EX-99.1 2 a10-14626_2ex99d1.htm EX-99.1

Exhibit 99.1

 

GRAPHIC

 

News Release

 

Waddell & Reed Financial, Inc. Reports Second Quarter Results

 

Overland Park, KS, Jul. 28, 2010 – Waddell & Reed Financial, Inc. (NYSE: WDR) today reported second quarter net income of $34.2 million, or $0.40 per diluted share, compared to net income of $35.9 million, or $0.42 per diluted share, in the first quarter of 2010 and net income of $23.4 million, or $0.27 per diluted share, during the second quarter of 2009.

 

Business Discussion

 

Management commentary

 

“In the context of high market volatility and subdued investor demand for equities, we achieved positive flows in each of our three distribution channels,” said Henry J. Herrmann, chairman and chief executive officer of Waddell & Reed Financial, Inc.  “We believe this reflects the breadth and performance of our products and the ongoing acceptance and demand that has been created among investors for Waddell & Reed and Ivy investment strategies.

 

“Our business faced two major challenges during the second quarter,” Herrmann added.  “First, financial markets suffered a meaningful pullback as investors around the world questioned the pace of economic recovery.  This affected not only the level of assets managed, but also investors’ willingness to invest in equities.  Second, as of June 30th, year-to-date performance of our funds has been mixed.  Almost two-thirds of our mutual funds outperformed their peer group, but performance of our two largest funds remains relatively weak.

 

“That said,” Herrmann continued, “we remain well positioned to continue capturing market share.”

 

Advisors channel

 

Sales in our Advisors channel during the quarter improved on both a sequential and year-over-year basis.  At $954 million, gross sales increased 8% compared to the previous quarter and 22% compared to the same period in 2009.  Flows remained positive at $100 million and represent the fifth consecutive quarter of inflows.  Our advisors’ productivity continues to improve, and their focus on long-term financial planning has once again validated the stability of this channel’s distribution model.

 

Wholesale channel

 

Considering the volatility in the financial markets and weak performance of our lead fund, Ivy Asset Strategy, sales held up relatively well.  At $3.5 billion, gross sales for the quarter were down 20% sequentially and 14% compared to the second quarter of 2009.  Flows during the quarter were positive at

 

1


 

$388 million, but weaker than previous quarters due to higher redemptions and somewhat lower sales volume.  Redemptions, which peaked during the month of May, had meaningfully abated by the beginning of June.  Nonetheless, we continue to compare favorably to the industry.  The Wholesale channel’s organic growth rate for equity assets during the quarter was 1.9% compared with organic decay of 1.4% experienced by the industry.

 

Sales diversification continues to play a key role in our Wholesale channel.  During the quarter, sales of products other than the Asset Strategy and Global Natural Resources funds reached $920 million, or 26% of total sales, including five funds with daily sales in excess of $1 million.

 

Institutional channel

 

Gross sales of $768 million during the quarter were solid and flows remained positive.  Our subadvisor efforts continue to show promise and are responsible for more than 85% of sales and substantially all of the flows during the quarter.  Sales of traditional defined benefit products were more modest, but net flows were positive.

 

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 influenced by asset composition, sales, redemptions and financial market conditions.

 

Average assets under management of $72.6 billion during the quarter increased 2% compared to the previous quarter and 37% compared to the second quarter of 2009.  The effective fee rate remained relatively unchanged at 62.5 basis points compared to 62.6 basis points and 62.5 basis points in the first quarter of 2010 and second quarter of 2009, respectively.

 

Underwriting and Distribution Revenue and Expense Analysis

 

Advisors channel

 

Compared to the first quarter of 2010, revenues rose on higher asset allocation product fees and variable annuity commissions while front-load commissions declined.  Direct expenses rose in close correlation to revenues.  Indirect expenses were lower, largely due to a decline in group insurance and payroll tax costs.

 

Compared to the same period in 2009, revenues increased due to a combination of higher asset-based Rule 12b-1 and asset allocation product fees.  Direct expenses increased in concert with higher revenues.  Indirect expenses rose slightly due to higher compensation and information technology charges.

 

Wholesale channel

 

Sequentially, revenues increased on higher asset-based service and distribution fees.  Direct expenses increased slightly as higher asset-based Rule 12b-1 service and distribution fees were offset by lower wholesaler commissions.  Indirect expenses declined slightly.

