UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~2020



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35355

_____________________________________________________________

MANNING & NAPIER, INC.

(Exact name of registrant as specified in its charter)



Delaware		45-2609100
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

290 Woodcliff Drive Fairport, New York		14450
(Address of principal executive offices)		(Zip Code)

(585) 325-6880

(Registrant’s telephone number, including area ~~code:~~

~~(585) 325-6880~~code)

_____________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.01 par value per share	MN	New York Stock Exchange
Common Stock Purchase Rights	MN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act:



Large accelerated filer	¨	Accelerated filer	x ¨

Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~ x	Smaller reporting company	¨x

		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.



Class		Outstanding at November ~~3, 2017~~11, 2020
Class A common stock, $0.01 par value per share		~~15,039,347~~
~~Class B common stock, $0.01 par value per share~~		~~1,000~~16,490,832

TABLE OF CONTENTS



		Page
Part I	Financial Information
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Financial Condition as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019	1
	Consolidated Statements of Operations for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	2
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	3
	Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	4
	Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019	56
	Notes to Consolidated Financial Statements	67
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1926
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3850
Item 4.	Controls and Procedures	3951

Part II	Other Information
Item 1A.	Risk Factors	4052
Item 5.	Other Information	66
Item 6.	Exhibits	4067

	In this Quarterly Report on Form 10-Q, “we”, “our”, “us”, the “Company”, “Manning & Napier” and the “Registrant” refers to Manning & Napier, Inc. and, unless the context otherwise requires, its consolidated direct and indirect subsidiaries and predecessors.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Manning & Napier, Inc.

Consolidated Statements of Financial Condition

(InU.S. dollars in thousands, except share data)


	September 30, 2017			December 31, 2016			September 30, 2020			December 31, 2019
	(unaudited)						(unaudited)
Assets
Cash and cash equivalents	$	103,322		$	100,819		$	52,175		$	67,088
Accounts receivable	11,041			15,434			10,866			10,182
Accounts receivable—affiliated mutual funds	6,213			6,761
Investment securities	38,322			36,475			23,439			90,467
Investment securities - consolidated funds	—			995
Prepaid expenses and other assets	2,977			4,883			13,765			5,607
Total current assets	161,875			165,367			100,245			173,344
Property and equipment, net	5,536			5,680			3,334			4,565
Operating lease right-of-use assets							16,981			18,795
Net deferred tax assets, non-current	39,563			41,905			20,722			20,668
Goodwill	4,829			4,829			4,829			4,829
Other long-term assets	2,784			2,818			3,425			4,010
Total assets	$	214,587		$	220,599		$	149,536		$	226,211

Liabilities
Accounts payable	$	1,915		$	2,053		$	2,726		$	1,614
Accrued expenses and other liabilities	25,609			35,115			29,523			26,201
Deferred revenue	10,326			10,210			11,459			10,759
Total current liabilities	37,850			47,378			43,708			38,574
Operating lease liabilities, non-current							17,406			18,753
Amounts payable under tax receivable agreement, non-current							15,473			17,246
Other long-term liabilities	3,352			4,034			1,151			2,017
Amounts payable under tax receivable agreement, non-current	32,244			34,709
Total liabilities	73,446			86,121			77,738			76,590
Commitments and contingencies (Note 8)
Commitments and contingencies (Note 9)
Shareholders’ equity
Class A common stock, $0.01 par value; 300,000,000 shares authorized; 15,039,347 and 14,982,880 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	150			150
Class B common stock, $0.01 par value; 2,000 shares authorized, 1,000 shares issued and outstanding at September 30, 2017 and December 31, 2016	—			—
Class A common stock, $0.01 par value; 300,000,000 shares authorized; and 16,490,832 and 15,956,526 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively							165			160
Additional paid-in capital	198,536			200,158			112,841			198,516
Retained deficit	(35,706		)	(37,383		)	(33,900		)	(38,478		)
Accumulated other comprehensive income (loss)	(30		)	(13		)
Accumulated other comprehensive loss							(185		)	(50		)
Total shareholders’ equity	162,950			162,912			78,921			160,148
Noncontrolling interests	(21,809		)	(28,434		)	(7,123		)	(10,527		)
Total shareholders’ equity and noncontrolling interests	141,141			134,478			71,798			149,621
Total liabilities, shareholders’ equity and noncontrolling interests	$	214,587		$	220,599		$	149,536		$	226,211

The accompanying notes are an integral part of these consolidated financial statements.

Manning & Napier, Inc.

Consolidated Statements of Operations

(InU.S. dollars in thousands, except share data)

(Unaudited)


	Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,					Nine months ended September 30,
	2017			2016			2017			2016			2020		2019			2020			2019
Revenues
Investment management services revenue	$	48,838		$	63,305		$	155,859		$	189,852
Management Fees
Wealth Management													$	13,743	$	14,181		$	41,335		$	42,913
Institutional and Intermediary													13,534		14,815			38,255			44,927
Distribution and shareholder servicing													2,424		2,570			7,117			7,760
Custodial services													1,577		1,763			4,639			5,258
Other revenue													789		849			2,176			2,411
Total revenue													32,067		34,178			93,522			103,269
Expenses
Compensation and related costs	22,287			24,627			67,901			70,973			18,605		19,504			55,247			61,113
Distribution, servicing and custody expenses	6,920			8,798			21,415			26,590			2,596		2,959			7,834			9,736
Other operating costs	7,887			8,188			23,099			24,854			6,611		8,286			21,197			25,232
Total operating expenses	37,094			41,613			112,415			122,417			27,812		30,749			84,278			96,081
Operating income	11,744			21,692			43,444			67,435			4,255		3,429			9,244			7,188
Non-operating income (loss)
Interest expense	(22		)	(127		)	(34		)	(339		)	—		(13		)	(5		)	(26		)
Interest and dividend income	191			141			609			457			115		782			835			2,428
Change in liability under tax receivable agreement	(33		)	(76		)	(33		)	(94		)	24		(394		)	(1,912		)	(199		)
Net gains (losses) on investments	711			(80		)	2,293			1,192			411		40			(5		)	1,162
Gain on sale of business													—		2,883			—			2,883
Total non-operating income (loss)	847			(142		)	2,835			1,216			550		3,298			(1,087		)	6,248
Income before provision for income taxes	12,591			21,550			46,279			68,651
Provision for income taxes	739			1,565			3,324			4,784
Income before provision for (benefit from) income taxes													4,805		6,727			8,157			13,436
Provision for (benefit from) income taxes													1,738		150			(28		)	723
Net income attributable to controlling and noncontrolling interests	11,852			19,985			42,955			63,867			3,067		6,577			8,185			12,713
Less: net income attributable to noncontrolling interests	10,331			17,727			37,852			56,586			560		5,753			3,274			10,914
Net income attributable to Manning & Napier, Inc.	$	1,521		$	2,258		$	5,103		$	7,281		$	2,507	$	824		$	4,911		$	1,799

Net income per share available to Class A common stock
Basic	$	0.10		$	0.15		$	0.35		$	0.49		$	0.15	$	0.05		$	0.30		$	0.12
Diluted	$	0.10		$	0.15		$	0.35		$	0.48		$	0.13	$	0.05		$	0.15		$	0.12
Weighted average shares of Class A common stock outstanding
Basic	14,249,347			14,042,880			14,135,288			13,916,721			16,176,280		15,290,595			16,041,128			15,163,205
Diluted	78,210,019			14,175,321			14,241,642			14,173,283			18,928,954		15,600,686			48,339,759			15,466,339
Cash dividends declared per share of Class A common stock	$	0.08		$	0.16		$	0.24		$	0.48

The accompanying notes are an integral part of these consolidated financial statements.

Manning & Napier, Inc.

Consolidated Statements of Comprehensive Income

(InU.S. dollars in thousands)

(Unaudited)


	Three months ended September 30,					Nine months ended September 30,					Three months ended September 30,					Nine months ended September 30,
	2017			2016		2017			2016		2020		2019			2020			2019
Net income attributable to controlling and noncontrolling interests	$	11,852		$	19,985	$	42,955		$	63,867	$	3,067	$	6,577		$	8,185		$	12,713
Net unrealized holding gain (loss) on investment securities, net of tax	(2		)	1		(17		)	7
Net unrealized holding gains (losses) on investment securities, net of tax											6		(9		)	(243		)	223
Reclassification adjustment for net realized gains on investment securities included in net income											—		(15		)	(174		)	(21		)
Comprehensive income	$	11,850		$	19,986	$	42,938		$	63,874	$	3,073	$	6,553		$	7,768		$	12,915
Less: Comprehensive income attributable to noncontrolling interests	10,329			17,728		37,835			56,593		639		5,730			2,992			11,074
Comprehensive income attributable to Manning & Napier, Inc.	$	1,521		$	2,258	$	5,103		$	7,281	$	2,434	$	823		$	4,776		$	1,841

The accompanying notes are an integral part of these consolidated financial statements.

Manning & Napier, Inc.

Consolidated Statements of Shareholders’ Equity

(InU.S. dollars in thousands, except share data)

(Unaudited)




	Common Stock – Class A			Additional Paid in Capital			Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Non Controlling Interests
	Shares	Amount		Additional Paid in Capital			Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Non Controlling Interests			Total
Three months ended September 30, 2020
Balance—June 30, 2020	16,275,359	$	163	$	112,300		$	(36,407	)	$	(112	)	$	(6,852	)	$	69,092
Net income	—	—		—			2,507			—			560			3,067
Distributions to noncontrolling interests	—	—		—			—			—			(177		)	(177		)
Net changes in unrealized investment securities gains or losses	—	—		—			—			(73		)	79			6
Common stock issued under equity compensation plan, net of forfeitures	215,473	2		(2		)	—			—			—			—
Shares withheld to satisfy tax withholding requirements related to equity awards vested	—	—		(565		)	—			—			(455		)	(1,020		)
Equity-based compensation	—	—		1,108			—			—			(278		)	830
Balance—September 30, 2020	16,490,832	$	165	$	112,841		$	(33,900	)	$	(185	)	$	(7,123	)	$	71,798

Nine months ended September 30, 2020
Balance—December 31, 2019	15,956,526	$	160	$	198,516		$	(38,478	)	$	(50	)	$	(10,527	)	$	149,621
Net income	—	—		—			4,911			—			3,274			8,185
Distributions to noncontrolling interests	—	—		—			—			—			(177		)	(177		)
Net changes in unrealized investment securities gains or losses	—	—		—			—			(135		)	(108		)	(243		)
Common stock issued under equity compensation plan, net of forfeitures	534,306	5		(5		)	—			—			—			—
Shares withheld to satisfy tax withholding requirements related to equity awards vested	—	—		(565		)	—			—			(457		)	(1,022		)
Equity-based compensation	—	—		1,630			—			—			1,315			2,945
Dividends declared on Class A common stock - $0.02 per share	—	—		—			(333		)	—			—			(333		)
Impact of changes in ownership of Manning & Napier Group, LLC (Note 4)	—	—		(90,341		)	—			—			(443		)	(90,784		)
Deferred tax impacts from transactions with shareholders (Note 12)	—	—		3,606												3,606
Balance—September 30, 2020	16,490,832	$	165	$	112,841		$	(33,900	)	$	(185	)	$	(7,123	)	$	71,798


	Common Stock – class A			Common Stock – class B			Additional Paid in Capital				Retained Deficit				Accumulated Other Comprehensive Income (Loss)				Non Controlling Interests
	Shares	Amount		Shares	Amount						Retained Deficit			Total				Common Stock – Class A						Additional Paid in Capital				Retained Deficit		Accumulated Other Comprehensive Income (Loss)				Non Controlling Interests
Balance—December 31, 2015	14,755,130	$	148	1,000	$	—	Additional Paid in Capital			$	205,760			$	Accumulated Other Comprehensive Income (Loss)		(37,149	)	Non Controlling Interests			$	(3	Additional Paid in Capital			)	Retained Deficit		Accumulated Other Comprehensive Income (Loss)			$	Non Controlling Interests			(33,976	)		$	134,780
Net income	—	—		—	—		—				7,281				—				56,586			63,867
Distributions to noncontrolling interests	—	—		—	—		—				—				—				(34,153		)	(34,153		)
Net changes in unrealized investment securities gains or losses	—	—		—	—		—				—				7				—			7
Common stock issued under equity compensation plan	277,750	2		—	—		(2		)		—				—				—			—
Shares withheld to satisfy tax withholding requirements related to restricted stock units granted	—	—		—	—		(162		)		—				—				(791		)	(953		)
Equity-based compensation	—	—		—	—		433				—				—				2,102			2,535
Dividends declared on Class A common stock - $0.48 per share	—	—		—	—		—				(7,159		)		—				—			(7,159		)
Impact of changes in ownership of Manning & Napier Group, LLC	—	—		—	—		(2,144		)		—				—				(13,991		)	(16,135		)
Balance—September 30, 2016	15,032,880	$	150	1,000	$	—	$	203,885			$	(37,027	)		$	4			$	(24,223	)	$	142,789
																									Shares			Amount		Additional Paid in Capital				Retained Deficit				Accumulated Other Comprehensive Income (Loss)				Non Controlling Interests				Total
Balance—December 31, 2016	14,982,880	$	150	1,000	$	—	$	200,158			$	(37,383	)		$	(13	)		$	(28,434	)	$	134,478															Accumulated Other Comprehensive Income (Loss)				Non Controlling Interests
Three months ended September 30, 2019																														Additional Paid in Capital
Balance—June 30, 2019																									15,620,595			$	156	$	198,304			Retained Deficit		$	(38,372	)		$	(34	)		$	(11,324	)		$	148,730
Net income	—	—		—	—		—				5,103				—				37,852			42,955			—			—		—				824				—				5,753				6,577
Distributions to noncontrolling interests	—	—		—	—		—				—				—				(24,490		)	(24,490		)	—			—		—				—				—				(2,624		)		(2,624		)
Net changes in unrealized investment securities gains or losses	—	—		—	—		—				—				(17		)		—			(17		)	—			—		—				—				(1		)		(8		)		(9		)
Common stock issued under equity compensation plan, net of forfeitures	56,467	—		—	—		—				—				—				—			—			(10,000	)		—		—				—				—				—				—
Shares withheld to satisfy tax withholding requirements related to restricted stock units vested	—	—		—	—		(48		)		—				—				(224		)	(272		)
Equity-based compensation	—	—		—	—		304				—				—				1,412			1,716			—			—		125				—				—				531				656
Dividends declared on Class A common stock - $0.24 per share	—	—		—	—		—				(3,426		)		—				—			(3,426		)
Impact of changes in ownership of Manning & Napier Group, LLC (Note 4)	—	—		—	—		(1,878		)		—				—				(7,925		)	(9,803		)
Balance—September 30, 2017	15,039,347	$	150	1,000	$	—	$	198,536			$	(35,706	)		$	(30	)		$	(21,809	)	$	141,141
Dividends declared on Class A common stock - $0.02 per share																									—			—		—				(294		)		—				—				(294		)
Balance—September 30, 2019																									15,610,595			$	156	$	198,429			$	(37,842	)		$	(35	)		$	(7,672	)		$	153,036

Nine months ended September 30, 2019
Balance—December 31, 2018																									15,310,958			$	153	$	198,604			$	(38,865	)		$	(77	)		$	(13,572	)		$	146,243
Net income																									—			—		—				1,799				—				10,914				12,713
Distributions to noncontrolling interests																									—			—		—				—				—				(5,043		)		(5,043		)
Net changes in unrealized investment securities gains or losses																									—			—		—				—				42				181				223
Common stock issued under equity compensation plan, net of forfeitures																									299,637			3		(3		)		—				—				—				—
Shares withheld to satisfy tax withholding requirements related to equity awards vested																									—			—		(15		)		—				—				(63		)		(78		)
Equity-based compensation																									—			—		527				—				—				2,279				2,806
Dividends declared on Class A common stock - $0.06 per share																									—			—		—				(852		)		—				—				(852		)
Cumulative effect of change in accounting principle, net of taxes																									—			—		—				76				—				—				76
Impact of changes in ownership of Manning & Napier Group, LLC																									—			—		(684		)		—				—				(2,368		)		(3,052		)
Balance—September 30, 2019																									15,610,595			$	156	$	198,429			$	(37,842	)		$	(35	)		$	(7,672	)		$	153,036

The accompanying notes are an integral part of these consolidated financial statements.

Manning & Napier, Inc.

Consolidated Statements of Cash Flows

(InU.S. dollars in thousands)

(Unaudited)


	Nine months ended September 30,						Nine months ended September 30,
	2017			2016			2020			2019
Cash flows from operating activities:
Net income attributable to controlling and noncontrolling interests	$	42,955		$	63,867		$	8,185		$	12,713
Adjustment to reconcile net income to net cash provided by operating activities:
Equity-based compensation	1,716			2,535			2,945			2,806
Depreciation and amortization	1,328			1,952			1,147			1,202
Change in amounts payable under tax receivable agreement	33			94			1,912			199
Change in contingent consideration liability	—			(500		)
Net (gains) losses on investment securities	(2,293		)	(1,192		)
Impairment of long-lived assets							663			—
Gain on sale of intangible assets							(21		)	(160		)
Gain on sale of business							—			(2,883		)
Net losses (gains) on investment securities							5			(1,162		)
Deferred income taxes	2,342			2,212			(789		)	504
Amortization of debt issuance costs	—			117
(Increase) decrease in operating assets and increase (decrease) in operating liabilities:
Accounts receivable	4,073			2,011			(683		)	668
Accounts receivable—affiliated mutual funds	548			1,862
Due from broker - consolidated funds	—			3,795
Prepaid expenses and other assets	1,907			1,238			(3,429		)	282
Other long-term assets							2,450			1,898
Accounts payable	(138		)	(349		)	1,112			(232		)
Accrued expenses and other liabilities	(10,599		)	(12,196		)	(165		)	(6,826		)
Deferred revenue	116			(68		)	699			1,870
Other long-term liabilities	(671		)	(8		)	(2,832		)	(2,162		)
Net cash provided by operating activities	41,317			65,370			11,199			8,717
Cash flows from investing activities:
Purchase of property and equipment	(1,057		)	(240		)	(204		)	(1,689		)
Sale of investments	12,871			9,033			71,310			9,937
Purchase of investments	(38,510		)	(4,229		)	(23,250		)	(84,544		)
Due from broker	—			4,022
Sale of intangible assets							21			160
Proceeds from sale of business, net							—			2,902
Proceeds from maturity of investments	27,063			—			18,720			102,523
Acquisitions, net of cash received	320			(9,321		)
Net cash provided by (used in) investing activities	687			(735		)
Net cash provided by investing activities							66,597			29,289
Cash flows from financing activities:
Distributions to noncontrolling interests	(24,490		)	(34,153		)	(177		)	(5,043		)
Dividends paid on Class A common stock	(4,802		)	(7,123		)	(645		)	(932		)
Payment of shares withheld to satisfy withholding requirements	(272		)	(953		)	(1,022		)	(78		)
Payment of capital lease obligations	(134		)	(154		)	(81		)	(104		)
Purchase of Class A units of Manning & Napier Group, LLC	(9,803		)	(16,135		)	(90,784		)	(3,052		)
Net cash used in financing activities	(39,501		)	(58,518		)	(92,709		)	(9,209		)
Net increase (decrease) in cash and cash equivalents	2,503			6,117
Net (decrease) increase in cash and cash equivalents							(14,913		)	28,797
Cash and cash equivalents:
Beginning of period	100,819			117,591			67,088			59,586
End of period	$	103,322		$	123,708		$	52,175		$	88,383

The accompanying notes are an integral part of these consolidated financial statements.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements

Note 1—Organization and Nature of the Business

Manning & Napier, Inc. ("Manning & Napier", or the "Company") provides a broad range of investment solutions through separately managed accounts, mutual funds, and collective investment ~~trusts,~~trust funds, as well as a variety of consultative services that complement its investment process. Founded in 1970, the Company offers ~~U.S. and non-U.S.~~ equity, fixed income and alternative strategies, as well as a range of blended asset portfolios, ~~such as~~including life cycle ~~funds and actively-managed exchange-traded fund ("ETF")-based portfolios.~~funds. Headquartered in Fairport, New York, the Company serves a diversified client base of ~~high net worth~~high-net-worth individuals and institutions, including 401(k) plans, pension plans, Taft-Hartley plans, endowments and foundations.

The Company was incorporated in 2011 as a Delaware corporation, and is the sole managing member of Manning & Napier Group, LLC and its subsidiaries ("(“Manning & Napier ~~Group"~~Group”), a holding company for the investment management businesses conducted by its operating subsidiaries. The diagram below depicts the Company's ~~organization~~organizational structure as of September 30, ~~2017~~2020. Manning & Napier Group completed the redemption of 60,012,419 of its Class A units held by M&N Group Holdings, LLC ("M&N Group Holdings") and Manning & Napier Capital Company, LLC ("MNCC") on May 11, 2020 with payment made from its cash, cash equivalents and proceeds from the sale of investment securities. Subsequent to the redemption, the Class A units were retired and as a result, the Company's ownership of Manning & Napier Group increased from 19.5% to 88.2%. Refer to Note 4 for further discussion.


(1)	The consolidated operating subsidiaries of Manning & Napier Group include Manning & Napier Advisors, LLC ("MNA"), Manning & Napier ~~Alternative Opportunities, LLC, Perspective Partners LLC, Manning & Napier Information Services, LLC, Manning & Napier Benefits, LLC, Manning & Napier~~ Investor Services, Inc., Exeter Trust Company and Rainier Investment Management, ~~LLC.~~


~~(2)~~	On November 17, 2017, all outstanding shares of the Company's Class B common stock will be automatically, without any further action on the Company's part or the holder of the shares of the Company's Class B common stock, canceled and will revert to the status of authorized but unissued shares of Class B common stock.LLC ("Rainier").

Note 2—Summary of Significant Accounting Policies

Critical Accounting Policies

~~There have been no significant changes in our~~The Company's critical accounting policies and estimates ~~from those that were~~are disclosed in ~~our~~its Annual Report on Form 10-K for the year ended December 31, ~~2016~~.

~~Manning & Napier, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

2019. The Company believes that the disclosures herein are adequate so that the information presented is not misleading; however, these financial statements should be read in conjunction with the financial statements and the notes thereto in ~~our~~the Company's Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019. The financial data for the interim periods may not necessarily be indicative of results for future interim periods or for the full year.

Basis of Presentation

The accompanying unaudited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and related rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting and include all adjustments, consisting only of normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim period.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates or assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results could differ from these estimates or assumptions.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Presentation Changes

As of January 1, 2020, the Company revised its presentation of investment management revenue within its consolidated statements of operations. Investment management revenue, previously presented by investment vehicle, has been disaggregated to present investment management revenue by sales channel. Concurrently, the Company revised the presentation of assets under management ("AUM") activity previously reported by investment vehicle to present this activity by sales channel.

Amounts for the comparative prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on previously reported net income and do not represent a restatement of any previously published financial results.

Revision of Previously Reported Consolidated Statements of Operations

In the quarter ended September 30, 2020, the Company revised its sales channel classification of certain 2020 and 2019 investment management revenues to properly present these revenues as either wealth management or institutional and intermediary investment management revenues, in accordance with the "Summary of Presentation Changes" discussed above. The Company assessed the materiality of this item on its quarterly reports on Form 10-Q for the periods ended March 31, 2020 and June 30, 2020, and concluded that the reclassification was not material to any such periods. The reclassification has no impact on total revenue, operating income, or net income. The impact to the classification of total investment management revenues between sales channels and among investment portfolios is illustrated below:



	Three Months Ended March 31, 2019			Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
	(in thousands)
Wealth Management Revenue, as previously reported	$	16,469		$	16,209		$	32,678
Adjustments	(1,996		)	(1,950		)	(3,946		)
Wealth Management Revenue, as revised	$	14,473		$	14,259		$	28,732

Institutional and Intermediary Revenue, as previously reported	$	13,234		$	12,932		$	26,166
Adjustments	1,996			1,950			3,946
Institutional and Intermediary Revenue, as revised	$	15,230		$	14,882		$	30,112

	Three Months Ended March 31, 2020			Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
	(in thousands)
Wealth Management Revenue, as previously reported	$	14,300		$	13,740		$	28,040
Adjustments	(280		)	(169		)	(449		)
Wealth Management Revenue, as revised	$	14,020		$	13,571		$	27,591

Institutional and Intermediary Revenue, as previously reported	$	12,131		$	12,142		$	24,273
Adjustments	280			169			449
Institutional and Intermediary Revenue, as revised	$	12,411		$	12,311		$	24,722

Three Months Ended March 31, 2020

Three Months Ended March 31, 2019

(in thousands)

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)



	Wealth Management		Institutional and Intermediary	Total	Wealth Management		Institutional and Intermediary		Total
Blended Asset, as previously reported	11,942		8,186	20,128	13,498		7,828		21,326
Adjustments	—		—	—	(1,084	)	1,084		—
Blended Asset, as revised	11,942		8,186	20,128	12,414		8,912		21,326
Equity, as previously reported	2,165		3,619	5,784	2,761		4,957		7,718
Adjustments	(280	)	280	—	(916	)	916		—
Equity, as revised	1,885		3,899	5,784	1,845		5,873		7,718
Fixed Income, as previously reported	193		326	519	210		449		659
Adjustments	—		—	—	4		(4	)	—
Fixed Income, as revised	193		326	519	214		445		659
Total, as previously reported	14,300		12,131	26,431	16,469		13,234		29,703
Adjustments	(280	)	280	—	(1,996	)	1,996		—
Total, as revised	14,020		12,411	26,431	14,473		15,230		29,703

	Three Months Ended June 30, 2020				Three Months Ended June 30, 2019
	(in thousands)
	Wealth Management		Institutional and Intermediary	Total	Wealth Management		Institutional and Intermediary		Total
Blended Asset, as previously reported	12,148		7,486	19,634	13,186		7,607		20,793
Adjustments	(164	)	164	—	(932	)	932		—
Blended Asset, as revised	11,984		7,650	19,634	12,254		8,539		20,793
Equity, as previously reported	1,470		4,345	5,815	2,819		4,894		7,713
Adjustments	(5	)	5	—	(1,026	)	1,026		—
Equity, as revised	1,465		4,350	5,815	1,793		5,920		7,713
Fixed Income, as previously reported	122		311	433	204		431		635
Adjustments	—		—	—	8		(8	)	—
Fixed Income, as revised	122		311	433	212		423		635
Total, as previously reported	13,740		12,142	25,882	16,209		12,932		29,141
Adjustments	(169	)	169	—	(1,950	)	1,950		—
Total, as revised	13,571		12,311	25,882	14,259		14,882		29,141

	Six Months Ended June 30, 2020				Six Months Ended June 30, 2019
	(in thousands)
	Wealth Management		Institutional and Intermediary	Total	Wealth Management		Institutional and Intermediary		Total
Blended Asset, as previously reported	24,090		15,672	39,762	26,684		15,435		42,119
Adjustments	(164	)	164	—	(2,016	)	2,016		—
Blended Asset, as revised	23,926		15,836	39,762	24,668		17,451		42,119
Equity, as previously reported	3,635		7,964	11,599	5,580		9,851		15,431
Adjustments	(285	)	285	—	(1,942	)	1,942		—
Equity, as revised	3,350		8,249	11,599	3,638		11,793		15,431
Fixed Income, as previously reported	315		637	952	414		880		1,294
Adjustments	—		—	—	12		(12	)	—
Fixed Income, as revised	315		637	952	426		868		1,294
Total, as previously reported	28,040		24,273	52,313	32,678		26,166		58,844
Adjustments	(449	)	449	—	(3,946	)	3,946		—
Total, as revised	27,591		24,722	52,313	28,732		30,112		58,844

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

Principles of Consolidation

The Company consolidates all majority-owned subsidiaries. In addition, as of September 30, ~~2017,~~2020, Manning & Napier holds an economic interest of approximately ~~17.8%~~88.2% in Manning & Napier Group ~~but,~~and, as managing member, controls all of the business and affairs of Manning & Napier Group. As a result, the Company consolidates the financial results of Manning & Napier Group and records a noncontrolling interest on its consolidated statements of financial condition with respect to the remaining economic interest in Manning & Napier Group held by Manning & Napier Group Holdings ~~LLC (“M&N Group Holdings”)~~ and ~~Manning & Napier Capital Company, LLC (“MNCC”).~~MNCC.

All material intercompany transactions have been eliminated in consolidation.

In accordance with Accounting Standards Update ("ASU") 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis, the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design, a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance, and whether a company is obligated to absorb losses or receive benefits that could potentially be significant to the entity. The standard also requires ongoing assessments of whether a company is the primary beneficiary of a variable interest entity (“VIE”). When utilizing the voting interest entity ("VOE") model, controlling financial interest is generally defined as majority ownership of voting interests.

The Company provides seed capital to its investment teams to develop new ~~products~~strategies and services for its clients. The original seed investment may be held in a separately managed account, comprised solely of the Company's investments or within a mutual fund, where the Company's investments may represent all or only a portion of the total equity investment in the mutual fund. Pursuant to U.S. GAAP, the Company evaluates its investments in mutual funds on a regular basis and consolidates such mutual funds for which it holds a controlling financial interest. When no longer deemed to hold a controlling financial interest, the Company would deconsolidate the fund and classify the remaining investment as either an equity method investment, equity investments, at fair value, or as trading securities, as applicable. As of September 30, 2020 and December 31, 2019, the Company did not have investments classified as an equity method investment.

The Company serves as the investment adviser for Manning & Napier Fund, Inc. series of mutual funds (the “Fund”), Exeter Trust Company Collective Investment Trusts (“CIT”)~~, Rainier Investment Management Mutual Funds~~ and Rainier Multiple Investment Trust. The Fund, CIT ~~Rainier Investment Management Mutual Funds~~ and Rainier Multiple Investment Trust are legal entities, the business and affairs of which are managed by their respective boards of directors. As a result, each of these entities is a VOE. The Company holds, in limited cases, direct investments in a mutual fund (which are made on the same terms as are available to other investors) and consolidates each of these entities where it has a controlling financial interest or a majority voting interest. The Company's investments in the Fund amounted to approximately ~~$1.5~~$1.7 million as of September 30, ~~2017~~2020 and ~~$1.3~~$3.2 million as of December 31, ~~2016.~~2019. As of September 30, 2020 and December 31, ~~2016,~~2019, the Company ~~maintained~~did not have a controlling financial interest in ~~one~~any mutual ~~fund,~~ fund.

Revenue

Investment Management: Investment management fees are computed as a percentage of AUM. The Company's performance obligation is a series of services that form part of a single performance obligation satisfied over time.

Separately managed accounts are paid in advance, typically for a semi-annual or quarterly period, or in arrears, typically for a monthly or quarterly period. When investment management fees are paid in advance, the Company defers the revenue as a contract liability and recognizes it over the applicable period. When investment management fees are paid in arrears, the Company estimates revenue and records a contract asset (accrued accounts receivable) based on AUM as of the most recent month end date.

Mutual funds and collective investment trust investment management revenue is calculated and earned daily based on AUM. Revenue is presented net of cash rebates and fees waived pursuant to contractual expense limitations of the funds. The Company also has agreements with third parties who provide recordkeeping and administrative services for employee benefit plans participating in the collective investment trusts. The Company is acting as an agent on behalf of the employee benefit plan sponsors, therefore, investment management revenue is recorded net of fees paid to third party service providers.

Distribution and shareholder servicing: The Company receives distribution and servicing fees for providing services to its affiliated mutual funds. Revenue is computed and earned daily based on a percentage of AUM. The performance obligation is a series of services that form part of a single performance obligation satisfied over time. The Company has agreements with third parties who provide distribution and administrative services for its mutual funds. The agreements are evaluated to determine whether revenue should be reported gross or net of payments to third-party service providers. The Company controls the services provided and acts as a principal in the relationship. Therefore, distribution and shareholder servicing revenue is recorded gross of fees paid to third parties.

Custodial services: Custodial service fees are calculated as a percentage of the client’s market value with additional fees charged for certain transactions. For the safeguarding and administrative services that are subject to a percentage of market value fee, the Company's performance obligation is a series of services that form part of a single performance obligation

Manning & Napier, ~~Fund,~~ Inc. ~~Quality Equity Series, and consolidated the mutual fund. As of September 30, 2017, the Company did not maintain~~

Notes to Consolidated Financial Statements (Continued)

satisfied over time. Revenue for transactions assigned a ~~controlling financial interest, but did retain significant influence~~stand-alone selling price is recognized in the ~~mutual fund,~~period in which ~~was accounted~~the transaction is executed. Custodial service fees are billed monthly in arrears. The Company has agreements with third parties who provide safeguarding, recordkeeping and administrative services for their clients. The Company controls the services provided and acts as ~~an equity method investment.~~a principal in the relationship. Therefore, custodial service revenue is recorded gross of fees paid to third parties.

Cash and Cash Equivalents

The Company generally considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents are primarily held in operating accounts at major financial institutions and also in money market securities. Cash equivalents are stated at cost, which approximates market value due to the short-term maturity of these investments. The fair value of cash equivalents ~~have~~has been classified as Level 1 in accordance with the fair value hierarchy.

Investment Securities

~~Manning & Napier, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

Investment securities are classified as either equity investments, trading, equity method investments or available-for-sale and are carried at fair value. Fair value is determined based on quoted market prices in active markets for identical or similar instruments.

Investment securities classified as ~~trading~~equity investments, at fair value consist of equity ~~securities, fixed income~~ securities and investments in mutual funds for which the Company provides advisory services. Realized and unrealized gains and losses on equity investments, at fair value or trading securities, as applicable, are recorded in net gains (losses) on investments in the consolidated statements of operations. At September 30, ~~2017~~2020, ~~trading securities~~equity investments, at fair value consist ~~solely~~ of investments held by the Company to provide initial cash seeding for product development ~~purposes.~~

~~Investments classified as equity method~~purposes and investments ~~represent seed investments in which the Company owns between 20-50% of the outstanding voting interests in the affiliated fund or when it is determined that the Company is able~~ to exercise significant influence but not control over the investments. If the seed investment results in significant influence, but not control, the investment will be accounted for as an equity method investment. When using the equity method, the Company recognizeshedge economic exposure to market movements on its ~~share of the investee's net income or loss for the period which is recorded in net gains (losses) on investments in the consolidated statements of operations.~~deferred compensation plan.

