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Quarterly Newsletter – January 2015 FUND, INC. Education and Insight for Fund Shareholders Emerging Markets Series International Series Overseas Series World Opportunities Series Fixed Income Funds Core Bond Series Core Plus Bond Series Diversified Tax Exempt Series Global Fixed Income Series High Yield Bond Series New York Tax Exempt Series Ohio Tax Exempt Series For Questions and Service: Manning & Napier Fund, Inc. • Toll-Free: (800) 466-3863 For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus at www.manning-napier.com or by calling (800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. For regulatory purposes, not all Series are offered in all states. A Word About Real Estate Series Risk Funds whose investments are concentrated in a specific industry or sector may be subject to a higher degree of market risk than funds whose investments are diversified among a variety of sectors. The Real Estate Series is subject to risks associated with the direct ownership of real estate, including the potential for falling real estate prices and the possibility of being highly leveraged; an investment in the Series will be closely aligned with the performance of the real estate markets. Additionally, like all derivatives, investments in options can be highly volatile and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk. Please note that diversification does not assure a profit or protect against loss in a declining market. The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares. This newsletter may contain factual business information concerning Manning & Napier, Inc. and is not intended for the use of investors or potential investors in Manning & Napier, Inc. It is not an offer to sell securities and it is not soliciting an offer to buy any securities of Manning & Napier, Inc. Approved FUND-PUB001.4 (1/15) Lower gas prices effectively unshackle a portion of consumer spending. This generally has positive near-term implications for economic growth as consumers are likely to allocate resources that would otherwise have been spent on energy to purchases in other categories. However, given a change in the nature of global oil supply over the past few years, specifically the substantial increase in U.S. oil production from shale rock in regions such as the Bakken in North Dakota, market watchers should also consider the potential negative impact declining crude oil prices could have on the domestic economy. Importantly, we believe any adverse consequences from lower oil prices would not be enough to meaningfully impair the current slow growth environment, but with the U.S. a more prominent contributor to global oil supply in recent times, investors will want to pay attention to this aspect of the economic growth equation. The U.S. unemployment rate dipped below 6% earlier this year for the first time since 2008. Some of the improvement in labor markets since the financial crisis can be attributed to growth in domestic oil production. If oil prices remain weak for too long, energy companies may be forced to shutter production and reduce their workforce. This could create headwinds in other areas of the economy and offset some of the boost to growth that typically comes from lower energy costs. Regarding inflation, lower energy prices are visible in the latest headline consumer price index (CPI) data. Year-over-year growth in the all items index has slowed modestly every month since May. In the year through October, headline inflation rose just under 1.7%. 4 $120 3.5 $110 3 $100 2.5 $90 2 $80 1.5 Nov-14 Aug-14 Feb-14 May-14 Nov-13 Aug-13 Feb-13 May-13 Nov-12 Aug-12 Feb-12 May-12 Nov-11 0.5 Aug-11 1 $60 Feb-11 $70 May-11 Foreign Equity Funds $130 Nov-10 Dividend Focus Series Dynamic Opportunities Series Equity Series Equity Income Series Focused Opportunities Series Inflation Focus Equity Series Real Estate Series Tax Managed Series Aug-10 Crude Oil Prices and U.S. Inflation November 2009 - November 2014 Feb-10 The usual flow of monthly information on the domestic economy did not reveal any major surprises over the past few weeks. U.S. retail sales rose 0.3% during October, erasing declines from September that were similar in magnitude. Of the 13 main retail categories tracked by the Department of Commerce, 11 showed growth versus the prior month. Sales at electronics and appliance stores as well as gas stations represented the weak spots. Electronics sales were strong in September coinciding with Apple’s release of new iPhone models so the drop in October likely reflected a waning impact of that recent sales boost. The decline in gas station sales is being driven by the downward trend in global oil prices feeding into lower domestic gasoline prices. The price per barrel of Brent crude oil was down more than 30% from the end of June through late November and the national average price for regular unleaded gasoline fell about onethird during that period as well. May-10 Pro-Blend® Maximum Term Series Pro-Blend® Extended Term Series Pro-Blend® Moderate Term Series Pro-Blend® Conservative Term Series Target 2055 Series Target 2050 Series Target 2045 