Good evening. My name is Angie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Manning & Napier First Quarter 2020 Earnings Conference Call. Our hosts for today’s call are Nicole Kingsley Brunner, Chief Marketing Officer; Marc Mayer, Chief Executive Officer; and Paul Battaglia, Chief Financial Officer. Today’s call is being recorded and will be available for replay beginning at 7

00 p.m. Eastern time today. The dial-in number is (404) 537-3406, and enter PIN 7976088. [Operator Instructions] It is now my pleasure to turn the floor over to Ms. Nicole Kingsley Brunner. Please go ahead.

Thank you, Angie, and thank you, everyone, for joining us today to discuss Manning & Napier’s first quarter 2020 results. Before we begin, I would like to remind everyone that certain statements made during this call not based on historical facts, including any statements relating to financial guidance, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Manning & Napier assumes no obligation or responsibility to update any forward-looking statements. During this call, some comments may include reference to non-GAAP financial measures. Full GAAP reconciliations can be found in our earnings release and related SEC filings. With that, allow me to introduce our Chief Executive Officer, Mr. Marc Mayer. Marc?

Thank you, Nicole. I’ll note that our remarks will be somewhat longer than usual, as there is a great deal for us to cover

COVID-19 and its implications, our investment performance, the exchange transaction with our founder and other former private unitholders, progress on our strategic initiatives, and our financial results. While I would normally begin with a review of our performance for clients, we must first acknowledge the events that are unfolding around us. These are unprecedented times and our hearts go out to the sufferers and mourners in our communities, our country and our world. And while much of the story is about adversity, as a community we are rising to the occasion. We are grateful for all the heroes who are keeping us safe and helping our society function. To the doctors, nurses, healthcare workers, our first responders, the policemen, firemen and soldiers, to our political leaders, our teachers, the cooks and kitchen workers, cashiers, delivery people and the armies of volunteers, we will never forget what you have sacrificed and done for us. We are all united in our ability to triumph over tragedy and to come together in ways that we never have before. Our priorities have been clear from the outset of this crisis. We are committed to the safety, health and well-being of our employees and their loved ones. We are doing everything we can to support them and ensure that they are secure. Stacey Green, our head of Human Resources, has done a remarkable job during this trying time in helping us make sure that our employees are fully supported. Her insights, judgment, EQ and sheer leadership have been a beacon for all of us and kept us on track. For our clients, we have committed to doing everything we can to provide superior investment results, advice and service during a tempestuous period. We are confident that focusing on these priorities is the very best thing we can do for the long-term health of our business and its value to shareholders. Turning to client performance. The first quarter was the most difficult market environment investors have seen in over a decade, and our time-tested investment processes were once again up to the challenge. Since equity markets began correcting in late February, our analysts have been finding great investment opportunities across asset classes and the globe. They have also been clear-eyed in what they have sold in equities, debt and real estate to fund these purchases. This team had also begun practicing operating smoothly remotely within our offices prior to the imposition of regional lockdowns, allowing for a comfortable transition following our lockdown in mid-March. This also allowed for a streamlined transition in our trade processing operations and portfolio implementation processes. Our senior executives, including Director of Investments, Ebrahim Busheri, as well as our leadership in trading and all subsequent implementation efforts, Dave Pulver and Michele McGinn, Scott Morabito and Katie Keeler, were key in driving these successful efforts. And while absolute returns were negative for the quarter, we delivered substantial downside protection during the selloff across almost all our strategies. The vast majority of our assets under management outperformed their benchmarks on a relative basis and, in many cases, by substantial margins. For 50 years Manning & Napier has believed that an active investment approach, active in both security selection and, critically, in asset allocation, the primary determinant of long-term results, is the best financial solution, for several reasons. First, it allows us to ignore the noise and focus on long-term success throughout market cycles. Second, it allows us to deliver equal or better investment results with less volatility; a smoother ride. Our results as of the end of the first quarter perfectly captured both these beliefs. First, our disciplined risk management processes enabled us to enter the latest downturn in a meaningfully defensive position. And balanced accounts, both our traditional and ETF-based strategies, were substantially underweight equities, specifically, and risk, broadly. As the selloff unfolded this put client portfolios in a position of strength. Via our dynamic approach to asset allocation, we then began capitalizing on the selloff by incrementally increasing equity exposure as the risk-reward balance became more attractive. By the end of the quarter, risk in our multi-asset-class portfolios swung from a substantial underweight to a substantial overweight, at exactly the right time. This is what a disciplined active investment process is intended to do. We were also able to meaningfully upgrade the quality of our equity holdings, adding to or initiating positions in what we term profile companies, the backbone of our equity portfolios. Suddenly, because of the ferocious speed of the selloff, these companies were available to us at very attractive prices. Our analysts who had been researching these firms, in some cases, for decades were prepared to move quickly. The complete collapse of certain other sectors with indiscriminate selling of both the strongest and weakest players provided what we term hurdle rate opportunities

