EX-99.1 2 a08-12093_1ex99d1.htm EX-99.1

 

Exhibit 99.1

 

News Release

 

 

Waddell & Reed Financial, Inc. Reports First Quarter Results

 

Overland Park, KS, Apr. 22, 2008 — Waddell & Reed Financial, Inc. (NYSE: WDR) reported first quarter net income of $28.3 million, or $0.33 per diluted share compared to net income of $35.1 million, or $0.42 per diluted share in the fourth quarter of 2007 and net income of $28.7 million, or $0.35 per diluted share in last year’s first quarter.

 

Business Discussion

 

Management commentary

 

“The market environment during the first quarter of 2008 was very challenging,” said Hank Herrmann, Chief Executive Officer of Waddell & Reed Financial, Inc.  “Flows remained very strong.  Sales in both our Advisors and Wholesale channels rose to record high levels.  A combination of factors — some of a one time nature — including commission costs stemming from high sales volume, performance bonuses, lower investment income and negative market action — kept our earning and operating margin under pressure.”

 

“Our strong inflows reflect our continued focus on enhancing our distribution and the superior investment performance delivered by our investment management team,” continued Herrmann.  “We were recognized by Barron’s, who named the Advisors Funds family ‘Best Mutual Fund Family of 2007’, and Lipper, who recognized the Waddell & Reed Advisors funds as best Overall Fund Family in the small firm category and the Ivy Funds as top family in the Mixed Asset category for small firms.”

 

Advisors channel

 

Gross sales during the quarter were $1.0 billion, a 5% increase over the preceding quarter and an increase of 34% compared to the same period in 2007.  Net flows were positive at $133 million compared to net outflows of $2 million and $106 million during the fourth and first quarters of 2007, respectively.   Sales per advisor of $351 thousand increased 5% sequentially and 39% compared to the same period last year.

 

These results were very encouraging considering the challenging equity market backdrop.  Positive flows in a difficult equity market are unprecedented in our Advisors channel, which speaks very positively about our success in revitalizing this channel; our Advisors channel has never been stronger.

 

1


 

Wholesale channel

 

Gross sales have once again surpassed most optimistic expectations.  Reaching $5.4 billion, sales grew 36% sequentially and 316% compared to last year’s first quarter.  Net flows of $4.3 billion represent an unprecedented 80% annualized organic growth rate.  Sales were concentrated in our Ivy Asset Strategy and Ivy Global Natural Resources funds, but the Ivy Large Cap Growth, Ivy Capital Appreciation and Ivy Science & Technology funds continue to see important daily flows, on average, in excess of $1 million each per day.

 

In April, we launched the new Ivy Global Strategic Income fund, a global fixed-income mutual fund designed to expand bond investors’ horizons beyond the United States.  This fund has the flexibility to invest in any bond sector, country, rating category, maturity, or currency, as well as to potentially invest up to 20% of its assets in equities globally.  This will allow investors to tap into global fixed income investment opportunities and further diversify their portfolios with global bonds.

 

Institutional channel

 

Gross sales of $696 million during the quarter were driven by our subadvisory relationship with Pictet & Cie.  There has been material improvement in the pipeline in several different investment styles and our existing defined benefit business is very stable at present.  We subadvise a total of $3.9 billion of other firm’s mutual funds, and accordingly, routinely experience redemptions and sales of these retail products.

 

Management Fee Revenue Analysis

 

Average assets increased by 2% on a sequential quarter basis and 29% compared to last year’s first quarter.  Strong sales volume and positive market action in 2007 were responsible for higher asset levels.

 

The effective management fee rate declined slightly to 65.3 basis points in the current quarter compared to 66.9 basis points in the fourth quarter and 68.4 basis points in last year’s first quarter.  The decline in our effective management fee rate is due to a mix-shift in assets under management.

 

Underwriting and Distribution Revenue and Expense Analysis

 

Advisors channel

 

On a sequential basis, revenues were pressured by lower variable annuity sales volume and lower asset-based fees, and partially offset by higher class A share sales.  Direct expenses declined, consistent with weaker variable annuity sales volume and lower asset levels while indirect expenses remained almost unchanged.