Series Target 2040 Series Target 2035 Series Target 2030 Series Target 2025 Series Target 2020 Series Target 2015 Series Target 2010 Series Target Income Series Multi-Asset Class Funds Strategic Income Moderate Series Strategic Income Conservative Series Equity Funds Nov-09 Life Cycle Funds Lower Gas Prices Unshackle Consumer Spending USD Manning & Napier Fund, Inc. offers a comprehensive suite of products Brent Crude (price per barrel, left axis) CPI - All Items (year-over-year change in %) CPI - Core (year-over-year change in %) Source: FactSet The recent trend in core inflation, which removes energy and food prices, has been flatter. Core prices increased 1.8% over the twelve months through October, slightly faster than the prior month’s 1.7% advance. Lending growth has accelerated during recent months, signaling that the build-up of ample reserves in the banking system from persistently loose monetary policy is flowing into the economy. On the domestic political front, 2014 has contrasted with the fanfare and fireworks of last year that culminated with a 16 day federal government shutdown. That being said, mid-term election results could spur bickering anew as Republicans now hold majorities in both houses of Congress and a Democrat continues to occupy the White House. We believe it is unlikely that any major policy moves will be made on hot-button issues such as health care or tax reform prior to the 2016 elections. The president’s veto power contributes to this view. While Republicans control both houses, they lack the two-thirds majority needed to override a presidential veto. Additionally, with Democratic support as weak as it has been recently, Republicans do not stand to gain much by attempting to make significant changes at the moment. Rather, we envision a scenario over the next two years in which the GOP simply works to avoid making major missteps and focuses on repeating their recent election success in the upcoming race for president. Continued on next page. For Questions & Service: Manning & Napier Fund, Inc. Toll-Free: (800) 466-3863 FEATURED FUND Manning & Napier Fund, Inc. Real Estate Series Eurozone and Japan Real GDP Growth December 2009 - September 2014 Global Economy While still weak in an absolute sense, Greece and Spain represented two of the fastest growing European economies during the third quarter. Real GDP in Spain grew 0.5% quarter-over-quarter and Greek GDP increased 0.7%. Encouragingly, after six long years of recession, recently revised data show that Greece emerged from recession earlier this year. The generally weak global economic news also extended to Japan. Reports show that its economy continued to shrink during the third quarter, still unable to overcome the sales tax hike from April and subsequent blow to consumer spending. Japan is now in recession for the third time since 2010. Real GDP fell 0.4% for the July through September period following a 1.9% decline during the prior three months. Responding to the weak economic performance, Prime Minister Abe dissolved the lower house of parliament and announced a snap election to take place in mid-December. This maneuver was meant to reaffirm 3 2.5 2 In November 2009, Manning & Napier Fund, Inc. launched its Real Estate Series in an effort to take advantage of opportunities in the real estate markets in the aftermath of the financial crisis. 1.5 1 Percent (%) 0.5 0 -0.5 -1 -1.5 Source: FactSet Sep-14 Jun-14 Mar-14 Dec-13 Jun-13 Sep-13 Mar-13 Dec-12 Jun-12 Eurozone Sep-12 Mar-12 Dec-11 Jun-11 Sep-11 Mar-11 Dec-10 Jun-10 Sep-10 Mar-10 -2 Dec-09 A bevy of recently released third quarter GDP reports confirm that some of the world’s most important economies continue to struggle. The pace of expansion in the 18-member Eurozone quickened relative to the second quarter, but was barely positive in absolute terms. Real GDP rose a meager 0.2% for the July through September period. Examining GDP among individual countries, France’s economy returned to growth after contracting during the second quarter. Real GDP in France advanced 0.3% quarter-over-quarter. Germany also narrowly avoided entering recession as contracting GDP during the second quarter gave way to a modest 0.1% rate of expansion during the third quarter. Meanwhile, Italy’s recession continued. Italian GDP shrank 0.1%. Italy’s economy has now contracted in 12 of the past 13 quarters. Japan support for the prime minister’s “Abenomics” strategy. In the end, Abe’s ruling Liberal Democratic Party was able to retain the majority in the lower house it needed, and as such, he remains in power. Along with the election news, Japan also said it will delay until 2017 another planned sales tax increase that was originally scheduled to occur in the fourth quarter of 2015. Regarding inflation, if we strip out the impact from last year’s sales tax hike, the pace of growth in Japanese CPI continues to run below the Bank of Japan’s (BOJ) 2% target. To help combat this, in late October the BOJ announced plans to meaningfully boost its monetary stimulus efforts. Yen weakness was exacerbated by the news, with the currency down 5% relative to the U.S. dollar in a matter of