 

Compared to the second quarter of 2009, revenues increased on higher asset-based Rule 12b-1 service and distribution fees, and to a lesser degree, higher sales volume at Legend.  Direct expenses rose in correlation with higher asset-based fees, and were partly offset by lower wholesaler commissions.  Indirect expenses rose largely on higher compensation costs.

 

2


 

Compensation and Related Expense Analysis

 

Compensation and related costs increased sequential quarterly largely due to higher equity compensation.  The increase in incentive compensation was offset by lower payroll taxes as FICA caps were met and lower software development costs.

 

Compared to the second quarter of 2009, the increase in costs is due to a combination of higher incentive and equity compensation, and to a lesser degree, base compensation.

 

General and Administrative Expense Analysis

 

General and administrative costs rose compared to both periods largely due to higher dealer services and fund related expenses as well as higher IT costs.

 

Subadvisory Fees

 

Subadvisory fees, which are paid on average asset levels in subadvised funds, fell on a sequential quarter basis, but increased compared to the second quarter of 2009.  The change is largely due to changes in assets in the Ivy Global Natural Resources fund.  Subadvised average assets under management during the quarter were $6.7 billion.

 

Investment and Other Income

 

We recorded an investment loss of $1.6 million, which was largely the result of $2.6 million in losses incurred in our mutual fund trading portfolio during the quarter.  These were partly offset by gains of $800 thousand from the sale of available-for-sale mutual fund holdings.

 

Tax Rate

 

Our effective tax rate during the current quarter was 40.7%.  The increase to our effective tax rate was mainly due to increasing our reserves against capital loss carryforwards as a result of the decline in the market value of our investment portfolio during the quarter.  A charge to earnings of $1.8 million, or $0.02 per diluted share, resulted from the increase to these reserves.  Our effective tax rate, excluding the impact of tax reserves, was 37.6%.  The effective tax rate for future periods (excluding any changes related to the valuation allowance) is anticipated to range between 37.3% and 38.3%.

 

Balance Sheet Information

 

As of June 30, 2010, cash and cash equivalents and investment securities were $290 million (excluding $54 million held for the benefit of customers segregated in compliance with federal and other regulations).  Short-term debt was $190 million, reflecting the current maturity of our January 2011 senior notes.

 

Stockholders’ equity was $377 million and there were 85.4 million shares outstanding.  During the quarter, we repurchased 1.5 million shares on the open market or privately at an aggregate cost of $46.7 million for a total of 1.9 million shares repurchased since the beginning of 2010.

 

3


 

Unaudited Schedule of Operating Data

(Amounts in thousands, except for per share data)

 

 

 

2009

 

2010

 

 

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment management fees

 

$

70,981

 

$

82,566

 

$

94,687

 

$

106,359

 

$

109,663

 

$

113,052

 

 

 

 

 

Underwriting and distribution fees

 

80,715

 

91,105

 

96,559

 

110,299

 

113,136

 

114,545

 

 

 

 

 

Shareholder service fees

 

24,976

 

25,957

 

26,730

 

28,155

 

28,815

 

29,622

 

 

 

 

 

Total operating revenues

 

176,672

 

199,628

 

217,976

 

244,813

 

251,614

 

257,219

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting and distribution

 

98,718

 

110,781

 

115,119

 

125,307

 

133,866

 

133,506

 

 

 

 

 

Compensation and related costs

 

25,699

 

27,399

 

29,275

 

42,090

 

32,925

 

34,355

 

 

 

 

 

General and administrative

 

13,413

 

14,503

 

15,106

 

15,012

 

15,686

 

16,709

 

 

 

 

 

Subadvisory fees

 

4,703

 

5,485

 

6,129

 

6,885

 

7,072

 

6,888

 

 

 

 

 

Depreciation

 

3,312

 

3,444

 

3,503

 

3,394

 

3,445

 

3,486

 

 

 

 

 

Total operating expenses

 

145,845

 

161,612

 

169,132

 

192,688

 

192,994

 

194,944

 

 

 

 

 

Operating Income:

 

30,827

 

38,016

 

48,844

 

52,125

 

58,620

 

62,275

 

 

 

 

 

Investment and other income/(loss)

 

(3,092

)

2,161

 

2,316

 

3,654

 

891

 

(1,585

)

 

 

 

 

Interest expense

 