 

Compared to last year’s first quarter, the increase in revenues is attributable to a combination of higher variable annuity sales volume (though lower than in the fourth quarter of 2007) and higher asset allocation product sales.  Direct expenses rose on higher sales volume while indirect expenses rose on higher recruiting, support and marketing costs.

 

Wholesale channel

 

Sequentially, the increase in revenues is largely attributable to higher asset-based service and distribution fees, driven by higher average assets under management.  Direct expenses rose on higher sales volume while indirect expenses increased slightly on higher sales support costs.

 

2


 

Compared to last year’s first quarter, revenues rose on higher asset-based service and distribution costs while direct expenses increased on higher sales volume.  Indirect expenses rose at a more moderate pace due to additional marketing and business travel costs and higher compensation costs.

 

Operating Expense Analysis

 

On a sequential quarter basis, the increase in operating costs is almost equally due to higher underwriting and distribution costs and compensation and related costs.  The increase in underwriting and distribution costs were was discussed above.  Compensation and related costs rose on higher incentive bonus payments for the investment management staff.  Incentive compensation for our investment management staff is highly correlated to investment performance.  Our investment performance was outstanding for both the 1- and 3-year periods and meaningfully better than projected, resulting in further adjustments in compensation expense and related payroll taxes.

 

Compared to the same quarter last year, the increase was largely due to higher underwriting and distribution costs as discussed above.  The remainder of the increase was due to higher compensation and related costs and to a lesser extent to higher general and administrative costs and higher subadvisory fees.  Compensation and related costs rose on higher incentive compensation and related payroll taxes and to a lesser degree, higher compensation costs related to higher headcount and annual merit increases.  General and administrative costs rose on a combination of higher technology and fund-related costs.  Subadvisory fees rose on higher levels of subadvised assets under management.

 

Subadvised average assets under management were $11.6 billion in the current quarter, compared to $12.0 billion and $8.7 billion for the fourth and first quarters of 2007, respectively.

 

Operating Margin

 

Our operating margin declined to 19.7% compared to 22.0% in the previous quarter and 24.2% in the first quarter of 2007.  As noted above, the decline in the current quarter is primarily due to lower investment management fees caused by a mix shift in our assets under management and one less day in the quarter, higher distribution costs related to robust sales in our Wholesale channel and higher incentive compensation for our investment management staff.  Compared to the first quarter of 2007, the decline is due to higher distribution and incentive costs, as noted above, higher general and administrative costs to support our growth and higher subadvisory costs.

 

Other

 

Investment and other income was lower in the current quarter as the fourth quarter’s results contained seasonally higher capital gains, dividend income and gains on sale of certain of our mutual fund investments and higher earnings from our mutual fund trading portfolio.

 

3


 

Balance Sheet Information

 

Cash and cash equivalents and investment securities are $235 million (excluding $120 million held for the benefit of customers segregated in compliance with federal and other regulations).  We have no short-term borrowings against our money market loan program or our $200 million credit facility.

 

Stockholders’ equity is $374 million and there were 85.9 million shares outstanding.  During the quarter, we repurchased 1.0 million shares on the open market or privately at an aggregate cost of $31.7 million.

 

On April 2, 2008, we issued shares of restricted stock in accordance with our annual restricted stock grant program.  The 2008 grant resulted in the issuance of an additional 1.4 million shares of restricted stock, 265,000 of which were granted on December 31, 2007.  These shares, like those issued in previous years, will vest over the next four years.