Investment securities classified as available-for-sale consist of U.S. Treasury notes, corporate bonds and other short-term investments. Unrealized gains and losses on available-for-sale securities are excluded from earnings and are reported, net of deferred income tax, as a separate component of accumulated other comprehensive income in ~~stockholders’~~shareholders’ equity until realized. The Company periodically reviews each individual security position that has an unrealized loss, or impairment, to determine if that impairment is other-than-temporary. If impairment is determined to be other-than-temporary, the carrying value of the security will be written down to fair value and the loss will be recognized in earnings. Realized gains and losses on sales of available-for-sale securities are computed on a specific identification basis and are recorded in net gains (losses) on investments in the consolidated statements of operations.

Property and Equipment

Property and equipment is presented net of accumulated depreciation of approximately ~~$11.3~~$12.3 million and ~~$11.6~~$11.4 million as of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively.

Goodwill and Intangible Assets

Goodwill represents the excess cost over the fair value of the identifiable net assets of acquired companies. Identifiable intangible assets generally represent the cost of client relationships and investment management agreements acquired as well as trademarks. Goodwill and indefinite-lived assets are tested for impairment annually or more frequently if events or circumstances indicate that the carrying value may not be recoverable. Intangible assets subject to amortization are tested for impairment whenever events or circumstances indicate that the carrying value may not be recoverable. Goodwill and intangible assets require significant management estimate and judgment, including the valuation and expected life determination in connection with the initial purchase price allocation and the ongoing evaluation for impairment.

~~On May 10, 2017,~~Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use ("ROU") assets, accrued expenses and other liabilities and operating lease liabilities, non-current on its consolidated statements of financial condition. Finance leases are included in other long-term assets, accrued expenses and other liabilities, and other long-term liabilities on its consolidated statements of financial condition.

ROU assets represent the ~~Company entered into~~Company's right to use an ~~agreement~~underlying asset for the lease term and lease liabilities represent the Company's obligation to ~~sell certain U.S. mutual funds to a third party. The transaction is expected to close during~~make lease payments arising from the ~~fourth quarter of 2017, with the selling price~~lease. Operating lease ROU assets and lease liabilities are recognized at commencement date based on the ~~total assets under management~~present value of lease payments over the lease term. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the ~~transaction closing date. As~~information available at commencement date in determining the present value of lease payments. The incremental borrowing rate, for each identified lease, is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term. The operating lease ROU asset is reduced for any lease incentives. The Company's lease terms may include options to extend or

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

terminate the lease when it is reasonably certain that it will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components, which are combined for all classes of underlying assets.

Impairment of Long-Lived Assets

The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no longer be appropriate. During the nine months ended September 30, ~~2017,~~2020, a downturn in the ~~assets under management for these products was approximately $0.4 billion.~~commercial real estate market indicated that an asset group, including previously vacated office space, may not be recoverable. The Company assessed recoverability of the asset group by comparing the undiscounted future net cash flows expected to result from the asset group to its carrying value. The carrying value exceeded the undiscounted future net cash flows of the ~~intangible assets for client relationships associated with these products~~asset, and an impairment loss of approximately $0.7 million was ~~$0 as of~~recognized during the nine months ended September 30, ~~2017.~~2020 as the difference between the net book value and the fair value of the asset group.

Operating Segments

The Company operates in one segment, the investment management industry.

~~Revenue~~

The majority of the Company’s revenues are based on fees charged to manage customers’ portfolios. Investment management fees are generally computed as a percentage of assets under management ("AUM") and recognized as earned. Fees for providing investment advisory services are computed and billed in accordance with the provisions of the applicable investment management agreements. For the Company’s separately managed accounts, clients either pay investment management fees in advance, typically for a semi-annual or quarterly period, or in arrears, typically for a monthly or quarterly period. When investment management fees are paid in advance, the Company defers the revenue and recognizes it over the applicable period. When investment management fees are paid in arrears, the Company estimates revenues based on AUM market values as of the most recent month end date, and adjusts to actual when billed. For mutual funds and collective investment trust vehicles, the Company’s fees are calculated and earned daily based on AUM. Investment management fees are presented net of cash rebates and fees waived pursuant to contractual expense limitations of the funds.

~~The Company is contractually obligated to make payments to certain advisory clients with the intent of providing those clients a discounted fee. In accordance with ASC 605-50, Revenue Recognition - Customer Payments and Incentives, these payments are presented as a reduction to revenue. There were no incentives reported as a reduction to revenue for the three~~

~~Manning & Napier, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

months ended September 30, 2017, while incentives were $3.4 million for the nine months ended September 30, 2017. Incentives reported as a reduction of revenue were $3.3 million and $8.9 million for the three and nine months ended September 30, 2016, respectively.

The Company has agreements with third parties who provide distribution and administrative services for its mutual funds, collective investment trusts and certain separately managed accounts. Third party agreements are evaluated against ASC 605-45 ~~Revenue Recognition - Principal Agent Considerations~~ to determine whether revenue should be reported gross or net of payments to third-party service providers. In management's judgment there are various indicators that support gross revenue reporting, the most notable being the Company acts as primary obligor and therefore principal service provider. Based on this evaluation, investment management service revenue is recorded gross of distribution and administrative fees paid to third parties.

~~Advisory Agreements~~

The Company derives significant revenue from its role as advisor to affiliated mutual funds and collective investment trusts. Fees earned for advisory related services were approximately $19.4 million and $64.6 million for the three and nine months ended September 30, 2017, respectively, and $28.8 million and $86.7 million for the three and nine months ended September 30, 2016, respectively, which represents greater than 10% of the Company's revenue in each period.

Recent Accounting Pronouncements

In ~~May 2014,~~August 2018, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ASU ~~2014-09,~~ 2018-15,~~Revenue from Contracts~~ Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with ~~Customers (Topic 606), which supersedes existing accounting standards~~the requirements that currently exist in U.S. GAAP for ~~revenue recognition and creates a single framework. The revenue standard contains principals that will be applied~~capitalizing implementation costs incurred to ~~determine the measurement of revenue and timing of recognition and also impacts the accounting for incremental costs to~~develop or obtain ~~a contract. We will adopt~~internal-use software. Under the new standard, ~~on its effective date of January 1, 2018. While we have not identified material changes~~implementation costs are deferred and presented in the ~~timing~~same financial statement caption on the consolidated statements of ~~revenue recognition, we continue to evaluate~~financial condition as a prepayment of related arrangement fees. The deferred costs are recognized over the ~~presentation~~term of ~~certain revenue~~the arrangement in the same financial statement caption in the consolidated statements of operations as the related costs on a gross versus net basis. We anticipate that certain first year costs associated with new investment management contracts will be capitalized and amortized over an estimated customer contract period. We have not yet determined whether we will adoptfees of the ~~standard~~arrangement. The Company adopted the provisions of this guidance using the ~~retrospective~~prospective adoption approach, ~~with adjustment to each~~which does not require the restatement of prior ~~period or modified retrospective approach with the cumulative effect of initial application recognized at the date of initial application.~~

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Recognition and Measurement of Financial Assets and Financial Liabilities,~~ which requires all equity investments to be measured at fair value with changes in the fair value recognized through net income. ASU 2016-01 will be effective on January 1, 2018 and will result in a cumulative-effect adjustment to the balance sheet upon adoption.years. The ~~Company is currently evaluating the impact that ASU 2016-01 will have on its consolidated financial statements.~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842),~~ which is intended to increase transparency and comparability among organizations by recognizing all lease transactions (with terms in excess of 12 months) on the balance sheet as a lease liability and a right-of-use asset (as defined). The new guidance will be effective for fiscal years beginning after December 15, 2018, with earlier application permitted. Upon adoption, the lessee will apply the new standard retrospectively to all periods presented or retrospectively using a cumulative effect adjustment in the year of adoption. The Company is currently evaluating the impact that ASU 2016-02 will have on its consolidated financial statements.

~~In March 2016, the FASB issued ASU 2016-09,~~ ~~Stock Compensation - Stock Compensation (Topic 718),Improvements to Employee Share-Based Payment Accounting~~, which is intended to simplify several aspects of the accounting for share-based payment award transactions. The guidance is effective for fiscal years beginning after December 15, 2016. The Company's adoption of ~~these amendments on January 1, 2017~~this ASU did not have a material impact on the Company's statement of operations as requirements under the standard are generally consistent with its ~~consolidated financial statements.~~

~~In August 2016,~~previous accounting for cloud computing arrangements, with the ~~FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments, to clarify guidance on~~primary difference being the classification of certain ~~cash receipts~~information in its statements of financial condition and ~~cash payments~~related disclosures.

As of September 30, 2020, the Company had a total of approximately $4.1 million of capitalized implementation costs for hosting arrangements within prepaid expenses and other assets on its statements of financial condition, with no amounts in accumulated amortization and no amortization expense recognized during the ~~statement~~nine months ended September 30, 2020. At December 31, 2019, approximately $0.4 million of ~~cash flows.~~these costs were capitalized within property and equipment, net. The ~~FASB issued~~hosting arrangements that are service contracts include internal and external costs related to various technology additions in support of the ~~ASU with~~Company's business. Amortization costs are recorded on a straight-line basis over the ~~intent~~term of reducing diversity in practice regarding eight types of cash flows. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The Company is evaluating the ~~effect of adopting this new accounting standard.~~hosting arrangement agreement.

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. The ASU requires goodwill impairments to be measured on the basis of the fair value of the reporting unit relative to the reporting unit's carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. The adoption of this ASU is effective for annual and interim impairment tests for periods beginning after December 15, 2019. Early adoption is allowed for annual and interim impairment tests occurring after January 1, 2017. The Company is evaluatingdid not have a material impact on the ~~effect of adopting this new accounting standard.~~Company's consolidated financial statements.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 3—~~Acquisitions~~Revenue

~~On April 30, 2016,~~Disaggregated Revenue

The following table represents the ~~Company acquired a majority ownership interest in Rainier Investment Management, LLC ("Rainier”), an active~~Company’s wealth management and institutional and intermediary investment management ~~firm. Under~~revenue by investment portfolio during the ~~terms of the transaction, the Company initially acquired a 75% ownership interest in Rainier, with the remaining 25% ownership maintained by key professionals at Rainier. As~~three and nine months ended September 30, 2020 and 2019:



	Three months ended September 30, 2020						Three months ended September 30, 2019
	Wealth Management		Institutional and Intermediary		Total		Wealth Management		Institutional and Intermediary		Total
	(in thousands)
Blended Asset	$	12,117	$	8,261	$	20,378	$	12,397	$	8,466	$	20,863
Equity	1,450		4,892		6,342		1,580		5,967		7,547
Fixed Income	176		381		557		204		382		586
Total	$	13,743	$	13,534	$	27,277	$	14,181	$	14,815	$	28,996



	Nine months ended September 30, 2020						Nine months ended September 30, 2019
	Wealth Management		Institutional and Intermediary		Total		Wealth Management		Institutional and Intermediary		Total
	(in thousands)
Blended Asset	$	36,044	$	24,096	$	60,140	$	37,065	$	25,917	$	62,982
Equity	4,800		13,141		17,941		5,218		17,760		22,978
Fixed Income	491		1,018		1,509		630		1,250		1,880
Total	$	41,335	$	38,255	$	79,590	$	42,913	$	44,927	$	87,840

Accounts Receivable

Accounts receivable as of September 30, ~~2017,~~2020 and December 31, 2019 consisted of the following:



	September 30, 2020		December 31, 2019
	(in thousands)
Accounts receivable - third parties	$	6,656	$	5,778
Accounts receivable - affiliated mutual funds and collective investment trusts	4,210		4,404
Total accounts receivable	$	10,866	$	10,182

Accounts receivable represents the Company's ~~ownership interest~~unconditional rights to consideration arising from its performance under separately managed account, mutual fund and collective investment trust, distribution and shareholder servicing, and custodial service contracts. Accounts receivable balances do not include an allowance for doubtful accounts nor has any significant bad debt expense attributable to accounts receivable been recorded during the three and nine months ended September 30, 2020 or 2019.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

Advisory and Distribution Agreements

The Company earns investment advisory fees, distribution fees and administrative service fees under agreements with affiliated mutual funds and collective investment trusts. Fees earned for advisory and distribution services provided were approximately $9.3 million and $26.7 million for the three and nine months ended September 30, 2020, respectively, and approximately $9.8 million and $31.1 million for the three and nine months ended September 30, 2019, respectively, which represents greater than 25% of revenue in ~~Rainier was 86%, an increase~~each period. The following provides amounts due from affiliated mutual funds and collective investment trusts reported within accounts receivable in the ~~acquisition due to~~consolidated statements of financial condition as of September 30, 2020 and December 31, 2019:



	September 30, 2020		December 31, 2019
	(in thousands)
Affiliated mutual funds	$	2,961	$	3,164
Affiliated collective investment trusts	1,249		1,240
Accounts receivable - affiliated mutual funds and collective investment trusts	$	4,210	$	4,404

Contract assets and liabilities

Accrued accounts receivable: Accrued accounts receivable represents the ~~forfeiture~~Company's contract asset for revenue that has been recognized in advance of ~~unvested ownership interests by certain individuals retiring from Rainier subsequent to~~billing separately managed account contracts. Consideration for the ~~acquisition.~~

~~Consideration transferred included an upfront cash payment~~period billed in arrears is dependent on the ~~transaction closing~~client’s AUM on a future billing date and therefore conditional as of ~~$13.0 million, a portion of which was held in escrow.~~the reporting period end. During the ~~second quarter~~nine months ended September 30, 2020, revenue was increased by less than $0.1 million for changes in transaction price. Accrued accounts receivable of ~~2017, the Company received~~ approximately $0.3 million ~~from amounts held~~is reported within prepaid expenses and other assets in ~~escrow~~the consolidated statements of financial condition for ~~post closing adjustments. Additional cash payments~~both September 30, 2020 and December 31, 2019.

Deferred revenue: Deferred revenue is recorded when consideration is received or unconditionally due in advance of upproviding services to ~~$32.5 million over a four year period are contingent upon Rainier’s achievement of certain annual financial targets. The fair value~~the Company's customer. Revenue recognized during the nine months ended September 30, 2020 that was included in deferred revenue at the beginning of the ~~liability~~period was approximately $10.6 million.

Costs to obtain a contract: Under compensation plans in effect for ~~this contingent consideration recognized~~periods prior to January 1, 2020, certain incremental first year commissions directly associated with new customer contracts were capitalized and amortized on ~~the acquisition date was $3.5 million. As~~a straight-line basis over an estimated customer contract period of 3 to 7 years. The total net asset as of September 30, ~~2017~~2020 and December 31, ~~2016,~~2019 was approximately $0.8 million and $1.0 million, respectively. The related amortization expense, which is included in compensation and related costs, totaled approximately $0.1 million and $0.2 million for the ~~fair value of this contingent liability was $0.~~

~~The transaction was accounted~~three and nine months ended September 30, 2020 and $0.1 million and $0.3 million for by the ~~Company using~~three and nine months ended September 30, 2019. An impairment loss is recorded for contract acquisition costs related to client contracts that cancel during the ~~acquisition method under ASC 805,~~ ~~Business Combinations. During~~period. These impairment losses totaled less than $0.1 million for both the ~~second quarter of 2016, the Company completed a preliminary allocation of the April~~three and nine months ended September 30, ~~2016 purchase price to the assets acquired~~2020 and liabilities assumed. During the first quarter of 2017, certain adjustments were recorded to liabilities assumed and the purchase price allocation was finalized as of March 31, 2017. The final purchase price was allocated as follows (in thousands):2019.

Assets acquired
Current assets $ 6,998
Property and equipment, net 783
Intangible assets
Client relationships 9,320
Trademarks 270
Goodwill 3,958
Total assets acquired 21,329
Liabilities assumed
Accounts payable and accrued expenses 4,023
Other liabilities 1,204
Total liabilities assumed 5,227
Purchase price $ 16,102

Note 4—Noncontrolling Interests

Manning & Napier holds an economic interest of approximately ~~17.8%~~88.2% in Manning & Napier Group, ~~but~~and as managing member controls all of the business and affairs of Manning & Napier Group. As a result, the Company consolidates the financial results of Manning & Napier Group and records a noncontrolling interest on its consolidated ~~statement~~statements of financial condition with respect to the remaining approximately ~~82.2% aggregate~~11.8% economic interest in Manning & Napier Group held by M&N Group Holdings and MNCC. Net income attributable to noncontrolling interests on the statements of operations represents the portion of earnings attributable to the economic interest in Manning & Napier Group held by the noncontrolling interests.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

The following table provides a reconciliation from “Income before provision for (benefit from) income taxes” to “Net income attributable to Manning & Napier, Inc.”:

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(in thousands)
Income before provision for income taxes $ 12,591
$ 21,550
$ 46,279
$ 68,651
Less: gain (loss) before provision for income taxes of Manning & Napier, Inc. ⁽¹⁾
(51 ) (95 ) (45 ) (114 )
Income before provision for income taxes, as adjusted 12,642
21,645
46,324
68,765
Controlling interest percentage ⁽²⁾
17.8 % 17.4 % 17.7 % 17.1 %
Net income attributable to controlling interest 2,261
3,765
8,189
11,753
Plus: gain (loss) before provision for income taxes of Manning & Napier, Inc. ⁽¹⁾
(51 ) (95 ) (45 ) (114 )
Income before income taxes attributable to Manning & Napier, Inc. 2,210
3,670
8,144
11,639
Less: provision for income taxes of Manning & Napier, Inc. ⁽³⁾
689
1,412
3,041
4,358
Net income attributable to Manning & Napier, Inc. $ 1,521
$ 2,258
$ 5,103
$ 7,281



	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(in thousands)
Income before provision for (benefit from) income taxes	$	4,805		$	6,727		$	8,157		$	13,436
Less: income (loss) before provision for (benefit from) income taxes of Manning & Napier, Inc. ⁽¹⁾	14			(388		)	(1,950		)	(207		)
Income before provision for (benefit from) income taxes, as adjusted	4,791			7,115			10,107			13,643
Controlling interest percentage ⁽²⁾	88.2		%	18.9		%	64.0		%	18.8		%
Net income attributable to controlling interest	4,225			1,341			6,471			2,562
Plus: income (loss) before provision for (benefit from) income taxes of Manning & Napier, Inc. ⁽¹⁾	14			(388		)	(1,950		)	(207		)
Income before provision for (benefit from) income taxes attributable to Manning & Napier, Inc.	4,239			953			4,521			2,355
Less: provision for (benefit from) income taxes of Manning & Napier, Inc.⁽³⁾	1,732			129			(390		)	556
Net income attributable to Manning & Napier, Inc.	$	2,507		$	824		$	4,911		$	1,799

________________________


(1)	Manning & Napier, Inc. incurs certain ~~gains~~income or expenses that are only attributable to it and are therefore excluded from the net income attributable to noncontrolling interests.

(2)

Income before provision for (benefit from) income taxes is allocated to the controlling interest based on the percentage of units of Manning & Napier Group held by Manning & Napier, Inc. The amount represents the Company's weighted ownership of Manning & Napier ~~Group~~Group's income for the respective ~~periods.~~periods and anticipates a closing of the books pursuant to Internal Revenue Code Section 1377.

(3)

The consolidated provision for (benefit from) income taxes is equal to the sum of (i) the provision for (benefit from) income taxes for entities other than Manning & Napier, Inc. and (ii) the provision for (benefit from) income taxes of Manning & Napier, Inc. which includes all U.S. federal and state income taxes. The consolidated provision for (benefit from) income taxes was ~~$0.7~~a provision of $1.7 million and ~~$3.3~~$0.2 million for the three months ended September 30, 2020 and 2019, respectively, and a benefit of less than $0.1 million and provision of $0.7 million for the nine months ended September 30, ~~2017, respectively,~~2020 and ~~$1.6 million and $4.8 million for the three and nine months ended September 30, 2016,~~2019, respectively.

As of September 30, ~~2017,~~2020, a total of ~~63,931,065~~2,021,781 units of Manning & Napier Group were held by the noncontrolling interests. Pursuant to the terms of the exchange agreement entered into at the time of the Company's initial public offering ("Exchange Agreement"), such units may be ~~exchangeable~~tendered for ~~shares of the Company's Class A common stock.~~exchange or redemption. For any units exchanged, the Company ~~will~~may (i) pay an amount of cash equal to the number of tendered units ~~exchanged~~ multiplied by the value of one share of the Company's Class A common stock less a market discount and expected expenses, or, at the Company's election, (ii) issue shares of the Company's Class A common stock on a one-for-one basis, subject to customary adjustments. As the Company receives units of Manning & Napier Group that are exchanged, the Company's ownership of Manning & Napier Group will increase.

On March 15, 2020, a total of 60,012,419 Class A units, including 59,957,419 units held by William Manning, who was previously the Chairman of the Company's Board of Directors, were tendered for either cash or shares of the Company's Class A common stock pursuant to the exchange process. The independent directors, on behalf of the Company as managing member of Manning & Napier Group, decided to settle the transaction as a redemption, utilizing approximately $90.8 million in cash, including approximately $90.7 million paid to Mr. Manning. Manning & Napier Group completed the redemption on May 11, 2020 with payment made from its cash, cash equivalents and proceeds from the sale of investment securities. Subsequent to the redemption the Class A units were retired and as a result, the Company's ownership of Manning & Napier Group increased from 19.5% to 88.2%.

During the nine months ended September 30, 2017, M&N Group Holdings and MNCC exchanged a total of 1,853,506 Class A units of Manning & Napier Group for approximately $9.8 million in cash. Subsequent to the exchange the Class A units were retired, resulting in an increase in Manning & Napier's ownership in Manning & Napier Group. In addition, during the nine months ended September 30, 2017,2020, Class A common stock was issued under the Company's 2011 Equity Compensation Plan (the "Equity Plan") for which Manning & Napier, Inc. acquired an equivalent number of Class A units of Manning & Napier ~~Group, net of forfeitures of unvested restricted stock awards.~~

Group.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

The following is the impact to the Company's equity ownership interest in Manning & Napier Group for the nine months ended September 30, ~~2017:~~2020:

Manning & Napier Group Class A Units Held

Manning & Napier

Noncontrolling Interests Total Manning & Napier Ownership %
As of December 31, 2016 13,826,575
65,784,571
79,611,146
17.4%
Class A Units issued ⁽¹⁾
46,467
—
46,467
—%
Class A Units exchanged —
(1,853,506 ) (1,853,506 ) 0.4%
As of September 30, 2017 13,873,042
63,931,065
77,804,107
17.8%

~~______________________~~


~~(1)~~	~~The impact of the transaction of Manning & Napier's ownership was less than 0.1%.~~



	Manning & Napier Group Class A Units Held
	Manning & Napier	Noncontrolling Interests		Total		Manning & Napier Ownership %
As of December 31, 2019	14,750,221	62,034,200		76,784,421		19.2%
Class A Units issued	318,833	—		318,833		0.3%
Class A Units redeemed	—	(60,012,419	)	(60,012,419	)	68.7%
As of September 30, 2020	15,069,054	2,021,781		17,090,835		88.2%

Manning & Napier, as managing member controls all of the business and affairs of Manning & Napier Group prior to and subsequent to the redemption that was completed during the second quarter of 2020. Since the Company continues to have a controlling interest in Manning & Napier Group, the aforementioned changes in ownership of Manning & Napier Group were accounted for as equity transactions under ASC Topic 810, Consolidation. Additional paid-in capital and noncontrolling interests in the ~~Consolidated Statements~~consolidated statements of ~~Financial Position~~financial position are adjusted to reallocate the Company's historical equity to reflect the change in ownership of Manning & Napier Group.

At September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the Company had recorded a liability of ~~$34.7~~$19.4 million and ~~$37.1~~$17.5 million, respectively, representing the estimated payments due to the selling unit holders under the tax receivable agreement ("TRA") entered into between Manning & Napier and the other holders of Class A Units of Manning & Napier Group. Of these amounts, ~~$2.5~~approximately $4.0 million and ~~$2.4~~$0.3 million were included in accrued expenses and other liabilities at September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, respectively. The Company made no payments ~~of $2.4 million and $3.4 million~~ pursuant to the TRA during either of the nine months ended September 30, ~~2017~~2020 and ~~2016, respectively.~~2019. Refer to Note 12 for further discussion surrounding the amounts payable under the TRA.

Obligations pursuant to the TRA are obligations of Manning & Napier. They do not impact the noncontrolling interests. These obligations are not income tax obligations. Furthermore, the TRA has no impact on the allocation of the provision for income taxes to the Company’s net income.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 5—Investment Securities

The following represents the Company’s investment securities holdings as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019:



	September 30, 2020
	Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Available-for-sale securities
U.S. Treasury notes	$	9,392	$	—	$	(46	)	$	9,346
Fixed income securities	7,465		—		(88		)	7,377
								16,723
Equity investments, at fair value
Equity securities								4,992
Mutual funds								1,724
								6,716
Total investment securities								$	23,439


	September 30, 2017									December 31, 2019
	Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)									(in thousands)
Available-for-sale securities
U.S. Treasury notes	$	7,117	$	3	$	(13	)	$	7,107	$	33,908	$	193	$	—		$	34,101
Fixed income securities										35,148		—		(91		)	35,057
Short-term investments	22,255		—		—			22,255		12,119		—		—			12,119
								29,362									81,277
Trading securities
Equity investments, at fair value
Equity securities								2,493									6,038
Fixed income securities								5,009
Mutual funds								346									3,152
								7,848									9,190
Equity method investments
Mutual funds								1,112
Total investment securities								$	38,322								$	90,467

~~Manning & Napier, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

December 31, 2016
Cost
Unrealized
Gains

Unrealized
Losses

Fair
Value
(in thousands)
Available-for-sale securities
U.S. Treasury notes $ 7,093
$ 13
$ (6 ) $ 7,100
Short-term investments 14,744
—
—
14,744
21,844
Trading securities
Equity securities 7,176
Fixed income securities 7,167
Mutual funds 288
Mutual funds - consolidated funds 995
15,626
Total investment securities $ 37,470

Investment securities are classified as either ~~trading~~equity investments or available-for-sale and are carried at fair value. Fair value is determined based on quoted market prices in active markets for identical or similar instruments.

Investment securities classified as ~~trading~~equity investments, at fair value consist of equity ~~securities, fixed income~~ securities and investments in mutual funds for which the Company provides advisory services. At September 30, ~~2017~~2020 and December 31, ~~2016~~2019, ~~trading securities~~equity investments, at fair value consist ~~solely~~ of investments held by the Company to provide initial cash seeding for product development ~~purposes.~~purposes and investments in mutual funds to hedge economic exposure to market movements on its deferred compensation plan. The Company recognized approximately ~~$1.5~~$0.1 million of net unrealized losses and ~~$1.6~~$1.1 million of net unrealized gains related to investments classified as ~~trading~~equity investments, at fair value during the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019, respectively.

Investment securities classified as available-for-sale consist of U.S. Treasury notes, corporate bonds and other short-term investments to optimize cash management opportunities and for compliance with certain regulatory ~~requirements and to optimize cash management opportunities.~~requirements. As of September 30, ~~2017~~2020 and December 31, ~~2016~~2019, approximately $0.6 million of these securities was considered restricted. The Company periodically reviews each individual security position that has an unrealized loss, or impairment, to determine if that impairment is other-than-temporary. No other-than-temporary impairment charges have been recognized by the Company during the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019.

Note 6—Fair Value Measurements

Fair value is defined as the price that the Company would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. A fair value hierarchy is ~~provided~~applied that gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

The following three-tier fair value hierarchy prioritizes the inputs used in measuring fair value:

•Level 1—observable inputs such as quoted prices in active markets for identical securities;

Level 2—other significant observable inputs (including but not limited to quoted prices for similar securities, interest rates, prepayment rates, credit risk, etc.); and

Level 3—significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments).

~~Manning & Napier, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

The following ~~provides~~table summarizes the hierarchy of inputs used to derive the fair value of the Company’s ~~financial instruments measured at fair value on a recurring basis~~assets as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019:


	September 30, 2017								September 30, 2020
	Level 1		Level 2		Level 3		Totals		Level 1		Level 2		Level 3		Totals
	(in thousands)								(in thousands)
Equity securities	$	2,493	$	—	$	—	$	2,493	$	4,992	$	—	$	—	$	4,992
Fixed income securities	—		5,009		—		5,009		—		7,377		—		7,377
Mutual funds	1,458		—		—		1,458		1,724		—		—		1,724
U.S. Treasury notes	—		7,107		—		7,107		—		9,346		—		9,346
Short-term investments	22,255		—		—		22,255
Total assets at fair value	$	26,206	$	12,116	$	—	$	38,322	$	6,716	$	16,723	$	—	$	23,439

Contingent consideration liability	$	—	$	—	$	—	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—


	December 31, 2016								December 31, 2019
	Level 1		Level 2		Level 3		Totals		Level 1		Level 2		Level 3		Totals
	(in thousands)								(in thousands)
Equity securities	$	7,176	$	—	$	—	$	7,176	$	6,038	$	—	$	—	$	6,038
Fixed income securities	1,071		6,096		—		7,167		—		35,057		—		35,057
Mutual funds	288		—		—		288		3,152		—		—		3,152
Mutual funds - consolidated funds	995		—		—		995
U.S. Treasury notes	—		7,100		—		7,100		—		34,101		—		34,101
Short-term investments	14,744		—		—		14,744		—		12,119		—		12,119
Total assets at fair value	$	24,274	$	13,196	$	—	$	37,470	$	9,190	$	81,277	$	—	$	90,467

Contingent consideration liability	$	—	$	—	$	—	$	—
Total liabilities at fair value	$	—	$	—	$	—	$	—

Short-term investments consists of ~~certificate of deposits ("CDs") that are stated at cost, which approximate fair value due to the short maturity of the investments.~~U.S. Treasury bills.

Valuations of investments in fixed income securities, U.S. Treasury notes and U.S. Treasury ~~notes~~bills can generally be obtained through independent pricing services. For most bond types, the pricing service utilizes matrix pricing, which considers one or more of the following factors: yield or price of bonds of comparable quality, coupon, maturity, current cash flows, type and current day trade information, as well as dealer supplied prices. These valuations are categorized as Level 2 in the hierarchy.

Contingent consideration was a component of the purchase price of Rainier (Note 3). The contingent consideration is payable over a four year period upon Rainier’s achievement of certain financial targets. The fair value of the contingent consideration is calculated on a quarterly basis by forecasting Rainier’s adjusted earnings before interest, taxes and amortization ("EBITA") as defined by the purchase agreement over the contingency period with changes in the fair value included in other operating costs in the consolidated statements of operations.

There were no changes in contingent consideration liability measured at fair value using significant unobservable inputs (Level 3) for the nine months ended September 30, 2017. The fair value was $0 at September 30, 2017 and December 31, 2016.

The Company’s policy is to recognize transfers in and transfers out of the valuation levels as of the beginning of the reporting period. There were no transfers between ~~Levels~~valuation levels during the nine months ended September 30, ~~2017~~2020.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

Note 7—Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019 consisted of the following:


	September 30, 2017		December 31, 2016		September 30, 2020		December 31, 2019
	(in thousands)				(in thousands)
Accrued bonus and sales commissions	$	11,471	$	18,342	$	12,906	$	14,825
Accrued payroll and benefits	3,705		3,430		3,932		4,415
Accrued sub-transfer agent fees	3,000		4,785		469		420
Dividends payable	1,203		2,397
Dividends payable on Class A common stock					—		312
Amounts payable under tax receivable agreement	2,475		2,364		3,960		275
Short-term operating lease liabilities					2,828		2,682
Other accruals and liabilities	3,755		3,797		5,428		3,272
Total accrued expenses and other liabilities	$	25,609	$	35,115	$	29,523	$	26,201

Note 8—Leases

Leases

The Company has operating and finance leases for office space and certain equipment. For these leases, the office space or equipment is an explicitly identified asset within the contract. The Company has determined that it has obtained substantially all of the economic benefits from the use of the underlying asset and directs how and for what purpose the asset is used during the term of the contract.

The Company's leases have remaining lease terms ranging between approximately 1 year and 7 years. The Company's lease term on certain of its multi-year office space leases, including its headquarters, include options for the Company to extend those leases for periods ranging from an additional five to 10 years. In addition, the Company has the option to reduce a portion of its square footage at certain times throughout the term of the lease for its headquarters. The Company determined it is not reasonably certain at this time it will exercise the options to extend these leases or will exercise the options to reduce its square footage; therefore, the payment amounts related to these lease term extensions and contraction options have been excluded from determining its ROU asset and lease liability.

Certain of the Company's operating leases for office space include variable lease payments, including non-lease components (such as utilities and operating expenses) that vary based on actual expenses and are adjusted on an annual basis. The Company concluded that these variable lease payments are in substance fixed payments and included the estimated variable payments in its determination of ROU assets and lease liabilities.

Changes in the lease terms, including renewal options and options to reduce its square footage, incremental borrowing rates, and/or variable lease payments, and the corresponding impact to the ROU assets and lease liabilities, are recognized in the period incurred.

Certain of the Company's operating leases have been subleased for which the Company will receive cash totaling approximately $3.5 million over the remaining term of such leases. The lease terms for the three subleased operating leases end in 2021, 2027 and 2028.

The components of lease expense for the three and nine months ended September 30, 2020 and 2019 were as follows:



	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(in thousands)
Finance lease expense
Amortization of right-of-use assets	$	9		$	34		$	57		$	93
Interest on lease liabilities	1			4			5			9
Operating lease expense	931			904			3,151			2,762
Short-term lease expense	—			3			3			10
Variable lease expense	31			139			178			250
Sublease income	(136		)	(224		)	(463		)	(521		)
Total lease expense	$	836		$	860		$	2,931		$	2,603

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

Supplemental cash flow information related to leases for the three and nine months ended September 30, 2020 and 2019 were as follows:



	Three months ended September 30,					Nine months ended September 30,
	2020		2019			2020		2019
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from finance leases	$	2	$	3		$	6	$	8
Finance cash flows from finance leases	$	24	$	34		$	76	96
Operating cash flows from operating leases	$	941	$	1,132		$	2,601	3,085

Right-of-use assets obtained in exchange for new lease obligations:
Finance leases	$	—	$	—		$	—	175
Operating leases	$	678	$	(104	)	$	814	$	761

Supplemental balance sheet information related to leases as of September 30, 2020 was as follows:



(in thousands, except lease term and discount rate)	September 30, 2020
Finance Leases
Finance lease right-of-use assets ⁽¹⁾	$	131

Accrued expenses and other liabilities	$	58
Other long-term liabilities	80
Total finance lease liabilities	$	138

Operating Leases
Operating lease right-of-use assets	$	16,981

Accrued expenses and other liabilities	$	2,828
Operating lease liabilities, non-current	17,406
Total operating lease liabilities	$	20,234

Weighted average remaining lease term
Finance leases	2.56 years
Operating leases	6.72 years
Weighted average discount rate
Finance leases	5.06		%
Operating leases	5.13		%

_______________________


(1)	Amounts included in other long-term assets within the consolidated statements of financial condition.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

Maturities of lease liabilities were as follows:



Twelve month period ending September 30,	Finance Leases			Operating Leases
	(in thousands)
2021	$	65		$	3,794
2022	48			3,810
2023	27			3,481
2024	7			3,336
2025	—			3,049
Thereafter	—			6,448
Total lease payments	147			23,918
Less imputed interest	(9		)	(3,684		)
Total lease liabilities	$	138		$	20,234

Note 9—Commitments and Contingencies

The Company may from time to time enter into agreements that contain certain representations and warranties and which provide general indemnifications. The Company may also serve as a guarantor of such ~~obligations of one or more of the Manning & Napier Group entities.~~obligations. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company expects any risk of liability associated with such guarantees to be remote.

