and measured and paid semi-annually as of June 30 and December 31. The Sales, Service and Product Team compensation includes incentives for both new business generation as well as service incentives Starting in the second quarter of 2013, compensation and related costs includes expenses associated with equity grants awarded under the Company s Long-Term Incentive Plan, with additional equity awards expected in future years. For the year ended December 31, For the quarter ended 55% 53% 54% 56% 56% 52% 55% 60% 57% 31% 27% 28% 29% 30% 26% 28% 32% 30% 14% 16% 17% 18% 18% 18% 18% 18% 19% 10% 9% 9% 8% 0.4% 2010 2011 2012 2013 9% 8% 8% 9% 8% 0.5% 1% 1% 1% 3/31/13 6/30/13 9/30/13 12/31/13 3/31/2014 Other operating costs Distribution, servicing and custody expenses Stock-Based Compensation Compensation & related costs Total Operating Expense as Percentage of Revenue (1) Operating expense and compensation and related costs as a percentage of revenue excludes non-cash reorganization-related share-based compensation. For the quarters ended March 31, June 30, September 30 and December 31, 2013, these charges amounted to $21.7M, $22.8M, $18.2M and $17.9M respectively. For the quarter ended March 31, 2014 these charges amounted to $21.9M. For further information and reconciliation between GAAP and our Non-GAAP financial measures, see the appendix as well as previously filed Form 10-Ks, 10-Qs and 8-Ks. 25
Economic Income, Economic Net Income & Economic Income Margins (1) ($ in millions) Our focused business model results in a flexible expense structure and has produced consistent margins over time and allows for investment in growth alongside of high dividend payouts For the year ended December 31, $157 $157 $167 80% 70% For the quarter ended $40 $44 $43 $40 $45 80% 70% $115 45% 47% 46% 45% 60% 50% 40% 44% 47% 46% 41% 45% 60% 50% 40% 30% 30% $71 $97 $97 $103 20% 10% $25 $27 $27 $25 $28 20% 10% 2010 2011 2012 2013 Economic Net Income per Adjusted Share (2) n/a $1.08 $1.08 $1.15 0% 3/31/13 6/30/13 9/30/13 12/31/13 3/31/2014 Economic Net Income per Adjusted Share (2) $0.28 $0.30 $0.30 $0.28 $0.31 0% Economic Income Economic Net Income Economic Income Margin (1) For further information and reconciliation between GAAP and our Non-GAAP financial measures, see the appendix as well as previously filed Form 10-Ks, 10-Qs and 8-Ks. (2) Assumes the weighted average exchangeable units of Manning & Napier Group, LLC are converted into the Company s Class A common stock as of the respective reporting date, on a one-to-one basis 26
Creating Strong Cash Flow Cash Provided by Operating Activities for the Quarter Ended ($ in millions) 51.5 37.5 49.0 30.5 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Current Quarter Commentary Cash inflow from operating activities of $30.5M was mainly attributable to net income after adjustment for non-cash items. Cash Provided by (Used in) Investing Activities for the Quarter Ended ($ in millions) (0.9) (3.3) (8.1) (8.1) Q2 2013 Q3 2013 Q4 2013 Q1 2014 Cash Used in Financing Activities for the Quarter Ended ($ in millions) (56.2) (29.2) (42.1) (33.7) Q2 2013 Q3 2013 Q4 2013 Q1 2014 Cash used in investing activities was primarily attributable to the purchasing of investments to provide initial cash seeding for product development purposes during the period. Cash used in financing activities of $33.7M was attributable to the legacy ownership exchange of $30.3M during the period. Cash & Cash Equivalents ($ in millions) 131.7 126.1 126.3 125.2 118.7 3/31/2013 6/30/2013 9/30/2013 12/31/2013 3/31/2014 Significant free cash flow generation allows for the payment of a quarterly dividend and the funding of other opportunities to enhance shareholder value Dividends $0.16 $0.16 $0.16 $0.24 $0.16 27
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Use of Non-GAAP Measures Measuring Profitability Primary measures we utilize to evaluate profitability of our results and operations They are more reflective of our returns and cash flows Economic Income Defined as pre-tax income excluding non-cash accounting charges resulting from the reorganization and IPO, including: Reorganization-related share-based compensation Economic Net Income Defined as Economic Income less adjusted income taxes Adjusted income taxes represents an estimate of income tax expense at an effective rate of 38.25% on economic income Economic Net Income per Adjusted Share Assumes the weighted average exchangeable units of Manning & Napier Group, LLC and unvested restricted stock units (RSUs) are converted to Class A Shares on a one-to-one basis 29
Consolidated Statements of Operations (In thousands, except share data) 30
Reconciliation of Non-GAAP Financial Measures to GAAP Measures (In thousands, except share data) 31
Assets Under Management (in millions) 32