EX-99.1 2 a08-20016_2ex99d1.htm EX-99.1

 

Exhibit 99.1

 

 

News Release

 

 

Waddell & Reed Financial, Inc. Reports Second Quarter Results

 

Overland Park, KS, Jul. 29, 2008 — Waddell & Reed Financial, Inc. (NYSE: WDR) reported second quarter net income of $35.2 million, or $0.42 per diluted share compared to net income of $28.3 million, or $0.33 per diluted share during the first quarter and net income of $29.7 million, or $0.36 per diluted share in last year’s second quarter.

 

Business Discussion

 

Management commentary

 

“Our quarterly results support our confidence in our distribution model,” said Hank Herrmann, Chief Executive Officer of Waddell & Reed Financial, Inc.  “Despite a turbulent market environment, we achieved very strong gross sales and net flows across our distribution channels.


“We attribute our current sales success not only to our top notch investment management team that continues to deliver solid relative results in this difficult market environment,” continued Herrmann, “but also as importantly, to our ever stronger sales and support organization.”

 

Advisors channel

 

Gross sales during the quarter were $1.1 billion, a 5% increase compared to the first quarter of this year and a 27% increase compared to the same period last year.  Net flows were $243 million, nearly double the level experienced in the previous quarter and a meaningful improvement compared to the outflows we have experienced historically in this channel.  Our Advisors channel has seen significant improvement in individual productivity and overall sales volume over the past few years.  This has resulted in steady improvements to net flows every year since 2006.  It is notable and gratifying that this progress has continued through the challenging equity environment.

 

Our brokerage platform is now operational.  A few of our financial advisors moved to the new platform during the quarter.  With the first phase now in place, we will begin active recruiting of experienced financial advisors. This complements our traditional recruiting model that focuses primarily on individuals with little or no previous industry experience.  Success in this new approach should further accelerate sales and productivity.

 

 

1


 

 

Wholesale channel

 

Gross sales decelerated slightly compared with the first quarter’s exceptional volume.  At $4.6 billion, gross sales continued to exhibit a strong rate of growth and year-to-date has surpassed total sales in 2007.  Net flows are following a similar pattern.  Net flows of $3.4 billion during the quarter represent an annualized growth rate of 55%.

 

Sales continue to broaden with seven funds internally forecasted to reach annual gross sales of at least $100 million and five of these have already surpassed that mark.

 

Institutional channel

 

Gross sales during the quarter were $664 million, a 5% decline during the quarter and nearly a four-fold increase compared to last year’s second quarter.  Sales continue to be largely driven by our subadvisory relationship with Pictet & Cie.  Net flows of $196 million during the quarter represent a respectable annualized quarterly growth rate of 9%.

 

Demand for our Large Capitalization Growth style remains strong not only through Pictet & Cie’s distribution network, but also in the traditional institutional market, which continues to favor this investment style.  The pipeline looks promising but prospects remain in the early or mid-stage of development as the closing cycle is being elongated by volatile markets.

 

Management Fee Revenue Analysis

 

We earn management fee revenues by providing investment management services to our retail funds and institutional clients.  These revenues are based on the amount of average assets under management and are influenced by asset composition, sales, redemptions, and the financial market conditions.

 

Average assets under management increased by 10% on a sequential quarter basis and 33% compared to last year’s second quarter.

 

The effective management fee rate declined slightly to 65.1 basis points in the current quarter compared to 65.3 basis points in the previous quarter and 68.4 basis points in last year’s second quarter.  The decline is due to a mix-shift in assets under management.

 

Underwriting and Distribution Revenue and Expense Analysis

 

Advisors channel


On a sequential basis, the increase in revenues was largely due to strong sales and asset growth in our asset allocation products, and to a lesser extent, higher asset-based service fee revenues.  Direct expenses rose in correlation with higher asset levels in our asset allocation products and asset-based service fees while indirect costs increased due to a combination of items including sales convention, incentive compensation and group insurance costs.

 

Compared to last year’s second quarter, the increase in revenues was due to a combination of higher variable annuity sales volume and higher asset-based fee revenues.  Direct expenses rose in correlation with higher sales volume and asset levels.  Indirect expenses increased due to higher group health costs (last year’s second quarter contained an adjustment due to favorable claim activity) as well as higher compensation, recruiting and support costs.

 

 

2


 

 

Wholesale channel


Sequentially, the increase in revenues was largely attributable to higher asset-based service and distribution fees as asset levels continued to rise.  Direct costs rose as asset-based distribution fees paid to our distributors more than offset the drop in commission paid mostly from lower sales volume.  Indirect costs remained unchanged.

 

Compared to the same period last year, revenues rose on higher asset-based service and distribution costs while direct expenses increased on higher sales volume.  Indirect expenses rose more moderately due to a combination of additional marketing, higher compensation and group health costs.

