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.
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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.
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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.
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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.
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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 | | | | | |
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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 | | | | | |
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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 wo rds 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 f rom 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:
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· 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.
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