washed-out cyclicals in industries where capital was exiting at an historic rate, providing compelling value purchases to balance the serial compounders we were able to add to at great prices. Both elements of our equity portfolios have served us well as we delivered for our clients during an unprecedented outperformance by growth stocks through March 23, followed by large episodic returns to value in the next few weeks. Our flexible, non-dogmatic yet highly disciplined approach enabled our research team to do well for our clients. This has continued to serve us well during the equity market rebound in April, as the great majority of our strategies in our AUM continue to outperform on the way up, as well. As of the end of March, client accounts in our flagship Long-Term Growth composite, which represents approximately 30% of our assets under management, and our Strategic Income Moderate composite and in our Fi360 ETF long-term growth composite experienced 470, 331 and 200 basis points of outperformance, respectively. While we recognize that clients do not hire investment managers for negative absolute returns, we are extremely pleased at our ability to add value in such a turbulent environment. Our long-term results are outstanding. Since inception in January 1973, almost a full 50 years ago, our Long-Term Growth composite has outperformed its blended benchmark by 76 basis points, annualized, compounding 9.3% per annum after fees. $100,000 invested at inception would be worth approximately $6.5 million today. This compounding has come despite severe downturns in 1973-1974, when the S&P 500 declined 48%, just as we were getting started; in 1980-1982; the epic crash in 1987; in 1990; in 2000-2002, a 49% decline peak to trough; and 2008-2009, a 56% decline; and then through the current turmoil, a 34% decrease in one month. Over just the past 20 years, with three major market downturns, our Long-Term Growth composite outperformed its blended benchmark by 117 basis points per annum and beat the S&P 500 total return by 137 basis points annually. Our tremendous track record of real long-term results, along with our ability to protect on the downside, clearly demonstrates that our investment processes are as effective and relevant as they have ever been. Beyond multi-asset-class portfolios, our results have been equally compelling across the vast majority of our investment strategies. In our traditional all-equity portfolios, our unrestricted Core Equity, U.S. Equity and Core Non-U.S. Equity composites all delivered impressive relative performance in the first quarter, outperforming their respective benchmarks by 372, 381, and 259 basis points, respectively. Each of these strategies have entirely rebuilt their short- to intermediate-term track records and now reflect meaningful outperformance across the one-, three- and five-year rolling track records. All these performance figures are available on Page 5 of the earnings supplement. Our Disciplined Value suite performed admirably, as well. In a difficult environment for value-oriented equities, broadly, our Disciplined Value-U.S. and Disciplined Value-Unrestricted composites delivered 201 and 132 basis points of relative outperformance. The strong start to the year builds on already outstanding long-term track records for our Disciplined Value suite. Our Rainier International Small Cap team continues to post outsize relative returns, as the Rainier International Discovery Fund generated 913 basis points of relative outperformance in Q1 alone, driving its rolling one-year outperformance to over 11 full percentage points. On a three- and five-year basis, Rainier International Discovery is ahead of its benchmark by 704 and 337 basis points annualized, a truly stunning achievement. Finally, our Real Estate Series outperformed its benchmark by 413 basis points in the quarter and is ahead of its benchmark by over 300 basis points on both a three- and five-year basis. Our municipal bond strategies, namely our Diversified Tax Exempt Series and New York Tax Exempt Series, were each ranked in the first percentile of their Morningstar peer groups in the quarter. I have to say it, past performance is no guarantee of future results and it is really to important to offer that caveat when we are doing well. Like all seasoned investors, we have made our share of mistakes in the past and we will assuredly have more in the future. The key is to establish, maintain and refine the investment philosophy, disciplined processes and high-quality people capable of meeting and exceeding client objectives. Almost universally, our investment strategies and philosophies delivered what we strive to deliver during the market selloff