(3,149

)

(3,150

)

(3,153

)

(3,243

)

(3,558

)

(3,111

)

 

 

 

 

Income before taxes

 

24,586

 

37,027

 

48,007

 

52,536

 

55,953

 

57,579

 

 

 

 

 

Provision for taxes

 

9,120

 

13,653

 

14,594

 

19,284

 

20,044

 

23,427

 

 

 

 

 

Net Income

 

$

15,466

 

$

23,374

 

$

33,413

 

$

33,252

 

$

35,909

 

$

34,152

 

 

 

 

 

Net income per share

 

0.18

 

0.27

 

0.39

 

0.39

 

0.42

 

0.40

 

 

 

 

 

Weighted average shares outstanding - diluted

 

84,910

 

86,001

 

85,774

 

85,482

 

85,675

 

86,025

 

 

 

 

 

Operating margin

 

17.4

%

19.0

%

22.4

%

21.3

%

23.3

%

24.2

%

 

 

 

 

 

Underwriting and Distribution

(Amounts in thousands)

 

 

 

2009

 

2010

 

 

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

Advisors Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

47,413

 

$

52,262

 

$

53,125

 

$

60,458

 

$

60,537

 

$

61,443

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

33,309

 

36,281

 

36,367

 

41,512

 

42,540

 

43,151

 

 

 

 

 

Indirect

 

21,719

 

20,938

 

21,336

 

19,924

 

22,845

 

21,746

 

 

 

 

 

Total expenses

 

$

55,028

 

$

57,219

 

$

57,703

 

$

61,436

 

$

65,385

 

$

64,897

 

 

 

 

 

Margin

 

-16.1

%

-9.5

%

-8.6

%

-1.6

%

-8.0

%

-5.6

%

 

 

 

 

Wholesale Channel (Third-Party)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

23,075

 

$

27,222

 

$

30,989

 

$

36,166

 

$

38,069

 

$

38,791

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

28,012

 

35,915

 

39,327

 

44,389

 

48,344

 

48,136

 

 

 

 

 

Indirect

 

6,382

 

7,214

 

7,132

 

7,036

 

8,160

 

7,967

 

 

 

 

 

Total expenses

 

$

34,394

 

$

43,129

 

$

46,459

 

$

51,425

 

$

56,504

 

$

56,103

 

 

 

 

 

Wholesale Channel (Legend)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

10,227

 

$

11,621

 

$

12,445

 

$

13,675

 

$

14,530

 

$

14,311

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

6,466

 

7,547

 

7,949

 

8,762

 

8,797

 

9,499

 

 

 

 

 

Indirect

 

2,830

 

2,886

 

3,008

 

3,684

 

3,180

 

3,007

 

 

 

 

 

Total expenses

 

$

9,296

 

$

10,433

 

$

10,957

 

$

12,446

 

$

11,977

 

$

12,506

 

 

 

 

 

Consolidated Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

80,715

 

$

91,105

 

$

96,559

 

$

110,299

 

$

113,136

 

$

114,545

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

67,787

 

79,743

 

83,643

 

94,663

 

99,681

 

100,786

 

 

 

 

 

Indirect

 

30,931

 

31,038

 

31,476

 

30,644

 

34,185

 

32,720

 

 

 

 

 

Total expenses

 

$

98,718

 

$

110,781

 

$

115,119

 

$

125,307

 

$

133,866

 

$

133,506

 

 

 

 

 

Margin

 

-22.3

%

-21.6

%

-19.2

%

-13.6

%

-18.3

%

-16.6

%

 

 

 

 

 

4


 

Changes in Assets Under Management
(Amounts in millions)

 

 

 

2009

 

2010

 

 

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

Advisors Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

23,472

 

$

22,643

 

$

25,205

 

$

28,351

 

$

29,474

 

$

30,501

 

 

 

 

 

Sales (net of commissions)

 

695

 

783

 

804

 

920

 

886

 

954

 

 

 

 

 

Redemptions

 

(823

)

(724

)

(719

)

(786

)

(762

)

(902

)

 

 

 

 

Net sales

 

(128

)

59

 

85

 

134

 

124

 

52

 

 

 

 

 

Net exchanges

 

(27

)

(26

)

(25

)

(119

)

(35

)

(55

)

 

 

 

 

Reinvested dividends & capital gains

 

73

 

107

 

78

 

71

 

