Waddell & Reed Financial, Inc. is a corporation, incorporated in the state
of Delaware in 1981, that conducts business through its subsidiaries. Founded
in 1937, we are one of the oldest mutual fund complexes in the United States,
having introduced the Waddell & Reed Advisors group of mutual funds (the
"Advisors Funds") in 1940. Over time we added additional mutual fund
families: Ivy Funds (the "Ivy Funds"), Ivy Funds Variable Insurance
Portfolios ("Ivy Funds VIP"), InvestEd Portfolios, our 529 college
savings plan ("InvestEd") (collectively, the Advisors Funds, Ivy Funds,
Ivy Funds VIP and InvestEd are referred to as the "Funds") and the
Ivy Global Investors Fund SICAV (the "SICAV") and its Ivy Global Investors
sub-funds (the "IGI Funds"), an undertaking for the collective investment
in transferable securities ("UCITS").
We derive our revenues from providing investment management, investment advisory,
investment product underwriting and distribution, and shareholder services administration
to the Funds, the IGI Funds and institutional and separately managed accounts.
Investment management fees are based on the amount of average assets under management
and are affected by sales levels, financial market conditions, redemptions and
the composition of assets. Our underwriting and distribution revenues consist
of Rule 12b-1 asset-based service and distribution fees, fees earned on fee-based
asset allocation products and related advisory services, commissions derived
from sales of investment and insurance products, and distribution fees on certain
variable products. The products sold have various commission structures and
the revenues received from those sales vary based on the type and dollar amount
sold. Shareholder service fee revenue includes transfer agency fees, custodian
fees from retirement plan accounts, and portfolio accounting and administration
fees, and is earned based on assets under management or number of client accounts.
We operate our business through a balanced distribution network. Our retail
products are distributed through third parties such as other broker/dealers,
registered investment advisors and various retirement platforms (collectively,
the "Wholesale channel") or through our sales force of independent
financial advisors (the "Advisors channel"). We also market our investment
advisory services to institutional investors, either directly or through consultants
(the "Institutional channel").
Our Wholesale channel efforts include retail fund distribution through broker/dealers
(the primary method of distributing mutual funds for the industry), registered
investment advisors (fee-based financial advisors who generally sell mutual
funds through financial supermarkets) and retirement and insurance platforms.
In the Advisors channel, our sales force focuses its efforts primarily on
financial planning, serving mostly middle class and mass affluent clients. We
compete with smaller broker/dealers and independent financial advisors, as well
as a span of other financial service providers.
We operate our investment advisory business through our subsidiary companies,
primarily Waddell & Reed Investment Management Company ("WRIMCO"),
a registered investment adviser for the Advisors Funds, the Ivy Funds VIP and
InvestEd, and Ivy Investment Management Company ("IICO"), the registered
investment adviser for the Ivy Funds and the IGI Funds and global distributor
of the IGI Funds.
Our underwriting and distribution business operates through two broker/dealers:
Waddell & Reed, Inc. ("W&R") and Ivy Funds Distributor, Inc.
("IFDI"). W&R is a registered broker/dealer and investment adviser
that acts primarily as the national distributor and underwriter for shares of
the Advisors Funds, Ivy Funds VIP, InvestEd and other mutual funds, and as a
distributor of variable annuities and other insurance products issued by our
business partners. In addition, W&R is the sixth largest distributor of
the Ivy Funds. IFDI is the distributor and underwriter for the Ivy Funds.
Waddell & Reed Services Company ("WRSCO") provides transfer
agency and accounting services to the Funds.
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