a degree of downside protection for absolute return-focused accounts and significant relative performance for clients who are more sensitive to relative results. These investment results put us in a position of strength as we move forward and as we build the Manning & Napier of tomorrow. I might just offer a few thoughts on the capital markets, particularly equities, which seem somehow uncoupled from the bleak employment and economic environment. Equity markets have rebounded 25% globally since bottoming on March 23, even as the employment and economic data and earnings reports from companies have been awful, with outlooks remaining bleak over the next couple of quarters. This is unsurprising. Markets are discounting mechanisms which look ahead. Central banks and finance ministries globally have shown remarkable speed and great largess in putting in place immense emergency measures to bolster economies and prevent disaster in the banking and financial system. Current estimates for S&P earnings in 2021 look to rebound to about 2019 levels, helped enormously by healthcare, technology and media, consumer staples and utilities, sectors whose earnings are not being savaged by the virus. More vulnerable sectors, energy, consumer durables, travel, hospitality and finance, make up collectively a much smaller portion of the earnings pie. Analysts' and strategists' projections of $160, plus or minus, per share in 2021 S&P earnings provide support for the current level of equities, as do ultra-low interest rates around the globe, which lower the rate at which future cash flows are discounted. Low prospective returns on many forms of fixed income also support TINA reasoning around the level of equities, an acronym meaning "their is no alternative" to stocks. So with this reasoning, maybe equity levels are not perilously high. But then again, global equities may be vulnerable, as the most important statistics to monitor probably are not backward-looking or even contemporaneous economic and earnings data. The most important data remain the epidemiological ones and there are all kinds of plausible scenarios. The incidence of new cases in the New York metropolitan area peaked weeks ago, yet it is still rising in the rest of the country. Who knows what the impact of staggered re-openings will be. FEMA’s model predicts 200,000 new COVID-19 cases per day in the country by the end of May, versus 20,000 to 25,000 currently. That is truly sobering. There is still an astonishing amount we don’t understand about the virus. Why are mega cities of the global south like Bangkok, Delhi, Jakarta, Mexico City not being devastated? Is it demographics? Weather? Cross-immunities? Effective restrictions? Or are their risks just not yet manifest? Will there be further waves as there were with the 1918-1919 flu epidemic? If so, will they be milder or more malignant? What will be the status of treatments and vaccines? How effective and when? All this is a way of saying that I and we have limited visibility into whether we have seen the bottom in global equities and whether they go up, down or sideways from here over the next number of quarters. But our track record of active asset management gives us confidence that we will be well positioned to adapt. Let me speak about our strategic initiatives. For while we are encouraged by our results at the investment strategy level, which ultimately drive the success of our business, we recognize that at the enterprise level there is still much work to be done. To that end, I will now turn to a discussion on our key strategic initiatives which are as follows