Regulation

As an investment adviser to a variety of investment products, the Company and its affiliated broker-dealer are subject to routine reviews and inspections by the SEC and the Financial Industry Regulatory Authority, Inc., Additionally, the Company could be subject to non-routine reviews and inspections by the National Futures Association and U.S. Commodity Futures Trading ~~Commission.~~Commission in regards to the Company’s de minimis exposure to commodity interest investments in the mutual funds and collective investment trust vehicles it operates. From time to time the Company may also be subject to claims, or be involved in various legal proceedings, arising in the ordinary course of its business and ~~be subject to~~ other contingencies. The Company does not believe that the outcome of any of these reviews, inspections or other legal proceedings will have a material impact on its consolidated financial statements; however, litigation is subject to many uncertainties, and the outcome of individual litigated matters is difficult to predict. The Company will establish accruals for matters that are probable, can be reasonably estimated, and may take into account any related insurance recoveries to the extent of such recoveries. As of September 30, ~~2017~~2020 and December 31, ~~2016~~,2019, the Company has not accrued for any such claims, legal proceedings, or other contingencies.

Note 9—10—Earnings per Common Share

Basic earnings per share (“basic EPS”) is computed using the two-class method to determine net income available to Class A common stock. The two-class method includes an earnings allocation formula that determines earnings per share for each participating security according to dividends declared and undistributed earnings for the period. The Company's restricted Class A common shares granted under the Equity Plan have non-forfeitable dividend rights during their vesting period and are therefore considered participating securities under the two-class method. Under the two-class method, the Company's net income available to Class A common stock is reduced by the amount allocated to the unvested restricted Class A common stock. Basic EPS is calculated by dividing net income available to Class A common stock by the weighted average number of common shares outstanding during the period.

Diluted earnings per share (“diluted EPS”) is computed under the more dilutive of either the treasury method or the two-class method. For the diluted calculation, the weighted average number of common shares outstanding during the period is increased by the assumed conversion into Class A common stock of ~~the~~ unvested ~~equity~~restricted stock units, unvested restricted stock awards, and outstanding stock options (collectively, "outstanding equity awards"), as well as the exchangeable Class A units of Manning & Napier Group, to the extent that such conversion would dilute earnings per share.

Net income attributable to noncontrolling interests on the statements of operations represents the portion of earnings attributable to the economic interest of Manning & Napier Group held by the noncontrolling interests (Note 4). For periods in which the outstanding Class A Units of Manning & Napier Group are dilutive to the Company's earnings per share, the calculation of diluted earnings per share also takes into account the incremental net income that would be available to Class A common stock upon the conversion of Class A Units into Class A common stock.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

The following is a reconciliation of the income and share data used in the basic and diluted ~~earnings per share~~EPS computations for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 under the two-class method:


	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016		2020		2019		2020		2019
	(in thousands, except share data)								(in thousands, except share data)
Numerator:
Net income attributable to controlling and noncontrolling interests	$	11,852	$	19,985	$	42,955	$	63,867	$	3,067	$	6,577	$	8,185	$	12,713
Less: net income attributable to noncontrolling interests	10,331		17,727		37,852		56,586		560		5,753		3,274		10,914
Net income attributable to Manning & Napier, Inc.	$	1,521	$	2,258	$	5,103	$	7,281	$	2,507	$	824	$	4,911	$	1,799
Less: allocation to participating securities	83		158		288		480		20		—		52		(42		)
Net income available to Class A common stock	$	1,438	$	2,100	$	4,815	$	6,801
Net income available to Class A common stock for basic EPS									$	2,487	$	824	$	4,859	$	1,841
Plus: reallocation of net income attributable to participating securities									3		—		4		—
Plus: incremental net income as a result of conversion of Class A Units of Manning & Napier Group to Class A common stock									—		—		2,279		—
Net income available to Class A common stock for diluted EPS									$	2,490	$	824	$	7,142	$	1,841

Denominator:
Weighted average shares of Class A common stock outstanding - basic	14,249,347		14,042,880		14,135,288		13,916,721		16,176,280		15,290,595		16,041,128		15,163,205
Dilutive effect of unvested equity awards	23,388		132,441		106,354		256,562
Dilutive effect of outstanding equity awards									2,752,674		310,091		1,584,781		303,134
Dilutive effect of exchangeable Class A Units	63,937,284		—		—		—		—		—		30,713,850		—
Weighted average shares of Class A common stock outstanding - diluted	78,210,019		14,175,321		14,241,642		14,173,283		18,928,954		15,600,686		48,339,759		15,466,339
Net income available to Class A common stock per share - basic	$	0.10	$	0.15	$	0.35	$	0.49	$	0.15	$	0.05	$	0.30	$	0.12
Net income available to Class A common stock per share - diluted	$	0.10	$	0.15	$	0.35	$	0.48	$	0.13	$	0.05	$	0.15	$	0.12

~~The Company’s Class B common~~Performance-based stock ~~represents voting interests and does not participate in~~options are excluded from the ~~earnings~~calculation of ~~the Company. Accordingly, there is no basic or~~ diluted EPS ~~related to~~for periods in which the ~~Company’s Class B common stock.~~

~~For both~~associated market condition has not yet been achieved. As such, for the three and nine months ended September 30, ~~2017, 790,000~~2020, 2,022,000 unvested performance-based stock options were excluded, and for the three and nine months ended September 30, 2019, 3,000,000 unvested performance-based stock options were excluded from the calculation of diluted EPS.

For the three and nine months ended September 30, 2020, 64,530 and 164,696, respectively, unvested equity awards were excluded from the calculation of diluted ~~earnings per common share~~EPS because the effect would have been anti-dilutive. For ~~both~~ the three and nine months ended September 30, ~~2016, 990,000~~2019, 951,060 and 1,201,060, respectively, unvested equity awards were excluded from the calculation of diluted ~~earnings per common share~~EPS because the effect would have been anti-dilutive.

At September 30, ~~2017~~2020, there were ~~63,931,065~~2,021,781 Class A Units of Manning & Napier Group outstanding, which, subject to certain restrictions, may be exchangeable for up to an equivalent number of shares of the Company's Class A common stock. These units were not included in the calculation of diluted earnings per common share for the ~~nine~~three months ended September 30, ~~2017, because the effect would have been anti-dilutive.~~

~~At September 30, 2016 there were 65,784,571 Class A Units of Manning & Napier Group outstanding, which were not included in the calculation of diluted earnings per common share~~2020 or for the three and nine months ended September 30, ~~2016,~~2019, because the effect would have been anti-dilutive.

Note ~~10—Equity Based~~11—Equity-Based Compensation

The Equity Plan was adopted by the Company's board of directors and approved by ~~stockholders~~shareholders prior to the consummation of the Company's 2011 initial public offering. Under the Equity Plan, a total of 13,142,813 equity interests are authorized for issuance, and may be issued in the form of Class A common stock, restricted stock units, stock options, units of Manning & Napier Group, or certain classes of membership interests in the Company which may convert into units of Manning & Napier Group.

~~The following table summarizes the award activity for the~~ ~~nine months ended~~ At September 30, ~~2017~~ ~~under~~2020, a total of 3,124,420 equity interests were available for issuance pursuant to the Equity ~~Plan:~~

Restricted
Stock Awards
Weighted Average Grant Date Fair Value
Stock awards outstanding at January 1, 2017 1,207,788
$ 12.56
Granted 70,399
$ 5.55
Vested (276,064 ) $ 12.41
Forfeited (150,000 ) $ 12.20
Stock awards outstanding at September 30, 2017 852,123
$ 12.09
Plan.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

The following table summarizes activity related to awards of restricted stock and restricted stock units (collectively, "stock awards") under the Equity Plan for the nine months ended September 30, 2020:



	Stock Awards		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2020	1,037,901		$	4.30
Granted	2,997,940		$	1.58
Vested	(444,165	)	$	4.55
Forfeited	(28,983	)	$	1.58
Outstanding at September 30, 2020	3,562,693		$	2.01

The weighted average fair value of stock awards granted during the nine months ended September 30, 2020 was $1.58, based on the closing sale price of the Company's Class A common stock as reported on the New York Stock Exchange on the date of grant, and, if not entitled to dividends or dividend equivalents during the vesting period, reduced by the present value of such amounts expected to be paid on the underlying shares during the requisite service period.

For the three and nine months ended September 30, ~~2017,~~2020, the Company recorded approximately ~~$0.3~~$0.7 million and ~~$1.7~~$2.5 million, respectively, of compensation expense related to stock awards under the Equity Plan. For the three and nine months ended September 30, ~~2016,~~2019, the Company recorded approximately ~~$0.4~~$0.5 million and ~~$2.5~~$2.4 million, respectively, of compensation expense related to stock awards under the Equity Plan. The aggregate intrinsic value of stock awards that vested during the nine months ended September 30, 2020 and 2019 was approximately $0.9 million and $1.3 million, respectively. As of September 30, ~~2017,~~2020, there was unrecognized compensation expense of approximately $4.9 million related to ~~Equity Plan~~stock awards, ~~of approximately $5.8 million,~~ which the Company expects to recognize over a weighted average period of approximately ~~3.5~~3.4 years.

~~During~~In connection with the ~~nine months ended September 30, 2017~~vesting of restricted stock units and ~~2016, the Company withheld a total~~exercise of 69,597 and 111,729 restricted shares, respectively, as a result of net share settlements to satisfy employee tax withholding obligations. The Company paid approximately $0.3 million and $1.0 million in employee tax withholding obligations related to these settlementsstock options during the nine months ended September 30, ~~2017 and 2016, respectively.~~2020, the Company withheld a total of 637,359 shares of Class A common stock to satisfy approximately $1.0 million of employee income tax withholding requirements. These net share settlements had the effect of shares repurchased and retired by the Company, as they reduced the total number of Class A common shares outstanding.

A summary of activity under the Equity Plan related to stock option awards during the nine months ended September 30, 2020 is presented below:



	Stock Option Awards		Weighted Average Exercise Price		Weighted Average Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2020	3,500,000		$	2.01
Granted	—		$	—
Exercised	(850,000	)	$	2.01
Forfeited	—		$	—
Outstanding at September 30, 2020	2,650,000		$	2.01	4.1	$	5,989
Exercisable at September 30, 2020	294,666		$	2.01	4.0	$	666

For the three and nine months ended September 30, 2020, the Company recorded approximately $0.1 million and $0.4 million, respectively, of compensation expense related to stock options under the Equity Plan. For the three and nine month periods ended September 30, 2019, the Company recorded approximately $0.2 million and $0.4 million of compensation expense related to stock options under the Equity Plan. As of September 30, 2020, there was unrecognized compensation expense of approximately $0.5 million related to stock options, which the Company expects to recognize over a weighted average period of approximately 1.0 year.

Note ~~11—~~12—Income Taxes

The Company is comprised of entities that have elected to be treated as either a limited liability company ("LLC") or a “C-Corporation". As such, the entities functioning as ~~LLC’s~~LLCs are not liable for or able to benefit from U.S. federal and most state income taxes on their earnings, and earnings (losses) will be included in the personal income tax returns of each entity’s unit holders. The entities functioning as C-Corporations are liable for or able to benefit from U.S. federal and state and local income taxes on their earnings and losses, respectively.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") which includes, among other things, the ability to carryback net operating losses from 2018, 2019 and 2020 to prior years. As of December 31, 2019, the Company had approximately $12.1 million net operating losses available to offset future taxable income for federal income tax purposes and approximately $6.1 million for state income tax purposes. The Company expects to carryback net operating losses generated in 2018 and 2019 to prior years and claim refunds when the federal corporate tax rate was 34% compared to the current statutory rates of 21%. During the nine months ended September 30, 2020, the Company recognized an income tax benefit of approximately $2.3 million, related to the favorable rate applied to its net operating losses. As a result, the Company increased its deferred tax asset during the nine months ended September 30, 2020 related to the TRA by approximately $2.3 million, resulting in a $1.9 million increase of the liability, representing 85% of the applicable cash savings.

On May 11, 2020, the Company completed the redemption and subsequent retirement of 60,012,419 Class A units, resulting in the Company's ownership of Manning & Napier Group increasing from 19.5% to 88.2% (Refer to Note 4). The Company recognized a deferred tax asset of approximately $1.1 million, resulting from an increased share of Manning & Napier Group's deferred tax assets. Additionally, as a result of Manning & Napier Group's redemption of its Class A units on May 11, 2020 and Manning & Napier Group's election under Section 754 of the Internal Revenue Code ("IRC"), the Company expects to benefit from depreciation and amortization deductions resulting from increases in the tax basis of tangible and intangible assets of Manning & Napier Group. Those deductions allocated to the Company will be taken into account in reporting the Company's taxable income resulting in the recognition of a deferred tax asset of approximately $2.5 million. The aggregate $3.6 million of deferred tax assets recognized during the three months ended June 30, 2020 resulting from the redemption were recorded within the Company's consolidated statements of shareholder's equity.

The Company’s income tax provision (benefit) and effective tax rate were as follows:

Three months ended September 30, Nine months ended September 30,
2017 2016 2017 2016
(in thousands)
Earnings from continuing operations before income taxes $ 12,591
$ 21,550
$ 46,279
$ 68,651
Effective tax rate 5.9 % 7.3 % 7.2 % 7.0 %
Provision for income taxes 739
1,565
3,324
4,784
Provision for income taxes @ statutory rate 4,281
7,543
15,735
24,028
Difference between tax at effective vs. statutory rate $ (3,542 ) $ (5,978 ) $ (12,411 ) $ (19,244 )



	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
	(in thousands)
Income before provision for (benefit from) income taxes	$	4,805		$	6,727		$	8,157		$	13,436
Effective tax rate	36.2		%	2.2		%	(0.3		)%	5.4		%
Provision for (benefit from) income taxes	1,738			150			(28		)	723
Provision for (benefit from) income taxes at statutory rate	1,009			1,413			1,713			2,822
Difference between tax at effective vs. statutory rate	$	729		$	(1,263	)	$	(1,741	)	$	(2,099	)

For the nine months ended September 30, 2020 and the three and nine months endedSeptember 30, ~~2017~~ ~~and~~ ~~2016~~,2019, the difference between the Company’s recorded provision (benefit) and the provision that would result from applying the U.S. statutory rate of ~~34% and 35%, respectively, is primarily attributable to~~21% includes the benefit resulting from the fact that a significant portion of the Company’s operations include a series of flow-through entities which are generally not subject to federal and most state income taxes. Accordingly, a portion of the Company’s earnings are not subject to corporate level taxes. The effective rate during the three months ended September 30, 2020 is higher than the statutory rate due to the impacts from permanent differences between book and tax, including but not limited to Section 162(m) of the IRC which limits the annual amount of deductible compensation. For the nine months ended September 30, 2020, the income tax benefit also includes the impact from the enactment of the CARES Act, which resulted in the recognition of an income tax benefit based on the ability to carry back net operating losses to prior years.

A state is currently auditing the Company's 2016, 2017 and 2018 corporate tax returns. The audit is expected to be completed in 2020. As of September 30, 2020, the audit is in process and the state is collecting and evaluating the data for which the Company has not recorded a liability for uncertain tax positions under ASC Topic 740, Income Taxes. The Company believes any potential increases to this liability, which could be up to approximately $1.3 million, would not result in a material change to its financial position.

Note ~~12—~~13—Related Party Transactions

Transactions with noncontrolling members

From time to time, the Company may be asked to provide certain services, including accounting, legal and other administrative functions for the noncontrolling members of Manning & Napier Group. While immaterial, the Company has not received any reimbursement for such services.

The Company manages the personal funds of certain of the Company's executive officers ~~including William Manning.~~and directors and/or their affiliated entities. Pursuant to the respective investment management agreements, in some instances the Company ~~waives~~may waive or ~~reduces~~reduce its regular advisory fees for these ~~accounts and personal funds utilized to incubate products.~~accounts. The aggregate value of the fees earned ~~was approximately $0.2 million~~ and the value of ~~the fees waived was approximately $0.1 million for the~~ ~~nine months ended September 30, 2017. The aggregate value of the fees earned was approximately $0.1 million and the value of the~~ fees waived was less than $0.1 million for each of the nine months ended September 30, ~~2016.~~2020 and 2019.

Manning & Napier, Inc.

Notes to Consolidated Financial Statements (Continued)

Manning & Napier Group completed the redemption of 60,012,419 Class A units held by the noncontrolling members of Manning & Napier Group, including 59,957,419 units held by William Manning, who was previously the Chairman of the Company's Board of Directors on May 11, 2020. The independent directors, on behalf of the Company, decided to settle the transaction utilizing approximately $90.8 million in cash, including approximately $90.7 million paid to Mr. Manning. Manning & Napier Group completed the redemption with payment made from its cash, cash equivalents and proceeds from the sale of investment securities. See Note 4 for additional details.

During the three months ended September 30, 2020, the Company entered into an agreement with Manning Ventures, Inc., which is wholly-owned by William Manning, to reimburse Manning Ventures, Inc. up to approximately $0.2 million for certain services.

Affiliated fund transactions

The Company earns investment advisory fees, distribution fees and administrative service fees under agreements with affiliated mutual funds and collective investment trusts. ~~The aggregate value of revenue~~Fees earned ~~was~~for advisory and distribution services provided were approximately ~~$19.4~~$9.3 million and ~~$64.6~~$26.7 million for the three and nine months ended September 30, ~~2017, respectively,~~2020, and ~~$28.8~~approximately $9.8 million and ~~$86.7~~$31.1 million for the three and nine months ended September 30, ~~2016, respectively. As of~~2019. Fees earned for administrative services provided were approximately $0.4 million and $1.2 million for the three and nine months ended September 30, ~~2017~~2020, and ~~December 31, 2016, amounts due from the affiliated mutual funds was~~ approximately ~~$6.2~~$0.6 million and ~~$6.8~~$1.6 million ~~respectively. As of~~for the three and nine months ended September 30, ~~2017 and December 31, 2016,~~2019. See Note 3 for disclosure of amounts due from affiliated mutual funds and collective investment ~~trusts was approximately $2.1 million and $4.5 million, respectively.~~

~~Manning & Napier, Inc.~~

~~Notes to Consolidated Financial Statements (Continued)~~

trusts.

The Company incurs certain expenses on behalf of the collective investment trusts and has contractually agreed to limit its fees and reimburse expenses to limit operating expenses incurred by certain affiliated fund series. The aggregate value of fees waived and expenses reimbursed to, or incurred for, affiliated mutual funds and collective investment trusts ~~was $4.1~~were approximately $1.3 million and ~~$3.4~~$3.7 million for the three and nine months ended September 30, 2020 and $1.9 million and $5.1 million for the three and nine months ended September 30, 2019.

During the three months ended September 30, 2020 the Company received approximately $1.4 million in cash for reimbursement of prior expenses paid on behalf of our affiliated mutual funds and collective investment trusts. These expenses are reimbursable to the Company under an agreement with the affiliated mutual fund and collective investments trusts upon the settlement of a claim between both the affiliated mutual funds and the collective investment trusts and a third party. As of June 30, 2020, the Company had recorded a receivable of approximately $0.2 million within other long-term assets on its consolidated statement of financial condition. The remaining $1.2 million of proceeds received was recognized as a gain within other operating costs in its consolidated statements of operations during the nine months ended September 30, ~~2017 and 2016, respectively.~~2020.

Note ~~13—~~14—Subsequent Events

~~Distributions and dividends~~Distribution

~~On October 24, 2017,~~Subsequent to September 30, 2020, the Board of Directors approved a $1.3 million distribution from Manning & Napier Group to Manning & Napier and the noncontrolling interests of Manning & Napier ~~Group. The amount~~Group, of ~~the distribution will be based on earnings for the quarter ended December 31, 2017, with a maximum amount of $10.0 million. Concurrently, the Board of Directors declared an $0.08 per share dividend~~which approximately $0.1 million was paid to the ~~holders~~noncontrolling members of ~~Class A common stock. The dividend is payable on or about February 1, 2018 to shareholders of record as of January 15, 2018.~~Manning & Napier Group.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations

This report contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which reflect ~~our~~the views of Manning & Napier, Inc. ("we," "our," or "us") with respect to, among other things, our future operations and financial performance. Words like "believes," "expects," "may," "estimates," "will," "should," "could," "intends," "likely," "plans," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, are used to identify forward-looking statements, although not all forward-looking statements contain these words.

Although we believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know about our business and operations, there can be no assurance that our actual results will not differ materially from what we expect or believe. Some of the factors that could cause our actual results to differ materially from our expectations or beliefs are summarized below under the heading "Summary of Principal Risks" and disclosed in the “Risk Factors” section, as well as other sections, of our Annual Report on Form 10-K ~~which include, without limitation: changes in securities or financial markets or general economic conditions; a decline in the performance of our products; client sales~~ and redemption activity; any loss of an executive officer or key personnel; changes in our business related to strategic acquisitions and other transactions; and changes of government policy or regulations.this Quarterly Report on Form 10-Q. All forward-looking statements speak only as of the date on which they are made and we undertake no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Summary of Principal Risks

The following factors are among the principal risks we face. For a more detailed description of the risks material to our business, see "Part II-Item 1A-Risk Factors." Some of the factors that could cause our results to differ materially from our expectations or beliefs include, without limitation;

the impact of the COVID-19 pandemic on the U.S. and global economy and our AUM;

the termination of contracts or relationships upon short or no notice or high rates of client sales and redemption activity;

the inability to realize the expected benefits of our restructuring plan and other operational improvement initiatives;

difficult market conditions, like those during the COVID-19 pandemic, impacting the performance of our strategies, impacting our ability to obtain attractive returns, or reducing our ability to deploy capital;

any loss of key investment and sales professionals or members of senior management, or difficulty integrating new executives;

concentration of our AUM in certain investment strategies or in certain geographic areas;

the impact on our portfolios of foreign currency exchange risk and the impact of any foreign tax, political, social and economic uncertainty on any non-U.S. issuers in which our portfolios have invested;

a reduction in the fees we are able to charge, increased expenses or reduced fee income from new products, or potential losses or failure of new products or portfolios;

changes in key distribution relationships that reduce our revenues or increase the influence of third-party intermediaries on our mutual fund assets;

failure to comply with investment guidelines set by our clients or limitations imposed by law;

the occurrence of operational or trading errors due to the failure, interruption or cessation of our or third-party financial, accounting, trading, custodial, clearing, compliance and other data processing systems;

the failure to effectively maintain, enhance and modernize our information technology systems and develop or deploy new technology platforms and upgrades;

cybersecurity breaches impacting our operations or the failure to implement effective information and cybersecurity policies;

reputational harm caused by employee misconduct or the failure to properly address conflicts of interest;

the inability to insure our business and otherwise manage risks;

the failure to comply with extensive regulatory requirements and changes in government policy;

the inability to effectively compete in the investment management industry;

catastrophic and unpredictable events, such as the COVID-19 pandemic, terrorist attacks and natural disasters;

our dependence on Manning & Napier Group, LLC (“Manning & Napier Group”) for distributions to pay expenses and dividends, if any, to our stockholders;

our obligation to make payments to holders of units of Manning & Napier Group for tax benefits we receive as a result of our structure pursuant to a tax receivable agreement; and

provisions in our corporate documents, stockholder rights plan and Delaware law that could discourage, delay or prevent a change in control of the Company that some stockholders might consider to be in their best interests.

Overview

Our Business

~~We are~~Manning & Napier, Inc. is an independent investment management firm that provides our clients with a broad range of financial solutions and investment ~~solutions, as well as a variety of consultative services that complement our investment process.~~strategies. Founded in 1970 ~~we offer U.S.~~ and ~~non-U.S equity, fixed income, and a range of blended asset portfolios, such as life cycle funds and exchange-traded fund ("ETF")-based portfolios. We~~headquartered in Fairport, New York, we serve a diversified client base of ~~high net worth~~high-net-worth individuals and institutions, including 401(k) plans, pension plans, Taft-Hartley plans, endowments and foundations. Our investment strategies offer equity, fixed income and a range of blended asset portfolios by employing traditional and quantitative approaches.

Impact of COVID-19

We are addressing the challenges of COVID-19 by protecting the health and well-being of our employees, while servicing our clients and leveraging technology to fully support our business needs in a primarily digital manner.

The impact of COVID-19 on our investment performance, financial statements, capital and liquidity, and our business operations are ~~based principally~~further discussed below:

Client Performance Impact:As a result of our ability to rapidly adapt to a remote work environment, we believe we were able to minimize the impact of COVID-19 on client performance. Additionally, due to the significant increase in volatility throughout the year, discussed in more detail in the ~~United States, with our headquarters located in Fairport, New York.~~next section, we were able to capitalize on the market environment by delivering strong results for clients year-to-date.

~~Market Developments~~

Financial ~~markets, specifically the current ten year bull market, have had~~Statement Impact: Our revenues consist primarily of investment management fees typically calculated as a ~~significant impact on asset flows and~~percentage of the market value of our assets under management ("AUM")~~. Though~~, and they are dependent on the value and composition of our ~~relative returns have been competitive for the nine months ended~~AUM. As of September 30, ~~2017 and have helped repair our longer-term track records,~~2020, AUM was $19.2 billion, an increase from $17.1 billion as of March 31, 2020. This 13% increase came on the ~~one, three, and five year annualized returns for many~~heels of ~~our key investment strategies have trailed their related benchmarks~~a market rebound primarily beginning in ~~recent years. In addition, we have experienced increased competition as a result~~the second quarter, with approximately $3.2 billion of ~~lower fee passive investment products which have gained popularity over the last decade, such as index funds and ETFs.~~

~~As a result~~market appreciation partially offset by approximately $1.0 billion of ~~these factors, we have experienced~~ net client outflows since ~~2013 resulting~~March 31, 2020. Going forward, we believe the pandemic may continue to negatively impact our operational results, cash flows, and financial position, although we cannot reasonably estimate the full impact at this time, given the uncertainty surrounding the duration and severity of the economic crisis.

Capital and Liquidity Impact: Our financial condition is stable, allowing us to effectively manage the financial impacts of COVID-19. We believe our capital structure should provide us with sufficient resources and flexibility to meet present and future cash needs. During the first quarter of 2020, we suspended the quarterly cash dividend on our Class A common stock. Given the uncertainty surrounding the current economic environment, we will continue to assess our liquidity needs.

Business Operations Impact: For the health and well-being of our employees, we have modified our business practices in ~~an overall decrease~~accordance with social distancing guidelines to encourage work-from-home arrangements, and we have restricted business-related travel. Our technology capabilities have allowed us to maintain sales and client servicing activity through digital collaboration platforms and digital marketing efforts. We believe our third quarter 2020 results, with gross client inflows comparable to prior periods and gross client outflows reduced from historical levels, indicate that our sales strategy is gaining traction. Our ability to adequately maintain our operations, internal controls and client relationships has not been adversely affected by these modifications.

We continue to assess the risks associated with COVID-19 and to mitigate them where possible. For further discussion regarding the potential future impacts of COVID-19 and related economic conditions on the Company's financial statements, capital and liquidity, and business operations, see "Part II-Item 1A-Risk Factors."

Market Developments

The third quarter was fairly calm in ~~our AUM, which is likely to continue~~global financial markets as the economy began recovering from the pandemic-driven shutdowns. Although the rebound in the ~~near term, though at~~global macroeconomy has been relatively strong, there remain areas of weakness, exacerbated by the sunsetting of key stimulus programs.

The continued strength in equity markets remains extraordinary and historic, driven to a ~~slower rate of decrease. Additionally, we expect that AUM will decrease approximately $0.4 billion~~substantial degree by enormous strength in the ~~fourth~~growth style. Growth’s multi-year run of outsized relative results versus value were further extended in the quarter, and the style holds a very substantial year-to-date performance edge, concentrated in technology-related equities. Amid the broad-based strength, domestic equities again outperformed international peers, and within the US specifically, small-cap stocks underperformed large-caps over the quarter.

Regarding fixed income, central bank policies continued to pin interest rates at ultra-low levels, leading to little movement in yield curves over the quarter. Moving out on the risk spectrum, credit spreads continued to compress throughout the quarter, significantly aiding performance for investment grade and below investment grade securities. Falling spreads aided municipal bonds as well, leading to good results for the sector.

We believe there remains a sharp divergence between underlying economic fundamentals and the historic rally in financial markets. As these two realities converge over time, we believe our truly active investment approach, powered by dynamic asset allocation, is well positioned to capitalize on potential opportunities as they present themselves.

Other Business Updates

During the first quarter of ~~2017~~2020, pursuant to the annual exchange process, approximately 60.0 million Class A Units of Manning & Napier Group, LLC ("Manning & Napier Group") were tendered for cash or shares of the Company's Class A common stock. In early April 2020, the independent directors, on behalf of the Company as managing member of Manning & Napier Group, decided to settle the transaction as a redemption, utilizing approximately $90.8 million in cash. Manning & Napier Group completed the redemption on May 11, 2020, with payment made from its cash, cash equivalents and proceeds from the sale of investment securities. The Class A Units were subsequently retired, and as a result, our ownership of ~~the anticipated sale of the Rainier Investment Management U.S. product set. Our ability~~Manning & Napier Group increased from 19.5% to increase AUM in the future will depend in part on our ability to execute our investment strategies to achieve competitive investment returns, and on our ability to successfully distribute our products and services, including those that have been areas of strategic focus for us.88.2%.

Our strategic initiatives are focused on gathering and retaining client assets. In response to industry trends and increasing fee pressure from passive strategies offered by our competitors, management is evaluating fees across our product set, including restructuring fees across many of our mutual fund and collective trust products. Management fee reductions and corresponding distribution and shareholder servicing expense reductions for the various series of our funds will be rolled out beginning during the fourth quarter of 2017 and continuing through the first half of 2018. Given the overall pressure on fees that all active managers are facing, we believe that bringing our fund fees to a more competitive level will enhance our ability to attract additional assets in the future.

Additionally, we are actively marketing our Custom Solution program. Custom Solution is a competitively priced consultative advisory service in which we tailor an allocation among proprietary and non-proprietary investment products and vehicles to meet a client’s unique investment objectives and cash flow needs. Direct advisory services such as Custom Solution are an essential part of our strategy to pursue direct relationships with clients built on managing risk and meeting investment objectives over market cycles.

~~Our Products~~Solutions

We derive substantially all of our revenues from investment management fees earned from providing advisory services to separately managed accounts and to mutual funds and collective investment trusts—including those offered by ~~MNA,~~Manning & Napier Advisors, LLC ("MNA"), the Manning & Napier Fund, Inc. (the "Fund"), Exeter Trust Company, and Rainier Investment ~~Management.~~

Management, LLC ("Rainier").

Our separate accounts are primarily distributed through our ~~Direct Channel,~~wealth management sales channel, where our ~~representatives~~financial consultants form relationships with ~~high net worth~~high-net-worth individuals, ~~middle market institutions or large institutions that are working with a consultant.~~endowments, foundations, and retirement plans. To a lesser extent, we also obtain a portion of our separate account distribution via third parties, either through our ~~Intermediary Channel~~intermediary sales channel where national brokerage firm representatives or independent financial advisors select our separate account strategies for their clients, or through our ~~Platform/Sub-Advisory Channel,~~platform/sub-advisor relationships, where unaffiliated registered investment advisors approve our strategies for their product platforms. Our separate account ~~products~~strategies are a primary driver of our blended asset portfolios for ~~high net worth,~~high-net-worth, middle market institutional clients and financial intermediaries. In contrast, larger institutions and unaffiliated registered investment advisor platforms are a driver of our separate account equity portfolios.

Our mutual funds and collective investment trusts are distributed through financial intermediaries, including brokers, financial advisors, retirement plan advisors and platform relationships. We also distribute our mutual fund and collective investment trusts through our ~~direct sales~~institutional representatives, ~~in particular~~particularly within the defined contribution, Taft-Hartley, and institutional marketplace. Our mutual fund and collective investment trust ~~products~~strategies are an important driver of ~~both~~ our blended asset class and single asset class portfolios.