weeks. Overall, Japan’s economy is still clearly struggling to digest the tax hike, and we believe ongoing stimulus efforts are highly likely. TIPS TO SHARE An Overview of Real Estate Investment Trusts Real Estate Investment Trusts (REITs) are companies that own and normally manage income-producing real estate or real estate-related assets. Congress created REITs in 1960 to provide a vehicle for individual investors to participate in the commercial real estate market without having to purchase commercial real estate themselves. REITs typically own assets such as office buildings, shopping malls, apartments, hotels, warehouses, and mortgages or loans. Most REITs focus on a single class of real estate; for instance, there are office REITs, retail REITs, and residential REITs. Unlike other real estate companies, which may develop properties and then resell them, REITs have to acquire and manage their properties primarily for the purpose of building their own investment portfolios. The foremost requirements for a company to qualify as a REIT are: 1) to have the majority of its assets and income tied to real estate investments; and 2) to distribute annually at least 90 percent of its taxable income to shareholders as dividends. Most REITs are equity REITs, which typically own and manage incomeproducing real estate. There are also mortgage REITs and REITs that utilize both equity and mortgage strategies, known as hybrid REITs. Another distinction between REITs is whether they are publiclytraded or non-traded. Publicly-traded REITs trade on a stock exchange, follow SEC rules similar to those of a publicly-traded corporation, and are managed by employees of the company. Non-traded REITs also file reports with the SEC, but there is no independent information available about their share value. Typically non-traded REITs do not have employees and are managed by a contracted third party. Due to the fact that a majority of Real Estate funds are composed of REITs, understanding the composition and purpose of a REIT will give investors a better understanding of a fund before they decide to invest. The progress the housing market has been making toward recovery stalled to a degree over the last year, but improving economic conditions point more toward a renewed recovery than another downturn. We expect improved job growth to spur demand for housing and homeownership. We believe increasing consumer activity will translate into a greater need for commercial real estate as businesses seek to expand. Some categories of real estate investments might face volatility in the near term as investors carefully weigh the Federal Reserve’s intentions concerning interest rates, which could create attractive buying opportunities. In an effort to capture such opportunities, the Series’ portfolio management team is constantly evaluating the numerous sectors of the real estate market in an attempt to uncover overarching themes that can serve as guidelines for stock selection decisions. Young people were particularly hard hit by the financial crisis and ensuing economic downturn. Unable to find jobs, many moved in with their parents. The percentage of millenials (roughly those currently 18 to 35) living with their parents kept rising from 2008 to 2013, but that trend may be reversing. Recent data show that the percentage of millenials living at home is at its lowest level since 2011, and the number of millenials sharing housing with each other has declined as well. As the labor market continues to improve, we believe this pent-up demand for housing should increasingly come out of parents’ basements and into the market. Despite mortgage rates having risen from their lowest levels, first-time homebuyers enter a market with rates that are still low by historical standards, making it easier for them to secure an affordable mortgage. It is important to note that there is more to real estate than simply residential housing. Real estate includes a variety of sub-sectors of the economy, and the holdings of the Real Estate Series reflect that diversity. Real estate offers investors exposure to sectors such as retail, lodging and hotels, health care, office space, self-storage, student housing, and data centers. There are different types of real estate investments as well, the most common being Real Estate Investment Trusts (REITs; see “Tips to Share” for definition). Over 80% of the fund’s holdings are in REITs, as has been the case throughout the fund’s history. Generally, we favor publicly-financed companies over their private counterparts for the Series’ portfolio. Public companies have more outlets through which to access capital, and they have taken advantage of the current environment to lock in low interest rates. The debt level among U.S. REITs continues to be very low, which, in our view, should give them the ability to make investments and/or provide a degree of financial stability if capital were to become scarce at some point. We also believe homebuilders and the timber industry are positioned to benefit from favorable supply/demand dynamics in a renewed recovery in the housing market. Construction of new single-family homes, which account