57

 

103

 

 

 

 

 

Net flows

 

(82

)

140

 

138

 

86

 

146

 

100

 

 

 

 

 

Market action

 

(747

)

2,422

 

3,008

 

1,037

 

881

 

(2,386

)

 

 

 

 

Ending assets

 

$

22,643

 

$

25,205

 

$

28,351

 

$

29,474

 

$

30,501

 

$

28,215

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

17,489

 

$

18,635

 

$

23,213

 

$

28,975

 

$

32,818

 

$

35,604

 

 

 

 

 

Sales (net of commissions)

 

2,389

 

4,104

 

4,064

 

4,188

 

4,430

 

3,530

 

 

 

 

 

Redemptions

 

(1,467

)

(1,249

)

(1,524

)

(1,711

)

(2,106

)

(3,303

)

 

 

 

 

Net sales

 

922

 

2,855

 

2,540

 

2,477

 

2,324

 

227

 

 

 

 

 

Net exchanges

 

26

 

(1

)

24

 

101

 

34

 

54

 

 

 

 

 

Reinvested dividends & capital gains

 

6

 

78

 

29

 

11

 

(6

)

107

 

 

 

 

 

Net flows

 

954

 

2,932

 

2,593

 

2,589

 

2,352

 

388

 

 

 

 

 

Market action

 

192

 

1,646

 

3,169

 

1,254

 

434

 

(3,469

)

 

 

 

 

Ending assets

 

$

18,635

 

$

23,213

 

$

28,975

 

$

32,818

 

$

35,604

 

$

32,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Institutional Channel

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

6,523

 

$

6,298

 

$

7,193

 

$

7,163

 

$

7,491

 

$

8,127

 

 

 

 

 

Disposition of assets

 

0

 

0

 

(488

)

0

 

0

 

0

 

 

 

 

 

Sales (net of commissions)

 

395

 

526

 

277

 

505

 

819

 

768

 

 

 

 

 

Redemptions

 

(301

)

(488

)

(608

)

(545

)

(517

)

(551

)

 

 

 

 

Net sales

 

94

 

38

 

(331

)

(40

)

302

 

217

 

 

 

 

 

Net exchanges

 

0

 

26

 

0

 

15

 

0

 

0

 

 

 

 

 

Reinvested dividends & capital gains

 

24

 

28

 

30

 

31

 

23

 

26

 

 

 

 

 

Net flows

 

118

 

92

 

(301

)

6

 

325

 

243

 

 

 

 

 

Market action

 

(343

)

803

 

759

 

322

 

311

 

(829

)

 

 

 

 

Ending assets

 

$

6,298

 

$

7,193

 

$

7,163

 

$

7,491

 

$

8,127

 

$

7,541

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets

 

$

47,484

 

$

47,576

 

$

55,611

 

$

64,489

 

$

69,783

 

$

74,232

 

 

 

 

 

Disposition of assets

 

0

 

0

 

(488

)

0

 

0

 

0

 

 

 

 

 

Sales (net of commissions)

 

3,479

 

5,413

 

5,145

 

5,613

 

6,135

 

5,252

 

 

 

 

 

Redemptions

 

(2,591

)

(2,461

)

(2,851

)

(3,042

)

(3,385

)

(4,756

)

 

 

 

 

Net sales

 

888

 

2,952

 

2,294

 

2,571

 

2,750

 

496

 

 

 

 

 

Net exchanges

 

(1

)

(1

)

(1

)

(3

)

(1

)

(1

)

 

 

 

 

Reinvested dividends & capital gains

 

103

 

213

 

137

 

113

 

74

 

236

 

 

 

 

 

Net flows

 

990

 

3,164

 

2,430

 

2,681

 

2,823

 

731

 

 

 

 

 

Market action

 

(898

)

4,871

 

6,936

 

2,613

 

1,626

 

(6,684

)

 

 

 

 

Ending assets

 

$

47,576

 

$

55,611

 

$

64,489

 

$

69,783

 

$

74,232

 

$

68,279

 

 

 

 

 

 

5


 

Supplemental Information

 

 

 

2009

 

2010

 

 

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

1st Qtr.

 

2nd Qtr.

 

3rd Qtr.

 

4th Qtr.