Assets Under Management

During 2019, we changed our distribution strategy following a business review to better capitalize on our strengths. As part of this change, we have adjusted our sales efforts to more distinctly separate the clients to which we deliver holistic solutions, including high-net-worth families, endowments and foundations, and small and mid-sized business, from our Institutional and Intermediary clients, including third party advisors, platforms and consultants, as well as larger institutions and Taft-Hartley clients. Our AUM was ~~$26.5~~$19.2 billion as of September 30, ~~2017.~~2020. The composition of our AUM by ~~vehicle~~sales channel and portfolio is illustrated in the table below:

September 30, 2017
AUM - by investment vehicle and portfolio
Blended
Asset
Equity Fixed Income Total
(in millions)
Separately managed accounts $ 10,728.4
$ 5,412.4
$ 1,219.5
$ 17,360.3
Mutual funds and collective investment trusts 5,651.7
3,425.0
108.8
9,185.5
Total $ 16,380.1
$ 8,837.4
$ 1,328.3
$ 26,545.8



	September 30, 2020
	Blended Asset			Equity			Fixed Income			Total
	(dollars in millions)
Total AUM
Wealth Management	$	7,331.6		$	510.5		$	260.5		$	8,102.6
Institutional and Intermediary	6,036.1			4,362.0			744.4			11,142.5
Total	$	13,367.7		$	4,872.5		$	1,004.9		$	19,245.1
Percentage of AUM
Wealth Management	38		%	3		%	1		%	42		%
Institutional and Intermediary	32		%	22		%	4		%	58		%
Total	70		%	25		%	5		%	100		%
Percentage of portfolio by channel
Wealth Management	55		%	10		%	26		%	42		%
Institutional and Intermediary	45		%	90		%	74		%	58		%
Total	100		%	100		%	100		%	100		%
Percentage of channel by portfolio
Wealth Management	91		%	6		%	3		%	100		%
Institutional and Intermediary	54		%	39		%	7		%	100		%

~~The composition of our separately managed accounts as of~~ ~~September 30, 2017, by~~Our wealth management channel ~~and portfolio, is set forth in the table below:~~

September 30, 2017

Blended
Asset
Equity Fixed Income Total
(dollars in millions)
Separate account AUM
Direct Channel $ 8,167.8
$ 3,789.4
$ 1,081.9
$ 13,039.1
Intermediary Channel 2,554.8
717.5
137.6
3,409.9
Platform/Sub-advisor Channel 5.8
905.5
—
911.3
Total $ 10,728.4
$ 5,412.4
$ 1,219.5
$ 17,360.3
Percentage of separate account AUM
Direct Channel 47 % 22 % 6 % 75 %
Intermediary Channel 15 % 4 % 1 % 20 %
Platform/Sub-advisor Channel 0 % 5 % — % 5 %
Total 62 % 31 % 7 % 100 %
Percentage of portfolio by channel
Direct Channel 76 % 70 % 89 % 75 %
Intermediary Channel 24 % 13 % 11 % 20 %
Platform/Sub-advisor Channel 0 % 17 % — % 5 %
Total 100 % 100 % 100 % 100 %
Percentage of channel by portfolio
Direct Channel 63 % 29 % 8 % 100 %
Intermediary Channel 75 % 21 % 4 % 100 %
Platform/Sub-advisor Channel 1 % 99 % — % 100 %

~~Our separate accounts contributed~~ ~~47%~~ ~~of our total gross client inflows for the~~ ~~nine months ended September 30, 2017~~ ~~and~~ represented ~~65%~~42% of our total AUM as of September 30, ~~2017~~.

2020. Blended portfolios are the most significant portion of wealth management assets, representing 91% of wealth management AUM. Equity and fixed income portfolios represent 6% and 3%, respectively, of wealth management AUM.

Our ~~separate account business has historically been driven primarily by our Direct Channel, where sales representatives form a relationship with high net worth investors, middle market institutions,~~institutional and large institutional clients working in conjunction with a consultant. The Direct Channel contributed 66% of the total gross client inflows for our separate account business for the nine months ended September 30, 2017 andintermediary channel represented ~~75%~~58% of our total ~~separate account~~ AUM as of September 30, ~~2017. We anticipate the Direct Channel to continue to be~~2020. Blended portfolios are also the largest ~~driver~~portion of ~~new separate~~institutional and intermediary assets at 54% of AUM, followed by equity and fixed income portfolios at 39% and 7%, respectively.

As of September 30, 2020, blended portfolios account ~~business going forward, given~~for 70% of our total AUM at $13.4 billion, a 2% increase from June 30, 2020 when blended assets were $13.1 billion. Blended portfolio AUM is similar across both distribution channels, with 55% in wealth management and 45% in institutional and intermediary. Equity portfolios account for 25% of our total AUM, at $4.9 billion, a 7% increase from June 30, 2020 when equity portfolios were at $4.6 billion. Of equity portfolio AUM, 90% is in the ~~Direct Channel’s high net worth~~institutional and ~~middle market~~intermediary channel, and 10% is in the wealth management channel. Fixed income portfolios account for 5% of total AUM at $1.0 billion, consistent with June 30, 2020. Similar to equity portfolio AUM, the majority of fixed income assets come through the institutional ~~client-type focus.~~and intermediary channel at 74%, and 26% of fixed income AUM is in the wealth management channel.

During the nine months ended September 30, ~~2017,~~2020, our wealth management sales channel contributed 36% of our total gross client inflows, while our institutional and intermediary channel contributed 64%. Of the $1.8 billion in gross client inflows, blended asset portfolios represented ~~68% of the separate account gross client inflows from the Direct Channel,~~69%, while equity and fixed income portfolios ~~each~~ represented ~~16%. As of September 30, 2017, blended asset~~24% and ~~equity portfolios represented 63% and 29%~~7%, respectively, of total Direct Channel separate account AUM, while our fixed income portfolios were 8%. We expect our focus on individuals and middle market institutions to continue to drive interest in our blended asset class portfolios, where we provide a comprehensive portfolio of stocks and bonds managed to a client’s specific investment objectives. Our relationships with larger institutions may also be a driver of growth in separately managed account equity strategies, though many of these larger institutions may seek exposure to non-U.S. equity strategies through commingled vehicles rather than separately managed accounts to limit related custody expenses.

To a lesser extent, we also obtain separate account business from third parties, including financial advisors or unaffiliated registered investment advisor programs or platforms. During the nine months ended September 30, 2017, 20% of the total gross client inflows for separate accounts came from financial advisor representatives (Intermediary Channel), and an additional 13% came from registered investment advisor platforms (Platform/Sub-advisor Channel). The Intermediary and Platform/Sub-advisor Channels represented 25% of our total separate account AUM as of September 30, 2017.

New separate account business through the Intermediary Channel flowed into both our blended asset and equity portfolios, driven by advisors’ needs to identify either a one-stop solution (blended asset portfolio) or to fill a mandate within a multi-strategy portfolio. During the nine months ended September 30, 2017, blended asset and equity portfolios represented 50% and 22%, respectively, of the separate account gross client inflows from the Intermediary Channel. As of September 30, 2017, 75% of our separate account AUM derived from financial advisors was allocated to blended asset portfolios, with 21% allocated to equity and 4% allocated to fixed income. We expect that equity and fixed income portfolios may see additional interest from financial advisors over time as more advisors structure a multi-strategy portfolio for their clients.

During the nine months ended September 30, 2017, 99% of our separate account gross client inflows from the Platform/Sub-advisory Channel were into equity portfolios. Gross client inflows through the Platform/Sub-advisor Channel are primarily directed to our equity strategies, where we are filling a specific mandate within the investment program or platform product.

Our annualized separate account retention rate across all channels was 80% during the nine months ended September 30, 2017, a decrease from our historical retention rate, which was 85% for the twelve months ended December 31, 2016.

~~The composition of our mutual fund and collective investment trust AUM as of September 30, 2017, by portfolio, is set forth in the table below:~~

September 30, 2017

Blended
Asset
Equity Fixed Income Total
(in millions)
Mutual fund and collective investment trust AUM $ 5,651.7
$ 3,425.0
$ 108.8
$ 9,185.5

~~Our mutual funds and collective investment trusts contributed~~ ~~53%~~ ~~of our total gross client inflows for the~~ ~~nine months ended September 30, 2017~~ ~~and represented~~ ~~35%~~ ~~of our total AUM as of~~ ~~September 30, 2017. As of~~ ~~September 30, 2017, our mutual fund and collective investment trust AUM consisted of~~ ~~62%~~ ~~from blended asset portfolios and~~ ~~37%~~ ~~from equity portfolios compared to 68% and 31% for blended asset and equity portfolios as of September 30, 2016. During the~~ ~~nine months ended September 30, 2017, 71% and 26% of the gross client inflows were attributable to blended assets and equity portfolios,~~ respectively.

Our mutual fund and collective investment trust business is driven by both financial intermediaries and direct sales representatives. Intermediary distribution of our mutual fund and collective investment trust vehicles is achieved via financial advisors, brokers and retirement plan advisors. Through our Intermediary Channel, we are focused on our blended asset life cycle fund vehicles given our emphasis on advisors who work with retirement plans. Our blended asset portfolios are also used by advisors seeking a multi-asset class solution for their retail clients. In addition, we are focused on equity and fixed income portfolios within the Intermediary Channel for intermediaries who wish to use our mutual funds as a component of a larger portfolio.

We also have relationships with consultants and manager research teams at platforms in order to distribute our funds within advisory programs, or through placement on platforms' approved lists of funds. To facilitate our relationships with intermediaries, we currently have approximately 285 dealer relationships. These relationships are important to our retail business as well as our 401(k) life cycle and institutional business.

Through the Direct Channel, we also form relationships with middle market and large market defined contribution plan sponsors seeking to use our life cycle mutual funds and collective investment trusts as default options on their investment menu. Our Direct Sales Representatives also distribute our equity portfolios to large institutional clients with which we have direct relationships and often, the client's consultant. We expect this channel to focus on distributing blended asset and equity portfolio funds in the future.

Results of Operations

Below is a discussion of our consolidated results of operations for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019.

Components of Results of Operations

Overview

An important factor influencing inflows and outflows of our AUM is the investment performance of our various investment approaches. Our ~~variety of~~ stock selection strategies, absolute pricing discipline and active asset allocation ~~management approach~~ generally ~~results~~result in specific absolute and relative return characteristics in different market environments. For example, during a fundamental-driven bull market when prices are rising alongside improving fundamentals, we are likely to experience positive absolute returns and competitive relative returns. However, in a more momentum-driven bull market, when prices become disconnected from underlying fundamentals, or narrow market environment where a small handful of stocks outperform the average stock, we are likely to experience positive absolute returns but lagging relative returns. Similarly, during a valuation-driven bear market, when markets experience a period of price correction following a momentum-driven bull market, we are likely to experience negative absolute returns but strong relative returns. However, in a momentum-driven bear market, which is typically characterized by broad price declines in a highly correlated market, we are likely to experience negative absolute returns and potentially lagging relative returns. Essentially, our approach is likely to do well when markets are driven by fundamentals, but lag when markets are driven primarily by momentum.

Other components impacting our operating results include:

asset-based fee rates and changes in those rates;

the composition of our AUM among various portfolios, vehicles and client types;

changes in our variable costs, including incentive compensation and distribution, servicing and custody expenses, which are affected by our investment performance, level of our AUM and revenue; and

fixed costs, including changes to base compensation, vendor-related costs and investment spending on new products.

Assets Under Management and Investment Performance

The following table reflects the indicated components of our AUM for our ~~investment vehicles~~sales channels for the three and nine months ended September 30, ~~2017~~2020 and ~~2016~~2019:


	Separately managed accounts			Mutual funds and collective investment trusts			Total			Separately managed accounts		Mutual funds and collective investment trusts		Total		Sales Channel ⁽⁴⁾
				(in millions)												Wealth Management			Institutional and Intermediary			Total			Wealth Management		Institutional and Intermediary		Total
As of June 30, 2017	$	17,714.9		$	9,360.6		$	27,075.5		65	%	35	%	100	%
																			(in millions)
As of June 30, 2020																$	8,334.4		$	10,305.9		$	18,640.3		45	%	55	%	100	%
Gross client inflows ⁽¹⁾																250.7			343.7			594.4
Gross client outflows ⁽¹⁾																(304.9		)	(674.8		)	(979.7		)
AUM Reclassification ⁽³⁾																(266.8		)	266.8			—
Market appreciation/(depreciation) & other ⁽²⁾																89.2			900.9			990.1
As of September 30, 2020																$	8,102.6		$	11,142.5		$	19,245.1		42	%	58	%	100	%
Average AUM for period																$	8,093.3		$	11,129.6		$	19,222.9

As of June 30, 2019																$	9,397.9		$	11,852.9		$	21,250.8		44	%	56	%	100	%
Gross client inflows ⁽¹⁾	407.2			393.4			800.6									231.6			372.1			603.7
Gross client outflows ⁽¹⁾	(1,383.4		)	(928.2		)	(2,311.6		)							(664.7		)	(972.3		)	(1,637.0		)
Market appreciation/(depreciation) & other ⁽²⁾	621.6			359.7			981.3									(589.9		)	845.6			255.7
As of September 30, 2017	$	17,360.3		$	9,185.5		$	26,545.8		65	%	35	%	100	%
Average AUM for period	$	17,707.0		$	9,294.0		$	27,001.0

As of June 30, 2016	$	20,585.0		$	15,131.2		$	35,716.2		58	%	42	%	100	%
Gross client inflows ⁽¹⁾	374.6			752.2			1,126.8
Gross client outflows ⁽¹⁾	(1,226.0		)	(2,163.2		)	(3,389.2		)
Market appreciation/(depreciation) & other ⁽²⁾	803.4			561.3			1,364.7
As of September 30, 2016	$	20,537.0		$	14,281.5		$	34,818.5		59	%	41	%	100	%
As of September 30, 2019																$	8,374.9		$	12,098.3		$	20,473.2		41	%	59	%	100	%
Average AUM for period	$	20,678.1		$	14,767.5		$	35,445.6								$	8,559.4		$	12,317.3		$	20,876.7

	Separately managed accounts			Mutual funds and collective investment trusts			Total			Separately managed accounts		Mutual funds and collective investment trusts		Total		Wealth Management			Institutional and Intermediary			Total			Wealth Management		Institutional and Intermediary		Total
				(in millions)															(in millions)
As of December 31, 2016	$	18,801.9		$	12,881.1		$	31,683.0		59	%	41	%	100	%
As of December 31, 2019																$	8,716.4		$	10,763.7		$	19,480.1		45	%	55	%	100	%
Gross client inflows ⁽¹⁾	1,384.3			1,554.4			2,938.7									646.1			1,169.9			1,816.0
Gross client outflows ⁽¹⁾	(5,223.1		)	(6,807.8		)	(12,030.9		)							(1,040.9		)	(2,279.6		)	(3,320.5		)
Market appreciation/(depreciation) & other ⁽²⁾	2,397.2			1,557.8			3,955.0									(219.0		)	1,488.5			1,269.5
As of September 30, 2017	$	17,360.3		$	9,185.5		$	26,545.8		65	%	35	%	100	%
As of September 30, 2020																$	8,102.6		$	11,142.5		$	19,245.1		42	%	58	%	100	%
Average AUM for period	$	18,397.8		$	10,784.9		$	29,182.7								$	7,903.8		$	10,869.2		$	18,773.0

As of December 31, 2015	$	20,735.4		$	14,706.8		$	35,442.2		59	%	41	%	100	%
As of December 31, 2018																$	8,700.9		$	11,462.7		$	20,163.6		43	%	57	%	100	%
Gross client inflows ⁽¹⁾	1,295.9			2,534.1			3,830.0									621.7			1,253.1			1,874.8
Gross client outflows ⁽¹⁾	(4,178.4		)	(5,694.7		)	(9,873.1		)							(1,550.7		)	(2,782.0		)	(4,332.7		)
Acquired assets	1,234.2			1,660.1			2,894.3
Market appreciation/(depreciation) & other ⁽²⁾	1,449.9			1,075.2			2,525.1									603.0			2,164.5			2,767.5
As of September 30, 2016	$	20,537.0		$	14,281.5		$	34,818.5		59	%	41	%	100	%
As of September 30, 2019																$	8,374.9		$	12,098.3		$	20,473.2		41	%	59	%	100	%
Average AUM for period	$	20,584.2		$	14,724.0		$	35,308.2								$	8,515.5		$	12,301.4		$	20,816.9

________________________


(1)	Transfers of client assets between portfolios are included in gross client inflows and gross client outflows.


(2)	Market appreciation/(depreciation) and other includes investment gains/(losses) on assets under management, the impact of changes in foreign exchange rates and net flows from non-sales related activities including net reinvested dividends.


(3)	During the third quarter of 2020, the Company identified certain Institutional and Intermediary assets that were incorrectly allocated to the Wealth Management Sales Channel as of June 30, 2020. The difference had no impact to total AUM or AUM by Portfolio as of June 30, 2020 and were reclassified to the appropriate Sales Channel during the third quarter of 2020.


(4)	AUM and gross client flows between sales channels have been estimated based upon preliminary data. For a limited portion of our mutual fund AUM, reporting by sales channel is not available at the time of this report. Such estimates have no impact on total AUM, total cash flows, or AUM by investment portfolio reported in the table above.

The following table reflects the indicated components of our AUM for our portfolios for the three and nine months ended September 30, ~~2017~~2020 and ~~2016:~~2019:


	Blended Asset			Equity			Fixed Income			Total			Blended Asset		Equity		Fixed Income		Total		Blended Asset			Equity			Fixed Income			Total			Blended Asset		Equity		Fixed Income		Total
				(in millions)																				(in millions)
As of June 30, 2017	$	16,613.8		$	9,094.3		$	1,367.4		$	27,075.5		61	%	34	%	5	%	100	%
As of June 30, 2020																					$	13,075.3		$	4,561.7		$	1,003.3		$	18,640.3		71	%	23	%	6	%	100	%
Gross client inflows ⁽¹⁾	468.0			278.0			54.6			800.6											461.3			104.2			28.9			594.4
Gross client outflows ⁽¹⁾	(1,193.5		)	(1,014.5		)	(103.6		)	(2,311.6		)									(756.6		)	(191.4		)	(31.7		)	(979.7		)
Market appreciation/(depreciation) & other ⁽²⁾	491.8			479.6			9.9			981.3											587.7			398.1			4.3			990.1
As of September 30, 2017	$	16,380.1		$	8,837.4		$	1,328.3		$	26,545.8		62	%	33	%	5	%	100	%
As of September 30, 2020																					$	13,367.7		$	4,872.6		$	1,004.8		$	19,245.1		70	%	25	%	5	%	100	%
Average AUM for period	$	16,538.6		$	9,125.2		$	1,337.2		$	27,001.0										$	13,432.5		$	4,785.3		$	1,005.1		$	19,222.9

As of June 30, 2016	$	21,676.8		$	12,608.9		$	1,430.5		$	35,716.2		61	%	35	%	4	%	100	%
As of June 30, 2019																					$	13,844.3		$	6,309.5		$	1,097.0		$	21,250.8		65	%	30	%	5	%	100	%
Gross client inflows ⁽¹⁾	742.8			329.1			54.9			1,126.8											433.8			107.1			62.8			603.7
Gross client outflows ⁽¹⁾	(1,628.3		)	(1,612.5		)	(148.4		)	(3,389.2		)									(1,116.7		)	(396.4		)	(123.9		)	(1,637.0		)
Market appreciation/(depreciation) & other ⁽²⁾	757.6			599.3			7.8			1,364.7											226.1			12.0			17.6			255.7
As of September 30, 2016	$	21,548.9		$	11,924.8		$	1,344.8		$	34,818.5		62	%	34	%	4	%	100	%
As of September 30, 2019																					$	13,387.5		$	6,032.2		$	1,053.5		$	20,473.2		65	%	30	%	5	%	100	%
Average AUM for period	$	21,649.0		$	12,412.7		$	1,383.9		$	35,445.6										$	13,619.9		$	6,177.2		$	1,079.6		$	20,876.7

	Blended Asset			Equity			Fixed Income			Total			Blended Asset		Equity		Fixed Income		Total		Blended Asset			Equity			Fixed Income			Total			Blended Asset		Equity		Fixed Income		Total
				(in millions)																				(in millions)
As of December 31, 2016	$	19,909.4		$	10,463.9		$	1,309.7		$	31,683.0		63	%	33	%	4	%	100	%
As of December 31, 2019																					$	13,473.3		$	4,988.8		$	1,018.0		$	19,480.1		69	%	26	%	5	%	100	%
Gross client inflows ⁽¹⁾	1,733.9			914.1			290.7			2,938.7											1,256.0			440.8			119.2			1,816.0
Gross client outflows ⁽¹⁾	(7,321.1		)	(4,382.1		)	(327.7		)	(12,030.9		)									(2,424.8		)	(715.6		)	(180.1		)	(3,320.5		)
Market appreciation/(depreciation) & other ⁽²⁾	2,057.9			1,841.5			55.6			3,955.0											1,063.2			158.6			47.7			1,269.5
As of September 30, 2017	$	16,380.1		$	8,837.4		$	1,328.3		$	26,545.8		62	%	33	%	5	%	100	%
As of September 30, 2020																					$	13,367.7		$	4,872.6		$	1,004.8		$	19,245.1		69	%	26	%	5	%	100	%
Average AUM for period	$	17,917.8		$	9,948.0		$	1,316.9		$	29,182.7										$	13,124.9		$	4,635.3		$	1,012.8		$	18,773.0

As of December 31, 2015	$	22,442.4		$	11,828.4		$	1,171.4		$	35,442.2		64	%	33	%	3	%	100	%
As of December 31, 2018																					$	13,532.2		$	5,501.9		$	1,129.5		$	20,163.6		67	%	27	%	6	%	100	%
Gross client inflows ⁽¹⁾	2,571.2			972.1			286.7			3,830.0											1,062.9			648.1			163.8			1,874.8
Gross client outflows ⁽¹⁾	(4,982.2		)	(4,550.1		)	(340.8		)	(9,873.1		)									(2,928.3		)	(1,087.3		)	(317.1		)	(4,332.7		)
Acquired assets	—			2,719.8			174.5			2,894.3
Market appreciation/(depreciation) & other ⁽²⁾	1,517.5			954.6			53.0			2,525.1											1,720.7			969.5			77.3			2,767.5
As of September 30, 2016	$	21,548.9		$	11,924.8		$	1,344.8		$	34,818.5		62	%	34	%	4	%	100	%
As of September 30, 2019																					$	13,387.5		$	6,032.2		$	1,053.5		$	20,473.2		65	%	30	%	5	%	100	%
Average AUM for period	$	21,840.7		$	12,167.4		$	1,300.1		$	35,308.2										$	13,640.1		$	6,077.6		$	1,099.2		$	20,816.9

________________________


(1)	Transfers of client assets between portfolios are included in gross client inflows and gross client outflows.


(2)	Market appreciation/(depreciation) and other includes investment gains/(losses) on assets under management, the impact of changes in foreign exchange rates and net flows from non-sales related activities including net reinvested dividends.

The following table summarizes the annualized returns for several of our key investment strategies and ~~the~~ relative ~~performance of the industry benchmark over the periods indicated.~~benchmarks. Since inception and over long-term periods, we believe these strategies have earned attractive returns on both an absolute and relative basis. We recognize, however that some key strategies have mixed track records over the past several years. These strategies are used across separate account, mutual fund and collective investment trust vehicles, and represent approximately ~~80%~~76% of our AUM as of September 30, ~~2017.~~2020.


Key Strategies	AUM as of September 30, 2017 (in millions)		Inception Date	Annualized Returns as of September 30, 2017 (3)						AUM as of September 30, 2020 (in millions)		Inception Date	Annualized Returns as of September 30, 2020 (2)
Key Strategies	AUM as of September 30, 2017 (in millions)		Inception Date	One Year	Three Year	Five Year	Ten Year	Market Cycle (1)	Inception	AUM as of September 30, 2020 (in millions)		Inception Date	One Year	Three Year	Five Year	Ten Year	Inception
Long-Term Growth (30%-80% Equity Exposure)	$	7,440.5	1/1/1973	8.8%	4.4%	7.2%	4.7%	6.5%	9.6%	$	5,553.3	1/1/1973	14.7%	8.7%	9.1%	7.9%	9.5%
Blended Benchmark: 55% S&P 500 Total Return / 45% Bloomberg Barclays Government/Credit Bond				9.9%	7.3%	8.7%	6.4%	5.4%	9.3%
Blended Index (3)													10.3%	7.6%	8.6%	7.8%	8.8%
Core Non-U.S. Equity	$	4,242.2	10/1/1996	14.4%	3.6%	6.0%	1.6%	5.9%	7.7%	$	614.7	10/1/1996	18.5%	5.8%	8.8%	4.8%	7.5%
Benchmark: ACWIxUS Index				19.6%	4.7%	7.0%	1.3%	3.8%	5.4%				3.0%	1.2%	6.2%	4.0%	4.8%
Growth with Reduced Volatility (20%-60% Equity Exposure)	$	3,322.9	1/1/1973	6.5%	3.4%	5.5%	4.2%	5.9%	8.8%	$	2,603.6	1/1/1973	13.1%	7.7%	7.5%	6.5%	8.7%
Blended Benchmark: 40% S&P 500 Total Return / 60% Bloomberg Barclays Government/Credit Bond				7.1%	6.1%	6.9%	5.9%	5.4%	8.8%
Blended Index (4)													9.2%	6.8%	7.2%	6.6%	8.4%
Equity-Oriented (70%-100% Equity Exposure)	$	1,513.4	1/1/1993	12.8%	5.6%	9.6%	4.9%	6.9%	10.0%	$	1,325.7	1/1/1993	17.6%	11.8%	12.4%	9.9%	10.2%
Blended Benchmark: 65% Russell 3000® / 20% ACWIxUS / 15% Bloomberg Barclays U.S. Aggregate Bond				16.0%	8.4%	11.0%	6.0%	5.3%	8.6%
Blended Benchmark: 65% Russell 3000 / 20% ACWIxUS/ 15% Bloomberg Barclays U.S. Aggregate Bond													11.7%	8.8%	10.9%	10.2%	8.6%
Equity-Focused Blend (50%-90% Equity Exposure)	$	1,130.9	4/1/2000	10.4%	5.0%	8.2%	4.9%	7.0%	7.0%	$	962.7	4/1/2000	16.0%	9.7%	10.2%	8.8%	7.4%
Blended Benchmark: 53% Russell 3000/ 17% ACWIxUS/ 30% Bloomberg Barclays U.S. Aggregate Bond				13.0%	7.4%	9.4%	5.8%	5.4%	5.4%
Blended Benchmark: 53% Russell 3000 / 17% ACWIxUS/ 30% Bloomberg Barclays U.S. Aggregate Bond													11.1%	8.3%	9.8%	9.1%	5.8%
Core Equity-Unrestricted (90%-100% Equity Exposure)	$	951.1	1/1/1995	14.8%	6.1%	11.4%	5.9%	7.7%	11.1%	$	562.7	1/1/1995	17.5%	12.9%	13.8%	11.5%	11.3%
Blended Benchmark: 80% Russell 3000® / 20% ACWIxUS				19.0%	9.6%	12.8%	6.4%	5.1%	9.1%
Blended Benchmark: 80% Russell 3000 / 20% ACWIxUS													12.6%	9.5%	12.2%	11.6%	9.2%
Core U.S. Equity	$	703.4	7/1/2000	16.1%	7.7%	12.5%	6.4%	N/A ⁽²⁾	7.5%	$	175.6	7/1/2000	20.1%	15.2%	15.7%	12.6%	8.6%
Benchmark: Russell 3000® Index				18.7%	10.7%	14.2%	7.6%	N/A ⁽²⁾	5.7%
Benchmark: Russell 3000													15.0%	11.7%	13.7%	13.5%	6.5%
Conservative Growth (5%-35% Equity Exposure)	$	538.8	4/1/1992	3.6%	2.4%	3.3%	3.8%	5.2%	6.0%	$	516.8	4/1/1992	9.4%	5.8%	5.3%	4.5%	6.0%
Blended Benchmark:15% Russell 3000/ 5% ACWIxUS/ 80% Bloomberg Barclays U.S. Intermediate Aggregate Bond				3.8%	3.7%	3.9%	4.5%	5.0%	6.2%
Blended Benchmark: 15% Russell 3000 / 5% ACWIxUS / 80% Bloomberg Barclays U.S. Intermediate Aggregate Bond													7.4%	5.4%	5.1%	4.7%	6.2%
Aggregate Fixed Income	$	495.8	1/1/1984	0.3%	2.3%	1.8%	4.3%	4.9%	7.3%	$	189.5	1/1/1984	8.1%	5.5%	4.3%	3.6%	7.2%
Benchmark: Bloomberg Barclays U.S. Aggregate Bond				0.1%	2.7%	2.1%	4.3%	5.1%	7.2%				7.0%	5.2%	4.2%	3.6%	7.1%
Rainier International Small Cap	$	629.5	3/28/2012	22.1%	13.2%	15.3%	N/A ⁽²⁾	N/A ⁽²⁾	15.4%	$	920.2	3/28/2012	32.1%	9.2%	10.9%	N/A ⁽¹⁾	13.0%
Benchmark: MSCI ACWIxUS Small Cap Index				19.2%	8.1%	9.7%	N/A ⁽²⁾	N/A ⁽²⁾	6%				7.0%	0.9%	6.8%	N/A ⁽¹⁾	5.8%
Disciplined Value	$	372.4	11/1/2003	15.9%	9%	12.0%	8.2%	N/A ⁽²⁾	10.8%
Disciplined Value US (5)										$	1,133.1	1/1/2013	(2.8)%	5.6%	10.3%	N/A ⁽¹⁾	12.2%
Benchmark: Russell 1000 Value				15.1%	8.5%	13.2%	5.9%	N/A ⁽²⁾	8.4%				(5.0)%	2.6%	7.7%	N/A ⁽¹⁾	11.4%

__________________________

(1)

The market cycle performance numbers are calculated from April 1, 2000 to September 30, 2017. We believe that a full market cycle time period should contain a wide range of market conditions and usually consists of a bear market, recovery and bull market stage. Our definition of the current market cycle includes the bear market that began with an abrupt decline in the technology sector (4/1/2000 - 9/30/2002), the subsequent failed recovery (10/1/2002 - 10/31/2007), the financial crisis bear market (11/1/2007 - 2/28/2009), and the current bull market (3/1/2009 - current). The period utilized in our current market cycle may differ from periods used by other investment managers.


~~(2)~~	Performance not available given the product's inception date.


~~(3)~~(2)	Key investment strategy returns are presented net of fees. Benchmark returns do not reflect any fees or expenses.

(3)

Benchmark shown uses the 55/45 Blended Index from 01/01/1973-12/31/1987 and the 40/15/45 Blended Index from 01/01/1988- 09/30/2020. The 55/45 Blended Index is represented by 55% S&P 500 Total Return Index ("S&P 500") and 45% Bloomberg Barclays U.S. Government/Credit Bond Index ("BGCB"). The 40/15/45 Blended Index is 40% Russell 3000 Index ("Russell 3000"), 15% MSCI ACWI ex USA Index ("ACWxUS"), and 45% Bloomberg Barclays U.S. Aggregate Bond Index ("BAB").

(4)

Benchmark shown uses the 40/60 Blended Index from 01/01/1973-12/31/1987, the 30/10/60 Blended Index from 01/01/1988-12/31/2019, and the 30/10/30/30 Blended Index from 01/01/2020 to 09/30/2020. The 40/60 Blended Index is represented by 40% S&P 500 and 60% BGCB. The 30/10/60 Blended Index is represented by 30% Russell 3000, 10% ACWxUS, and 60% BAB. The 30/10/30/30 Blended Index is represented by 30% Russell 3000, 10% ACWxUS, 30% BAB, and 30% Barclays Intermediate Aggregate Bond Index.


(5)	In our Annual Report, on Form 10-K for the year ended December 31, 2019, we began presenting the performance of Disciplined Value US in place of Disciplined Value Unrestricted.

Revenue

Our revenues primarily consist of investment management fees earned from managing our clients’ AUM. We earn our investment management fees as a percentage of our clients’ AUM either as of a specified date or on a daily basis. Our investment management fees can fluctuate based on the average fee rate for our investment management products, which are affected by the composition of our AUM among various portfolios and investment vehicles.

~~The Company serves~~We serve as the investment adviser for Manning & Napier Fund, Inc., ~~Rainier Investment Management Mutual Funds,~~ Exeter Trust Company Collective Investment Trusts and Rainier Multiple Investment Trust. The mutual funds are open-end mutual funds that primarily offer no-load share classes designed to meet the needs of a range of institutional and other investors. Exeter Trust Company, an affiliated New Hampshire-chartered trust company and Rainier Multiple Investment Trust sponsor collective investment trusts for qualified retirement plans, including 401(k) plans. These mutual funds and collective investment trusts comprised ~~$9.2~~$5.6 billion,, or ~~35%~~29%, of our AUM as of September 30, ~~2017~~.2020. MNA and Rainier also serve as the investment advisor to all of our separately managed accounts, managing ~~$17.4~~$13.6 billion,, or ~~65%~~71%, of our AUM as of September 30, ~~2017~~,2020, including assets managed as a sub-advisor to pooled investment vehicles. For the period ended September 30, ~~2017~~2020 approximately ~~97%~~98% of our revenue was earned from clients located in the United States.

~~In response~~We earn distribution and servicing fees for providing services to ~~industry trends~~our affiliated mutual funds. Revenue is computed and ~~increasing fee pressure from passive strategies offered~~earned daily based on a percentage of AUM.

We earn custodial service fees for administrative and safeguarding services performed by ~~our competitors~~Exeter Trust Company. Fees are calculated as ~~well as~~a percentage of the ~~anticipated impact~~client's market value with additional fees for certain transactions.

During the first quarter of ~~regulatory changes, management is in~~2019, we completed the ~~midst of an~~ effort to restructure fees ~~across~~for many of our mutual fund ~~product set. We anticipate that the majority of the financial~~and collective trust vehicles. The impacts ~~including reduced management fees and distribution and servicing charges, will occur in the first half of 2018 and the impact~~ on our overall revenue margins ~~will vary depending on the business mix at the time of the fee change. Given the overall pressure on fees that all active managers~~and operating expenses are ~~facing, we believe that bringing our fund fees to a more competitive level will enhance our ability to attract additional assets~~described below in the ~~future.~~discussion of results for the three and nine months ended September 30, 2020.

Operating Expenses

Our largest operating expenses are employee compensation and related costs, and to a lesser degree, distribution, servicing and custody expenses, discussed further below, with a significant portion of these expenses varying in a direct relationship to our absolute and relative investment management performance, as well as AUM and revenues. We review our operating expenses in relation to the investment market environment and changes in our revenues. However, we are generally willing to make expenditures as necessary, even when faced with declining rates of growth in revenues, in order to support our investment products, our client service levels, strategic initiatives and our long-term value.

Compensation and related costs. Employee compensation and related costs represent our largest expense, including employee salaries and benefits, incentive compensation to investment and sales professionals, ~~and equity-based~~ compensation issued under our long-term incentive plan as well as equity ~~compensation plan.~~compensation. These costs are affected by changes in the employee headcount, the mix of existing job descriptions, competitive factors, the addition of new skill sets and variations in the level of our AUM and ~~revenues, changes in our stock price reflected in our share-based compensation and/or the number of awards issued.~~revenues. In addition, these costs are impacted by the amount of compensation granted under our equity plan and the amount of deferred cash awards granted under our long-term incentive plan. Incentive compensation for our research team considers the cumulative impact of both absolute and relative investment performance over ~~the trailing one-, two- and three-year~~historical time periods, with more weight placed on the recent periods. As such, incentive compensation paid to our research team will vary, in part, based on absolute and relative investment performance.