for the bulk of the housing market, surged to a post-recession high in October 2014 before falling slightly in November. ability to increase rents. Nevertheless, we believe there is still space for additional occupancy gains in the current cycle. Also, new commercial property construction is running well below average, and is likely to remain subdued for several years. As of the end of November, the Real Estate Series’ largest holdings were in retail, residential, lodging and hotels, and health care. These four sectors accounted for more than 50% of the fund’s holdings. Among other sectors, the fund has an allocation to data centers, a niche market. We believe this market segment is positioned to benefit from growing global internet traffic, the rise of cloud computing, and increasing regulatory requirements. Also, operating a niche property type has allowed the owners and operators of data centers to grow throughout the real estate cycle. In seeking to invest in companies that are exposed to positive longer-term themes, our analysts use three time-tested and disciplined strategies to determine which securities comprise the Real Estate Series. Manning & Napier was founded more than 40 years ago as an investment manager focused on company and industry fundamentals. As the real estate market evolves, the firm believes that its disciplined, bottoms-up active management philosophy enables it to adapt to changing market conditions as they arise. As with the residential market, we are looking to take advantage of supply/demand dynamics in some segments of the commercial real estate market. Since the economic downturn, there has been a steady absorption of commercial space across all major real estate sectors, which should enhance landlords’ Investment in real estate, including REITs, is subject to risks associated with the direct ownership of real estate: interest rate risk, liquidity risk, and changes in property value, among others. Additionally, investments concentrated in a specific industry or sector may be less diversified and subject to a higher degree of risk than the overall market. Analysis: Manning & Napier Advisors, LLC. Source: FactSet All investments contain risk and may lose value. This material contains the opinions of Manning & Napier Advisors, LLC, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please reference final page for disclosures. FEATURED FUND Manning & Napier Fund, Inc. Real Estate Series Eurozone and Japan Real GDP Growth December 2009 - September 2014 Global Economy While still weak in an absolute sense, Greece and Spain represented two of the fastest growing European economies during the third quarter. Real GDP in Spain grew 0.5% quarter-over-quarter and Greek GDP increased 0.7%. Encouragingly, after six long years of recession, recently revised data show that Greece emerged from recession earlier this year. The generally weak global economic news also extended to Japan. Reports show that its economy continued to shrink during the third quarter, still unable to overcome the sales tax hike from April and subsequent blow to consumer spending. Japan is now in recession for the third time since 2010. Real GDP fell 0.4% for the July through September period following a 1.9% decline during the prior three months. Responding to the weak economic performance, Prime Minister Abe dissolved the lower house of parliament and announced a snap election to take place in mid-December. This maneuver was meant to reaffirm 3 2.5 2 In November 2009, Manning & Napier Fund, Inc. launched its Real Estate Series in an effort to take advantage of opportunities in the real estate markets in the aftermath of the financial crisis. 1.5 1 Percent (%) 0.5 0 -0.5 -1 -1.5 Source: FactSet Sep-14 Jun-14 Mar-14 Dec-13 Jun-13 Sep-13 Mar-13 Dec-12 Jun-12 Eurozone Sep-12 Mar-12 Dec-11 Jun-11 Sep-11 Mar-11 Dec-10 Jun-10 Sep-10 Mar-10 -2 Dec-09 A bevy of recently released third quarter GDP reports confirm that some of the world’s most important economies continue to struggle. The pace of expansion in the 18-member Eurozone quickened relative to the second quarter, but was barely positive in absolute terms. Real GDP rose a meager 0.2% for the July through September period. Examining GDP among individual countries, France’s economy returned to growth after contracting during the second quarter. Real GDP in France advanced 0.3% quarter-over-quarter. Germany also narrowly avoided entering recession as contracting GDP during the second quarter gave way to a modest 0.1% rate of expansion during the third quarter. Meanwhile, Italy’s recession continued. Italian GDP shrank 0.1%. Italy’s economy has now contracted in 12 of the past 13 quarters. Japan support for the prime minister’s “Abenomics” strategy. In the end, Abe’s ruling Liberal Democratic Party was able to retain the majority in the lower house it needed, and as such, he remains in power. Along with the election news, Japan also said it will delay until 2017 another planned sales tax increase that was originally scheduled to occur in the fourth quarter of 2015. Regarding inflation, if we strip out the impact from last year’s sales tax hike, the pace of growth