 

4

 


 

Unaudited Schedule of Operating Data

(Amounts in thousands, except for per share data)

 

2007

 

2008

 

 

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees

 

$

82,860

 

$

89,383

 

$

94,806

 

$

105,296

 

$

102,972

 

 

 

 

 

 

 

Underwriting and distribution fees

 

84,016

 

88,556

 

92,168

 

106,345

 

106,111

 

 

 

 

 

 

 

Shareholder service fees

 

22,623

 

23,347

 

23,678

 

24,476

 

24,986

 

 

 

 

 

 

 

Total operating revenues

 

189,499

 

201,286

 

210,652

 

236,117

 

234,069

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting and distribution

 

94,397

 

99,528

 

105,604

 

122,745

 

124,777

 

 

 

 

 

 

 

Compensation and related costs

 

26,932

 

28,312

 

28,760

 

31,901

 

34,346

 

 

 

 

 

 

 

General and administrative

 

10,083

 

11,840

 

12,745

 

13,819

 

13,833

 

 

 

 

 

 

 

Subadvisory fees

 

9,215

 

10,638

 

11,459

 

12,532

 

11,834

 

 

 

 

 

 

 

Depreciation

 

3,043

 

3,062

 

3,167

 

3,140

 

3,140

 

 

 

 

 

 

 

Total operating expenses

 

143,670

 

153,380

 

161,735

 

184,137

 

187,930

 

 

 

 

 

 

 

Operating Income:

 

45,829

 

47,906

 

48,917

 

51,980

 

46,139

 

 

 

 

 

 

 

Investment and other income

 

2,480

 

2,609

 

4,831

 

6,532

 

2,186

 

 

 

 

 

 

 

Interest expense

 

(2,984

)

(2,982

)

(2,984

)

(2,974

)

(2,978

)

 

 

 

 

 

 

Income before taxes

 

45,325

 

47,533

 

50,764

 

55,538

 

45,347

 

 

 

 

 

 

 

Provision for taxes

 

16,598

 

17,827

 

18,797

 

20,441

 

17,006

 

 

 

 

 

 

 

Net Income

 

$

28,727

 

$

29,706

 

$

31,967

 

$

35,097

 

$

28,341

 

 

 

 

 

 

 

Net income per share- diluted

 

0.35

 

0.36

 

0.39

 

0.42

 

0.33

 

 

 

 

 

 

 

Weighted average shares outstanding - diluted

 

82,803

 

82,323

 

82,099

 

83,676

 

84,964

 

 

 

 

 

 

 

Operating margin

 

24.2

%

23.8

%

23.2

%

22.0

%

19.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting and Distribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Amounts in thousands)

 

2007

 

2008

 

Advisors Channel

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

Revenues

 

$

56,807

 

$

57,839

 

$

57,728

 

$

65,836

 

$

61,677

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

39,340

 

40,173

 

39,539

 

44,461

 

42,712

 

 

 

 

 

 

 

Indirect

 

20,775

 

20,057

 

21,145

 

22,800

 

22,616

 

 

 

 

 

 

 

Total expenses

 

$

60,115

 

$

60,230

 

$

60,684

 

$

67,261

 

$

65,328

 

 

 

 

 

 

 

Margin

 

-5.8

%

-4.1

%

-5.1

%

-2.2

%

-5.9

%

 

 

 

 

 

 

Wholesale Channel (Third-Party)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

12,968

 

$

15,609

 

$

19,271

 

$

25,343

 

$

30,345

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

16,951

 

20,025

 

25,340

 

35,253

 

39,595

 

 

 

 

 

 

 

Indirect

 

5,001

 

6,158

 

6,304

 

6,820

 

7,252

 

 

 

 

 

 

 

Total expenses

 

$

21,952

 

$

26,183

 

$

31,644

 

$

42,073

 

$

46,847

 

 

 

 

 

 

 

Wholesale Channel (Legend)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

14,241

 

$

15,108

 

$

15,169

 

$

15,166

 

$

14,089

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

9,478

 

10,165

 

10,158

 

10,046

 

9,423

 

 

 

 

 

 

 

Indirect

 

2,852

 

2,950

 

3,118

 

3,365

 

3,179

 

 

 

 

 

 

 

Total expenses

 

$

12,330

 

$

13,115

 

$

13,276

 

$

13,411

 

$

12,602

 