Distribution, servicing and custody expenses. Distribution, servicing and custody ~~expense~~expenses represent amounts paid to various ~~platforms that distribute our mutual funds~~intermediaries for distribution, shareholder servicing, administrative servicing and ~~collective trust funds, as well as costs for~~ custodial ~~services, shareholder services, and 12b-1 distribution.~~services. These expenses generally increase or decrease in line with changes in our mutual fund and collective investment trust AUM or services performed by these intermediaries. During the first quarter of 2019, we completed the effort, begun in 2017, of restructuring fees across our mutual funds. The financial impacts were a reduction in the management fees on existing business, as well as an offsetting reduction in related distribution, servicing and custody expenses. Given the overall pressure on fees that all active managers are facing, we felt bringing our fund fees to a more competitive level would enhance our ability to attract additional assets in the future.

Other operating costs. Other operating costs include technology costs, accounting, legal and other professional service fees, occupancy and facility costs, travel and entertainment expenses, insurance, market data service expenses and all other miscellaneous costs associated with managing the day-to-day operations of our business.

Non-Operating Income (Loss)

Non-operating income (loss) includes interest expense, interest and dividend income, changes in liability under the tax receivable agreement ("TRA") entered into between Manning & Napier and the other holders of Class A units of Manning &

Napier Group, LLC ("Manning & Napier Group"), gains (losses) related to investment securities sales ~~and~~as well as changes in values of those investment securities designated as ~~trading and~~ equity ~~method investments.~~securities, at fair value.

We expect the interest and investment components of non-operating income (loss) to fluctuate based on market conditions, the performance of our investments and the overall amount of our investments held by the Company to provide initial cash seeding for product development purposes and short-term investment for cash management opportunities.

Provision for Income Taxes

The Company is comprised of entities that have elected to be treated as either a limited liability company ("LLC") or a "C-Corporation". As such, the entities functioning as ~~LLC's~~LLCs are not liable for or able to benefit from U.S. federal or most state and local income taxes on their earnings, and their earnings (losses) will be included in the personal income tax returns of each entity's unit holders. The entities functioning as C-Corporations are liable for or able to benefit from U.S. federal and state and local income taxes on their earnings and losses, respectively.

Noncontrolling Interests

Manning & Napier, Inc. holds an economic interest of approximately ~~17.8%~~88.2% in Manning & Napier Group as of September 30, ~~2017 but,~~2020 and, as managing member, controls all of the business and affairs of Manning & Napier Group. As a result, the Company consolidates the financial results of Manning & Napier Group and records a noncontrolling interest in our consolidated financial statements. Net income attributable to noncontrolling interests on the consolidated statements of operations represents the portion of earnings attributable to the economic interest in Manning & Napier Group held by the noncontrolling interests.

Critical Accounting Policies and Estimates

~~There have been no significant changes in our~~Our critical accounting policies and estimates ~~from those that were~~are disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019.

This management’s discussion and analysis should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 together with the consolidated financial statements and related notes and the other financial information that appear elsewhere in this report.

Recent Accounting Pronouncements

See Note 2, "Summary of Significant Accounting Policies - Recent Accounting Pronouncements" to the Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information.

Revision of Previously Reported Consolidated Statements of Operations

In the quarter ended September 30, 2020, we revised our sales channel classification of certain 2020 and 2019 investment management revenues to properly present these revenues as either wealth management or institutional and intermediary investment management revenues. The reclassification had no impact on total revenue, operating income, or net income. See Note 2, “Summary of Significant Accounting Policies - Revision of Previously Reported Consolidated Statements of Operations” to the Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional information.

Three Months Ended September 30, ~~2017~~2020 Compared to Three Months Ended September 30, ~~2016~~2019

Assets Under Management

The following table reflects changes in our AUM for the three months ended September 30, ~~2017~~2020 and ~~2016~~2019:


	Three months ended September 30,						Period-to-Period					Three months ended September 30,						Period-to-Period
	2017			2016			$			%		2020			2019			$			%
	(in millions)											(in millions)
Separately managed accounts
Wealth Management ⁽⁴⁾
Beginning assets under management	$	17,714.9		$	20,585.0		$	(2,870.1	)	(14	)%	$	8,334.4		$	9,397.9		$	(1,063.5	)	(11	)%
Gross client inflows ⁽¹⁾	407.2			374.6			32.6			9	%	250.7			231.6			19.1			8	%
Gross client outflows ⁽¹⁾	(1,383.4		)	(1,226.0		)	(157.4		)	13	%	(304.9		)	(664.7		)	359.8			(54	)%
AUM Reclassification ⁽³⁾												(266.8		)	—			(266.8		)	NM
Market appreciation (depreciation) & other ⁽²⁾	621.6			803.4			(181.8		)	(23	)%	89.2			(589.9		)	679.1			(115	)%
Ending assets under management	$	17,360.3		$	20,537.0		$	(3,176.7	)	(15	)%	$	8,102.6		$	8,374.9		$	(272.3	)	(3	)%
Mutual funds and collective investment trusts
Average AUM for period												$	8,093.3		$	8,559.4
Institutional and Intermediary ⁽⁴⁾
Beginning assets under management	$	9,360.6		$	15,131.2		$	(5,770.6	)	(38	)%	$	10,305.9		$	11,852.9		$	(1,547.0	)	(13	)%
Gross client inflows ⁽¹⁾	393.4			752.2			(358.8		)	(48	)%	343.7			372.1			(28.4		)	(8	)%
Gross client outflows ⁽¹⁾	(928.2		)	(2,163.2		)	1,235.0			(57	)%	(674.8		)	(972.3		)	297.5			(31	)%
AUM Reclassification ⁽³⁾												266.8			—			266.8			NM
Market appreciation (depreciation) & other ⁽²⁾	359.7			561.3			(201.6		)	(36	)%	900.9			845.6			55.3			7	%
Ending assets under management	$	9,185.5		$	14,281.5		$	(5,096.0	)	(36	)%	$	11,142.5		$	12,098.3		$	(955.8	)	(8	)%
Average AUM for period												$	11,129.6		$	12,317.3
Total assets under management
Beginning assets under management	$	27,075.5		$	35,716.2		$	(8,640.7	)	(24	)%	$	18,640.3		$	21,250.8		$	(2,610.5	)	(12	)%
Gross client inflows ⁽¹⁾	800.6			1,126.8			(326.2		)	(29	)%	594.4			603.7			(9.3		)	(2	)%
Gross client outflows ⁽¹⁾	(2,311.6		)	(3,389.2		)	1,077.6			(32	)%	(979.7		)	(1,637.0		)	657.3			(40	)%
Market appreciation (depreciation) & other ⁽²⁾	981.3			1,364.7			(383.4		)	(28	)%	990.1			255.7			734.4			287	%
Ending assets under management	$	26,545.8		$	34,818.5		$	(8,272.7	)	(24	)%	$	19,245.1		$	20,473.2		$	(1,228.1	)	(6	)%
Average AUM for period												$	19,222.9		$	20,876.7

________________________


~~(1)~~	~~Transfers of client assets between portfolios are included in gross client inflows and gross client outflows.~~


~~(2)~~	Market appreciation/(depreciation) and other includes investment gains/(losses) on assets under management, the impact of changes in foreign exchange rates and net flows from non-sales related activities including net reinvested dividends.

Our total AUM decreased by $8.3 billion from $34.8 billion at September 30, 2016 to $26.5 billion at September 30, 2017. The decrease was attributable to net client outflows of $11.1 billion, partially offset by market appreciation of $2.8 billion. Net client outflows consisted of approximately $4.9 billion of net outflows for separate accounts and $6.2 billion for mutual funds and collective investment trusts. By portfolio, the rates ofNM - Percentage change in AUM from September 30, 2016 to September 30, 2017 consisted of a $3.1 billion, or 26% decrease in our equity portfolio, a $5.2 billion, or 24% decrease in our blended asset portfolio, and a decrease of $16.5 million, or 1% in our fixed income portfolio.

We attribute our net cash outflows to our challenging investment returns, whereby our one, three, and five year annualized returns for many of our key investment strategies have trailed their related benchmarks in recent years and increased competition from lower fee passive investment products. Our ability to improve cash flows going forward will depend on our ability to sustain improved investment performance and execute on our strategic initiatives focused on gathering and retaining client assets.

The total AUM decrease of $0.5 billion, to $26.5 billion at September 30, 2017 from $27.1 billion at June 30, 2017 was attributable to net client cash outflows of $1.5 billion, partially offset by market appreciation of $1.0 billion. Our separate accounts and mutual fund and collective investment trust vehicles had net client outflows of approximately $1.0 billion and $0.5 billion, respectively. The blended investment gain was 4% in separately managed accounts and 4% in mutual funds and collective investment trusts. By portfolio, our AUM decreased by $0.2 billion in our blended asset portfolio and $0.3 billion in our equity portfolio, and increased by $39.1 million in our fixed income portfolio.

As of September 30, 2017, the composition of our AUM was 65% in separate accounts and 35% in mutual funds and collective investment trusts, compared to 59% in separate accounts and 41% in mutual funds and collective investment trusts at September 30, 2016. The composition of our AUM across portfolios at September 30, 2017 was 62% in blended assets, 33% in equity, and 5% in fixed income, compared to 62% in blended assets, 34% in equity, and 4% in fixed income at September 30, 2016.

With regard to our separate accounts, gross client inflows of $0.4 billion were offset by approximately $1.4 billion of gross client outflows during the three months ended September 30, 2017. The $0.4 billion gross client inflows include approximately $0.2 billion into our blended asset portfolio and $0.2 billion into our equity portfolio. During the three months ended September 30, 2017, 75% of our separate account gross client inflows were derived from our Direct Channel. With regard to gross client outflows, cancellations were approximately $0.5 billion and withdrawals from existing accounts were approximately $0.9 billion. Outflows during the second quarter were 46%, 48% and 6% from blended, equity and fixed income portfolios, respectively. Our separate account clients redeemed assets at a rate of 31% during the quarter, compared to a 33% redemption rate over the trailing twelve months ended September 30, 2017. The annualized separate account retention rate was 89% for the three months ended September 30, 2017 compared to 82% for the rolling twelve months ended September 30, 2017.

Net client outflows of $0.5 billion from our mutual fund and collective investment trusts included gross client inflows of $0.4 billion, offset by gross client outflows of $0.9 billion during the three months ended September 30, 2017. Gross client inflows into our blended asset life cycle vehicles, including both risk based and target date strategies, represented $0.3 billion, or 73%, of mutual fund and collective trust fund gross client inflows during the three months ended September 30, 2017. With regard to gross client outflows, $0.6 billion, or 61%, of mutual fund and collective investment trust gross client outflows were from blended asset mutual fund and collective trust products.

~~The following table sets forth our results of operations and related data for the three months ended September 30, 2017 and 2016:~~

Three months ended September 30, Period-to-Period
2017 2016 $ %
(in thousands, except share data)
Revenues
Investment management services revenue $ 48,838
$ 63,305
$ (14,467 ) (23 )%
Expenses
Compensation and related costs 22,287
24,627
(2,340 ) (10 )%
Distribution, servicing and custody expenses 6,920
8,798
(1,878 ) (21 )%
Other operating costs 7,887
8,188
(301 ) (4 )%
Total operating expenses 37,094
41,613
(4,519 ) (11 )%
Operating income 11,744
21,692
(9,948 ) (46 )%
Non-operating income (loss)
Non-operating income (loss), net 847
(142 ) 989
*
Income before provision for income taxes 12,591
21,550
(8,959 ) (42 )%
Provision for income taxes 739
1,565
(826 ) (53 )%
Net income attributable to controlling and noncontrolling interests 11,852
19,985
(8,133 ) (41 )%
Less: net income attributable to noncontrolling interests 10,331
17,727
(7,396 ) (42 )%
Net income attributable to Manning & Napier, Inc. $ 1,521
$ 2,258
$ (737 ) (33 )%
Per Share Data
Net income per share available to Class A common stock
Basic $ 0.10
$ 0.15

Diluted $ 0.10
$ 0.15

Weighted average shares of Class A common stock outstanding
Basic 14,249,347
14,042,880

Diluted 78,210,019
14,175,321

Cash dividends declared per share of Class A common stock $ 0.08
$ 0.16

Other financial and operating data
Economic net income ⁽¹⁾
$ 7,681
$ 13,361
$ (5,680 ) (43 )%
Economic net income per adjusted share ⁽¹⁾
$ 0.10
$ 0.16

Weighted average adjusted Class A common stock outstanding ⁽¹⁾
79,060,711
81,171,115

~~_______________________~~


~~(*)~~	~~Percentage change not meaningful~~


~~(1)~~	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Supplemental Non-GAAP Financial Information” for Manning & Napier’s reasons for including these non-GAAP measures in this report in addition to a reconciliation of non-GAAP financial measures to GAAP measures for the periods indicated.

~~Revenues~~

Our investment management services revenue decreased by $14.5 million, or 23%, to $48.8 million for the three months ended September 30, 2017 from $63.3 million for the three months ended September 30, 2016. This decrease is driven primarily by an $8.4 billion, or 24%, decrease in our average AUM to $27.0 billion for the three months ended September 30, 2017 from $35.4 billion for the three months ended September 30, 2016. Average AUM decreased as a result of net client outflows of $11.1 billion, partially offset by market appreciation of $2.8 billion during the rolling twelve months ended September 30, 2017. By portfolio, our AUM decreases were concentrated in our equity and blended asset portfolios, which decreased by 26% and 24%, respectively, compared to September 30, 2016. The outflows were largely attributable to challenging portfolio performance relative to benchmarks and increased competition as a result of an industry shift to lower fee passive investment products.

Our average separately managed account fee for the three months ended September 30, 2017 remained consistent at 0.62% when compared to the three months ended September 30, 2016. For the three months ended September 30, 2017 and 2016, separately managed account standard fees ranged from 0.15% to 1.25% depending on investment objective and account size. As of September 30, 2017, the concentration of investments in our separately managed account assets was 62% blended assets, 31% equity and 7% fixed income, compared to 58% blended assets, 36% equity and 6% fixed income as of September 30, 2016.

Our average fee on mutual fund and collective investment trust products increased to 0.85% for the three months ended September 30, 2017 from 0.77% for the three months ended September 30, 2016. This increase was primarily due to a single retirement plan relationship which redeemed approximately $2.5 billion during the second quarter of 2017 where the fees were lower than those associated with the remaining population of mutual fund and collective AUM. The management fees earned on our mutual fund and collective investment trust management fees ranged from 0.14% to 1.00%, depending on investment strategy, for the three months ended September 30, 2017 and 2016. As of September 30, 2017, the concentration of assets in our mutual fund and collective investment trusts was 62% blended assets, 37% equity and 1% fixed income, compared to 68% blended assets, 31% equity and 1% fixed income as of September 30, 2016.

~~Operating Expenses~~

~~Our operating expenses decreased by $4.5 million, or 11%, to $37.1 million for the three months ended September 30, 2017 from $41.6 million for the three months ended September 30, 2016.~~

Compensation and related costs decreased by $2.3 million, or 10%, to $22.3 million for the three months ended September 30, 2017 from $24.6 million for the three months ended September 30, 2016. This decrease was driven by lower variable incentive costs as a result of the reduction in AUM, coupled with a reduction in our average overall workforce of 7% compared to the three months ended September 30, 2016. When considered as a percentage of revenue, compensation and related costs for the three months ended September 30, 2017 was 46% compared to 39% for the three months ended September 30, 2016. We anticipate that our compensation ratio as a percentage of revenue will remain elevated in the near term compared to prior periods.

Distribution, servicing and custody expenses decreased by $1.9 million, or 21%, to $6.9 million for the three months ended September 30, 2017 from $8.8 million for the three months ended September 30, 2016. The decrease was generally driven by a 37% decrease in mutual fund and collective investment trust average AUM for the three months ended September 30, 2017 compared to the three months ended September 30, 2016. The percentage decrease in AUM exceeds the percentage decrease in expense since 2017 redemptions have been concentrated in those relationships where we do not have distribution and servicing obligations. Specifically, we had a single retirement plan relationship which redeemed approximately $2.5 billion during the second quarter of 2017 where there was no associated distribution obligation. As a percentage of mutual fund and collective investment trust average AUM, distribution, servicing and custody expense was 0.30% for the three months ended September 30, 2017, compared to 0.24% for the three months ended September 30, 2016.meaningful

Other operating costs for the three months ended September 30, 2017 was $7.9 million, compared to $8.2 million for the three months ended September 30, 2016. Included in other operating costs for the three months ended September 30, 2017 were certain one-time costs, including those associated with the adoption of the Rainier International Discovery Fund onto the Manning & Napier fund platform and the mutual fund fee restructure. As a percentage of revenue, other operating costs was 16% for the three months ended September 30, 2017 and 13% for the three months ended September 30, 2016.

~~Non-Operating Income (Loss)~~

Non-operating income for the three months ended September 30, 2017 was $0.8 million, compared to net loss of $0.1 million for the three months ended September 30, 2016. Included within non-operating income (loss) for the three months ended September 30, 2017 and 2016 was $0.7 million of net gains and $0.1 million of net losses, respectively, on investments held by us to provide initial cash seeding for product development purposes. Interest expense for the three months ended September 30, 2017 decreased by approximately $0.1 million compared to the three months ended September 30, 2016, driven by the termination of our credit facility in early 2017 and the unused commitment fee on our credit facility paid in 2016.

~~Provision for Income Taxes~~

Our tax provision decreased by $0.8 million to $0.7 million for the three months ended September 30, 2017 from $1.6 million for the three months ended September 30, 2016. The change was primarily driven by a decrease in taxable earnings compared to the prior year.

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Assets Under Management~~

~~The following table reflects changes in our AUM for the nine months ended September 30, 2017 and 2016:~~

Nine months ended September 30, Period-to-Period
2017 2016 $ %
(in millions)
Separately managed accounts
Beginning assets under management $ 18,801.9
$ 20,735.4
$ (1,933.5 ) (9 )%
Gross client inflows ⁽¹⁾
1,384.3
1,295.9
88.4
7 %
Gross client outflows ⁽¹⁾
(5,223.1 ) (4,178.4 ) (1,044.7 ) 25 %
Acquired assets —
1,234.2
(1,234.2 ) *
Market appreciation (depreciation) & other ⁽²⁾
2,397.2
1,449.9
947.3
65 %
Ending assets under management $ 17,360.3
$ 20,537.0
$ (3,176.7 ) (15 )%
Mutual funds and collective investment trusts
Beginning assets under management $ 12,881.1
$ 14,706.8
$ (1,825.7 ) (12 )%
Gross client inflows ⁽¹⁾
1,554.4
2,534.1
(979.7 ) (39 )%
Gross client outflows ⁽¹⁾
(6,807.8 ) (5,694.7 ) (1,113.1 ) 20 %
Acquired assets —
1,660.1
(1,660.1 ) *
Market appreciation (depreciation) & other ⁽²⁾
1,557.8
1,075.2
482.6
45 %
Ending assets under management $ 9,185.5
$ 14,281.5
$ (5,096.0 ) (36 )%
Total assets under management
Beginning assets under management $ 31,683.0
$ 35,442.2
$ (3,759.2 ) (11 )%
Gross client inflows ⁽¹⁾
2,938.7
3,830.0
(891.3 ) (23 )%
Gross client outflows ⁽¹⁾
(12,030.9 ) (9,873.1 ) (2,157.8 ) 22 %
Acquired assets —
2,894.3
(2,894.3 ) *
Market appreciation (depreciation) & other ⁽²⁾
3,955.0
2,525.1
1,429.9
57 %
Ending assets under management $ 26,545.8
$ 34,818.5
$ (8,272.7 ) (24 )%

~~________________________~~


~~(*)~~	~~Percentage change not meaningful~~


(1)	Transfers of client assets between portfolios are included in gross client inflows and gross client outflows.


(2)	Market appreciation/(depreciation) and other includes investment gains/(losses) on assets under management, the impact of changes in foreign exchange rates and net flows from non-sales related activities including net reinvested dividends.


(3)	During the third quarter of 2020, the Company identified certain Institutional and Intermediary assets that were incorrectly allocated to the Wealth Management Sales Channel as of June 30, 2020. The difference had no impact to total AUM or AUM by Portfolio as of June 30, 2020 and were reclassified to the appropriate Sales Channel during the third quarter of 2020.


(4)	AUM and gross client flows between sales channels have been estimated based upon preliminary data. For a limited portion of our mutual fund AUM, reporting by sales channel is not available at the time of this report. Such estimates have no impact on total AUM, total cash flows, or AUM by investment portfolio reported in the table above.

Our total AUM decreased by ~~$8.3~~$1.2 billion from ~~$34.8~~$20.5 billion at September 30, ~~2016~~2019 to ~~$26.5~~$19.2 billion at September 30, ~~2017.~~2020. The decrease was attributable to net client outflows of ~~$11.1~~$3.5 billion, partially offset by market appreciation of ~~$2.8~~$2.3 billion. Net client outflows consisted of approximately ~~$4.9~~$0.8 billion of net outflows for ~~separate~~wealth management and $2.7 billion for institutional and intermediary. By portfolio, the rates of change in AUM from September 30, 2019 to September 30, 2020 consisted of a $1.2 billion, or 19% decrease in our equity portfolio, a $19.8 million, or 0.1% decrease in our blended asset portfolio, and a decrease of approximately $48.7 million, or 5% in our fixed income portfolio.

We have experienced a decrease in the overall rate of outflows with gross outflows of approximately $1.0 billion during the quarter ended September 30, 2020, a 40% decrease from the quarter ended September 30, 2019. Gross outflows annualized as a percentage of our AUM, or turnover rate, for the three months ended September 30, 2020 was 12%.

The rate of gross client inflows was approximately $0.6 billion during the three months ended September 30, 2020, consistent with the quarter ended September 30, 2019. We believe that by demonstrating stability in client AUM and in our organization, and modernizing our platform, we will provide a foundation from which we can grow.

The total AUM increase of approximately $0.6 billion, to $19.2 billion at September 30, 2020 from $18.6 billion at June 30, 2020 was attributable to market appreciation of $1.0 billion, partially offset by net client outflows of $0.4 billion. Net client outflows consisted of less than $0.1 billion for wealth management while net client outflows in institutional and intermediary were $0.3 billion. The blended investment gain was 1.1% in wealth management accounts and ~~$6.2~~8.7% in institutional and intermediary. By portfolio in the period, our AUM increased by $0.3 billion in our blended asset portfolio, $0.3 billion in our equity portfolio, and increased by $1.5 million in our fixed income portfolio.

As of September 30, 2020, the composition of our AUM was 42% in wealth management and 58% in institutional and intermediary, compared to 41% in wealth management and 59% in institutional and intermediary at September 30, 2019. The composition of our AUM across portfolios at September 30, 2020 was 70% in blended assets, 25% in equity, and 5% in fixed income, compared to 65% in blended assets, 30% in equity, 5% in fixed income at September 30, 2019.

For our wealth management channel, gross client inflows of less than $0.3 billion were offset by $0.3 billion of gross client outflows during the three months ended September 30, 2020. The $0.3 billion gross client inflows include approximately $0.2 billion into our blended asset portfolio and less than $0.1 billion into both our equity and fixed income portfolios. Outflows during the quarter were $0.3 billion, or 86% from blended portfolios, less than $0.1 billion, or 12% from equity, and less than $0.1 billion, or 2% from fixed income portfolios, respectively.

Gross client inflows of $0.3 billion were offset by gross client outflows of $0.7 billion within our institutional and intermediary channel during the three months ended September 30, 2020. Gross client inflows include approximately $0.2 billion into our blended asset portfolios and less than $0.1 billion into both our equity and fixed income portfolios. With regard to gross client outflows, $0.5 billion, or 73% was from our blended asset portfolios, $0.2 billion or 23% was from our equity portfolios, and less than $0.1 billion, or 4% was from our fixed income portfolios.

The following table sets forth our results of operations and related data for the three months ended September 30, 2020 and 2019:



	Three months ended September 30,				Period-to-Period
	2020		2019		$			%
	(in thousands, except share data)
Revenues
Management Fees
Wealth management	$	13,743	$	14,181	$	(438	)	(3	)%
Institutional and intermediary	13,534		14,815		(1,281		)	(9	)%
Distribution and shareholder servicing	2,424		2,570		(146		)	(6	)%
Custodial services	1,577		1,763		(186		)	(11	)%
Other revenue	789		849		(60		)	(7	)%
Total revenue	32,067		34,178		(2,111		)	(6	)%
Expenses
Compensation and related costs	18,605		19,504		(899		)	(5	)%
Distribution, servicing and custody expenses	2,596		2,959		(363		)	(12	)%
Other operating costs	6,611		8,286		(1,675		)	(20	)%
Total operating expenses	27,812		30,749		(2,937		)	(10	)%
Operating income	4,255		3,429		826			24	%
Non-operating income (loss)
Non-operating income (loss), net	550		3,298		(2,748		)	(83	)%
Income before provision for income taxes	4,805		6,727		(1,922		)	(29	)%
Provision for income taxes	1,738		150		1,588			1,059	%
Net income attributable to controlling and noncontrolling interests	3,067		6,577		(3,510		)	(53	)%
Less: net income attributable to noncontrolling interests	560		5,753		(5,193		)	(90	)%
Net income attributable to Manning & Napier, Inc.	$	2,507	$	824	$	1,683		204	%
Per Share Data
Net income per share available to Class A common stock
Basic	$	0.15	$	0.05
Diluted	$	0.13	$	0.05
Weighted average shares of Class A common stock outstanding
Basic	16,176,280		15,290,595
Diluted	18,928,954		15,600,686

Other financial and operating data
Economic income ⁽¹⁾	$	5,219	$	5,177	$	42		1	%
Economic net income ⁽¹⁾	$	3,170	$	3,676	$	(506	)	(14	)%
Economic net income per adjusted share ⁽¹⁾	$	0.14	$	0.05
Weighted average adjusted Class A common stock outstanding⁽¹⁾	22,395,521		79,033,403

_______________________

(1)

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Supplemental Non-GAAP Financial Information” for Manning & Napier’s reasons for including these measures not calculated in accordance with accounting principles generally accepted in the United States of America ("GAAP") in this report in addition to a reconciliation of non-GAAP financial measures to GAAP measures for the periods indicated.

Revenues

Wealth management revenue decreased by $0.4 million, or 3%, to $13.7 million for the three months ended September 30, 2020 from $14.2 million for the three months ended September 30, 2019. This decrease is driven primarily by a 5%, or $0.5 billion, decrease in our average wealth management AUM for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. At September 30, 2020 the concentration of investments in our wealth management assets were 91% blended assets, 6% equity and 3% fixed income, compared to 79% blended assets, 18% equity and 3% fixed income as of September 30, 2019.

Institutional and intermediary revenue decreased by $1.3 million, or 9%, to $13.5 million for the three months ended September 30, 2020 from $14.8 million for the three months ended September 30, 2019. This decrease is driven primarily by a 10%, or $1.2 billion, decrease in our average institutional and intermediary AUM for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. As of September 30, 2020, the concentration of assets in our institutional and intermediary was 54% blended assets, 39% equity and 7% fixed income, compared to 56% blended assets, 38% equity and 6% fixed income as of September 30, 2019.

Distribution and shareholder servicing revenue decreased by $0.1 million, or 6%, to $2.4 million for the three months ended September 30, 2020 from $2.6 million for the three months ended September 30, 2019. This decrease was driven by a reduction in mutual fund and collective investment trust average AUM of 8% for the same period.

Custodial services revenue decreased by $0.2 million, or 11%, to $1.6 million for the three months ended September 30, 2020 from $1.8 million for the three months ended September 30, 2019. The decrease primarily relates to decreases in our collective investment trust AUM.

Operating Expenses

Our operating expenses decreased by $2.9 million, or 10%, to $27.8 million for the three months ended September 30, 2020 from $30.7 million for the three months ended September 30, 2019.

Compensation and related costs decreased by $0.9 million, or 5%, to $18.6 million for the three months ended September 30, 2020 from $19.5 million for the three months ended September 30, 2019. This decrease in the current quarter compared to the third quarter of 2019 was driven by a decrease in our workforce and a reduction in employee severance costs, partially offset by an increase in the estimated incentive compensation for our investment team resulting from investment performance. When considered as a percentage of revenue, compensation and related costs was 58% for the three months ended September 30, 2020 and 57% for the three months ended September 30, 2019. Given the declines in our revenue, we anticipate that our compensation ratio as a percentage of revenue will remain elevated in the near term compared to prior periods.

Distribution, servicing and custody expenses decreased by $0.4 million, or 12%, to $2.6 million for the three months ended September 30, 2020 from $3.0 million for the three months ended September 30, 2019. The decrease was generally driven by a 8% reduction in mutual fund and collective investment trust average AUM for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. As a percentage of mutual fund and collective investment trust average AUM, distribution, servicing and custody expense was 0.18% for the three months ended September 30, 2020, compared to 0.19% for the three months ended September 30, 2019.

Other operating costs for the three months ended September 30, 2020 were $6.6 million, as compared to $8.3 million for the three months ended September 30, 2019. We recognized a $1.2 million gain, which offset other operating costs, in the third quarter of 2020 related to the reimbursement of prior expenses paid on behalf of our affiliated mutual funds and collective investment ~~trusts.~~ trusts ("the Funds and CITs") upon the settlement of the Funds and CITs claim against a third party. As a percentage of revenue, other operating costs were 21% for the three months ended September 30, 2020 and 24% for the three months ended September 30, 2019.

Non-Operating Income (Loss)

Non-operating income for the three months ended September 30, 2020 was $0.6 million, a decrease of $2.7 million, from non-operating income of $3.3 million for the three months ended September 30, 2019. The following table reflects the components of non-operating income (loss) for the three months ended September 30, 2020 and 2019:



	Three months ended September 30,					Period-to-Period
	2020		2019			$			%
	(in thousands)
Non-operating income (loss)
Interest expense	$	—	$	(13	)	$	13		(100	)%
Interest and dividend income ⁽¹⁾	115		782			(667		)	(85	)%
Change in liability under tax receivable agreement ⁽²⁾	24		(394		)	418			(106	)%
Net gains (losses) on investments ⁽³⁾	411		40			371			928	%
Gain on sale of business ⁽⁴⁾	—		2,883			(2,883		)	(100	)%
Total non-operating income (loss)	$	550	$	3,298		$	(2,748	)	(83	)%

__________________________


(1)	The decrease in interest and dividend income for the three months ended September 30, 2020 compared to 2019 is attributable to a decrease in investments, including U.S. Treasury notes and bills, corporate bonds and other short-term investments to optimize cash management opportunities, coupled with a decrease in interest rates.


(2)	The change in the liability under the tax receivable agreement for both the three month periods ended September 30, 2020 and 2019 was driven by a change in our effective tax rate during the period and the corresponding increase in the payment of expected tax benefit under the tax receivable agreement.


(3)	The amount of net gain (loss) on investments held by us, to provide initial cash seeding for product development purposes and to hedge economic exposure to market movements on our deferred compensation plan, will vary depending on the performance and overall amount of our investments.


(4)	The gain on sale of business during the three months ended September 30, 2019 is due to the completion of the sale of our wholly-owned subsidiary Perspective Partners, LLC on August 30, 2019.

Provision for Income Taxes

Our provision for income taxes was $1.7 million for the three months ended September 30, 2020, compared to a provision of $0.2 million for the three months ended September 30, 2019. The increase in the provision for income taxes during the current quarter compared to the third quarter of 2019 is due to the redemption and subsequent retirement of Class A units of Manning & Napier Group during the second quarter of 2020. The redemption resulted in an increase of Manning & Napier, Inc.'s ownership of Manning & Napier Group from 19.5% to 88.2%. Accordingly, a higher portion of Manning & Napier Group's earnings are subject to taxation at the C-Corporation level.

Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019

Assets Under Management

The following table reflects changes in our AUM for the nine months ended September 30, 2020 and 2019:



	Nine months ended September 30,						Period-to-Period
	2020			2019			$			%
	(in millions)
Wealth Management ⁽³⁾
Beginning assets under management	$	8,716.4		$	8,700.9		$	15.5		—	%
Gross client inflows ⁽¹⁾	646.1			621.7			24.4			4	%
Gross client outflows ⁽¹⁾	(1,040.9		)	(1,550.7		)	509.8			(33	)%
Market appreciation (depreciation) & other ⁽²⁾	(219.0		)	603.0			(822.0		)	(136	)%
Ending assets under management	$	8,102.6		$	8,374.9		$	(272.3	)	(3	)%
Average AUM for period	$	7,903.8		$	8,515.5
Institutional and Intermediary ⁽³⁾
Beginning assets under management	$	10,763.7		$	11,462.7		$	(699.0	)	(6	)%
Gross client inflows ⁽¹⁾	1,169.9			1,253.1			(83.2		)	(7	)%
Gross client outflows ⁽¹⁾	(2,279.6		)	(2,782.0		)	502.4			(18	)%
Market appreciation (depreciation) & other ⁽²⁾	1,488.5			2,164.5			(676.0		)	(31	)%
Ending assets under management	$	11,142.5		$	12,098.3		$	(955.8	)	(8	)%
Average AUM for period	$	10,869.2		$	12,301.4
Total assets under management
Beginning assets under management	$	19,480.1		$	20,163.6		$	(683.5	)	(3	)%
Gross client inflows ⁽¹⁾	1,816.0			1,874.8			(58.8		)	(3	)%
Gross client outflows ⁽¹⁾	(3,320.5		)	(4,332.7		)	1,012.2			(23	)%
Market appreciation (depreciation) & other ⁽²⁾	1,269.5			2,767.5			(1,498.0		)	(54	)%
Ending assets under management	$	19,245.1		$	20,473.2		$	(1,228.1	)	(6	)%
Average AUM for period	$	18,773.0		$	20,816.9

________________________


(1)	Transfers of client assets between portfolios are included in gross client inflows and gross client outflows.


(2)	Market appreciation/(depreciation) and other includes investment gains/(losses) on assets under management, the impact of changes in foreign exchange rates and net flows from non-sales related activities including net reinvested dividends.


(3)	AUM and gross client flows between sales channels have been estimated based upon preliminary data. For a limited portion of our mutual fund AUM, reporting by sales channel is not available at the time of this report. Such estimates have no impact on total AUM, total cash flows, or AUM by investment portfolio reported in the table above.

Our total AUM decreased by $1.2 billion from $20.5 billion at September 30, 2019 to $19.2 billion at September 30, 2020. The decrease was attributable to net client outflows of $3.5 billion, partially offset by market appreciation of $2.3 billion. Net client outflows consisted of approximately $0.8 billion of net outflows for wealth management and $2.7 billion for institutional and intermediary. By portfolio, the rates of change in AUM from September 30, 2019 to September 30, 2020 consisted of a $1.2 billion, or 19% decrease in our equity portfolio, a $19.8 million, or 0.1% decrease in our blended asset portfolio, and a decrease of $48.7 million, or 5% in our fixed income portfolio.