in Japanese CPI continues to run below the Bank of Japan’s (BOJ) 2% target. To help combat this, in late October the BOJ announced plans to meaningfully boost its monetary stimulus efforts. Yen weakness was exacerbated by the news, with the currency down 5% relative to the U.S. dollar in a matter of weeks. Overall, Japan’s economy is still clearly struggling to digest the tax hike, and we believe ongoing stimulus efforts are highly likely. TIPS TO SHARE An Overview of Real Estate Investment Trusts Real Estate Investment Trusts (REITs) are companies that own and normally manage income-producing real estate or real estate-related assets. Congress created REITs in 1960 to provide a vehicle for individual investors to participate in the commercial real estate market without having to purchase commercial real estate themselves. REITs typically own assets such as office buildings, shopping malls, apartments, hotels, warehouses, and mortgages or loans. Most REITs focus on a single class of real estate; for instance, there are office REITs, retail REITs, and residential REITs. Unlike other real estate companies, which may develop properties and then resell them, REITs have to acquire and manage their properties primarily for the purpose of building their own investment portfolios. The foremost requirements for a company to qualify as a REIT are: 1) to have the majority of its assets and income tied to real estate investments; and 2) to distribute annually at least 90 percent of its taxable income to shareholders as dividends. Most REITs are equity REITs, which typically own and manage incomeproducing real estate. There are also mortgage REITs and REITs that utilize both equity and mortgage strategies, known as hybrid REITs. Another distinction between REITs is whether they are publiclytraded or non-traded. Publicly-traded REITs trade on a stock exchange, follow SEC rules similar to those of a publicly-traded corporation, and are managed by employees of the company. Non-traded REITs also file reports with the SEC, but there is no independent information available about their share value. Typically non-traded REITs do not have employees and are managed by a contracted third party. Due to the fact that a majority of Real Estate funds are composed of REITs, understanding the composition and purpose of a REIT will give investors a better understanding of a fund before they decide to invest. The progress the housing market has been making toward recovery stalled to a degree over the last year, but improving economic conditions point more toward a renewed recovery than another downturn. We expect improved job growth to spur demand for housing and homeownership. We believe increasing consumer activity will translate into a greater need for commercial real estate as businesses seek to expand. Some categories of real estate investments might face volatility in the near term as investors carefully weigh the Federal Reserve’s intentions concerning interest rates, which could create attractive buying opportunities. In an effort to capture such opportunities, the Series’ portfolio management team is constantly evaluating the numerous sectors of the real estate market in an attempt to uncover overarching themes that can serve as guidelines for stock selection decisions. Young people were particularly hard hit by the financial crisis and ensuing economic downturn. Unable to find jobs, many moved in with their parents. The percentage of millenials (roughly those currently 18 to 35) living with their parents kept rising from 2008 to 2013, but that trend may be reversing. Recent data show that the percentage of millenials living at home is at its lowest level since 2011, and the number of millenials sharing housing with each other has declined as well. As the labor market continues to improve, we believe this pent-up demand for housing should increasingly come out of parents’ basements and into the market. Despite mortgage rates having risen from their lowest levels, first-time homebuyers enter a market with rates that are still low by historical standards, making it easier for them to secure an affordable mortgage. It is important to note that there is more to real estate than simply residential housing. Real estate includes a variety of sub-sectors of the economy, and the holdings of the Real Estate Series reflect that diversity. Real estate offers investors exposure to sectors such as retail, lodging and hotels, health care, office space, self-storage, student housing, and data centers. There are different types of real estate investments as well, the most common being Real Estate Investment Trusts (REITs; see “Tips to Share” for definition). Over 80% of the fund’s holdings are in REITs, as has been the case throughout the fund’s history. Generally, we favor publicly-financed companies over their private counterparts for the Series’ portfolio. Public companies have more outlets through which to access capital, and they have taken advantage of the current environment to lock in low interest rates. The debt level among U.S. REITs continues to be very low, which, in our view, should give them the ability to make investments