to leverage our expertise and experience to establish a strong, differentiated Wealth Management presence at the regional level where we see attractive growth opportunities; to drive revenue and earnings through the intermediary and institutional segments of our asset management business by developing and executing a playbook appropriate to a small firm with distinguished and differentiated investment capabilities; number three, to pursue a digital transformation capable of turning a material technology deficit into a source of competitive strength, literally ripping out and replacing virtually the entirety of our front, middle and back office systems; four, to refine and build on our investment strengths by further honing our knowledge and expertise in active asset allocation and risk management to fully integrate ESG into our investment offerings; five, to simplify and enhance the efficiency of our operations, improving profitability; and six, to increase employee ownership of the firm. Let me now elaborate on the six initiatives, starting with Wealth Management. The build-out of our Wealth Management team took further steps in the first quarter. We added three new financial consultants to our group, bringing the total size of the team to 17. Continuing to add talent by way of new financial consultants to regions where we already have physical presence is a key objective in our build-out strategy. These new consultants located in Columbus, Ohio, Tampa-St. Petersburg, Florida, and Pittsburgh, Pennsylvania, markets will increase both our sales and service capacity. Our Wealth Management leadership team of Greg Woodard, Megan Henry, Mark Macpherson and Dana Vosburgh are driving the formulation and execution of the strategic plan for the division. They are exploring additional advisory capabilities to augment our existing strengths and investigating potential complementary investment offerings in the alternatives arena. They are looking at ways to extract much greater value from the trust capabilities of our wholly owned Exeter Trust Company. And they are considering steps to simplify our complex web of custodians and service providers in order to generate potentially meaningful efficiencies. Turning to our intermediary and institutional effort. Our intermediary and institutional teams under the leadership of Aaron McGreevy have been similarly highly engaged with clients and prospects over the past 2 months of working remotely. We are focusing our intermediary efforts on independent advisers and RIAs that traditionally made up the majority of the third-party FAs with whom we worked. They are interested in smaller firms for whom they are more important and whose investment offerings are interesting and differentiated, as ours are. The intermediary business is performance sensitive and capable of faster decision making than the institutional market. We would expect to see things turning the corner fastest in this channel and we are, as Paul will describe in a moment. Our institutional business is dominated by Taft-Hartley multi-employer plans. We are rebuilding relationships with the key consultants in that market, as our resurgent investment performance over the past three-plus years coupled with other developments at the company have rekindled interest in Manning & Napier. As Paul will detail, while we sustained negative flows in the first quarter they were at half the rate of the prior few years. The rate of gross outflows declined materially across channels, and new sales, despite the difficult environment, were surprisingly solid. Though no better than last year’s run rates, under the circumstances I would interpret that as positioning us for better results as things begin to normalize. Let me speak about technology. As we’ve discussed on prior calls, we continue to push forward with an aggressive timeline on our digital transformation. We are grateful for the timing of the earliest steps on this transformation, as it has allowed us to seamlessly maintain our business and a strong digital employee experience as we navigate our business and operational needs during today’s health crisis. Chris Briley, our CTO, and his team have been simply spectacular supporting all of us. We have been seamlessly managing all elements of our business amid an incredibly volatile market environment without technological disruption, and that’s provided us with an advantage that we may not have had even a year or so ago. The current environment has accelerated many of the digital-led, marketing-driven efforts that we have been working towards to augment our direct sales efforts. Given the inability to hold face-to-face meetings and in-person prospecting events, our marketing team, led by Nicole Kingsley Brunner, has ramped our digital-first engagement efforts via client servicing webinars, prospecting webinars, content marketing and digital distribution. Clients and prospects are responding well to the new digital engagement strategies. Our webinars over the past two months had two to four times the attendance as last year’s; in some cases, literally hundreds of attendees. And we believe these offer a compelling opportunity to deepen relationships and broaden our reach in ways that will last beyond the current environment. Beyond the near term, we continue to make the necessary strategic investments in our technology. We are progressing well with our partnership with InvestCloud, and we remain on track to have our first client deliverable in the third quarter, despite all the implementation being done remotely. Our Charles River integration is tracking our plans for full implementation by the early fall. This promises to modernize and transform our trading and order management processes, realizing efficiencies along the way. And we’ve begun the early stages of implementing Workday into our finance department. Workday is the leading finance and HR technology provider in the industry, and we look forward to the streamlining and simplification that will come via their technology. I’ll speak later about efficiency and profitability, but it is clear that our large near-term investments in technology will enable meaningful simplification and streamlining of our business processes, with favorable longer-term implications for our cost structure and profitability. Turning to research. I discussed a great deal about the accomplishments of our research team in terms of delivering results for clients. So I won’t repeat that here. There are numerous initiatives underway to build on our research strengths. We are comprehensively evaluating our thinking and efforts around strategic and dynamic asset allocation to ensure that we are making decisions in the most effective way, especially in a persistently low interest rate environment. Our risk management has always been a strength, and we are refining our risk monitoring efforts using sophisticated tools. And while ESG concerns have always been a factor in our research decision making, we are working to more fully integrate it into our core processes. And as for simplifying our overly complex platform, we are looking at the following areas