We ~~attribute~~have experienced a decrease in the overall rate of outflows with gross outflows of approximately $3.3 billion during the nine months ended September 30, 2020, a 23% improvement from the same period through September 30, 2019. While we have experienced an improvement in the rate of outflows, gross client inflows were approximately $1.8 billion during the nine months ended September 30, 2020, a 3% decrease compared to the same period in 2019. We believe that changes in our ~~net cash outflows to~~organization and macro trends towards passive investing have all played a role in this trend. We believe that by demonstrating

stability in client AUM and in our challenging investment returns, whereby our one, three, and five year annualized returns for many of our key investment strategies have trailed their related benchmarks in recent years and increased competition from lower fee passive investment products. Our abilityorganization, along with continuing to improve ~~cash flows going forward~~long-term track records and modernizing our platform, we will ~~depend on our ability to sustain improved investment performance and execute on our strategic initiatives focused on gathering and retaining client assets.~~provide a foundation from which we can grow.

The total AUM decrease of ~~$5.1~~$0.2 billion, or ~~16%~~1%, to ~~$26.5~~$19.2 billion at September 30, ~~2017~~2020 from ~~$31.7~~$19.5 billion at December 31, ~~2016~~2019 was attributable to net client cash outflows of ~~$9.1~~$1.5 billion, partially offset by market appreciation of ~~$4.0~~$1.3 billion. Included in net client flows during the nine months ended September 30, ~~2017~~2020 were net client outflows in ~~separately managed accounts~~wealth management of approximately ~~$3.8~~$0.4 billion and ~~mutual funds~~institutional and ~~collective investment trusts~~intermediary of approximately ~~$5.3~~$1.1 billion. The blended investment loss was 2.5% in wealth management and the blended investment gain was ~~12.7%~~13.8% in ~~separately managed accounts~~institutional and ~~12.1% in mutual funds and collective investment trusts.~~intermediary. By portfolio, our ~~net $5.1~~$0.2 billion AUM decrease was derived from ~~a decrease~~decreases of ~~$3.5 billion,~~$116.2 million, or ~~18%, in our~~

~~blended asset portfolio and $1.6 billion, or 16%~~2%, in our equity portfolio, ~~offset by an increase of $18.6~~$105.6 million, or 1%, in our blended asset portfolio and $13.2 million, or 1%, in our fixed income portfolio.

As of September 30, ~~2017,~~2020, the composition of our AUM was ~~65%~~42% in ~~separate accounts~~wealth management and ~~35%~~58% in ~~mutual funds~~institutional and ~~collective investment trusts,~~intermediary, compared to 41% in wealth management and 59% in ~~separate accounts~~institutional and ~~41% in mutual funds and collective investment trusts~~intermediary at September 30, ~~2016.~~2019. The composition of our AUM across portfolios at September 30, ~~2017~~2020 was ~~62%~~70% in blended assets, ~~33%~~25% in equity, and 5% in fixed income, compared to ~~62%~~65% in blended assets, ~~34%~~30% in equity, and 4%5% in fixed income atas of September 30, ~~2016.~~2019.

With regard to our ~~separate accounts,~~wealth management channel, gross client inflows of ~~$1.4~~$0.6 billion were offset by approximately ~~$5.2~~$1.0 billion of gross client outflows during the nine months ended September 30, ~~2017.~~2020. The ~~$1.4~~$0.6 billion of gross client inflows included ~~$0.6~~$0.5 billion into our blended asset portfolios, ~~$0.5~~and less than $0.1 billion into both our equity portfolios and ~~$0.2 billion into~~ fixed income portfolios. During the nine months ended September 30, 2017, 66% of our separate account gross client inflows were derived from our Direct Channel. Gross client inflows were split with 65% contributions from existing accounts and 35% from new relationships. Gross client outflows were split with 45% withdrawals from existing accounts and 55% representing client cancellations. Our blended asset and equity portfolios experienced net client outflows of approximately $1.4 billion and $2.4 billion, respectively. In light of challenging relative returns, our separate account clients redeemed assets at a rate of 37%Outflows during the nine months ended September 30, ~~2017, compared to a 33% redemption rate over the trailing twelve months ended September 30, 2017.~~2020 were $1.0 billion, with 71% from blended portfolios, 19% from equity, and 10% from fixed income portfolios, respectively. The annualized separate account retention rate was ~~80%~~95% for the nine months ended September 30, ~~2017, down~~2020, up from ~~82%~~87% for the rolling twelve months ended September 30, ~~2017.~~2020. We believe the improvement is further support that our overall servicing efforts, importantly including our value-added advisory services, are effective in supporting long-term relationships.

Net client outflows of ~~$5.3~~$1.1 billion from our ~~mutual fund~~institutional and ~~collective investment trusts~~intermediary channel included gross client inflows of ~~$1.6~~$1.2 billion offset by gross client outflows of ~~$6.8~~$2.3 billion during the nine months ended September 30, ~~2017.~~2020. Gross client inflows into our blended asset ~~life cycle vehicles, including both risk based and target date strategies,~~portfolios, represented ~~$1.1~~$0.7 billion, or ~~71%~~61%, of ~~mutual fund~~institutional and ~~collective trust fund~~intermediary gross client inflows during the nine months ended September 30, ~~2017.~~2020. With regard to gross client outflows, ~~$5.3~~$1.7 billion, or ~~77%~~74%, of ~~mutual fund~~institutional and ~~collective investment trust~~intermediary gross client outflows were from blended asset ~~mutual fund~~institutional and ~~collective trust~~intermediary products. ~~A single retirement plan relationship redeemed approximately $2.5 billion from our blended asset portfolio during the second quarter of 2017.~~

The following table sets forth our results of operations and other data for the nine months ended September 30, ~~2017~~2020 and ~~2016:~~2019:


	Nine months ended September 30,				Period-to-Period					Nine months ended September 30,					Period-to-Period
	2017		2016		$			%		2020			2019		$			%
	(in thousands, except share data)									(in thousands, except share data)
Revenues
Investment management services revenue	$	155,859	$	189,852	$	(33,993	)	(18	)%
Management Fees
Wealth management										$	41,335		$	42,913	$	(1,578	)	(4	)%
Institutional and intermediary										38,255			44,927		(6,672		)	(15	)%
Distribution and shareholder servicing										7,117			7,760		(643		)	(8	)%
Custodial services										4,639			5,258		(619		)	(12	)%
Other revenue										2,176			2,411		(235		)	(10	)%
Total revenue										93,522			103,269		(9,747		)	(9	)%
Expenses
Compensation and related costs	67,901		70,973		(3,072		)	(4	)%	55,247			61,113		(5,866		)	(10	)%
Distribution, servicing and custody expenses	21,415		26,590		(5,175		)	(19	)%	7,834			9,736		(1,902		)	(20	)%
Other operating costs	23,099		24,854		(1,755		)	(7	)%	21,197			25,232		(4,035		)	(16	)%
Total operating expenses	112,415		122,417		(10,002		)	(8	)%	84,278			96,081		(11,803		)	(12	)%
Operating income	43,444		67,435		(23,991		)	(36	)%	9,244			7,188		2,056			29	%
Non-operating income (loss)
Non-operating income (loss), net	2,835		1,216		1,619			133	%	(1,087		)	6,248		(7,335		)	(117	)%
Income before provision for income taxes	46,279		68,651		(22,372		)	(33	)%	8,157			13,436		(5,279		)	(39	)%
Provision for income taxes	3,324		4,784		(1,460		)	(31	)%
Provision for (benefit from) income taxes										(28		)	723		(751		)	(104	)%
Net income attributable to controlling and noncontrolling interests	42,955		63,867		(20,912		)	(33	)%	8,185			12,713		(4,528		)	(36	)%
Less: net income attributable to noncontrolling interests	37,852		56,586		(18,734		)	(33	)%	3,274			10,914		(7,640		)	(70	)%
Net income attributable to Manning & Napier, Inc.	$	5,103	$	7,281	$	(2,178	)	(30	)%	$	4,911		$	1,799	$	3,112		173	%
Per Share Data
Net income per share available to Class A common stock
Basic	$	0.35	$	0.49						$	0.30		$	0.12
Diluted	$	0.35	$	0.48						$	0.15		$	0.12
Weighted average shares of Class A common stock outstanding
Basic	14,135,288		13,916,721							16,041,128			15,163,205
Diluted	14,241,642		14,173,283							48,339,759			15,466,339
Cash dividends declared per share of Class A common stock	$	0.24	$	0.48

Other financial and operating data
Economic income ⁽¹⁾										$	10,248		$	13,220	$	(2,972	)	(22	)%
Economic net income ⁽¹⁾	$	28,230	$	42,570	$	(14,340	)	(34	)%	$	8,707		$	9,386	$	(679	)	(7	)%
Economic net income per adjusted share ⁽¹⁾	$	0.35	$	0.52						$	0.17		$	0.12
Weighted average adjusted Class A common stock outstanding ⁽¹⁾	79,747,791		82,282,598							50,460,114			79,553,585

________________________


(1)	See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Supplemental Non-GAAP Financial Information” for Manning & Napier’s reasons for including these non-GAAP measures in this report in addition to a reconciliation of non-GAAP financial measures to GAAP measures for the periods indicated.

Revenues

~~Our investment~~Wealth management ~~services~~ revenue decreased by ~~$34.0~~$1.6 million, or ~~18%~~4%, to ~~$155.9~~$41.3 million for the nine months ended September 30, ~~2017~~2020 from ~~$189.9~~$42.9 million for the nine months ended September 30, ~~2016.~~2019. This decrease ~~was~~is driven primarily by a ~~$6.1 billion, or 17%,~~7% decrease in our average wealth management AUM ~~to $29.2 billion~~ for the nine months ended September 30, ~~2017 from $35.3 billion~~2020 compared to the nine months ended

September 30, 2019. As of September 30, 2020, the concentration of assets in our wealth management channel was 91% blended assets, 6% equity and 3% fixed income, compared to 79% blended assets, 18% equity and 3% fixed income as of September 30, 2019.

Institutional and intermediary revenue decreased by $6.7 million, or 15%, to $38.3 million for the nine months ended September 30, 2016. Average AUM decreased as a result of net client outflows of $11.1 billion offset by market appreciation and other changes of $2.8 billion for the rolling twelve months ended September 30, 2017. By portfolio, our equity and blended asset portfolios decreased by 26% and 24%, respectively, compared to September 30, 2016. The outflows were largely attributable to challenging portfolio performance relative to benchmarks.

~~Our average separately managed account fee remained consistent at 0.62%~~2020 from $44.9 million for the nine months ended September 30, ~~2017 compared to 0.62%~~2019. This decrease is driven primarily by a 12%, or $1.4 billion, decrease in average institutional and intermediary AUM for the nine months ended September 30, ~~2016. For both~~2020 compared to the nine months ended September 30, ~~2017 and 2016, separately managed account management fees ranged from 0.15% to 1.25%, depending on investment objective and account size.~~2019. As of September 30, ~~2017,~~2020 the concentration of assets in our ~~separately managed accounts~~institutional and intermediary channel was ~~62%~~54% blended

assets, ~~31%~~39% equity and 7% fixed income, compared to ~~58%~~56% blended assets, ~~36%~~38% equity and 6% fixed income as of September 30, ~~2016.~~2019.

~~Our average fee on mutual fund~~Distribution and ~~collective investment trust products was 0.81%~~shareholder servicing revenue decreased by $0.6 million, or 8%, to $7.1 million for the nine months ended September 30, ~~2017, an increase~~2020 from ~~0.78%~~$7.8 million for the nine months ended September 30, ~~2016.~~2019. This ~~increase was primarily due to~~decrease is driven by a ~~single retirement plan relationship which redeemed approximately $2.5 billion during the second quarter of 2017 where the fees were lower than those associated with the remaining population of~~reduction in mutual fund and collective ~~AUM. For both~~investment trust average AUM of 13% for the same period.

Custodial services revenue decreased by $0.6 million, or 12%, to $4.6 million for the nine months ended September 30, ~~2017 and 2016, mutual fund and collective investment trust management fees ranged~~2020 from ~~0.14% to 1.00%, depending on investment strategy. As of~~$5.3 million for the nine months ended September 30, ~~2017 the concentration of assets~~2019. The decrease primarily relates to decreases in our ~~mutual fund and~~ collective ~~investment trusts was 62% blended assets, 37% equity and 1% fixed income, compared to 68% blended assets, 31% equity and 1% fixed income as of September 30, 2016.~~trust AUM.

Operating Expenses

Our operating expenses decreased by ~~$10.0~~$11.8 million, or 8%12%, to ~~$112.4~~$84.3 million for the nine months ended September 30, ~~2017~~2020 from ~~$122.4~~$96.1 million for the nine months ended September 30, ~~2016.~~2019.

Compensation and related costs decreased by ~~$3.1~~$5.9 million, or 4%10%, to ~~$67.9~~$55.2 million for the nine months ended September 30, ~~2017~~2020 from ~~$71.0~~$61.1 million for the nine months ended September 30, ~~2016. The decrease~~2019. This change was primarily driven by ~~lower variable incentive costs as~~ a ~~result of the reduction~~decrease in ~~AUM,~~our workforce, coupled with a reduction in ~~equity based~~employee severance costs. This decrease was partially offset by an increase in the estimated incentive compensation ~~due to the timing and amount of unvested equity awards.~~for our investment team resulting from investment performance. When considered as a percentage of revenue, compensation and related costs was 59% for both the nine months ended September 30, ~~2017 was 44% compared to 37%~~2020 and 2019. Given the declines in ~~2016. We~~our revenue, we anticipate that our compensation ratio as a percentage of revenue will remain elevated in the near term compared to prior periods.

Distribution, servicing and custody expenses decreased by ~~$5.2~~$1.9 million, or ~~19%~~20%, to ~~$21.4~~$7.8 million for the nine months ended September 30, ~~2017~~2020 from ~~$26.6~~$9.7 million for the nine months ended September 30, ~~2016.~~2019. The decrease was generally attributable to a ~~27%~~13% decrease in mutual fund and collective investment trust average AUM for the nine months ended September 30, ~~2017~~2020 compared to the nine months ended September 30, ~~2016. The percentage decrease in AUM exceeds~~2019, coupled with the percentage decrease in expense since 2017 redemptions have been concentrated in those relationships where we do not have distribution and servicing obligations. Specifically, we had a single retirement plan relationship which redeemed approximately $2.5 billioncompletion of MNA's mutual fund fee restructure initiative during the ~~second~~first quarter of ~~2017~~2019, where ~~there was no associated distribution obligation.~~a portion of these expenses are now borne by the mutual funds directly. As a percentage of mutual fund and collective investment trust average AUM, distribution, servicing and custody expense was ~~0.27%~~0.19% for the nine months ended September 30, ~~2017,~~2020, compared to ~~0.24%~~0.21% for the nine months ended September 30, ~~2016.~~2019.

Other operating costs decreased by ~~$1.8~~$4.0 million, or 7%16%, to ~~$23.1~~$21.2 million for the nine months ended September 30, ~~2017~~2020 from ~~$24.9~~$25.2 million for the nine months ended September 30, ~~2016.~~2019. This decrease was driven primarily by a $1.2 million gain recognized during the third quarter of 2020, which offset other operating costs, related to the reimbursement of prior expenses paid on behalf the Funds and CITs upon the settlement of their claim against a third party. This gain was coupled with an overall reduction in operational costs resulting from COVID-19, including a decrease in travel and facility costs. As a percentage of revenue, other operating costs for the nine months ended September 30, ~~2017~~2020 was ~~15%~~23% compared to ~~13%~~24% for ~~2016.~~nine months ended September 30, 2019.

Non-Operating Income (Loss)

Non-operating ~~income~~loss for the nine months ended September 30, ~~2017~~2020 was ~~$2.8~~$1.1 million, ~~compared to $1.2~~a decrease of $7.3 million, from non-operating income of $6.2 million for the nine months ended September 30, ~~2016. Included in~~2019. The following table reflects the components of non-operating income (loss) ~~was a net gain of $2.3 million on investments held by us to provide initial cash seeding for product development purposes~~ for the nine months ended September 30, 2017, compared to $1.2 million in 2016. Interest expense for the nine months ended September 30, 2017 decreased by $0.3 million compared to the nine months ended September 30, 2016, driven by the termination of our credit facility in early 20172020 and ~~the unused commitment fee on our credit facility paid in 2016.~~2019:



	Nine months ended September 30,						Period-to-Period
	2020			2019			$			%
	(in thousands)
Non-operating income (loss)
Interest expense	$	(5	)	$	(26	)	$	21		(81	)%
Interest and dividend income ⁽¹⁾	835			2,428			(1,593		)	(66	)%
Change in liability under tax receivable agreement ⁽²⁾	(1,912		)	(199		)	(1,713		)	861	%
Net gains (losses) on investments ⁽³⁾	(5		)	1,162			(1,167		)	(100	)%
Gain on sale of business ⁽⁴⁾	—			$	2,883		$	(2,883	)	(100	)%
Total non-operating income	$	(1,087	)	$	6,248		$	(7,335	)	(117	)%

__________________________


(1)	The decrease in interest and dividend income for the nine months ended September 30, 2020 compared to 2019 is attributable to a decrease in investments, including U.S. Treasury notes and bills, corporate bonds and other short-term investments to optimize cash management opportunities, coupled with a decrease in interest rates.

(2)

The change in the liability under the tax receivable agreement for the nine months ended September 30, 2020 is driven by an increase in the Company's expected tax benefits under the tax receivable agreement with the other holders of units of Manning & Napier Group and the corresponding changes in the payment of such benefits. The change during the nine months ended September 30, 2020 is driven by the tax benefits realized with the enactment of the CARES Act.


(3)	The amount of net gain (loss) on investments held by us, to provide initial cash seeding for product development purposes and to hedge economic exposure to market movements on our deferred compensation plan, will vary depending on the performance and overall amount of our investments.


(4)	The gain on sale of business during the nine months ended September 30, 2019 is due to the completion of the sale of our wholly-owned subsidiary Perspective Partners, LLC on August 30, 2019.

Provision for Income Taxes

~~Our tax provision decreased by $1.5 million, or 31%, to $3.3~~We recognized a benefit from income taxes of less than $0.1 million for the nine months ended September 30, ~~2017 from $4.8~~2020, compared to a provision for income taxes of $0.7 million for the nine months ended September 30, ~~2016.~~2019. The change ~~was primarily driven~~is attributed to the enactment of the CARES Act which includes, among other things, the elimination of certain restrictions on net operating losses. As a result, we recognized an income tax benefit related to the favorable rate applied to our net operating losses. This decrease is partially offset by a ~~decrease in taxable~~higher portion of Manning & Napier Group's earnings subject to taxation at the C-Corporation level due to Manning & Napier Inc.'s increased ownership of Manning & Napier Group as ~~compared to~~a result of the ~~prior year.~~

redemption completed on May 11, 2020.

Supplemental Non-GAAP Financial Information

~~To provide investors~~Beginning with ~~greater insight, promote transparency and allow~~the release of our operating results for the third quarter of 2019, as supplemental information we began providing a more comprehensive understanding of the information used by management in its financial and operational decision-making, we supplement our consolidated statements of operations presented on a GAAP basis withnew non-GAAP ~~financial measures of earnings.~~

measure, economic income. Management uses economic income, economic net income and economic net income per adjusted share as financial measures to evaluate the profitability and efficiency of our business as a whole in the ordinary, ongoing and customary course of its ~~business.~~operations. Economic income, economic net income and economic net income per adjusted share are not presented in accordance with GAAP.

Economic income, for periods beginning in and subsequent to January 1, 2019, presents a non-GAAP financial measure of the controlling and non-controlling interests of Manning & Napier Group and excludes from income before provision for income taxes strategic restructuring and transaction costs, net. We define strategic restructuring and transaction costs, net, as items related to our ongoing strategic review focused on the evolution of our distribution strategy and technology initiatives. These costs include severance-related costs, certain consulting and other professional service fees, lease and other contract termination costs, and gain or loss on sale of a business. Non-GAAP measures for the first and second quarters of 2019 have been restated to conform to the current period presentation.

Economic net income is a non-GAAP measure of after-tax operating performance and equals ~~our~~the Company’s income before provision for income taxes less adjusted income taxes. Adjusted income taxes are estimated assuming the exchange of all outstanding units of Manning & Napier Group into Class A common stock on a one-to-one basis. Therefore, all income of Manning & Napier Group allocated to the units of Manning & Napier Group is treated as if it were allocated to us and represents an estimate of income tax expense (benefit) at an effective rate of ~~39.0%~~39.3% and ~~38.0%~~29.0% for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, and ~~39.0%~~15.0% and ~~38.0%~~29.0% for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively, reflecting assumed federal, state and local income taxes.

Economic net income per adjusted share is a non-GAAP measure and is equal to economic net income divided by the weighted average adjusted Class A common shares outstanding. The number of weighted average adjusted Class A common shares outstanding for all periods presented is determined by assuming the weighted average exchangeable units of Manning & Napier Group, weighted average unvested stock units, weighted average unvested restricted stock awards, and ~~unvested equity awards~~weighted average vested stock options are converted into our outstanding Class A common stock as of the respective reporting date, on a one-to-one basis. Our management uses economic net income, among other financial data, to determine the earnings available to distribute as dividends to holders of its Class A common stock and to the holders of the units of Manning & Napier Group.

Non-GAAP measures are not a substitute for financial measures prepared in accordance with ~~GAAP.~~GAAP and therefore should not be used in isolation of, but in conjunction with, GAAP measures. Additionally, our non-GAAP measures may differ from similar measures used by other companies, even if similar terms are used to identify such measures.

The following table sets forth, for the periods indicated, our other financial and operating ~~data for the~~ ~~nine months endedSeptember 30, 2017~~ ~~and~~ ~~2016~~:data:


	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016		2020		2019		2020		2019
	(in thousands, except share data)								(in thousands, except share data)
Income before provision for income taxes	$	12,591	$	21,550	$	46,279	$	68,651
Economic income (loss) (Non-GAAP)									$	5,219	$	5,177	$	10,248	$	13,220
Economic net income (Non-GAAP)	$	7,681	$	13,361	$	28,230	$	42,570	$	3,170	$	3,676	$	8,707	$	9,386
Economic net income per adjusted share (Non-GAAP)	$	0.10	$	0.16	$	0.35	$	0.52	$	0.14	$	0.05	$	0.17	$	0.12
Weighted average adjusted Class A common stock outstanding (Non-GAAP)	79,060,711		81,171,115		79,747,791		82,282,598		22,395,521		79,033,403		50,460,114		79,553,585

The following table sets forth, for the periods indicated, a reconciliation of non-GAAP financial measures to GAAP measures:


	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,					Nine months ended September 30,
	2017		2016		2017		2016		2020		2019			2020			2019
	(in thousands, except share data)								(in thousands, except share data)
Net income attributable to Manning & Napier, Inc.	$	1,521	$	2,258	$	5,103	$	7,281	$	2,507	$	824		$	4,911		$	1,799
Add back: Net income attributable to noncontrolling interests	10,331		17,727		37,852		56,586
Add back: Provision for income taxes	739		1,565		3,324		4,784
Income before provision for income taxes	12,591		21,550		46,279		68,651
Add back: Net income (loss) attributable to noncontrolling interests									560		5,753			3,274			10,914
Add back: Provision for (benefit from) income taxes									1,738		150			(28		)	723
Income (loss) before provision for (benefit from) income taxes									$	4,805	$	6,727		$	8,157		$	13,436
Add back: Strategic restructuring and transaction costs, net ⁽¹⁾									414		(1,550		)	2,091			(216		)
Economic income (loss) (Non-GAAP)									$	5,219	5,177			10,248			13,220
Adjusted income taxes (Non-GAAP)	4,910		8,189		18,049		26,081		2,049		1,501			1,541			3,834
Economic net income (Non-GAAP)	$	7,681	$	13,361	$	28,230	$	42,570	$	3,170	$	3,676		$	8,707		$	9,386

Weighted average shares of Class A common stock outstanding - Basic	14,249,347		14,042,880		14,135,288		13,916,721		16,176,280		15,290,595			16,041,128			15,163,205
Assumed vesting, conversion or exchange of:
Weighted average Manning & Napier Group, LLC units outstanding (noncontrolling interest)	63,937,284		65,784,571		64,541,055		66,686,373		2,021,781		62,034,200			30,713,850			62,617,270
Weighted average unvested restricted share-based awards	874,080		1,343,664		1,071,448		1,679,504
Weighted average unvested restricted stock units and share awards									3,562,979		1,708,608			3,306,941			1,773,110
Weighted average vested stock options									634,481		—			398,195			—
Weighted average adjusted shares (Non-GAAP)	79,060,711		81,171,115		79,747,791		82,282,598		22,395,521		79,033,403			50,460,114			79,553,585

Economic net income per adjusted share (Non-GAAP)	$	0.10	$	0.16	$	0.35	$	0.52	$	0.14	$	0.05		$	0.17		$	0.12

__________________________

⁽¹⁾ Strategic restructuring and transaction costs, net, are included in the following financial statement line items of our Consolidated Statements of Operations:



	Three months ended September 30,					Nine months ended September 30,
	2020		2019			2020		2019
	(in thousands)
Compensation and related costs	$	63	$	677		$	903	$	1,787
Other operating costs	351		656			1,188		880
Gain on sale of business	—		(2,883		)	—		(2,883		)
Total strategic restructuring and transaction costs	$	414	$	(1,550	)	$	2,091	$	(216	)

Liquidity and Capital Resources

Historically, our cash and liquidity needs have been met primarily through cash generated by our ~~operations.~~operations and cash and cash equivalents on hand. Our ~~current~~ financial condition isat September 30, 2020 was highly liquid, with a significant amount of our assets comprised of cash and cash equivalents, accounts receivable and investment securities held by us for the purpose of optimizing short-term cash management and providing initial cash seeding for product development purposes.

The following table sets forth certain key financial data relating to our liquidity and capital resources as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019:


	September 30, 2017		December 31, 2016		September 30, 2020		December 31, 2019
	(in thousands)				(in thousands)
Cash and cash equivalents	$	103,322	$	100,819	$	52,175	$	67,088
Accounts receivable	$	17,254	$	22,195	$	10,866	$	10,182
Investment securities	$	38,322	$	36,475	$	23,439	$	90,467
Investment securities - consolidated funds	$	—	$	995
Amounts payable under tax receivable agreement ⁽¹⁾	$	34,719	$	37,073	$	19,433	$	17,521
Contingent consideration liability ⁽²⁾	$	—	$	—

________________________


(1)	In light of numerous factors affecting our obligation to make such payments, the timing and amounts of any such actual payments are based on our best estimate as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019, including our ability to realize the expected tax benefits. Actual payments may significantly differ from estimated payments.


~~(2)~~	Represents the fair value of additional cash payments related to our acquisition of Rainier of up to $32.5 million over the period ending December 31, 2019, contingent upon Rainier's achievement of certain financial targets.

We have no material assets other than our ownership of Class A units of Manning & Napier Group and, accordingly, will depend on distributions from Manning & Napier Group to pay taxes and operating expenses, as well as any dividends we may pay. As managing member of Manning & Napier Group, we will determine the timing and amount of any distributions to be paid to its members. We intend to cause Manning & Napier Group to distribute cash to its members, including us, in an amount sufficient to cover taxes and operating expenses, including dividends, if any, declared by us. If we do cause Manning & Napier Group to make such distributions, M&N Group Holdings, MNCC and any other holders of units of Manning & Napier Group will be entitled to receive equivalent distributions on a pari-passu basis. On April 22, 2020 the Board of Directors determined to suspend our quarterly cash dividend on our Class A common stock due to the market volatility and ongoing uncertainty resulting from the COVID-19 pandemic.

In determining the sufficiency of liquidity and capital resources to fund our business, we regularly monitor our liquidity position, including among other things, cash, working capital, long-term liabilities, lease commitments and operating company distributions.

On ~~January 12, 2017,~~March 27, 2020, the U.S. government enacted the CARES Act which includes, among other things, the ability to carryback net operating losses from 2018, 2019 and 2020 to prior years. We expect to carryback net operating losses generated in 2018 and 2019 to prior years and claim refunds when the federal corporate tax rate was 34% compared to the current statutory rate of 21%. During the nine months ended September 30, 2020, we ~~terminated~~recognized an income tax benefit of approximately $2.3 million, related to the favorable rate applied to our ~~revolving credit~~net operating losses. As a result, we increased the amounts payable under the tax receivable agreement that provided borrowing capacity of up to $100.0 million. No amounts had been borrowed and thus none were outstanding. Our decision to terminate the facility was based on an evaluation of factors including the costby $1.9 million, representing 85% of the ~~facility,~~applicable cash savings. As of September 30, 2020, we have recorded an estimated income tax refund of approximately $4.3 million within our prepaid expenses and other assets, of which we expect to pay out 85% under our tax receivable agreement. At this time, we do not anticipate the ~~anticipated need~~enactment of the CARES Act to ~~finance capital or~~have any other ~~projects,~~material impacts to our short- and long-term liquidity.

A state is currently auditing the ~~sufficiency of liquidity~~Company's 2016, 2017 and ~~capital resources.~~

~~On May 10, 2017, we entered into an agreement to sell certain U.S. equity products to a third party.~~2018 corporate tax returns. The ~~selling price will be determined by the assets under management on the date of closing, which~~audit is expected to be completed in 2020. As of September 30, 2020, the ~~fourth quarter~~audit is in process and the state is collecting and evaluating the data for which the Company has not recorded a liability for uncertain tax positions under ASC Topic 740, Income Taxes. The Company believes any potential increases to this liability, which could be up to approximately $1.3 million, would not result in a material change to its financial position.

As of ~~2017. The amount~~September 30, 2020, a total of 2,021,781 units of Manning & Napier Group were held by the noncontrolling interests, including M&N Group Holdings and MNCC. Pursuant to the terms of the ~~assets under management~~annual exchange process, such units may be tendered for exchange or redemption. On March 15, 2020, certain legacy shareholders and William Manning, the former Chairman of our Board of Directors, tendered a total of 60,012,419 Class A units, including 59,957,419 units held by William Manning, for cash or shares of our Class A common stock pursuant to ~~be sold~~the terms of the annual exchange process.

The independent directors, on behalf of the Company, decided to settle the transaction utilizing approximately $90.8 million in cash, including approximately $90.7 million paid to Mr. Manning. Manning & Napier Group completed the redemption on May 11, 2020, with payment made from its cash, cash equivalents and proceeds from the sale of investment

securities. Subsequent to the redemption, the Class A units were retired and as a result, Manning & Napier's ownership of Manning & Napier Group increased from 19.5% to 88.2%.

Following the settlement of the redemption of Class A units of Manning & Napier Group, we have significantly less cash and cash equivalents to meet working capital requirements and liquidity needs. With approximately $75.6 million in cash and investment securities on hand as of September 30, ~~2017 was approximately $0.4 billion.~~

2020, we expect that we have sufficient liquidity available to meet our needs for the foreseeable future. We believe ~~that~~ cash on hand and cash generated from operations will be sufficient over the next twelve months to meet our working capital requirements. ~~Further, we expect that cash on hand, including short-term investments and cash generated by operations will be sufficient to meet our liquidity needs for the foreseeable future.~~

Cash Flows

The following table sets forth our cash flows for the nine months ended September 30, ~~2017~~2020 and ~~2016~~2019. Operating activities consist primarily of net income subject to adjustments for changes in operating assets and liabilities, equity-based compensation expense, changes in the liability under the TRA, ~~and contingent consideration,~~ deferred income tax expense, gain on sale of intangible assets and gains on sale of business and depreciation and amortization. Investing activities consist primarily of the purchase and sale of investments for the purpose of providing initial cash seeding for product development and ~~for~~ cash management purposes, gain on sale of intangible assets, and purchases of property and equipment. Financing activities consist primarily of distributions to noncontrolling interests, dividends paid on our Class A common stock, payment of shares withheld to satisfy withholding requirements and purchases of Class A units held by noncontrolling interests of Manning & Napier Group.


	Nine months ended September 30,						Nine months ended September 30,
	2017			2016			2020			2019
	(in thousands)						(in thousands)
Net cash provided by operating activities	$	41,317		$	65,370		$	11,199		$	8,717
Net cash provided by (used in) investing activities	687			(735		)
Net cash provided by investing activities							66,597			29,289
Net cash used in financing activities	(39,501		)	(58,518		)	(92,709		)	(9,209		)
Net change in cash and cash equivalents	$	2,503		$	6,117		$	(14,913	)	$	28,797

Nine Months Ended September 30, ~~2017~~2020 Compared to Nine Months Ended September 30, ~~2016~~2019

Operating Activities

Operating activities provided ~~$41.3 million~~ ~~and~~ ~~$65.4 million~~ ~~of net cash for the~~ ~~nine months ended September 30, 2017~~ ~~and~~ ~~2016, respectively. This overall~~ ~~$24.1 milliondecrease~~ ~~in net cash provided by operating activities for the~~ ~~nine months ended September 30, 2017~~ ~~compared to~~ ~~2016~~ ~~was due to a decrease in net income after adjustment for non-cash items of approximately~~ ~~$23.0 million~~ driven by lower revenues resulting primarily from changes in our average AUM. This decrease was also due to $3.8 million of cash from consolidated funds due to the timing of trading activity in 2016, partially offset by an increase of $2.7 million in operating assets and liabilities.

~~Investing Activities~~

~~Investing activities provided $0.7~~$11.2 million and ~~used $0.7~~$8.7 million of net cash for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively. This overall $2.5 million increase in net cash provided in operating activities for the nine months ended September 30, 2020 compared to 2019 was attributed to changes in operating assets and operating liabilities of approximately $1.7 million driven by the timing of payments, including compensation and benefits and other accrued costs, partially offset by increased implementation costs during the nine months ended September 30, 2020 related to our technology enhancements. The increase in net cash provided was also attributed to an increase in net income after adjustment for non-cash items of approximately $0.8 million during the nine months ended September 30, 2020 compared to the same period of 2019.