 

 

 

 

 

 

Consolidated Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

84,016

 

$

88,556

 

$

92,168

 

$

106,345

 

$

106,111

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

65,769

 

70,363

 

75,037

 

89,760

 

91,730

 

 

 

 

 

 

 

Indirect

 

28,628

 

29,165

 

30,567

 

32,985

 

33,047

 

 

 

 

 

 

 

Total expenses

 

$

94,397

 

$

99,528

 

$

105,604

 

$

122,745

 

$

124,777

 

 

 

 

 

 

 

 

5

 


 

Changes in Assets Under Management

(Amounts in millions)

 

2007

 

2008

 

 

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

Advisors Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

29,905

 

$

30,427

 

$

32,153

 

$

34,069

 

$

34,562

 

 

 

 

 

 

 

Sales (net of commissions)

 

783

 

866

 

902

 

1,000

 

1,048

 

 

 

 

 

 

 

Redemptions

 

(915

)

(1,027

)

(922

)

(965

)

(917

)

 

 

 

 

 

 

Net sales

 

(132

)

(161

)

(20

)

35

 

131

 

 

 

 

 

 

 

Net exchanges

 

(39

)

(46

)

(67

)

(29

)

(67

)

 

 

 

 

 

 

Reinvested dividends & capital gains

 

65

 

108

 

80

 

(8

)

69

 

 

 

 

 

 

 

Net flows

 

(106

)

(99

)

(7

)

(2

)

133

 

 

 

 

 

 

 

Market action

 

628

 

1,825

 

1,923

 

495

 

(2,620

)

 

 

 

 

 

 

Ending assets

 

$

30,427

 

$

32,153

 

$

34,069

 

$

34,562

 

$

32,075

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

10,819

 

$

11,996

 

$

14,247

 

$

17,405

 

$

21,537

 

 

 

 

 

 

 

Sales (net of commissions)

 

1,300

 

1,703

 

2,500

 

3,967

 

5,413

 

 

 

 

 

 

 

Redemptions

 

(596

)

(635

)

(701

)

(863

)

(1,171

)

 

 

 

 

 

 

Net sales

 

704

 

1,068

 

1,799

 

3,104

 

4,242

 

 

 

 

 

 

 

Net exchanges

 

37

 

45

 

65

 

27

 

65

 

 

 

 

 

 

 

Reinvested dividends & capital gains

 

12

 

35

 

18

 

(89

)

6

 

 

 

 

 

 

 

Net flows

 

753

 

1,148

 

1,882

 

3,042

 

4,313

 

 

 

 

 

 

 

Market action

 

424

 

1,103

 

1,276

 

1,090

 

(1,318

)

 

 

 

 

 

 

Ending assets

 

$

11,996

 

$

14,247

 

$

17,405

 

$

21,537

 

$

24,532

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Institutional Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

7,677

 

$

7,315

 

$

7,564

 

$

7,908

 

$

8,769

 

 

 

 

 

 

 

Sales (net of commissions)

 

353

 

137

 

282

 

1,111

 

696

 

 

 

 

 

 

 

Redemptions

 

(899

)

(319

)

(542

)

(368

)

(365

)

 

 

 

 

 

 

Net sales

 

(546

)

(182

)

(260

)

743

 

331

 

 

 

 

 

 

 

Net exchanges

 

0

 

0

 

0

 

0

 

0

 

 

 

 

 

 

 

Reinvested dividends & capital gains

 

28

 

28

 

24

 

25

 

27

 

 

 

 

 

 

 

Net flows

 

(518

)

(154

)

(236

)

768

 

358

 

 

 

 

 

 

 

Market action

 

156

 

403

 

580

 

93

 

(842

)

 

 

 

 

 

 

Ending assets

 

$

7,315

 

$

7,564

 

$

7,908

 

$

8,769

 

$

8,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

48,401

 

$

49,738

 

$

53,964

 

$

59,382

 

$

64,868

 

 

 

 

 

 

 

Sales (net of commissions)

 