research, where we have important simplification and efficiency initiatives underway to reduce our number of SKUs, which are mostly in minor-flavor variations of our main strategies; and within our trust company/client service/fund services complex, where, as I noted, we have a tangled web of service providers, coupled with overly manual processes; and IT and operations, where technological improvements will yield efficiencies in the future. I do want to be clear, however, that these initiatives will yield results over time. And as I indicated at the outset, the priority we put on employees during this crisis means that we want them secure in their jobs during this inherently insecure time. Finally, on employee ownership. I will note that after the exchange with our founder, Bill Manning, about which we will speak further, when it closes next week employees and the board will possess 31% of the fully diluted shares outstanding. Now just over half that proportion is in unvested restricted stock that will vest over the next five years, and those restricted stock units represent an important step in our effort to put meaningful ownership in the hands of our employees and the future leaders of Manning & Napier. Having now addressed our six initiatives, I’d like to provide a perspective on how we are thinking about our business, going forward. As I noted earlier, the outlook for capital markets, particularly equity markets, is quite unclear. And since the level of global stock markets is the single most important determinant of our revenues, this uncertainty translates into limited visibility. So I will not forecast the short term. As you have heard, we are resetting and refocusing our firm towards a course for sustainable long-term success. We believe that over the next several years our strategic initiatives will evolve from green shoots of growth to having a major impact on our financials. Our sense of urgency as a management team and as a firm is high, and we know that we must move fast and improve continuously. Broadly speaking, we believe that within an intermediate-term investable horizon we are on a path to turning net outflows to inflows, to achieving significantly improved profitability that brings us to 10% operating margins on the way to 20%, or better, and to driving towards a meaningful and growing level of pretax earnings and EBITDA that can reach $20 million, or better. Again, importantly, this will not happen this year or next, but we must begin tracking to these targets now and over the next 24 months, and we are fiercely focused on making progress every single day. Lastly, and before turning the conversation to Paul, I’d like to provide a little more color around the recent notable change to our capital structure. Last month our founder, Bill Manning, tendered his private ownership interests for exchange, bringing to close a historic chapter of Manning & Napier’s story. The shares will be purchased for cash next week and retired, accreting existing shareholders. Paul will describe this in greater detail. And I would like to acknowledge the exceptional work of Sarah Turner, our General Counsel, as well as Paul Battaglia and Nicole Kingsley Brunner and the leaders of our client-facing teams, Aaron McGreevy, Megan Henry and Greg Woodard, for managing the many and complex elements of the exchange process. We have so far secured 100% positive consents with respect to change in control provisions of separate account investment management agreements, with almost 1,700 received so far, about one-half of our separate account client base. These are technically negative consents, with the agreements being reassigned in the absence of action on the part of clients. So, the fact that so many have actively engaged and positively consented is really encouraging. Our mutual fund shareholders will be voting on the change in control in June, and we expect a favorable outcome. Now let me speak for a few minutes about Bill Manning. Bill’s impact on our firm is unparalleled and enduring. He is an immensely skilled investor who employs three critical virtues in abundance

first, penetrating analytic skills, allowing him to connect the dots in unusually insightful ways; second, rigorous adherence to time-tested disciplines; and third, incredible courage to invest aggressively where his research and disciplines take him. That courage has been most evident during extremes in the market, much like today. And though Bill has not been responsible for investment decisions or day-to-day operations of the firm for many years, he has engaged with research and offered important perspectives and insights and he has served as our board chair. We owe him a great deal of gratitude for his foresight in instilling processes that allow successors to execute on his teachings. Bill was instrumental in establishing a deep research culture and strong investment disciplines over the past 50 years, allowing successive investment leaders to follow in his footsteps. As we illuminated at the beginning of the call, current leadership in research has done Bill a tremendous honor in delivering investment success that is representative of exactly the kind of legacy that should make him proud. And with that, I’ll turn the call over to Paul for more detail on our financials. Paul?