and/or provide a degree of financial stability if capital were to become scarce at some point. We also believe homebuilders and the timber industry are positioned to benefit from favorable supply/demand dynamics in a renewed recovery in the housing market. Construction of new single-family homes, which account for the bulk of the housing market, surged to a post-recession high in October 2014 before falling slightly in November. ability to increase rents. Nevertheless, we believe there is still space for additional occupancy gains in the current cycle. Also, new commercial property construction is running well below average, and is likely to remain subdued for several years. As of the end of November, the Real Estate Series’ largest holdings were in retail, residential, lodging and hotels, and health care. These four sectors accounted for more than 50% of the fund’s holdings. Among other sectors, the fund has an allocation to data centers, a niche market. We believe this market segment is positioned to benefit from growing global internet traffic, the rise of cloud computing, and increasing regulatory requirements. Also, operating a niche property type has allowed the owners and operators of data centers to grow throughout the real estate cycle. In seeking to invest in companies that are exposed to positive longer-term themes, our analysts use three time-tested and disciplined strategies to determine which securities comprise the Real Estate Series. Manning & Napier was founded more than 40 years ago as an investment manager focused on company and industry fundamentals. As the real estate market evolves, the firm believes that its disciplined, bottoms-up active management philosophy enables it to adapt to changing market conditions as they arise. As with the residential market, we are looking to take advantage of supply/demand dynamics in some segments of the commercial real estate market. Since the economic downturn, there has been a steady absorption of commercial space across all major real estate sectors, which should enhance landlords’ Investment in real estate, including REITs, is subject to risks associated with the direct ownership of real estate: interest rate risk, liquidity risk, and changes in property value, among others. Additionally, investments concentrated in a specific industry or sector may be less diversified and subject to a higher degree of risk than the overall market. Analysis: Manning & Napier Advisors, LLC. Source: FactSet All investments contain risk and may lose value. This material contains the opinions of Manning & Napier Advisors, LLC, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please reference final page for disclosures. Quarterly Newsletter – January 2015 FUND, INC. Education and Insight for Fund Shareholders Emerging Markets Series International Series Overseas Series World Opportunities Series Fixed Income Funds Core Bond Series Core Plus Bond Series Diversified Tax Exempt Series Global Fixed Income Series High Yield Bond Series New York Tax Exempt Series Ohio Tax Exempt Series For Questions and Service: Manning & Napier Fund, Inc. • Toll-Free: (800) 466-3863 For more information about any of the Manning & Napier Fund, Inc. Series, you may obtain a prospectus at www.manning-napier.com or by calling (800) 466-3863. Before investing, carefully consider the objectives, risks, charges and expenses of the investment and read the prospectus carefully as it contains this and other information about the investment company. For regulatory purposes, not all Series are offered in all states. A Word About Real Estate Series Risk Funds whose investments are concentrated in a specific industry or sector may be subject to a higher degree of market risk than funds whose investments are diversified among a variety of sectors. The Real Estate Series is subject to risks associated with the direct ownership of real estate, including the potential for falling real estate prices and the possibility of being highly leveraged; an investment in the Series will be closely aligned with the performance of the real estate markets. Additionally, like all derivatives, investments in options can be highly volatile and involve risks in addition to the risks of the underlying instrument on which the derivative is based, such as counterparty, correlation and liquidity risk. Please note that diversification does not assure a profit or protect against loss in a declining market. The Manning & Napier Fund, Inc. is managed by Manning & Napier Advisors, LLC. Manning & Napier Investor Services, Inc., an affiliate of Manning & Napier Advisors, LLC, is the distributor of the Fund shares. This newsletter may contain factual business information concerning Manning & Napier, Inc. and is not intended for the use of investors or potential investors in Manning & Napier, Inc. It is not an offer to sell securities and it is not soliciting an offer to buy any securities of Manning & Napier, Inc. Approved FUND-PUB001.4 (1/15) Lower gas prices effectively unshackle a portion of consumer spending. This generally has positive near-term implications for economic growth as consumers are likely to allocate resources