2,436

 

2,706

 

3,684

 

6,078

 

7,157

 

 

 

 

 

 

 

Redemptions

 

(2,410

)

(1,981

)

(2,165

)

(2,196

)

(2,453

)

 

 

 

 

 

 

Net sales

 

26

 

725

 

1,519

 

3,882

 

4,704

 

 

 

 

 

 

 

Net exchanges

 

(2

)

(1

)

(2

)

(2

)

(2

)

 

 

 

 

 

 

Reinvested dividends & capital gains

 

105

 

171

 

122

 

(72

)

102

 

 

 

 

 

 

 

Net flows

 

129

 

895

 

1,639

 

3,808

 

4,804

 

 

 

 

 

 

 

Market action

 

1,208

 

3,331

 

3,779

 

1,678

 

(4,780

)

 

 

 

 

 

 

Ending assets

 

$

49,738

 

$

53,964

 

$

59,382

 

$

64,868

 

$

64,892

 

 

 

 

 

 

 

 

6

 


 

Supplemental Information

 

 

2007

 

2008

 

 

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

Redemption rates - long term assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisors

 

9.8

%

10.0

%

8.8

%

8.0

%

8.4

%

 

 

 

 

 

 

Wholesale

 

21.0

%

18.8

%

17.9

%

17.3

%

20.6

%

 

 

 

 

 

 

Institutional

 

48.0

%

17.0

%

28.4

%

17.4

%

17.5

%

 

 

 

 

 

 

Total

 

18.4

%

13.3

%

14.1

%

12.2

%

14.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales per advisor (000s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

252

 

305

 

296

 

334

 

351

 

 

 

 

 

 

 

2+ Years

 

371

 

434

 

439

 

505

 

548

 

 

 

 

 

 

 

0 to 2 Years

 

77

 

102

 

91

 

94

 

100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross production per advisor (000s)

 

16.1

 

15.9

 

15.2

 

17.4

 

17.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of advisors

 

2,171

 

2,175

 

2,273

 

2,293

 

2,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shareholder accounts (000s)

 

2,969

 

3,047

 

3,142

 

3,275

 

3,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shareholders (000s)

 

663

 

688

 

696

 

720

 

757

 

 

 

 

 

 

 

 

Fund Rankings

Lipper

 

 

 

 

 

 

 

Equity funds

 

1 Year

 

3 Years

 

5 Years

 

Top quartile

 

56

%

60

%

44

%

Top half

 

82

%

76

%

71

%

 

 

 

 

 

 

 

 

Equity assets

 

 

 

 

 

 

 

Top quartile

 

67

%

85

%

77

%

Top half

 

93

%

92

%

87

%

 

 

 

 

 

 

 

 

All funds

 

 

 

 

 

 

 

Top quartile

 

50

%

53

%

35

%

Top half

 

80

%

75

%

63

%

 

 

 

 

 

 

 

 

All assets

 

 

 

 

 

 

 

Top quartile

 

65

%

80

%

71

%

Top half

 

93

%

92

%

82

%

 

 

 

 

 

 

 

 

MorningStar

 

 

 

 

 

 

 

% of funds with 4 or 5 stars

 

 

 

 

 

 

 

Equity funds

 

41

%

46

%

40

%

All funds

 

31

%

36

%

30

%

 

 

 

 

 

 

 

 

% of assets with 4 or 5 stars

 

 

 

 

 

 

 

Equity funds

 

79

%

77

%

76

%

All funds

 

72

%

70

%

68

%

 

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Earnings Conference Call

 

Stockholders, members of the investment community and the general public are invited to listen to a live Web cast of our earnings release conference call today, Apr. 22, 2008 at 10:00 a.m. Eastern.  During this call, Henry J. Herrmann, CEO, will review our first quarter results.  Live access to the teleconference will be available on the “Corporate” section of our Web site at www.waddell.com.  A Web cast replay will be made available shortly after the call through April 30th.