 

Redemption rates - long term assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisors

 

10.5

%

8.2

%

7.6

%

7.8

%

8.2

%

9.5

%

 

 

 

 

Wholesale

 

33.3

%

22.4

%

22.5

%

21.2

%

24.6

%

37.7

%

 

 

 

 

Institutional

 

19.6

%

28.2

%

33.8

%

30.1

%

27.4

%

28.0

%

 

 

 

 

Total

 

20.6

%

16.8

%

17.4

%

16.5

%

18.2

%

25.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average GDC per advisor (000s)

 

21.0

 

23.1

 

22.8

 

25.8

 

27.1

 

28.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of advisors

 

2,277

 

2,328

 

2,404

 

2,393

 

2,057

 

2,013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shareholder accounts (000s)

 

3,666

 

3,683

 

3,805

 

3,855

 

3,962

 

3,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shareholders (000s)

 

869

 

850

 

875

 

905

 

930

 

901

 

 

 

 

 

 

Fund Rankings

 

 

 

1 Year

 

3 Years

 

5 Years

 

Lipper

 

 

 

 

 

 

 

Equity funds

 

 

 

 

 

 

 

Top quartile

 

25

%

63

%

57

%

Top half

 

33

%

76

%

78

%

 

 

 

 

 

 

 

 

Equity assets

 

 

 

 

 

 

 

Top quartile

 

15

%

78

%

76

%

Top half

 

15

%

83

%

85

%

 

 

 

 

 

 

 

 

Fixed income funds

 

 

 

 

 

 

 

Top quartile

 

33

%

56

%

38

%

Top half

 

50

%

69

%

69

%

 

 

 

 

 

 

 

 

Fixed income assets

 

 

 

 

 

 

 

Top quartile

 

19

%

54

%

36

%

Top half

 

33

%

74

%

74

%

 

 

 

 

 

 

 

 

All funds

 

 

 

 

 

 

 

Top quartile

 

28

%

62

%

52

%

Top half

 

38

%

74

%

76

%

 

 

 

 

 

 

 

 

All assets

 

 

 

 

 

 

 

Top quartile

 

16

%

74

%

69

%

Top half

 

18

%

81

%

83

%

 

 

 

 

 

 

 

 

MorningStar

 

 

 

 

 

 

 

% of funds with 4 or 5 stars

 

 

 

 

 

 

 

Equity funds

 

62

%

67

%

56

%

All funds

 

57

%

62

%

53

%

 

 

 

 

 

 

 

 

% of assets with 4 or 5 stars

 

 

 

 

 

 

 

Equity funds

 

76

%

74

%

74

%

All funds

 

71

%

69

%

70

%

 

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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 28th at 10:00 a.m. Eastern.  During this call, Henry J. Herrmann, Chairman and CEO, will review our quarterly results.  Live access to the teleconference will be available on the “Investor Relations” section of our Web site at www.waddell.com.  A Web cast replay will be made available shortly after the conclusion of the call and accessible for seven days.

 

Web site Resources

 

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

 

Contacts

 

Investor Contact:

Nicole McIntosh, AVP, 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 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, Ivy Funds Variable Insurance Portfolios, Inc. and Waddell & Reed InvestEd Portfolios, Inc., while Ivy Investment Management Company serves as investment advisor to Ivy Funds. Waddell & Reed, Inc. serves as principal underwriter and distributor to the Waddell & Reed Advisors Group of Mutual Funds, Ivy Funds Variable Insurance Portfolios, Inc. and Waddell & Reed InvestEd Portfolios, Inc., while Ivy Funds Distributor, Inc. serves as principal underwriter and distributor to Ivy Funds.

 

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

 

7


 

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, 2009, which include, without limitation:

 

·                                          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 introduction of legislative or regulatory proposals or judicial rulings that change the independent contractor classification of our financial advisors at the federal or state level for employment tax or other employee benefit purposes;

·                                          The adverse ruling or resolution of any litigation, regulatory investigations and proceedings, or securities arbitrations by a federal or state court or regulatory body;

·                                          Non-compliance with applicable laws or regulations and changes in current legal, regulatory, accounting, tax or compliance requirements or governmental policies;

·                                          The 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;

·                                          A decrease in, or the elimination of, any future quarterly dividend paid to stockholders; and

·                                          Our inability to hire and retain senior executive management and other key personnel.

 

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, 2009 and as updated in our quarterly reports on Form 10-Q for the year ending December 31, 2010.  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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