that would otherwise have been spent on energy to purchases in other categories. However, given a change in the nature of global oil supply over the past few years, specifically the substantial increase in U.S. oil production from shale rock in regions such as the Bakken in North Dakota, market watchers should also consider the potential negative impact declining crude oil prices could have on the domestic economy. Importantly, we believe any adverse consequences from lower oil prices would not be enough to meaningfully impair the current slow growth environment, but with the U.S. a more prominent contributor to global oil supply in recent times, investors will want to pay attention to this aspect of the economic growth equation. The U.S. unemployment rate dipped below 6% earlier this year for the first time since 2008. Some of the improvement in labor markets since the financial crisis can be attributed to growth in domestic oil production. If oil prices remain weak for too long, energy companies may be forced to shutter production and reduce their workforce. This could create headwinds in other areas of the economy and offset some of the boost to growth that typically comes from lower energy costs. Regarding inflation, lower energy prices are visible in the latest headline consumer price index (CPI) data. Year-over-year growth in the all items index has slowed modestly every month since May. In the year through October, headline inflation rose just under 1.7%. 4 $120 3.5 $110 3 $100 2.5 $90 2 $80 1.5 Nov-14 Aug-14 Feb-14 May-14 Nov-13 Aug-13 Feb-13 May-13 Nov-12 Aug-12 Feb-12 May-12 Nov-11 0.5 Aug-11 1 $60 Feb-11 $70 May-11 Foreign Equity Funds $130 Nov-10 Dividend Focus Series Dynamic Opportunities Series Equity Series Equity Income Series Focused Opportunities Series Inflation Focus Equity Series Real Estate Series Tax Managed Series Aug-10 Crude Oil Prices and U.S. Inflation November 2009 - November 2014 Feb-10 The usual flow of monthly information on the domestic economy did not reveal any major surprises over the past few weeks. U.S. retail sales rose 0.3% during October, erasing declines from September that were similar in magnitude. Of the 13 main retail categories tracked by the Department of Commerce, 11 showed growth versus the prior month. Sales at electronics and appliance stores as well as gas stations represented the weak spots. Electronics sales were strong in September coinciding with Apple’s release of new iPhone models so the drop in October likely reflected a waning impact of that recent sales boost. The decline in gas station sales is being driven by the downward trend in global oil prices feeding into lower domestic gasoline prices. The price per barrel of Brent crude oil was down more than 30% from the end of June through late November and the national average price for regular unleaded gasoline fell about onethird during that period as well. May-10 Pro-Blend® Maximum Term Series Pro-Blend® Extended Term Series Pro-Blend® Moderate Term Series Pro-Blend® Conservative Term Series Target 2055 Series Target 2050 Series Target 2045 Series Target 2040 Series Target 2035 Series Target 2030 Series Target 2025 Series Target 2020 Series Target 2015 Series Target 2010 Series Target Income Series Multi-Asset Class Funds Strategic Income Moderate Series Strategic Income Conservative Series Equity Funds Nov-09 Life Cycle Funds Lower Gas Prices Unshackle Consumer Spending USD Manning & Napier Fund, Inc. offers a comprehensive suite of products Brent Crude (price per barrel, left axis) CPI - All Items (year-over-year change in %) CPI - Core (year-over-year change in %) Source: FactSet The recent trend in core inflation, which removes energy and food prices, has been flatter. Core prices increased 1.8% over the twelve months through October, slightly faster than the prior month’s 1.7% advance. Lending growth has accelerated during recent months, signaling that the build-up of ample reserves in the banking system from persistently loose monetary policy is flowing into the economy. On the domestic political front, 2014 has contrasted with the fanfare and fireworks of last year that culminated with a 16 day federal government shutdown. That being said, mid-term election results could spur bickering anew as Republicans now hold majorities in both houses of Congress and a Democrat continues to occupy the White House. We believe it is unlikely that any major policy moves will be made on hot-button issues such as health care or tax reform prior to the 2016 elections. The president’s veto power contributes to this view. While Republicans control both houses, they lack the two-thirds majority needed to override a presidential veto. Additionally, with Democratic support as weak as it has been recently, Republicans do not stand to gain much by attempting to make significant changes at the moment. Rather, we envision a scenario over the next two years in which the GOP simply works to avoid making major missteps and focuses on repeating their recent election success in the upcoming race for president. Continued on next page. For Questions & Service: Manning & Napier Fund, Inc. Toll-Free: (800) 466-3863