 

Web site Resources

 

We invite you to visit the “Corporate” section of our Web site at www.waddell.com under the caption “Data Tables” to review supplemental information schedules.

 

Contacts

 

Investor Contact:

Nicole McIntosh, Director of Investor Relations, (913) 236-1880, nmcintosh@waddell.com

 

Mutual Fund Investor Contact:

Call (888) WADDELL, or visit www.waddell.com or www.ivyfunds.com.

Past performance is no guarantee of future results.  Please invest carefully.

 

About the Company

Waddell & Reed, Inc., founded in 1937, is one of the oldest mutual fund complexes in the United States, having introduced the Waddell & Reed Advisors Group of Mutual Funds in 1940. Today, we distribute our investment products through the Waddell & Reed Advisors channel (our network of financial advisors), our Wholesale channel (encompassing broker/dealer, retirement, registered investment advisors as well as the activities of our Legend subsidiary), and our Institutional channel (including defined benefit plans, pension plans and endowments, as well as the activities of ACF and our subadvisory partnership with Mackenzie in Canada).

 

Through its subsidiaries, Waddell & Reed Financial, Inc. provides investment management and financial planning services to clients throughout the United States. Waddell & Reed Investment Management Company serves as investment advisor to the Waddell & Reed Advisors Group of Mutual Funds, W&R Target Funds, Inc. and Waddell & Reed InvestEd Portfolios, Inc., while Ivy Investment Management Company serves as investment advisor to Ivy Funds, Inc. and the Ivy Funds portfolios. Waddell & Reed, Inc. serves as principal underwriter and distributor to the Waddell & Reed Advisors Group of Mutual Funds, W&R Target Funds, Inc. and Waddell & Reed InvestEd Portfolios, Inc., while Ivy Funds Distributor, Inc. serves as principal underwriter and distributor to Ivy Funds, Inc. and the Ivy Funds portfolios.

 

Forward-Looking Statements

This press release 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, which reflect the current views and assumptions of management with respect to future events regarding our business and industry in general.  These forward-looking statements include all statements, other than statements of historical fact, regarding our financial position, business strategy and other plans and objectives for future operations, including statements with respect to revenues and earnings, the amount and composition of assets under management, distribution sources, expense levels, redemption rates and the financial markets and other conditions.  These statements are generally identified by the use of such words as “may,” “could,” “should,” “would,” “believe,” “anticipate,” “forecast,” “estimate,” “expect,” “intend,” “plan,” “project,” “outlook,” “will,” “potential” and similar statements of a future or forward-looking nature.  Readers are cautioned that any forward-looking information provided by or on behalf of the Company is not a guarantee of future performance.  Actual results may differ materially from those contained in these forward-looking statements as a result of various factors, including but not limited to those discussed below.  If one or more events related to these or other risks, contingencies or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from those forecasted or expected.  Certain important

 

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factors that could cause actual results to differ materially from our expectations are disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2007, which include, without limitation:

 

·                  Loss of existing distribution channels or inability to access new distribution channels;

 

·                  A reduction in assets under our management on short notice, through increased redemptions in our distribution channels or our Funds, particularly those Funds with a high concentration of assets, or investors terminating their relationship with us or shifting their funds to other types of accounts with different rate structures;

 

·                  Investors’ failure to renew our investment management or subadvisory agreements, or the terms of any such renewals being on unfavorable terms;

 

·                  A decline in the securities markets or in the relative investment performance of our Funds and other investment portfolios and products as compared to competing funds;

 

·                  A decline in the relative investment performance of our Funds and other investment portfolios and products as compared to competing offerings; and

 

·                  The unsuccessful implementation of new information systems or such implementations not being timely or cost effective.

 

The foregoing factors should not be construed as exhaustive and should be read together with other cautionary statements included in this and other reports and filings we make with the Securities and Exchange Commission, including the information in Item 1 “Business” and Item 1A “Risk Factors” of Part I and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II to our Annual Report on Form 10-K for the year ended December 31, 2007 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2008.  All forward-looking statements speak only as 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.

 

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