Thanks, Marc. Good afternoon, everyone, and thanks for joining us today. Before going through our results, I would like to pick up where Marc left off, by acknowledging Bill Manning. Last week, amid today’s unique circumstances, we celebrated the 50th anniversary of the firm’s inception, April 27, 1970. Everyone here is indebted to Bill for his guidance and vision over the years. As someone who has been with the firm for over 16 years, it was great to take a moment to celebrate this shared milestone. We appreciate all that has been accomplished over our first 50 years, and we are excited to have the opportunity to further grow the business that Bill pioneered over the next 50. I’ve organized my remarks to first address our results for the quarter, followed by further discussion of the upcoming transaction to close the annual shareholder exchange and then wrapping up with some thoughts on our outlook for the rest of 2020. As Nicole mentioned earlier, some of my remarks will make reference to non-GAAP financial measures

economic income. Full details on the calculation of economic income and the GAAP reconciliations are included in our press release. Additionally, new this quarter, our press release now includes our estimated assets under management and flows by sales channel. I’ve described this as estimated because sales channel data is not yet available for a limited portion of our mutual fund business based on the reporting cycles of the third-party intermediaries that utilize our funds. This wrinkle has no bearing on our total assets or cash flows, nor does it impact our AUM by investment portfolio. We hope that investors find this reporting enhancement helpful. Starting with assets under management, we finished March with AUM of $17.1 billion, down from $19.5 billion as of December 31. This 12% decrease was the result of $460 million in net client outflows and approximately $2 billion in market depreciation. When compared to March 31 of last year, AUM has decreased by $4 billion, or 19%. Many of our results for the quarter are influenced by the COVID-19 pandemic, including gross client inflows until we started restricting business travel in early March. While we were fortunate to be able to maintain contact with clients and prospects virtually through digital platforms and our digital marketing efforts, the impact of both the public health crisis and the resulting market volatility was a constraint to selling during the quarter. Gross client inflows came it at approximately $670 million during the quarter, consistent with the average inflows by quarter last year. Approximately 30% of our gross inflows, or nearly $200 million, came through our Wealth Management sales team, with another $467 million coming through our intermediary and institutional team. We were encouraged by the sales activity under the circumstances, and our competitive results and service-driven model contributed to the continued improvement in our turnover and retention rates. Gross client outflows for the quarter were $1.1 billion, an improvement from $2.9 billion last quarter and from our trailing 4-quarter average gross outflows of $1.8 billion. Our separate account retention rate during the quarter was approximately 95%. By sales team, the Wealth Management team had net client outflows of $173 million during the quarter and the institutional and intermediary team had $287 million of net outflows. While Taft-Hartley business continues to make up approximately half of our institutional and intermediary channel, we are excited about the improved traction we are seeing in distribution through third-party intermediaries. Though flows remained in a net outflow position for the quarter, we are optimistic that we are generating momentum that will carry into future quarters. Negative absolute performance across the portfolio is the primary reason for the decrease in AUM. As Marc highlighted extensively in his remarks, on a relative performance basis our products performed exceptionally during the quarter. In our business, there is often a significant lag between performance and inflows, measured anywhere between a few quarters to a few years. For institutional sales, our experience has been that lag between performance and inflows has been at the longer end of the range, though that is not deterring our prospecting efforts. However, for the intermediary distribution team the recent performance successes has potential to translate to meaningful AUM growth as a result of its levered nature, as compared to the less volatile and more solution-driven Wealth Management business. Building out our Wealth Management business remains a strategic priority, but we believe that it is possible that our intermediary business, in particular, could see a quicker and more substantial uptake in the near term as our performance successes become increasingly noticeable to clients and prospects. Growth through multiple distribution channels has always been a priority for us and can help establish a good balance of asset growth and diversity in our products and client profiles. Turning now to the first quarter P&L, we reported revenue of $31.1 million for the quarter, with overall revenue margins of 67 basis points, compared to revenue of $32.7 million and 66 basis points reported last quarter. Operating expenses were $29.2 million, a decrease of $8 million compared to the fourth quarter of 2019. Approximately $6.8 million of that decrease stems from impairment charges we reported last quarter as part of our digital transformation. Operating expenses have decreased by $4.3 million compared to the first quarter of 2019. Quarterly compensation and related costs decreased by approximately 3%, or $600,000, compared to the fourth quarter of 2019. However, compensation as a percentage of revenue remains elevated, at approximately 62%. Compensation costs in the quarter decreased as a result of the reduction in severance charges compared to last quarter as well as from a decrease in