 

Operating Expense Analysis

 

On a sequential quarter basis, the increase in operating costs is almost entirely due to higher underwriting and distribution costs as discussed above.  The increase in both subadvisory fees and general and administrative costs was largely offset by lower compensation and related costs.  Subadvisory fees rose on strong sales in our subadvised products.  The increase in general and administrative expenses was due to a number of items including higher consulting and information technology costs.  Compensation and related costs were lower in the current quarter as costs in the previous quarter included higher incentive compensation for the investment management staff.

 

Compared to the same period last year, the increase was mostly due to higher underwriting and distribution costs as discussed above.  The remainder of the increase was due in part to higher compensation and related costs and to a lesser extent higher general and administrative costs and higher subadvisory fees.  Compensation and related costs increased due to a combination of higher headcount and base compensation, group health and insurance costs and higher incentive compensation.  General and administrative costs rose on a combination of higher information technology and fund-related costs.  Subadvisory fees rose on higher levels of subadvised assets under management.

 

Subadvised average assets under management were $12.8 billion in the current quarter, compared to $11.6 billion during the first quarter of 2008 and $10.1 billion during the second quarter of 2007.

 

Margin Discussion

 

On a sequential quarter basis, strong asset growth was largely responsible for the 8% increase in operating revenues while a drop in sales volume in our Wholesale channel and a more normalized compensation level help contain expenses.  These factors led to an improvement in operating margin during the quarter to 22.4% compared to 19.7% during the first quarter of 2008.

 

Compared to last year’s second quarter, operating revenues rose 26% while operating costs rose 28% leading to a 140 basis point contraction in the operating margin.  Expense growth surpassed revenue growth primarily due to a 169% increase in the sales volume in our Wholesale channel.

 

Management fees earned at current levels of assets under management are sufficient to offset the cost of distribution through our Wholesale channel at current sales volume.  If asset levels decline or sales volume increases, we could experience pressure on our operating margin.

 

 

3


 

 

Balance Sheet Information

 

Cash and cash equivalents and investment securities are $273 million (excluding $117 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 was $378 million and there were 86.2 million shares outstanding.  During the quarter, we repurchased 588 thousand shares on the open market or privately at an aggregate cost of $19.8 million.

 

 

 

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

 

$

112,583

 

 

 

 

 

Underwriting and distribution fees

 

84,016

 

88,556

 

92,168

 

106,345

 

106,111

 

114,254

 

 

 

 

 

Shareholder service fees

 

22,623

 

23,347

 

23,678

 

24,476

 

24,986

 

25,946

 

 

 

 

 

Total operating revenues

 

189,499

 

201,286

 

210,652

 

236,117

 

234,069

 

252,783

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting and distribution

 

94,397

 

99,528

 

105,604

 

122,745

 

124,777

 

132,292

 

 

 

 

 

Compensation and related costs

 

26,932

 

28,312

 

28,760

 

31,901

 

34,346

 

32,870

 

 

 

 

 

General and administrative

 

10,083

 

11,840

 

12,745

 

13,819

 

13,833

 

14,731

 

 

 

 

 

Subadvisory fees

 

9,215

 

10,638

 

11,459

 

12,532

 

11,834

 

13,037

 

 

 

 

 

Depreciation

 

3,043

 

3,062

 

3,167

 

3,140

 

3,140

 

3,188

 

 

 

 

 

Total operating expenses

 

143,670

 

153,380

 

161,735

 

184,137

 

187,930

 

196,118

 

 

 

 

 

Operating Income:

 

45,829

 

47,906

 

48,917

 

51,980

 

46,139

 

56,665

 

 

 

 

 

Investment and other income

 

2,480

 

2,609

 

4,831

 

6,532

 

2,186

 

1,817

 

 

 

 

 

Interest expense

 

(2,984

)

(2,982

)

(2,984

)

(2,974

)

(2,978

)

(2,982

)

 

 

 

 

Income before taxes

 

45,325

 

47,533

 

50,764

 

55,538

 

45,347

 

55,500

 

 

 

 

 

Provision for taxes

 

16,598

 

17,827

 

18,797

 

20,441

 

17,006

 

20,313

 

 

 

 

 

Net Income

 

$

28,727

 

$

29,706

 

$

31,967

 

$

35,097

 

$

28,341

 

$

35,187

 

 

 

 

 

Net income per share- diluted

 

0.35

 

0.36

 

0.39

 

0.42

 

0.33

 

0.42

 

 

 

 

 

Weighted average shares outstanding - diluted

 

82,803

 

82,323

 

82,099

 

83,676

 

84,964

 

84,594

 

 

 

 

 

Operating margin

 

24.2

%

23.8

%

23.2

%

22.0

%

19.7

%

22.4

%

 

 

 

 

 