Investing Activities

Investing activities provided $66.6 million and $29.3 million of net cash for the nine months ended September 30, 2020 and 2019, respectively. This change was ~~primarily~~ driven by ~~changes~~an increase in cash from investing activities of ~~$7.4~~$38.9 million due to our funding of and timing of activity within our investment ~~securities.~~securities, primarily related to the sale of investment securities in order facilitate the redemption of Class A units during the nine months ended September 30, 2020. During the nine months ended September 30, ~~2017,~~2020, we ~~used~~received approximately ~~$7.5~~$64.2 million, net, ~~for~~from the purchase and sale of ~~short-term investments~~certain securities for cash management purposes ~~which was offset by cash provided~~compared to $28.2 million in the same period of 2019. In addition, we received approximately ~~$10.4~~$2.4 million and less than $0.1 million, net ~~within our investment securities for the purposes of new product development due to the~~from seeding and redemption activity of certain seeded portfolios in the nine months ended September 30, 2020and ~~the seeding of a new portfolio. In addition, we utilized $9.3 million for acquisitions during 2016.~~ 2019, respectively. Our purchases of property and equipment was approximately ~~$1.1~~$0.2 million during the nine months ended September 30, ~~2017~~2020 compared to ~~$0.2~~$1.7 million in ~~2016.~~the same period of 2019.

Financing Activities

Financing activities used ~~$39.5~~$92.7 million and ~~$58.5~~$9.2 million of net cash for the nine months ended September 30, ~~2017~~2020 and ~~2016~~,2019, respectively. This overall ~~$19.0~~$83.5 million~~decrease~~ increase in net cash used in financing activities was primarily the result of ~~a reduction~~an increase in distributions to noncontrolling interests of $9.7 million and dividends paid on Class A common stock of $2.3 million driven by lower income after adjustment for non-cash items in 2017 compared to 2016. The decrease in cash used in financing activities was also driven by a decrease of $6.3 million of cash used for the ~~purchase~~redemption of Class A units of Manning & Napier Group pursuant to the annual exchange ~~agreement entered into at~~process, existing since the time of our IPO, of ~~$9.8~~$90.8 million in 2020 compared to $3.1 million in 2019. This increase of $87.7 million in 2020 compared to the prior year was due to a high number of units redeemed in 2020. The overall increase in cash used for financing activities was partially offset by a reduction in distributions to noncontrolling interests of $4.9 million. This decrease was due to lower net income during the nine months ended September 30, ~~2017,~~2020 compared to ~~$16.1 million~~the same period in ~~2016. This decrease was due~~2019, coupled

with the impact of the redemption of Class A units of Manning & Napier Group during 2020 that resulted in the increase in our ownership of Manning & Napier Group from 19.5% to ~~a lower exchange price and a lower number of units exchanged in 2017 compared to 2016.~~88.2%. In addition, during the nine months ended September 30, ~~2017 and 2016~~2020 we ~~utilized cash of~~used approximately ~~$0.3 million and~~ $1.0 million ~~respectively,~~ for ~~the~~ payment of shares withheld to satisfy ~~tax withholdings due to the vesting of~~withholding requirements on vested equity awards, compared to approximately $0.1 million during the ~~respective periods.~~same period in 2019.

Dividends

On October ~~25, 2016,~~22, 2019, the Board of Directors declared a ~~$0.16~~$0.02 per share dividend to the holders of Class A common stock. The dividend was paid on February ~~1, 2017~~3, 2020 to shareholders of record as of January ~~13, 2017.~~15, 2020.

On March ~~7, 2017,~~3, 2020, the Board of Directors declared ~~an $0.08~~a $0.02 per share dividend to the holders of Class A common stock. The dividend was paid on May 1, ~~2017~~2020 to shareholders of record as of April ~~14, 2017.~~

~~On April 25, 2017, the Board of Directors declared an $0.08 per share dividend to the holders of Class A common stock. The dividend was paid on August~~ 1, ~~2017 to shareholders of record as of July 14, 2017.~~

On July 25, 2017, the Board of Directors declared an $0.08 per share dividend to the holders of Class A common stock. The dividend was paid on November 1, 2017 to shareholders of record as of October 13, 2017.

On October 24, 2017, the Board of Directors declared an $0.08 per share dividend to the holders of Class A common stock. The dividend is payable on or about February 1, 2018 to shareholders of record as of January 15, 2018.2020.

We ~~currently intend to pay~~have funded our historical quarterly cash dividends on our Class A common ~~stock. We intend to fund such~~stock, and we believe any future dividends would be funded from our portion of distributions made by Manning & Napier Group, from its available cash generated from operations. ~~William Manning, as~~On April 22, 2020, the ~~holder~~Board of Directors determined to suspend our quarterly cash dividend on our Class BA common stock due to the market volatility and ongoing uncertainty resulting from the COVID-19 pandemic. Company management and the Board of Directors will ~~not be entitled~~continue to ~~any cash~~monitor our ability to declare and pay future dividends ~~in his capacity as a Class B stockholder, but will, in his capacity as an indirect holder of Class A units of Manning & Napier Group, generally participate~~ on a ~~pro rata basis in distributions by Manning & Napier Group.~~quarter-by-quarter basis.

The declaration and payment of all future dividends, if any, will be at the sole discretion of our ~~board~~Board of ~~directors.~~Directors. In determining the amount of any future dividends, our ~~board~~Board of ~~directors~~Directors will take into account:

the financial results of Manning & Napier Group;

our available cash, as well as anticipated cash requirements, including any debt servicing and payments required under the ~~TRA;~~

tax receivable agreement or the Exchange Agreement;

our capital requirements and the capital requirements of our subsidiaries, including Manning & Napier Group;

contractual, legal, tax and regulatory restrictions on, and implications of, the payment of dividends by us to our ~~stockholders~~shareholders or distributions by Manning & Napier Group to us, including the obligation of Manning & Napier Group to make tax distributions to its unitholders, including us;

general economic and business ~~conditions;~~conditions, including the impact of the COVID-19 pandemic and state and regional stay-at-home orders; and

any other factors that our ~~board~~Board of ~~directors~~Directors may deem relevant.

We have no material assets other than our ownership of Class A units of Manning & Napier Group and, accordingly, will depend on distributions from Manning & Napier Group to fund any dividends we may pay. As managing member of Manning & Napier Group, we will determine the timing and amount of any distributions to be paid to its members, other than mandatory tax distributions required under Manning & Napier Group's operating agreement. We intend to cause Manning & Napier Group to distribute cash to its members, including us, in an amount sufficient to cover dividends, if any, declared by us. If we do cause Manning & Napier Group to make such distributions, M&N Group Holdings, MNCC and any other holders of units of Manning & Napier Group will be entitled to receive equivalent distributions on a pari passu basis.

~~Contractual Obligations~~

~~There have been no material changes~~On March 2, 2020, the Company’s Board of Directors had declared a $2.0 million distribution from Manning & Napier Group to its unit holders. Subsequent to March 3, 2020, there was significant disruption to global commercial activity as a result of the spread of COVID-19, which contributed to significant volatility and a decline in ~~our contractual obligations as set forth~~the value of many securities in ~~our Annual Report~~the financial markets. As a result, the Company’s Board of Directors determined on ~~Form 10-K for~~March 24, 2020 to withdraw its approval of that distribution from Manning & Napier Group. In July 2020, the ~~year ended December 31,~~ ~~2016~~.Board of Directors approved a $1.5 million distribution from Manning & Napier Group to Manning & Napier Inc. and the noncontrolling interests of Manning & Napier Group, of which approximately $0.2 million was paid to the noncontrolling interests of Manning & Napier Group. In October 2020, the Board of Directors approved a $1.3 million distribution from Manning & Napier Group to Manning & Napier Inc. and the noncontrolling interests of Manning & Napier Group, of which approximately $0.1 million was paid to the noncontrolling interests of Manning & Napier Group.

Off Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, ~~2017~~2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Market Risk~~

~~Our exposure~~As a "smaller reporting company," we are not required to market risk is directly related to the role of our operating company as an investment advisor for the mutual funds and separate accounts it manages. Substantially all of our revenues are derived from investment management agreements with these funds and accounts. Under these agreements, the investment management fees we receive are based on the value of our AUM and our fee rates. Accordingly, our revenues and net income may decline as a result of our AUM decreasing due to depreciation of our investment portfolios. In addition, such a decline could cause our clients to withdraw their funds in favor of investments offering higher returns or lower risk, which would cause our revenues to decline further.

~~The value of our AUM was~~ ~~$26.5 billion~~ ~~as of~~ ~~September 30, 2017. Assuming a 10% increase or decrease in the value of our AUM and the change being proportionally distributed over all our products, the value would increase or decrease by approximately~~ ~~$2.7 billion, which would cause an annualized increase or decrease in revenues of approximately~~ ~~$18.8 million~~ ~~at our current weighted average fee rate of~~ ~~0.71%~~.

We have not adopted a corporate-level risk management policy regarding client assets, nor have we attempted to hedge at the corporate level the market risks that would affect the value of our overall AUM and related revenues. Some of these risks (e.g., sector risks and currency risks) are inherent in certain strategies, and clients may invest in particular strategies to gain exposure to these risks.

We also are subject to market risk from a decline in the prices of investment securities that we own. These securities consist primarily of equity securities, fixed-income securities, investments in mutual funds, including the Fund for which MNA provides advisory services and short-term investment for cash management purposes. The value of these investments was ~~$38.3 million~~ ~~as of~~ ~~September 30, 2017~~ ~~of which approximately~~ ~~$7.8 million~~ ~~is investment securities classified as trading, $1.1 million is classified as equity method investments and~~ ~~$29.4 million~~ is investment securities classified as available-for-sale. Management regularly monitors the value of these investments; however, given their nature and relative size, we have not adopted a specific risk management policy to manage the associated market risk. Assuming a 10% increase or decrease in the values of these investment securities, the fair value would increase or decrease by approximately ~~$3.8 million~~ at ~~September 30, 2017. Due to the nature of our business, we believe that we do not face any material risk from inflation.~~

~~Exchange Rate Risk~~

A substantial portion of the accounts that we advise, or sub-advise, hold investments that are denominated in currencies other than the U.S. dollar. Movements in the rate of exchange between the U.S. dollar and the underlying foreign currency affect the values of assets held in accounts we manage, thereby affecting the amount of revenues we earn. The value of the assets we manage was ~~$26.5 billion~~ ~~as of~~ ~~September 30, 2017. As of~~ ~~September 30, 2017~~, approximately 18% of our AUM across our investment strategies was invested in securities denominated in currencies other than the U.S. dollar. To the extent our AUM are denominated in currencies other than the U.S. dollar, the value of those AUM would decrease, with an increase in the value of the U.S. dollar, or increase, with a decrease in the value of the U.S. dollar.provide this information.

We monitor our exposure to exchange rate risk and make decisions on how to manage such risk accordingly; however, we have not adopted a corporate-level risk management policy to manage exchange rate risk. Assuming that 18% of our AUM is invested in securities denominated in currencies other than the U.S. dollar and excluding the impact of any hedging arrangements, a 10% increase or decrease in the value of the U.S. dollar would increase or decrease the fair value of our AUM by approximately ~~$0.5 billion, which would cause an annualized increase or decrease in revenues of approximately~~ ~~$3.4 million~~ ~~at our current weighted average fee rate of~~ ~~0.71%~~.

~~Interest Rate Risk~~

The Company was exposed to interest-rate risk primarily due to our AUM that is invested in debt securities, as well as corporate assets that are invested in debt securities and short-term investments. Management considered a hypothetical 100 basis point fluctuation in interest rates and estimated the impact of such a fluctuation on these investments. Management determined there was no material impact as of September 30, 2017. Additionally, given the current level of income we earn from our cash and cash equivalent balances and short-term investments, interest rate changes would not have a material impact on us.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and ~~Principal~~Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2017~~2020 pursuant to Rule 13a-15 under the Exchange Act. Based on that evaluation, our Chief Executive Officer and ~~Principal~~Chief Financial Officer have concluded that, as of September 30, ~~2017~~2020, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and ~~Principal~~Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2017~~2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1A. Risk Factors

~~We have set forth~~In addition to the other information contained in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Item 1A to our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 (the “2019 Form 10-K”) in evaluating our business, industry, structure, future results and Class A common stock.

The information presented below updates and supplements those risk factors ~~relating~~for events, changes and developments since the filing of the 2019 Form 10-K and should be read in conjunction with the risks and other information contained in the 2019 Form 10-K. The risks described in our 2019 Form 10-K, as updated below and summarized in Part I, Item 2 under the heading "Summary of Principal Risks" are not the only risks we face. Additional risks that we do not presently know or that we currently believe are not material could also materially adversely affect our business, financial position, future results and prospects.

Risks Related to our Business

Our revenues are dependent on the market value and composition of our AUM, which are subject to significant fluctuations and have been impacted by the novel coronavirus (COVID-19) pandemic and its effect on the U.S. and global economy.

We derive the majority of our revenue from investment management fees, typically calculated as a percentage of the market value of our AUM. As a result, our revenues are dependent on the value and composition of our AUM, all of which are subject to fluctuation due to many factors, including:

Declines in prices of securities in our portfolios. The prices of the securities held in the portfolios we manage may decline due to any number of factors beyond our control, including, among others, the impacts of the novel coronavirus (COVID-19) pandemic on the companies whose securities are held in the portfolios we manage, declining stock or commodities markets, changes in interest rates, a general economic downturn, including as a result of the COVID-19 pandemic, political uncertainty, pandemics or other health crises, or acts of terrorism. The U.S. and global financial markets continue to be subject to uncertainty and instability. Such factors could cause an unusual degree of volatility and price declines for securities in the portfolios we manage;

Redemptions and other withdrawals. Our clients generally may withdraw their funds at any time, on very short notice and without any significant penalty. A substantial portion of our revenue is derived from investment advisory agreements that are terminable by clients upon short notice or no notice and investors in the mutual funds we advise can redeem their investments in those funds at any time without prior notice. Also, new clients and portfolios may not have the same client retention characteristics as we have experienced in the past. In a declining stock market, the pace of redemptions could accelerate;

Investment performance. Our ability to deliver strong investment performance depends in large part on our ability to identify appropriate investment opportunities in which to invest client assets. If we are unable to identify sufficient appropriate investment opportunities for existing and new client assets on a timely basis, our investment performance could be adversely affected. The risk that sufficient appropriate investment opportunities may be unavailable is influenced by a number of factors including general market conditions. If our portfolios perform poorly, even over the short-term, as compared with our competitors or applicable third-party benchmarks, or the rankings of mutual funds we manage decline, we may lose existing AUM and have difficulty attracting new assets; and

Competition from passive strategies.There has been an increasing preference for passive investment products, such as index and exchange-traded funds ("ETFs") over active strategies managed by asset managers. If this market preference continues, existing and prospective clients may choose to invest in passive investment products, our growth strategy may be impaired and our AUM may be negatively impacted.

The market disruption caused by COVID-19 may continue for as long or longer than the restrictions on general business operations and in-person interactions imposed by federal, state and local governments. If this period of economic disruption and volatility continues or worsens, our ~~industry,~~AUM could be reduced, and if we are unable to reduce expenses, our ~~structure~~net income will be reduced in the near term. Should the COVID-19 pandemic continue for an extended period of time, our business, financial condition, results of operations and cash flows may likewise be materially adversely impacted for an extended period of time.

If any of the factors described above cause a decline in our AUM, it would result in lower investment management revenues. If our revenues decline without a commensurate reduction in our expenses, our net income will be reduced and our business will be adversely affected.

We derive substantially all of our revenues from contracts and relationships that may be terminated upon short or no notice.

We derive substantially all of our revenues from investment advisory and sub-advisor agreements, all of which are terminable by clients upon short notice or no notice and without any significant penalty.

Our mutual fund and collective investment trust relationships may be terminated or not renewed for any number of reasons. Our investment management agreements with mutual funds, as required by law, are generally terminable by the funds’ board of directors or a vote of the majority of the funds’ outstanding voting securities on not more than 60 days’ written notice. After an initial term, each fund’s investment management agreement must be approved and renewed annually by such fund’s board, including by its independent members. Similarly, our investment management agreements with the collective investment trusts may be terminated at any time by Exeter Trust Company's board of directors, which includes independent members. As of September 30, 2020, mutual fund and collective investment trust relationships represent 29% of our AUM and 29% of our revenue for the quarter ended September 30, 2020.

Our clients will likely be impacted by the overall decline in the U.S. economy, which may cause them to terminate their relationships with us. The longer the economic results of the COVID-19 pandemic negatively impact our clients, clients may seek to withdraw their funds from our investment solutions. If a significant proportion of our clients withdraw their funds, our AUM and results of operations will be materially adversely impacted.

The decrease in revenues that could result from the termination of a material client relationship or group of client relationships could have an adverse effect on our business. During the fiscal year ended December 31, 2019 and the quarter ended September 30, 2020, other than our relationship with the Fund, there were no customers that provided over 10 percent of our total revenue.

We may not realize the expected benefits from our restructuring plan and other operational improvement initiatives relating

to our strategic review of our business.

We commenced a strategic review of our business upon the appointment of our new Chief Executive, Marc Mayer, in early 2019. Our comprehensive review resulted in changes to our overall distribution strategy, our suite of investment offerings, and our operational platform. The objective of this review was to improve financial results for stockholders and investment results for clients by more clearly prioritizing our strengths, eliminating distractions and sub-scale offerings, and increasing productivity across the firm through improved technology. As a result of this strategic review, we incurred approximately

$11.1 million of strategic restructuring and transaction costs during 2019 (excluding a $2.9 million gain on the sale of PPI). These charges consisted of $3.4 million of employee severance costs and $7.7 million of other operating costs, which included approximately $6.3 million of impairment charges stemming from the write-off of existing contracts that we will not be utilizing as we move forward with a new third-party service provider to leverage its platform in an effort to expand our digital capabilities. During the nine months ended September 30, 2020, we recognized $2.1 million of strategic restructuring and transaction costs and we will likely incur additional costs in the future as a result of this strategic review. There can be no assurance that the costs of undertaking our operational improvement initiatives will be offset by future earnings that may result from the improvements, and it is possible that we will not realize the expected benefits from our operational improvement initiatives to the extent we anticipate or at all.

Our portfolios may not obtain attractive returns under certain market conditions or at all.

The goal of our investment process is to provide competitive absolute returns over full market cycles. Accordingly, our portfolios may not perform well compared to benchmarks or other investment managers’ strategies during certain periods of time, under certain market conditions, or after specific market shocks. Underperformance may negatively affect our ability to retain clients and attract new clients. We are likely to be most out of favor when the markets are running on positive or negative price momentum and market prices become disconnected from underlying investment fundamentals. During and shortly following such periods of relative under performance, we are likely to see our highest levels of client turnover, even if our absolute returns are positive. Loss of client assets and the failure to attract new clients could adversely affect our revenues and growth.

Difficult market conditions, like those during the current COVID-19 pandemic, can adversely affect our strategies in many ways, including by negatively impacting their performance and reducing their ability to raise or deploy capital, which could materially reduce our revenues and adversely affect our business, financial condition or results of operations.

Significant disruptions and volatility in the global financial markets and economies, like the current conditions caused by the COVID-19 pandemic, could impair the investment performance of our strategies. Although we seek to generate consistent, positive, absolute returns across all market cycles, our strategies have been and may be materially affected by conditions in the global financial markets and economic conditions. The global market and economic climate may become increasingly uncertain due to numerous factors beyond our control, including but not limited to, the duration of the COVID-19 pandemic and resulting limitations on business operations in the U.S., concerns related to unpredictable global market and economic factors, uncertainty in U.S. federal fiscal, tax, trade or regulatory policy and the fiscal, tax, trade or regulatory policy of foreign governments, rising interest rates, inflation or deflation, the availability of credit, performance of financial markets, terrorism, natural or biological catastrophes, public health emergencies, or political uncertainty.

A general market downturn, a specific market dislocation or deteriorating economic conditions may cause a material reduction in our revenues and adversely affect our business, financial condition or results of operations by causing:

A decline in AUM, resulting in lower management fees and incentive income.

An increase in the cost of financial instruments, executing transactions or otherwise doing business.

Lower or negative investment returns, which may reduce AUM and potential incentive income.

Reduced demand for assets held by our funds, which would negatively affect our funds’ ability to realize value from such assets.

Increased investor redemptions or greater demands for enhanced liquidity or other terms, resulting in a reduction in AUM, lower revenues and potential increased difficulty in raising new capital.

During the first quarter of 2020 when the COVID-19 pandemic began, there was a global market downturn which caused a decline in our AUM primarily due to market depreciation. While our AUM as of September 30, 2020 has since increased by $2.2 billion since March 31, 2020, our AUM has decreased by $0.2 billion, or 1%, since December 31, 2019. The decrease was driven by net client cash outflows of $1.5 billion, partially offset by market appreciation of $1.3 billion. If these conditions continue, our business, financial condition, results of operations and cash flows may be materially adversely impacted for an extended period of time.

Furthermore, while difficult market and economic conditions and other factors can potentially increase investment opportunities over the long term, such conditions and factors also increase the risk of increased investment losses and additional regulation, which may impair our business model and operations. Our strategies may also be adversely affected by difficult market conditions if we fail to assess the adverse effect of such conditions, which would likely result in significant reductions in the returns of those strategies. Moreover, challenging market conditions may prompt industry-wide reductions in fees. In response to competitive pressures or for any other reason, we may reduce or change our fee structures, which could reduce the amount of fees and income that we may earn relative to AUM.

An investment in our Class A common stock is not an alternative to investing in our strategies, and the returns of our strategies should not be considered as indicative of any returns expected on our Class A common stock, although if our strategies perform poorly, our revenue could be materially adversely impacted, which may in turn impact the returns on our Class A common stock.

The returns on our Class A common stock are not directly linked to the historical or future performance of our investment strategies. Even if our strategies experience positive performance and our AUM increases, holders of our Class A common stock may not experience a corresponding positive return on their Class A common stock.

However, poor performance of our strategies could cause a decline in our revenues, and may therefore have a negative effect on our performance and the returns on our Class A common stock. ~~Readers~~If we fail to meet the expectations of our clients or otherwise experience poor performance, whether due to difficult economic and financial conditions or otherwise, our ability to retain existing AUM and attract new clients could be materially adversely affected. In turn, the fees that we would earn would be reduced and our business, financial condition or results of operations would suffer, thus negatively impacting the price of our Class A common stock. Furthermore, even if the investment performance of our strategies is positive, our business, financial condition or results of operations and the price of our Class A common stock could be materially adversely affected if we are unable to attract and retain additional AUM consistent with our past experience, industry trends or investor and market expectations.

The loss of key investment and sales professionals, members of our senior management team, or difficulty integrating new executives, could have an adverse effect on our business.

We depend on the skills, expertise and institutional knowledge of our key employees, including qualified investment and sales professionals and members of our senior management team, and our success depends on our ability to retain such key employees. Our investment professionals possess substantial experience in investing and have been primarily responsible for the historically attractive investment performance we have achieved. We particularly depend on our executive officers as well as senior members of our research department. As part of our strategic review of our business, we have experienced a reduction in headcount from 366 at January 1, 2019 to 281 employees at September 30, 2020. This and any future reductions to headcount may result in the loss of expertise and institutional knowledge and could adversely affect our business.

We have had significant changes in executive leadership and more could occur. Changes to strategic or operating goals, which can occur with the appointment of new executives, can create uncertainty, and may ultimately be unsuccessful. In addition, executive leadership transition periods, including adding new personnel, could be difficult as new executives gain an understanding of our business and strategy. Difficulty integrating new executives, or the loss of key individuals could limit our ability to successfully execute our business strategy and could have an adverse effect on our overall financial condition.

Competition for qualified investment, sales and top level management professionals is intense. Attracting qualified personnel, including top level management, may take time and we may fail to attract and retain qualified personnel including

top level management in the future. Our ability to attract and retain our executive officers and other key employees will depend heavily on our business strategy, corporate culture and the amount and structure of compensation. We have historically utilized a compensation structure that uses a combination of cash and equity-based incentives as appropriate. However, our compensation may not be effective to recruit and retain the personnel we need if our overall compensation packages are not competitive in the marketplace. Any cost-reduction initiative or adjustments or reductions to compensation could negatively impact our ability to retain key personnel, as could changes to our management structure, corporate culture and corporate governance arrangements.

We may be required to reduce the fees we charge, or our fees may decline due to changes in our AUM composition, which could have an adverse effect on our profit margins and results of operations.

Our current fee structure may be subject to downward pressure due to a variety of factors, including a trend in recent years toward lower fees in the investment management industry. We may be required to reduce fees with respect to both the separate accounts we manage and the mutual funds and collective trust funds we advise. We may charge lower fees in order to attract future new business, which may result in us having to also reduce our fees with respect to our existing business. During the first quarter of 2019, we completed the effort of restructuring fees for many of our mutual funds and collective trust vehicles. Given the overall pressure on fees that all active managers are facing, we believe that bringing our fund fees to a more competitive level will enhance our ability to attract additional business in the future. The fee restructuring reduced the management fees on our existing business, and may fail to attract additional business sufficient to offset any reduction in related operating expenses. Any further fee reductions on existing or future new business could have an adverse effect on our profit margins and results of operations.

Our AUM may be concentrated in certain strategies.

Client purchase and redemption activity may result in AUM concentrations with certain of our investment strategies. As a result, a substantial portion of our operating results may depend upon the performance of these strategies. If we sustain poor investment performance or adverse market conditions, clients may withdraw their investments or terminate their investment management agreements. To the extent any of these strategies is concentrated in an industry or geographic area that is disproportionately negatively impacted by the COVID-19 pandemic, the concentration of our AUM in those strategies will likely have a disproportionately negative impact on our revenues. These conditions would result in a reduction in our revenues from these strategies, which could have an adverse effect on our earnings and financial condition.

Our business is primarily focused in certain targeted geographic regions making us vulnerable to risks associated with having geographically concentrated operations.

Although our client base is national, we are primarily focused in certain targeted geographic regions, including the northeastern and southeastern regions of the United States. Furthermore, our review of our intermediary and institutional distribution strategy resulted in changes to our territory coverage and servicing efforts in order to more effectively service our existing clients with our team, while concentrating on geographies with the greatest chances for growth. This could have the effect of increasing the risks associated with having geographically concentrated operations, including increasing the risk that our business will be negatively impacted by the COVID-19 pandemic if its impacts are concentrated in any of these geographic areas. Our business, financial condition and results of operations may be susceptible to regional economic downturns and other regional factors.

Several of our portfolios involve investing principally in the securities of non-U.S. companies, which involve foreign currency exchange risk, and tax, political, social and economic uncertainties and risks.

As of September 30, 2020, approximately 21% of our AUM across all of our portfolios was invested in securities of non-U.S. companies. Fluctuations in foreign currency exchange rates could negatively affect the returns of our clients who are invested in these strategies. An increase in the value of the U.S. dollar relative to non-U.S. currencies is likely to result in a decrease in the U.S. dollar value of our AUM, which, in turn, could result in lower revenue since we report our financial results in U.S. dollars.

Investments in non-U.S. issuers may also be affected by tax positions taken in countries or regions in which we are invested as well as political, social and economic uncertainty. Declining tax revenues may cause governments to assert their ability to tax the local gains and/or income of foreign investors (including our clients), which could adversely affect clients’ interests in investing outside their home markets. Many financial markets are not as developed, or as efficient, as the U.S. financial markets, and as a result, those markets may have limited liquidity and higher price volatility and may lack established regulations. Liquidity may also be adversely affected by political or economic events, government policies, social or civil unrest within a particular country, and our ability to dispose of an investment may also be adversely affected if we increase the size of our investments in smaller non-U.S. issuers. Non-U.S. legal and regulatory environments, including financial accounting standards and practices, may also be different, and there may be less publicly available information about such

companies. These risks could adversely affect the performance of our strategies that are invested in securities of non-U.S. issuers and may be particularly acute in the emerging or less developed markets in which we invest.

The historical returns of our existing portfolios may not be indicative of their future results or of the portfolios we may develop in the future.

The historical returns of our portfolios and the ratings and rankings we or the mutual funds that we advise have earned in the past should not be considered indicative of the future results of these portfolios or of any other portfolios that we may develop in the future. The investment performance we achieve for our clients varies over time and the variance can be wide. The ratings and rankings we or the mutual funds we advise have earned are typically revised monthly. The historical performance and ratings and rankings included in this report are as of September 30, 2020 and for periods then ended except where otherwise stated. The performance we have achieved and the ratings and rankings earned at subsequent dates and for subsequent periods may be higher or lower and the difference could be material. Our portfolios’ returns have benefited during some periods from investment opportunities and positive economic and market conditions. In other periods, general economic and market conditions have negatively affected our portfolios’ returns. These negative conditions may occur again, and in the future we may not be able to identify and invest in profitable investment opportunities within our current or future portfolios.

Support provided to new products may reduce fee income, increase expenses and expose us to potential loss on invested capital.

We may support the development of new investment products by waiving all or a portion of the fees we receive for managing such products, by subsidizing expenses or by making seed capital investments. Seed investments in new products utilize Company capital that would otherwise be available for general corporate purposes and expose us to capital losses to the extent that realized investment losses are not offset by hedging gains. The risk of loss may be greater for seed capital investments that are not hedged, or if an intended hedge does not perform as expected. Failure to have or devote sufficient capital to support new products could have on adverse impact on our future growth.

Assets influenced by third-party intermediaries have a higher risk of redemption and are subject to changes in fee structures, which could reduce our revenues.

Investments in our mutual funds made through third-party intermediaries, as opposed to mutual fund investments resulting from sales by our own representatives can be more easily moved to investments in funds other than ours. Third-party intermediaries are attractive to investors because of the ease of accessibility to a variety of funds, but this causes the investments to be more sensitive to fluctuations in performance, especially in the short-term. If we were unable to retain the assets of our mutual funds held through third-party intermediaries, our AUM would be reduced. As a result, our revenues could decline and our business, results of operations and financial condition could be materially adversely affected.

We may elect to pursue growth in the United States and abroad through acquisitions or joint ventures, which would expose us to risks inherent in assimilating new operations, expanding into new jurisdictions, and making non-controlling minority investments in other entities.

In order to maintain and enhance our competitive position, we may review and pursue acquisition and joint venture opportunities. We cannot assure we will identify and consummate any such transactions on acceptable terms or have sufficient resources to accomplish such a strategy. Any strategic transaction can involve a number of risks, including:

additional demands on our staff;

unanticipated problems regarding integration of investor account and investment security recordkeeping, operating facilities and technologies, and new employees;

adverse effects in the event acquired intangible assets or goodwill become impaired;

the existence of liabilities or contingencies not disclosed to or otherwise known by us prior to closing such a transaction; and

dilution to our public stockholders if we issue shares of our Class A common stock, or units of Manning & Napier Group with exchange rights, in connection with future acquisitions.

A portion of our separate account business, mutual funds, and collective investment trusts are distributed through intermediaries, platforms, and consultants. Changes in key distribution relationships could reduce our revenues and adversely affect our profitability.

Given that a portion of our product offerings are distributed through intermediaries, platforms, and investment consultants, a share of our success is dependent on access to these various distribution systems. These distributors are not contractually required to distribute or consider our products for placement within advisory programs, on platforms’ approved lists, or in active searches conducted by investment consultants. Additionally, these intermediaries typically offer their clients

various investment products and services, in addition to and in competition with our products and services. If we are unable to cultivate and build strong relationships within these distribution channels, the sales of our products could lead to a decline in revenues and profitability. Additionally, increasing competition for these distribution channels could cause our distribution costs to rise, which could have an adverse effect on our profitability.

Our efforts to establish new portfolios or new products or services may be unsuccessful and could negatively impact our results of operations and our reputation.

As part of our growth strategy, we may seek to take advantage of opportunities to develop new portfolios consistent with our philosophy of managing portfolios to meet our clients’ objectives and using a team-based investment approach. The initial costs associated with establishing a new portfolio likely will exceed the revenues that the portfolio generates. If any such new portfolio performs poorly or fails to attract sufficient assets to manage, our results of operations could be negatively impacted. Further, a new portfolio’s poor performance may negatively impact our reputation and the reputation of our other portfolios within the investment community. We have developed and may seek from time to time to develop new products and services to take advantage of opportunities involving technology, insurance, participant and plan sponsor education and other products beyond investment management. The development of these products and services could involve investment of financial and management resources and may not be successful in developing client relationships, which could have an adverse effect on our business. The cost to develop these products initially will likely exceed the revenue they generate and additional investment in these products could negatively impact short term financial results. If establishing new portfolios or offering new products or services requires hiring new personnel, to the extent we are unable to recruit and retain sufficient personnel, we may not be successful in further diversifying our portfolios, client assets and business, which could have an adverse effect on our business and future prospects.

Our failure to comply with investment guidelines set by our clients and limitations imposed by applicable law, could result in damage awards against us and a loss of our AUM, either of which could adversely affect our reputation, results of operations or financial condition.

When clients retain us to manage assets on their behalf, they generally specify certain guidelines regarding investment allocation that we are required to follow in managing their portfolios. We are also required to invest the mutual funds’ assets in accordance with limitations under the 1940 Act, and applicable provisions of the IRC. Other clients, such as plans subject to ERISA, or non-U.S. funds, require us to invest their assets in accordance with applicable law. Our failure to comply with any of these guidelines and other limitations could result in losses to clients or investors in our products which, depending on the circumstances, could result in our obligation to make clients whole for such losses. If we believed that the circumstances did not justify a reimbursement, or clients believed the reimbursement we offered was insufficient, clients could seek to recover damages from us, withdraw assets from our products or terminate their investment management agreement with us. Any of these events could harm our reputation and adversely affect our business.

A change of control of our company could result in termination of our investment advisory agreements.

Under the 1940 Act, each of the investment advisory agreements for SEC registered mutual funds that our affiliate, MNA, advises automatically terminates in the event of its assignment, as defined under the 1940 Act. If such an assignment were to occur, MNA could continue to act as adviser to any such fund only if that fund’s board of directors and stockholders approved a new investment advisory agreement, except in the case of certain of the funds that we sub-advise for which only board approval would be necessary. Under the Advisers Act each of the investment advisory agreements for the separate accounts we manage may not be assigned without the consent of the client. An assignment may occur under the 1940 Act and the Advisers Act if, among other things, MNA undergoes a change of control. In certain other cases, the investment advisory agreements for the separate accounts we manage require the consent of the client for any assignment. If such an assignment occurs, we cannot be certain that MNA will be able to obtain the necessary approvals from the boards and stockholders of the mutual funds that it advises or the necessary consents from separate account clients.

New Hampshire banking laws applicable to our trust company include change in control restrictions.