the overall size of the workforce, now 293 employees as of March 31, representing a 14-person decrease from the start of the year. However, these decreases were partially offset by increases in stock-based compensation stemming from our 2020 long-term incentive awards as well as an increase in payroll benefits, as the firm increased its 401k match at the start of the year. We also typically experience some seasonality in the 401k match given the timing of incentive compensation payments. Distribution servicing and custody expenses decreased by 1% during the quarter, less than the 6% decrease in average funding Collective Trust assets, due to changes in the business mix between 12b-1 and non-12b-1 funds. These expenses represent approximately 20 basis points of average fund and Collective Trust assets, which is generally in line with prior quarters. As I mentioned previously, the sequential decrease in operating expenses is concentrated in our other operating expenses and is caused by the fourth quarter charges related to our technology initiatives. At $7.1 million for the quarter, other operating expenses now represent approximately 23% of total revenue, which is down slightly from the 24% to 25% range that we reported for most of 2019. With approximately $31 million of revenue and $29 million of operating expenses, we reported first quarter operating income of $1.9 million. However, we reported non-operating losses of $4.3 million during the quarter, caused by $1.8 million in holding losses on the marketable securities held on our balance sheet and a $2.9 million non-cash expense related to the increase in the amounts payable under the tax receivable agreement, or TRA. This increase in the liability is the result of the anticipated future tax benefits expected to be realized as a result of the legislation passed under the CARES Act. Under the terms of our TRA, the majority of the expected tax benefits will be paid out to our legacy shareholders and, therefore, are recorded as a non-operating loss. As a result, on a GAAP basis we reported a pretax loss for the quarter of $2.4 million. On a non-GAAP basis, when excluding approximately $700,000 of strategic restructuring costs in the quarter, we reported an economic pretax loss of $1.7 million. While this economic pretax loss was largely attributable to the increase in the amounts payable under the TRA, we reported economic net income after applying our effective tax rate of $1.6 million, or $0.02 per adjusted share. This change can be explained by the same income tax benefits recognized under the CARES Act. To summarize, the tax changes that caused an increase in the amounts due under the TRA also will result in a lower, in this case negative, effective tax rate on a non-GAAP basis. We expect to return to a more normalized effective tax rate in future quarters and will report updates as appropriate on future calls. Wrapping up the comments on the quarter, looking at the balance sheet, we reported approximately $146 million of cash and investments, with no debt. The decrease from December 31 was expected and is attributable to the timing of year-end incentive payments that were completed during the quarter. On April 22, we reported our plan to suspend the quarterly dividend following the payment of our most recent dividend on May 1. Management and the board of directors will continue to monitor the potential for a dividend in future quarters. Turning to ownership, during the quarter we saw an increase in the adjusted share count from approximately 79 million adjusted shares outstanding on December 31 to approximately 82 million outstanding on March 31. This was the result of 2.5 million restricted stock units awarded during the quarter under our long-term incentive plan. These awards will vest over the next 5 years. Moving on, next week we anticipate the closing of the annual legacy shareholder exchange transaction. This year, legacy shareholders tendered approximately 60 million private units for exchange, including the entirety of Bill Manning’s private ownership. The independent directors of our board elected to complete the exchange using cash, as we have done in prior years. And accordingly, we expect to use approximately $90 million of cash and securities from the balance sheet to complete the transaction. The private units will be subsequently retired, making the transaction accretive to all non-selling shareholders. Upon closing the exchange transaction, the firm’s adjusted share count will decrease from approximately 82 million adjusted shares outstanding to 22 million adjusted shares outstanding. Employees will own approximately 31% of those adjusted shares, including both vested and unvested Class A awards held by our team, the shares held by our board of directors and a small amount still held in the form of legacy private units. However, that percentage dips to 14% when excluding unvested awards held by our employees. When looking at the ownership of Manning & Napier Group, specifically, Manning & Napier, Inc., the managing member, will see its ownership increase from approximately 20% to 88%, with the remaining 12% held by the other owners of Manning & Napier Group, including Manning & Napier Capital Company and Manning & Napier Group Holdings. Looking ahead, we have participated in the equity market recovery that has taken place since the end of March. Next week, we will release our preliminary assets under management as of April 30, which will be reflective of this market improvement. To circle back to some of the comments that Marc made initially, we are bullish about our long-term distribution opportunities across channels by virtue of our stellar track records and our holistic solution offerings. In the near term, we are pursuing prospect leads across channels, though given the continuing uncertainty with the overall environment we expect that inflows may continue to be slow. To that end, we contnue to execute on the strategic initiatives we have discussed