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

 

$

63,812

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

39,340

 

40,173

 

39,539

 

44,461

 

42,712

 

44,872

 

 

 

 

 

Indirect

 

20,775

 

20,057

 

21,145

 

22,800

 

22,616

 

23,588

 

 

 

 

 

Total expenses

 

$

60,115

 

$

60,230

 

$

60,684

 

$

67,261

 

$

65,328

 

$

68,460

 

 

 

 

 

Margin

 

-5.8

%

-4.1

%

-5.1

%

-2.2

%

-5.9

%

-7.3

%

 

 

 

 

Wholesale Channel (Third-Party)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

12,968

 

$

15,609

 

$

19,271

 

$

25,343

 

$

30,345

 

$

35,905

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

16,951

 

20,025

 

25,340

 

35,253

 

39,595

 

43,307

 

 

 

 

 

Indirect

 

5,001

 

6,158

 

6,304

 

6,820

 

7,252

 

7,372

 

 

 

 

 

Total expenses

 

$

21,952

 

$

26,183

 

$

31,644

 

$

42,073

 

$

46,847

 

$

50,679

 

 

 

 

 

Wholesale Channel (Legend)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

14,241

 

$

15,108

 

$

15,169

 

$

15,166

 

$

14,089

 

$

14,537

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

9,478

 

10,165

 

10,158

 

10,046

 

9,423

 

9,695

 

 

 

 

 

Indirect

 

2,852

 

2,950

 

3,118

 

3,365

 

3,179

 

3,458

 

 

 

 

 

Total expenses

 

$

12,330

 

$

13,115

 

$

13,276

 

$

13,411

 

$

12,602

 

$

13,153

 

 

 

 

 

Consolidated Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

84,016

 

$

88,556

 

$

92,168

 

$

106,345

 

$

106,111

 

$

114,254

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

65,769

 

70,363

 

75,037

 

89,760

 

91,730

 

97,874

 

 

 

 

 

Indirect

 

28,628

 

29,165

 

30,567

 

32,985

 

33,047

 

34,418

 

 

 

 

 

Total expenses

 

$

94,397

 

$

99,528

 

$

105,604

 

$

122,745

 

$

124,777

 

$

132,292

 

 

 

 

 

 

 

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

 

$

32,075

 

 

 

 

 

Sales (net of commissions)

 

783

 

866

 

902

 

1,000

 

1,048

 

1,100

 

 

 

 

 

Redemptions

 

(915

)

(1,027

)

(922

)

(965

)

(917

)

(914

)

 

 

 

 

Net sales

 

(132

)

(161

)

(20

)

35

 

131

 

186

 

 

 

 

 

Net exchanges

 

(39

)

(46

)

(67

)

(29

)

(67

)

(36

)

 

 

 

 

Reinvested dividends & capital gains

 

65

 

108

 

80

 

(8

)

69

 

93

 

 

 

 

 

Net flows

 

(106

)

(99

)

(7

)

(2

)

133

 

243

 

 

 

 

 

Market action

 

628

 

1,825

 

1,923

 

495

 

(2,620

)

369

 

 

 

 

 

Ending assets

 

$

30,427

 

$

32,153

 

$

34,069

 

$

34,562

 

$

32,075

 

$

32,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

10,819

 

$

11,996

 

$

14,247

 

$

17,405

 

$

21,537

 

$

24,532

 

 

 

 

 

Sales (net of commissions)

 

1,300

 

1,703

 

2,500

 

3,967

 

5,413

 

4,574

 

 

 

 

 

Redemptions

 

(596

)

(635

)

(701

)

(863

)

(1,171

)

(1,243

)

 

 

 

 

Net sales

 

704

 

1,068

 

1,799

 

3,104

 

4,242

 

3,331

 

 

 

 

 

Net exchanges

 

37

 

45

 

65

 

27

 

65

 

35

 

 

 

 

 

Reinvested dividends & capital gains

 

12

 

35

 

18

 

(89

)

6

 

31

 

 

 

 

 

Net flows

 

753

 

1,148

 

1,882

 

3,042

 

4,313

 

3,397

 

 

 

 

 

Market action

 

424

 

1,103

 

1,276

 

1,090

 

(1,318

)

1,019

 

 

 

 

 

Ending assets

 

$

11,996

 

$

14,247

 

$

17,405

 

$

21,537

 

$

24,532

 

$

28,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Institutional Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

7,677

 

$

7,315

 

$

7,564

 

$

7,908

 

$

8,769

 

$

8,285

 

 

 

 

 

Sales (net of commissions)

 

353

 

137

 

282

 

1,111

 

696

 

664

 

 

 

 

 

Redemptions

 

(899

)

(319

)

(542

)

(368

)

(365

)

(497

)

 

 

 

 

Net sales

 

(546

)

(182

)