Our subsidiary, Exeter Trust Company (“ETC”), is established under the laws of New Hampshire. The New Hampshire Revised Statutes Annotated require that an application be filed with the Bank Commissioner for prior approval in the event of a change of ownership or a change of control. If any person intends to acquire directly or indirectly 10 percent or more of the voting shares of the Company, then a “change of ownership” of ETC will occur. Likewise, the direct or indirect transfer of ownership of more than 50 percent of the voting shares of the Company will result in a “change of control” of ETC. Approval of the application by the Bank Commissioner may take 90 days or longer.

Operational risks may disrupt our business, result in losses or limit our growth.

We are heavily dependent on the capacity and reliability of the communications, information and technology systems supporting our operations, whether developed, owned and operated by us or by third parties. Operational risks such as trading or operational errors or interruption of our financial, accounting, trading, compliance and other data processing systems,

whether caused by fire, natural disaster or pandemic, power or telecommunications failure, act of terrorism or war or otherwise, could result in a disruption of our business, liability to clients, regulatory intervention or reputational damage, and thus adversely affect our business. Some types of operational risks, including, for example, trading errors, may be increased in periods of increased volatility, which can magnify the cost of an error. Although we have back-up systems in place, our back-up procedures and capabilities in the event of a failure or interruption may not be adequate, and the fact that we operate our business out of multiple physical locations may make such failures and interruptions difficult to address on a timely and adequate basis.

We depend on our headquarters in Fairport, New York, where a majority of our employees, administration and technology resources are located, for the continued operation of our business. During the COVID-19 pandemic almost all of our employees are working remotely, which may impact the level of service that is provided to our clients. Any significant disruption to our headquarters could have an adverse effect on our business.

A failure to effectively maintain, enhance and modernize our information technology systems, and effectively develop and deploy new technologies, could adversely affect our business.

Our success depends on our ability to maintain effective information technology systems, to enhance those systems to better support our business in an efficient and cost-effective manner and to develop new technologies and capabilities in pursuit of our long-term strategy. We recently selected InvestCloud to lead our digital transformation, and will utilize InvestCloud's full suite of applications in order to deliver what we believe will be the best possible experience for our clients and partners. The multi-phased conversion will focus on enhancing the digital client experience, streamlining back-office processes, and centralizing performance data and reporting. Additionally, as part of the InvestCloud implementation, we will substantially re-engineer many of our business processes.

Some technology development initiatives are long-term in nature, may negatively impact our financial results as we invest in the initiatives, may cost more than anticipated to complete, or may not be completed. Additionally, our technology initiatives may be more costly or time-consuming than anticipated, may not deliver the expected benefits upon completion, and may need to be replaced or become obsolete more quickly than expected, which could result in accelerated recognition of expenses. If we fail to maintain or enhance our existing information technology systems or if we were to experience failure in developing and implementing new technologies, our relationships, reputation, ability to do business with our clients and our competitive position may be adversely affected. We could also experience other adverse consequences, including additional costs or write-offs of capitalized costs, unfavorable underwriting and reserving decisions, internal control deficiencies, and information security breaches resulting in loss or inappropriate disclosure of data. We have been required to make significant capital expenditures to update our technology infrastructure, and we may incur the costs described above as we deploy this new technology.

Failure to implement effective information and cyber security policies, procedures and capabilities, or cybersecurity breaches of software applications and other technologies on which we rely, could disrupt operations and cause financial losses that could result in a decrease in earnings and reputational harm.

We are dependent on the effectiveness of our, and third party software vendors', information and cybersecurity policies, procedures and capabilities to protect our computer and telecommunications systems and the data that reside on or are transmitted through them. As part of our normal operations, we maintain and transmit confidential information about our clients and employees as well as proprietary information relating to our business operations. We maintain a system of internal controls designed to provide reasonable assurance that fraudulent activity, including misappropriation of assets, fraudulent financial reporting and unauthorized access to sensitive or confidential data is either prevented or detected on a timely basis. Nevertheless, all technology systems remain vulnerable to unauthorized access and may be corrupted by cyberattacks, computer viruses or other malicious software code, the nature of which threats are constantly evolving and becoming increasingly sophisticated. In addition, we are currently facing heightened operational risk, including heighted cybersecurity risk, because more of our employees are working remotely. Remote working environments may be less secure and more susceptible to cyber-attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic.

Breach or other failure of our technology systems, including those of third parties with which we do business, or failure to timely and effectively identify and respond to any such breach or failure, could result in the loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by the incident, additional security costs to mitigate against future incidents, increased insurance premiums, and litigation costs resulting from the incident. Moreover, loss of confidential customer information could harm our reputation, result in the termination of contracts by our existing customers and subject us to liability under laws that protect confidential personal data, resulting in increased costs or loss of revenues. Ultimately, a cyberattack can damage our competitiveness, stock price and long-term stockholder value. Recent well-publicized security breaches at other companies have led to enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyberattacks, and may in the future result in heightened cybersecurity requirements, including additional regulatory expectations for oversight of vendors and service providers.

We depend on third-party service providers for services that are important to our business, and an interruption or cessation of such services by any such service providers could have an adverse effect on our business.

We depend on a number of service providers, including custodial and clearing firms, and vendors of communications and networking products and services. We cannot assure that these providers will be able to continue to provide these services in an efficient manner or that they will be able to adequately expand their services to meet our needs. An interruption or malfunction in or the cessation of an important service by any third-party and our inability to make alternative arrangements in a timely manner, or at all, could have an adverse impact on our business, financial condition and operating results.

Employee misconduct could expose us to significant legal liability and reputational harm.

We operate in an industry in which integrity and the confidence of our clients are of critical importance. Accordingly, if any of our employees engage in illegal or suspicious activities or other misconduct, we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial condition, client relationships and ability to attract new clients. For example, our business often requires that we deal with confidential information. If our employees were to improperly use or disclose this information, even if inadvertently, we could suffer serious harm to our reputation, financial condition and current and future business relationships. It is not always possible to deter employee misconduct, and the precautions we take to detect and prevent this activity may not always be effective. Misconduct by our employees, or even unsubstantiated allegations of misconduct, could result in an adverse effect on our reputation and our business.

Failure to properly address conflicts of interest could harm our reputation, business and results of operations.

We must monitor and address any conflicts between our interests and those of our clients. The SEC and other regulators scrutinize potential conflicts of interest, and we have implemented procedures and controls that we believe are reasonably designed to address these issues. However, appropriately dealing with conflicts of interest is complex, and if we fail, or appear to fail, to deal appropriately with conflicts of interest, we could face reputational damage, litigation or regulatory proceedings or penalties, any of which could adversely affect our reputation, business and results of operations.

If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses.

In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and control our exposure to operational, legal and reputational risks. Our risk management methods may prove to be ineffective due to their design or implementation, or as a result of the lack of adequate, accurate or timely information or otherwise. If our risk management efforts are ineffective, we could suffer losses that could have an adverse effect on our financial condition or operating results. Additionally, we could be subject to litigation, particularly from our clients, and sanctions or fines from regulators. Our techniques for managing risks in client portfolios may not fully mitigate the risk exposure in all economic or market environments, or against all types of risk, including risks that we might fail to identify or anticipate.

The cost of insuring our business is substantial and may increase.

While we carry insurance in amounts and under terms that we believe are appropriate, we cannot guarantee that our insurance will cover all liabilities and losses to which we may be exposed or, if covered, that such liabilities and losses will not exceed the limits of available insurance coverage, or that our insurers will remain solvent and meet their obligations. We cannot guarantee that our insurance policies will continue to be available at current terms and fees.

We believe our insurance costs are reasonable but they could fluctuate significantly from year to year. Certain insurance coverage may not be available or may only be available at prohibitive costs. As we renew our insurance policies, we may be subject to additional costs resulting from rising premiums, the assumption of higher deductibles or co-insurance liability and, to the extent certain of our mutual funds purchase separate director and officer or errors and omissions liability coverage, an increased risk of insurance companies disputing responsibility for joint claims. Higher insurance costs and incurred deductibles, as with any expense, would reduce our net income.

Risks Related to our Industry

We are subject to extensive regulation.

We are subject to extensive regulation for our investment management business and operations, including regulation by the SEC under the 1940 Act and the Advisers Act, by the U.S. Department of Labor under ERISA, and by FINRA. The U.S. mutual funds we advise are registered with and regulated by the SEC as investment companies under the 1940 Act. The Advisers Act imposes numerous obligations on investment advisers including record keeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities. The 1940 Act imposes similar obligations, as well as additional detailed operational requirements, on registered investment companies, which must be adhered to by their investment advisers. The U.S. mutual funds that we advise and our broker-dealer subsidiary are each subject to the USA PATRIOT Act of 2001, which requires them to know certain information about their clients and to monitor their transactions for

suspicious financial activities, including money laundering. The U.S. Office of Foreign Assets Control, ("OFAC"), has issued regulations requiring that we refrain from doing business, or allow our clients to do business through us, in certain countries or with certain organizations or individuals on a list maintained by the U.S. government.

Our failure to comply with applicable laws or regulations could result in fines, censure, suspensions of personnel or other sanctions, including revocation of our registration as an investment adviser. Even if a sanction imposed against us or our personnel is small in monetary amount, the adverse publicity arising from the imposition of sanctions against us by regulators could harm our reputation, result in withdrawal by our clients from our products and impede our ability to retain clients and develop new client relationships, which may reduce our revenues.

We face the risk of significant intervention by regulatory authorities, including extended investigation and surveillance activity, adoption of costly or restrictive new regulations and judicial or administrative proceedings that may result in substantial penalties. Among other things, we could be fined or be prohibited from engaging in some of our business activities. The requirements imposed by our regulators are designed to ensure the integrity of the financial markets and to protect customers and other third parties who deal with us, and are not designed to protect our stockholders. Accordingly, these regulations often serve to limit our activities, including through net capital, customer protection and market conduct requirements.

The regulatory environment in which we and our clients operate is subject to continual change, and regulatory developments designed to increase oversight could adversely affect our business.

The legislative and regulatory environment in which we operate undergoes continuous change, subjecting industry participants to additional, more costly and potentially more punitive regulation. New laws or regulations, or changes in the enforcement of existing laws or regulations, applicable to us and our clients could adversely affect our business subjecting us and other industry participants to additional costs. Any or all of the regulators who oversee us could adopt new rules or rule amendments that could substantially impact how we operate and may necessitate significant expenditures in order to adapt and comply.

Our ability to function in an uncertain and ever-changing regulatory environment will depend on our ability to constantly monitor and promptly react to legislative and regulatory changes, which inevitably result in intangible costs and resource drains. The compliance burden resulting from regulatory changes and uncertainty is likely to increase, particularly as regulators grow more technologically advanced and more reliant on data analytics. As a result, we may be forced to divert resources and expenditures to information technology in order to analyze data and risk in the same manner as regulators and to be able to provide regulators with the data output they may expect going forward.

Regulations may accelerate industry trends towards passive or lower cost investment options, centralized due diligence and shrinking platform ability, making access to intermediary decision-makers more challenging. Mutual fund intermediaries may be forced to eliminate or curtail the availability of certain mutual fund share classes, which may hamper our distribution efforts and reduce assets in the mutual fund. Similarly, platform consolidations may prevent our separate account intermediaries from supporting our products, which could result in AUM declines and fewer distribution channels.

There have been a number of highly publicized regulatory inquiries that have focused on the investment management industry. These inquiries have resulted in increased scrutiny of the industry and new rules and regulations for mutual funds and investment managers. This regulatory scrutiny may limit our ability to engage in certain activities that might be beneficial to our stockholders. Further, adverse results of regulatory investigations of mutual fund, investment advisory and financial services firms could tarnish the reputation of the financial services industry generally and mutual funds and investment advisers more specifically, causing investors to avoid further fund investments or redeem their account balances. Redemptions would decrease our AUM, which would reduce our advisory revenues and net income.

Further, due to acts of serious fraud in the investment management industry and perceived lapses in regulatory oversight, U.S. and non-U.S. governmental and regulatory authorities may continue to increase regulatory oversight of our business.

The investment management industry is intensely competitive.

The investment management industry is intensely competitive, with competition based on a variety of factors, including investment performance, investment management fee rates, recent trend towards favor for passive investment products, continuity of investment professionals and client relationships, the quality of services provided to clients, corporate positioning and business reputation, continuity of selling arrangements with intermediaries and differentiated products. A number of factors, including the following, serve to increase our competitive risks:

some competitors, including those with passive investment products and exchange traded funds, charge lower fees for their investment services than we do;

a number of our competitors have greater financial, technical, marketing and other resources, more comprehensive name recognition and more personnel than we do;

potential competitors have a relatively low cost of entering the investment management industry;

the recent trend toward consolidation in the investment management industry, and the securities business in general, has served to increase the size and strength of a number of our competitors;

some investors may prefer to invest with an investment manager that is not publicly traded based on the perception that a publicly traded asset manager may focus on the manager’s own growth to the detriment of investment performance for clients;

some competitors may invest according to different investment styles or in alternative asset classes that the markets may perceive as more attractive than the portfolios we offer;

some competitors may have more attractive investment returns;

some competitors may operate in a different regulatory environment than we do, which may give them certain competitive advantages in the investment products and portfolio structures that they offer; and

other industry participants, hedge funds and alternative asset managers may seek to recruit our investment professionals.

If we are unable to compete effectively, our revenues could be reduced and our business could be adversely affected.

Our industry is increasingly becoming subject to rapid changes in technology that may alter historical methods of doing business.

The financial industry continues to be impacted by innovation, technological changes, and changing customer preferences, including the emergence of “FinTech” companies and the deployment of new technologies based on artificial intelligence and machine learning that are becoming increasing competitive with and may disrupt more traditional business models. If we do not effectively anticipate and adapt to these changes it could limit our ability to compete, decrease the value of our products to clients, and adversely affect our business and results of operations.

Our business could also be affected by technological changes in the industries that represent our target markets, including tasks/roles that are currently performed by people being replaced by automation, artificial intelligence, or other advances outside of our control, which could impact national brokerage firm representatives or independent financial advisors, upon which a portion of our revenues are based, and adversely affect our business and results of operations.

The investment management industry faces substantial litigation risks, which could adversely affect our business, financial condition or results of operations or cause significant reputational harm to us.

We depend to a large extent on our network of relationships and on our reputation to attract and retain client assets. If a client is not satisfied with our services, its dissatisfaction may be more damaging to our business than client dissatisfaction would be to other types of businesses. We make investment decisions on behalf of our clients that could result in substantial losses to them. If our clients suffer significant losses, or are otherwise dissatisfied with our services, we could be subject to the risk of legal liabilities or actions alleging negligent misconduct, breach of fiduciary duty, breach of contract, unjust enrichment and/or fraud. These risks are often difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time, even after an action has been commenced. We may incur significant legal expenses in defending against litigation whether or not we engaged in conduct as a result of which we might be subject to legal liability. Substantial legal liability or significant regulatory action against us could adversely affect our business, financial condition or results of operations or cause significant reputational harm to us.

Catastrophic and unpredictable events, like the COVID-19 pandemic, could have an adverse effect on our business.

The COVID-19 pandemic and any terrorist attack, war, power failure, cyber-attack, natural disaster, public health emergency or pandemic or other catastrophic or unpredictable event could adversely affect our future revenues, expenses and earnings by:

decreasing investment valuations in, and returns on, the assets that we manage;

causing disruptions in national or global economies that decrease investor confidence and make investment products generally less attractive;

interrupting our normal business operations;

sustaining employee casualties, including loss of our key members of our senior management team or our investment team;

requiring substantial expenditures and expenses to repair, replace and restore normal business operations; and

reducing investor confidence.

We have a disaster recovery plan to address certain contingencies, but we cannot be assured that this plan will be sufficient in responding or ameliorating the effects of all disaster scenarios. If our employees or the vendors we rely upon for

support in a catastrophic event are unable to respond adequately or in a timely manner, we may lose clients resulting in a decrease in AUM which may have an adverse effect on revenues and net income.

Risks Related to Our Structure

We may not be able to resume paying dividends on our Class A common stock, and our ability to pay regular dividends to our stockholders is subject to the discretion of our board of directors and may be limited by our structure and applicable provisions of Delaware law.

On April 22, 2020, our board of directors determined to suspend our quarterly cash dividend on our Class A common stock due to the market volatility and ongoing uncertainty resulting from the COVID-19 pandemic. Although we had historically declared cash dividends on our Class A common stock, our board of directors has sole discretion over the amount or frequency of any dividends. Because of our structure, we will be dependent upon the ability of our subsidiaries to generate earnings and cash flows and distribute them to us so that we may pay dividends, if declared by the board of directors, to our stockholders. Manning & Napier Group’s ability to make distributions to its members, including us, in an amount sufficient for us to pay dividends, if any, will be subject to its and its subsidiaries’ operating results, cash requirements and financial condition, the applicable laws of the State of Delaware, which may limit the amount of funds available for distribution, and its compliance with covenants and financial ratios related to any indebtedness it may incur in the future. In addition, as described elsewhere, under the terms of its operating agreement, Manning & Napier Group is obligated to make tax distributions to holders of its units, including us. As a consequence of these various limitations and restrictions, we may have to reduce or eliminate the payment of dividends on our Class A common stock for an extended period of time, which could adversely affect the market price of our Class A common stock.

We depend on distributions from Manning & Napier Group to pay taxes and expenses, including payments under the tax receivable agreement, but Manning & Napier Group’s ability to make such distributions will be subject to various limitations and restrictions.

We have no material assets other than our ownership of Class A units of Manning & Napier Group and have no independent means of generating revenue. Manning & Napier Group is treated as a partnership for U.S. federal income tax purposes and, as such, is not subject to U.S. federal income tax. Instead, taxable income is allocated to holders of its units, including us. Accordingly, we incur income taxes on our allocable share of any net taxable income of Manning & Napier Group. Under the terms of its operating agreement, Manning & Napier Group is obligated to make tax distributions to holders of its units, including us. We also incur expenses related to our operations, including expenses under the tax receivable agreement, which we expect to be significant. We intend, as its managing member, to cause Manning & Napier Group to make distributions in an amount sufficient to allow us to pay our taxes and operating expenses, including any payments due under the tax receivable agreement. However, Manning & Napier Group’s ability to make such distributions is subject to various limitations and restrictions including, but not limited to, restrictions on distributions that would violate any contract or agreement to which Manning & Napier Group is then a party or any applicable law or that would have the effect of rendering Manning & Napier Group insolvent. If we do not have sufficient funds to pay tax or other liabilities to fund our operations, we may have to borrow funds, which could adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders.

Furthermore, by paying cash distributions rather than investing in our business, we might not have sufficient cash to fund operations or new growth initiatives that will support the growth of our business.

We are required to pay holders of units of Manning & Napier Group for certain tax benefits we may claim as a result of the tax basis step up we realize in connection with the future purchases or exchanges of those units for shares of our Class A common stock, and the amounts we may pay could be significant.

Our current and former employee owners indirectly hold a minority ownership interest in Manning & Napier Group. Any future purchases or exchanges of their units of Manning & Napier Group for cash or, at our election, shares of our Class A common stock may produce favorable tax attributes for us. When we acquire such units, both the existing basis and the anticipated basis adjustments may increase, for tax purposes, depreciation and amortization deductions allocable to us from Manning & Napier Group and therefore reduce the amount of income tax we would otherwise be required to pay in the future. This increase in tax basis may also decrease gain, or increase loss, on future dispositions of certain capital assets to the extent the increased tax basis is allocated to those capital assets.

We entered into a tax receivable agreement with the other holders of Class A units of Manning & Napier Group, pursuant to which we are required to pay to holders of such Class A units 85% of the applicable cash savings, if any, in U.S. federal, state, local and foreign income tax that we actually realize, or are deemed to realize in certain circumstances, as a result of any step-up in tax basis in Manning & Napier Group’s assets as a result of (i) certain tax attributes of our purchase of such Class A units or exchanges (for shares of Class A common stock) and that are created as a result of the sales or exchanges and payments

under the tax receivable agreement and (ii) payments under the tax receivable agreement, including any tax benefits related to imputed interest deemed to be paid by us as a result of such agreement.

We expect that the payments we will be required to make under the tax receivable agreement will be substantial. We have recorded the estimated impacts of the Tax Cuts and Jobs Act and the CARES Act on the liability under the tax receivable agreement. Assuming no new material changes in the relevant tax law, the purchase or exchange of Class A units would result in depreciable or amortizable basis and that we earn sufficient taxable income to realize all tax benefits that are subject to the tax receivable agreement, we expect that the reduction in tax payments for us is approximately $22.5 million as of September 30, 2020. Under such scenario, we would be required to pay the holders of such Class A units 85% of such amount, or approximately $19.4 million. The actual amounts may materially differ from these estimated amounts, as potential future reductions in tax payments for us and tax receivable agreement payments by us will be calculated using the market value of our Class A common stock and the prevailing tax rates at the time of purchase or exchange and will be dependent on us generating sufficient future taxable income to realize the benefit. In general, increases in the market value of our shares or in prevailing tax rates will increase the amounts we pay under the tax receivable agreement.

The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including:

the timing of exchanges by the holders of units of Manning & Napier Group, the number of units purchased or exchanged, or the price of our Class A common stock, as the case may be, at the time of the purchase or exchange;

the amount and timing of the taxable income we generate in the future and the tax rate then applicable; and

the portion of our payments under the tax receivable agreement constituting imputed interest and whether the purchases or exchanges result in depreciable or amortizable basis.

There is a possibility that not all of the 85% of the applicable cash savings will be paid to the selling or exchanging holder of Class A units at the time described above. If we determine that all or a portion of such applicable tax savings is in doubt, we will pay to the holders of such Class A units the amount attributable to the portion of the applicable tax savings that we determine is not in doubt and pay the remainder at such time as we determine the actual tax savings or that the amount is no longer in doubt.

Payments under the tax receivable agreement, if any, will be made pro rata among all tax receivable agreement holders entitled to payments on an annual basis to the extent we have sufficient taxable income to utilize the increased depreciation and amortization expense. The availability of sufficient taxable income to utilize the increased depreciation and amortization expense will not be determined until such time as the financial results for the year in question are known and tax estimates prepared. To the extent that we are unable to make payments under the tax receivable agreement for any reason, such payments will be deferred and in some instances, will accrue interest until paid.

In certain cases, payments under the tax receivable agreement to holders of Manning & Napier Group units may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement.

The tax receivable agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, or if, at any time, we elect an early termination of the tax receivable agreement, our obligations under the tax receivable agreement with respect to all Class A units of Manning & Napier Group, whether or not such units have been purchased or exchanged before or after such transaction, would be based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the tax receivable agreement. As a result, (i) we could be required to make payments under the tax receivable agreement that are greater than or less than the specified percentage of the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement and (ii) if we elect to terminate the tax receivable agreement early, we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits, which payment may be made significantly in advance of the actual realization of such future benefits. In these situations, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. There can be no assurance that we will be able to finance our obligations under the tax receivable agreement. If we were to elect to terminate the tax receivable agreement immediately as of September 30, 2020, we estimate that we would be required to pay up to approximately $20.3 million in the aggregate, which assumes the exchange of 2,021,781 units of Manning & Napier Group held by those other than us under the tax receivable agreement.

If we were deemed an investment company under the 1940 Act as a result of our ownership of Manning & Napier Group, applicable restrictions could make it impractical for us to continue our business as contemplated and could have an adverse effect on our business.

We do not believe that we are an “investment company” under the 1940 Act. Because we, as the sole managing member of Manning & Napier Group, control the management of and operations of Manning & Napier Group, we believe that our interest in Manning & Napier Group is not an “investment security” as such term is used in the 1940 Act. If we were to cease participation in the management of Manning & Napier Group or not be deemed to control Manning & Napier Group, our interest in Manning & Napier Group could be deemed an “investment security” for purposes of the 1940 Act. A person may be an “investment company” if it owns investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items). Our sole asset is our equity investment in Manning & Napier Group. A determination that such investment is an investment security could cause us to be deemed an investment company under the 1940 Act and to become subject to the registration and other requirements of the 1940 Act. We do not believe that we are an investment company under Section 3(b)(1) of the 1940 Act because we are not primarily engaged in a business that causes us to fall within the definition of “investment company.” The 1940 Act and the rules thereunder contain detailed prescriptions for the organization and operations of investment companies. Among other things, the 1940 Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equity securities, prohibit the issuance of stock options, and impose certain governance requirements. We and Manning & Napier Group intend to conduct our operations so that we will not be deemed an investment company. However, if we nevertheless were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have an adverse effect on our business, financial condition and results of operations.

Risks Related to Our Class A Common Stock

The market price and trading volume of our Class A common stock may be volatile, which could result in rapid and substantial losses for our stockholders.

The market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations. The trading volume of our Class A common stock may fluctuate and cause significant price variations to occur. If the market price of our Class A common stock declines significantly, investors may be unable to sell shares of Class A common stock at or above their purchase price, if at all. The market price of our Class A common stock may fluctuate or decline significantly in the future. Some of the factors that could negatively affect the price of our Class A common stock, or result in fluctuations in the price or trading volume of our Class A common stock, include:

an extended period of U.S. economic hardship as a result of the COVID-19 pandemic;

actual or anticipated variations in our quarterly operating results, including the suspension of our quarterly dividend;

failure to meet the market’s earnings expectations;

publication of negative research reports about us or the investment management industry, or the failure of securities analysts to cover our Class A common stock;

a limited float and low average daily trading volume, which may result in illiquidity as investors try to buy and sell and thereby exacerbating positive or negative pressure on our stock;

departures of any members of our senior management team or additions or departures of other key personnel;

adverse market reaction to any indebtedness we may incur or securities we may issue in the future;

adverse market reaction to our stockholder rights, or "poison pill," plan;

changes in market valuations of similar companies;

actual or anticipated poor performance in one or more of the portfolios we offer;

changes or proposed changes in laws or regulations, or differing interpretations thereof, affecting our business, or enforcement of these laws and regulations, or announcements relating to these matters;

adverse publicity about the investment management industry generally, or particular scandals, specifically;

litigation and governmental investigations;

consummation by us or our competitors of significant acquisitions, strategic partnerships or divestitures;

actions by stockholders, including any activist stockholders;

exchange of units of Manning & Napier Group for shares of our Class A common stock or the expectation that such conversions or exchanges may occur; and

general market and economic conditions.

Our Class A common stockholders may experience dilution in the future as a result of future acquisitions, additional capital raising, exchanges pursuant to the Exchange Agreement and/or equity grants under our equity compensation plans.

If we issue shares of Class A common stock or units of Manning & Napier Group in future acquisitions or capital raising activity, the ownership interest of our Class A common stockholders will be diluted. If we grant exchange rights with respect to the issuance of the units of Manning & Napier Group that allow its holder to exchange such units for shares of our Class A common stock, stockholders will incur dilution in the percentage of the issued and outstanding shares of Class A common stock that are owned at such time. Our stockholders will also be diluted to the extent the current holders of Class A units of Manning & Napier Group exchange their units pursuant to the Exchange Agreement and we settle that exchange in shares of our Class A common stock. We also may issue shares of our Class A common stock or units of Manning & Napier Group in connection with grants under our equity compensation plans, which will dilute our Class A common stockholders. Any such future sales, issuances or exchanges of our Class A common stock or rights to purchase our Class A common stock could result in substantial dilution to our existing stockholders.

If we fail to comply with our public company financial reporting and other regulatory obligations, including the Continued Listing Criteria of the New York Stock Exchange, our business and stock price could be adversely affected.

We are subject to the Continued Listing Criteria of the New York Stock Exchange (“NYSE”). In order for our Class A common stock to continue trading on the NYSE, we must maintain certain share prices, numbers of stockholders and corporate governance standards, including obtaining the approval of our stockholders prior to issuing shares in excess of 20% of the voting power outstanding before that issuance. If we are unable to meet any of these standards, our Class A common stock may no longer trade on the NYSE, which would adversely impact the trading market for our shares and liquidity for our stockholders and may adversely impact our business. If our Class A common stock does not maintain an average closing price of $1.00 or more over any consecutive 30 trading-day period, the NYSE may delist our Class A common stock for failure to maintain compliance with the NYSE price criteria listing standards. Specifically, in the event that our stock price falls below the minimum share price, we may fall out of compliance with the NYSE listing standards and to regain compliance we may be forced to take corporate actions, such as a reverse stock split, which may adversely impact the trading market for our shares and liquidity. As a public company, we are subject to the reporting requirements of the Exchange Act, have implemented specific corporate governance practices and adhere to a variety of reporting requirements under the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, as well as the rules of the NYSE.

Our management is required to conduct an annual assessment of the effectiveness of our internal controls over financial reporting and include a report on our internal controls in our annual reports on Form 10-K pursuant to Section 404 of the Sarbanes-Oxley Act of 2002. If our management identifies one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. If we are unable to assert that our internal control over financial reporting is effective, market perception of our financial condition and the trading price of our stock may be adversely affected and customer perception of our business may suffer.

Our corporate documents, stockholder rights plan and Delaware law contain provisions that could discourage, delay or prevent a change in control of the Company that our stockholders might consider to be in their best interests.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as our stockholder rights, or “poison pill,” plan, could impede attempts by our stockholders to remove or replace our management and could discourage others from initiating a potential merger, takeover or other change of control transaction, including a potential transaction at a premium over the market price of our Class A common stock, that our stockholders might consider to be in their best interests. These provisions:

authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend, or other rights or preferences superior to the rights of the holders of our Class A common stock;

discourage any person or group that wishes to acquire 15% or more of our Class A common stock from doing so without obtaining our agreement because such an acquisition would cause the person or group to suffer substantial dilution;

prohibit stockholder action by written consent and instead require all stockholder actions to be taken at a meeting of our stockholders;

provide that the board of directors is expressly authorized to make, alter, or repeal our amended and restated bylaws; and

establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit the holders of our Class A common stock.

A proxy contest for the election of directors at our annual meeting or proposals arising out of stockholder initiatives could cause us to incur substantial costs and negatively affect our business.

Due to the uncertainty in U.S. financial markets as a result of the COVID-19 pandemic in combination with the recent redemption pursuant to our annual exchange process, we may be subject to proxy contests and other forms of stockholder activism. In the event that any significant investor makes proposals concerning our operations, governance or other matters, or seeks to change our board of directors, our review and consideration of such proposals may require the devotion of a significant amount of time by our management and employees and could require us to expend significant resources. Further, if our board of directors, in exercising its fiduciary duties, disagrees with or determines not to pursue the strategic direction suggested by an activist stockholder, our business could be adversely affected by responding to a costly and time-consuming proxy contest or other actions from an activist stockholder that will divert the attention of our management and employees, interfere with our ability to execute our strategic plan, result in the loss of business opportunities and clients, and make it more difficult for us to attract and retain qualified personnel and business partners.

Any issuance of preferred stock could make it difficult for another company to acquire us or could otherwise adversely affect holders of our Class A common stock, which could depress the price of our Class A common stock.

Our board of directors has the authority to issue preferred stock and to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our Class A common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our Class A common stock at a premium over the market price, and adversely affect the market price and the voting and other rights of the holders of our Class A common stock.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our Class A common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Item 5. Other Information

Effective October 20, 2020, the Board of Directors adopted a Director Resignation Policy (the “Resignation Policy”). Under the Resignation Policy, in an uncontested election of directors, director nominees who receive a greater number of votes withheld from their election than for their election must tender their resignation to the chairman of the Board within five business days of when the stockholder vote is certified.

Under the Resignation Policy, the Nominating and Corporate Governance Committee of the Board of Directors (the “NCGC”) will consider the tendered resignation and recommend to the Board of Directors whether to accept or reject the resignation within 45 calendar days of the stockholder meeting. The Resignation Policy requires the Board of Directors to act on the NCGC’s recommendation within 120 calendar days of the stockholder meeting. Following the decision of the Board of Directors, the Company will promptly file a Current Report on Form 8-K with the SEC to announce the decision and, if applicable, the factors considered in determining whether to accept or reject the resignation.

The Resignation Policy prohibits any director who is required to tender his or her resignation from participating in the NCGC’s recommendation or the Board’s determination on the director’s tendered resignation, and it provides for processes in the event the chairman, a majority of the members of the NCGC or all directors are required to tender their resignation. A copy of the Resignation Policy can be found under the “Investor Relations-Governance” section of the Company’s website at www.manning-napier.com. The contents of the Company’s website are not incorporated by reference into this Quarterly Report on Form 10-Q are referred to such Item 1A for a more complete understanding of risks concerning our company. There have been no material changes in our risk factors since those published in such Form 10-K for the year ended December 31, 2016.10-Q.

Item 6. Exhibits



Exhibit No.		Description
3.1		Amended and Restated Bylaws of Manning & Napier, Inc., as of July 26, 2020 is incorporated herein by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 30, 2020

31.1		Certification of the Company’s Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Company’s Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of the Company’s Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of the Company’s Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		Materials from the Manning & Napier, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2017,~~2020, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Statements of Financial Condition, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated ~~Statement~~Statements of Shareholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) related Notes to the Unaudited Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	MANNING & NAPIER, INC.

Dated: November ~~8, 2017~~16, 2020	By:	/s/ ~~WILLIAM MANNING~~Marc Mayer
		~~William Manning~~Marc Mayer
		Chief Executive Officer
		(principal executive officer)

		/s/ ~~BETH H. GALUSHA~~Paul J. Battaglia
		~~Beth H. Galusha~~Paul J. Battaglia
		~~Principal~~Chief Financial Officer
		(principal financial and accounting officer)

4168



Assets acquired
Current assets	$	6,998
Property and equipment, net	783
Intangible assets
Client relationships	9,320
Trademarks	270
Goodwill	3,958
Total assets acquired	21,329
Liabilities assumed
Accounts payable and accrued expenses	4,023
Other liabilities	1,204
Total liabilities assumed	5,227
Purchase price	$	16,102



	Restricted Stock Awards		Weighted Average Grant Date Fair Value
Stock awards outstanding at January 1, 2017	1,207,788		$	12.56
Granted	70,399		$	5.55
Vested	(276,064	)	$	12.41
Forfeited	(150,000	)	$	12.20
Stock awards outstanding at September 30, 2017	852,123		$	12.09



	September 30, 2017
AUM - by investment vehicle and portfolio	Blended Asset		Equity		Fixed Income		Total
	(in millions)
Separately managed accounts	$	10,728.4	$	5,412.4	$	1,219.5	$	17,360.3
Mutual funds and collective investment trusts	5,651.7		3,425.0		108.8		9,185.5
Total	$	16,380.1	$	8,837.4	$	1,328.3	$	26,545.8