the continued support of our investment team that has delivered such strong results for clients; the build-out of our Wealth Management team is paramount to our strategy to grow our business and to keep deep client relationships that can withstand performance volatility; the improved focus and execution of our intermediary and institutional strategy, including taking advantage of leveraged distribution opportunities; the continued deployment of our technology enhancements, including InvestCloud and Workday, to enhance our client experience through our differentiated solutions, to improve the experience for our employees through state-of-the-art technologies and improved workflow and to drive business development efforts through digital marketing; the simplification of our business, wherever possible. We’ve already seen many small victories across our organization as a result of process simplification, but we believe that there is more that can still be achieved. For example, upon closing of the exchange transaction it will make sense for us to review our overall corporate structure and evaluate if a simpler structure would be an improvement. And finally, our goal of increasing ownership among our employees. In closing, we are forging ahead on these goals with intensity and urgency. Throughout the firm there is a renewed level of energy and excitement about the future and what we are capable of achieving. As a leadership team, our focus is on harnessing this energy and executing on our key strategic initiatives, moving us to our future-state as quickly as possible and creating meaningful long-term values for shareholders in the process. As we do this, we expect that our financials will remain challenged in the near term with pressure on both top line growth and margins as we navigate today’s uncertainty while investing for the future. We’ve always believed that our people are our most valuable asset. Protecting our people during this time of unprecedented uncertainty has been and continues to be our top priority. The health and well-being of our employees, our clients and the protection of the assets that our clients have entrusted to us are our top priorities right now. Providing an environment where our people can execute to the best of their ability in helping clients meet their goals is the best way that we can drive long-term value for shareholders. That concludes my formal remarks. Thanks for joining. Hope everyone stays safe. And I’ll turn the call back over to the Operator for questions. Angie?

[Operator Instructions] Your first question comes from the line of Ken Worthington, of J.P. Morgan.

I guess I’d like to dig a little bit into the expenses for the current quarter and to see to what extent they provide a good base or run rate as we look to expenses over the next couple of quarters. So on compensation, respect your comments about payroll taxes and the changes in headcount, but was there anything else in the $19.3 million? I don’t think there was any severance, but just in case, I’ll throw that little part into the question, as well. But $19.3 million, is that sort of where we should see expenses, plus or minus, accounting for I think it’s the 14 people and the payroll taxes 3Q and 4Q? And then the other operating costs, at $7.1 million, again same thing. There’s a number of initiatives. There is cost savings initiatives that you’ve been employing. So again is that sort of the right base to work off of for the rest of the year?

Ken, this is Paul. I’ll take a first shot at it and Marc can follow up if he thinks there’s anything that I missed. Thanks for the question. And just to I guess put a fine point on it, there was approximately $650,000 of severance in the quarter, and that was part of one of the items in the strategic restructuring add-back. So it’s down from the fourth quarter, but there was still some there. I think that as you look at payroll or compensation, specifically, the biggest wildcard is market performance and how that translates to the research team incentive comp which is based on both absolute and relative performance. So for the quarter ended March 31, our accrual is representative of what had happened through March 31. Now we have seen obviously quite a good recovery since then, and that will come through both in the form of revenue as well as in the form of analyst compensation. But that is the single biggest driver of any variation that we see from this point forward. We’re here on May 7. We have not seen substantial changes in any of the fixed compensation costs so far in the second quarter. And as we mentioned on our remarks, right now our priority is keeping the team intact and keeping everyone focused on executing for clients. With regard to other operating expenses, I think that that’s a pretty good number, especially when you take it as a percentage of revenue. Revenue, obviously, is a wildcard there. But with the way the technology enhancements are rolling in, a lot of those costs can be capitalized. They’re either license fees or they’re implementation costs that are capitalized and spread over the term of the contract. So it should be pretty smooth from another operating perspective as it relates to the things that we know right now. I think that we may have some savings in the amount that we spend on travel, for example, but I don’t know that it’s enough that I would change your model at this point. So I’ll stop there and take any other follow-up you may have.

[Operator Instructions] There are no further questions. Thank you for participating in today’s conference call. You may now disconnect your lines at this time, and have a wonderful day.

Thanks, everyone.

Thank you, everyone, and stay well, please.