Exhibit 99.1
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 | % |
6
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.
8