(260

)

743

 

331

 

167

 

 

 

 

 

Net exchanges

 

0

 

0

 

0

 

0

 

0

 

0

 

 

 

 

 

Reinvested dividends & capital gains

 

28

 

28

 

24

 

25

 

27

 

29

 

 

 

 

 

Net flows

 

(518

)

(154

)

(236

)

768

 

358

 

196

 

 

 

 

 

Market action

 

156

 

403

 

580

 

93

 

(842

)

8

 

 

 

 

 

Ending assets

 

$

7,315

 

$

7,564

 

$

7,908

 

$

8,769

 

$

8,285

 

$

8,489

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

48,401

 

$

49,738

 

$

53,964

 

$

59,382

 

$

64,868

 

$

64,892

 

 

 

 

 

Sales (net of commissions)

 

2,436

 

2,706

 

3,684

 

6,078

 

7,157

 

6,338

 

 

 

 

 

Redemptions

 

(2,410

)

(1,981

)

(2,165

)

(2,196

)

(2,453

)

(2,654

)

 

 

 

 

Net sales

 

26

 

725

 

1,519

 

3,882

 

4,704

 

3,684

 

 

 

 

 

Net exchanges

 

(2

)

(1

)

(2

)

(2

)

(2

)

(1

)

 

 

 

 

Reinvested dividends & capital gains

 

105

 

171

 

122

 

(72

)

102

 

153

 

 

 

 

 

Net flows

 

129

 

895

 

1,639

 

3,808

 

4,804

 

3,836

 

 

 

 

 

Market action

 

1,208

 

3,331

 

3,779

 

1,678

 

(4,780

)

1,396

 

 

 

 

 

Ending assets

 

$

49,738

 

$

53,964

 

$

59,382

 

$

64,868

 

$

64,892

 

$

70,124

 

 

 

 

 

 

 

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

%

7.7

%

 

 

 

 

Wholesale

 

21.0

%

18.8

%

17.9

%

17.3

%

20.6

%

18.0

%

 

 

 

 

Institutional

 

48.0

%

17.0

%

28.4

%

17.4

%

17.5

%

23.4

%

 

 

 

 

Total

 

18.4

%

13.3

%

14.1

%

12.2

%

14.0

%

13.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales per advisor (000s)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

252

 

305

 

296

 

334

 

351

 

357

 

 

 

 

 

2+ Years

 

371

 

434

 

439

 

505

 

548

 

538

 

 

 

 

 

0 to 2 Years

 

77

 

102

 

91

 

94

 

100

 

105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross production per advisor (000s)

 

16.1

 

15.9

 

15.2

 

17.4

 

17.2

 

17.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of advisors

 

2,171

 

2,175

 

2,273

 

2,293

 

2,235

 

2,285

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shareholder accounts (000s)

 

2,969

 

3,047

 

3,142

 

3,275

 

3,432

 

3,638

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shareholders (000s)

 

663

 

688

 

696

 

720

 

757

 

850

 

 

 

 

 

 

Fund Rankings

Lipper

 

 

 

 

 

 

 

Equity funds

 

1 Year

 

3 Years

 

5 Years

 

Top quartile

 

50

%

55

%

50

%

Top half

 

76

%

64

%

71

%

 

 

 

 

 

 

 

 

Equity assets

 

 

 

 

 

 

 

Top quartile

 

67

%

69

%

64

%

Top half

 

75

%

88

%

91

%

 

 

 

 

 

 

 

 

All funds

 

 

 

 

 

 

 

Top quartile

 

48

%

52

%

40

%

Top half

 

72

%

66

%

71

%

 

 

 

 

 

 

 

 

All assets

 

 

 

 

 

 

 

Top quartile

 

66

%

66

%

59

%

Top half

 

75

%

88

%

89

%

 

 

 

 

 

 

 

 

MorningStar

 

 

 

 

 

 

 

% of funds with 4 or 5 stars

 

 

 

 

 

 

 

Equity funds

 

44

%

41

%

38

%

All funds

 

35

%

36

%

30

%

 

 

 

 

 

 

 

 

% of assets with 4 or 5 stars

 

 

 

 

 

 

 

Equity funds

 

82

%

58

%

57

%

All funds

 

75

%

54

%

53

%

 

 

 

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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, July 29, 2008 at 10:00 a.m. Eastern.  During this call, Henry J. Herrmann, CEO, will review our second 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 Aug. 6th.

 

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 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:

 

 

8


 

 

·                  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;

 

·                  The unsuccessful implementation of new systems business technology platforms or such implementations not being timely or cost effective;

 

·                  Changes in, or non-compliance with, laws, regulations or in legal, regulatory, accounting, tax or compliance requirements or governmental policies applicable to the investment management and broker/dealer industries; and

 

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

 

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.

 

 

 

9