The WALL STREET FORUM
45th Institutional Investor Conference
The Roosevelt Hotel, New York, New York
September 13, 2002
Prepared Remarks of
Robert S. Smith, Chief Operating Officer
and
Kurt R. Harrington, Chief Financial Officer
This document is intended solely for the use of the party to whom FBR has
provided it, and is not to be reprinted or redistributed without the permission
of FBR. All references to "FBR" refer to Friedman, Billings, Ramsey Group, Inc.,
and its predecessors and subsidiaries as appropriate. Investment banking, sales,
trading, and research services are provided by Friedman, Billings, Ramsey & Co.,
Inc. (FBRC), except for those online offering, mutual fund distribution and
discount brokerage services provided by FBR Investment Services, Inc. (FBRIS),
and those services in the U.K., Europe and elsewhere outside the United States
and Canada provided by Friedman, Billings, Ramsey International, Ltd. FBRC and
FBRIS are broker-dealers registered with the SEC and are members of the NASD.
Asset management services, including managed hedge funds, mutual funds, private
equity and venture capital funds, are provided by FBR subsidiaries Friedman,
Billings, Ramsey Investment Management, Inc. (FBRIM), FBR Fund Advisers, Inc.,
FBR Venture Capital Managers, Inc. and Money Management Advisers, Inc., which
are investment advisers registered with the SEC. Mezzanine financing is provided
by FBR Asset Investment Corporation (NYSE: FB), an affiliate of FBR that is
managed by FBRIM. Banking services, including mutual fund custody and
administration, are provided by FBR National Bank & Trust(1). This document is
intended for information purposes only, and shall not constitute a solicitation
or an offer to buy or sell, any security or services, or an endorsement of any
particular investment strategy.
For additional important information, please visit our website, www.fbr.com.
(1) Member FDIC and an equal housing lender. Products offered by other FBR
subsidiaries are not FDIC insured, not offered, guaranteed or endorsed by FBR
National Bank & Trust, and may lose value.
Introduction
o FBR is an institutional research capital markets company
o Listed on the New York Stock Exchange (NYSE: FBR)
o Market cap of approximately $500 million
o More than 440 full-time employees in 15 offices as of June 30, 2002
o Strong, highly-liquid balance sheet: Equity of almost $250 million;
$6 million long term debt
*Assumes repayment of stock loans and interest of approximately $23 million
Drivers of FBR's Business, Revenue
and Earnings Growth
o Industry Focus: 6 verticals
o Independent Research: High-quality, objective and timely research
o Institutional Sales & Trading: Increasing business with the largest
institutional investors in both the United States and Europe
o Investment Banking: Mid-market emphasis; top 10 investment banking
rankings for below $1 billion market caps*
o Asset Management: Growing assets under management, including FBR Asset
(NYSE: FB), 10 mutual funds, and alternative investments
o Private Client Group: Brokerage, investment management, and private
banking
o Expense Containment: Relentless attention to the expense:revenue
relationship
*Source: CommScan LLC, see p. 18
Second Quarter 2002 Financial Highlights
* Earnings of $17.8 million or $0.39 per share (basic)
* Revenues up 33% over second quarter 2001, $73.3 million
* Continuing expense containment
* Assets under management up 110% since the beginning of 2002
* ROE 34.5%; fully taxed equivalent 21% = the highest in the brokerage
universe
Revenue Growth
Sales & Trading
Principal Agency Total
1999 $24.3M $15.0M $39.3M
2000 $25.5M $21.1M $46.6M
2001 $24.3M $27.1M $51.4M
12 Mos. Ended 6/30/02 $28.0M $33.2M $61.2M
H1 2002 Annualized $29.6M $37.3M $66.9M
(Excludes trading gains and losses.)
Asset Management
Net Investment and Base
Incentive Income Management Fees Total
1999 $(3.7)M $ 9.4M $ 5.7M
2000 $12.5M $ 9.7M $22.2M
2001 $13.2M $19.7M $32.9M
12 Mos. Ended 6/30/02 $24.9M $25.3M $50.2M
H1 2002 Annualized $38.4M $27.3M $65.7M
(Excludes technology sector net investment and incentive gain or loss of $36.4M,
$41.6M, $(18.1)M and $(3.5)M or $(7.0)M annualized for 1999, 2000, 2001, and H1
2002 respectively.)
Investment Banking
Corporate Finance Underwriting Total
1999 $22.5M $22.7M $45.2M
2000 $31.4M $21.1M $52.5M
2001 $28.5M $47.9M $76.4M
12 Mos. Ended 6/30/02 $29.5M $68.4M $97.9M
H1 2002 Annualized $42.6M $75.1M $117.7M
(Excludes investment gains.)
FBR Group
1999 $103M
2000 $139M
2001 $179M
12 Mos. Ended 6/30/02 $224M
H1 2002 Annualized $262M
(Excludes Technology sector net investment and incentive gains and losses.)
10 Years of Building
On the foundation of a financial services research boutique to become a leading
capital markets firm.
1993 Investment Banking added
1994 Real Estate added
1996 Technology added
1997 FBR Asset created
1998 Energy added
2000 Refocus: Broaden Business / Focused Hiring
* $250M Equity Capital in FBR ($850M with FBR Asset)
* 3 Broad, Profitable Business Lines
* 6 Industry Verticals
* Rational Cost Structure
BUSINESS
Research
60 analysts
Over 400 companies under coverage
* Independence
* In-depth company analysis
* Theme-driven industry coverage
* Daily morning note
* Daily meetings with sales force
* Up-to-date economic and policy news
* Frequent management roadshows
* Annual investor conferences
Institutional Sales & Trading
50 Institutional Brokers
30 Traders & Sales
Traders
Market-maker in over 460 equity and debt securities
* Covering over 1,000 institutional accounts
* Hedge funds
* Money managers
* Mutual funds
* Pension funds
Investment Banking
75 Investment Bankers
6 Focused industry sectors
* Financial Services
* Real Estate
* Technology
* Energy
* Diversified Industries
* Healthcare
Middle-market emphasis
Top 10 lead-managing underwriter
Asset Management
Almost $6 billion under management
* FBR Asset Investment Corporation (NYSE: FB)
* Mutual funds
* Separate accounts
* Alternative investments
-Hedge funds
-Private equity
-Venture capital
Private Client Group
Investment services for high net worth individuals, foundations, and endowments
* Investment management
* Financial planning
* Trust & estate services
* Restricted (144) stock sales
* Credit lines
* Hedging and monetization
* Employee stock option management
* Cash management
* FBR National Bank & Trust(1)
All numbers approximate as of June 30, 2002 unless otherwise stated.
(1)Member FDIC and an equal housing lender. Products offered by other FBR
subsidiaries are not FDIC insured, not offered, guaranteed or endorsed by FBR
National Bank & Trust, and may lose value
RESEARCH
RESEARCH
Economic & Policy Research
Financial Services
- - Asset Managers
- - Broker/Dealers*
- - Community Banks
- - Government-Sponsored Enterprises (GSEs)
- - Insurance Brokerage
- - Money-Center Banks
- - Mortgage Companies
- - Property/Casualty Insurance
- - Regional Banks
- - Specialty Finance: Consumer Finance/ Commercial Finance
- - Thrifts
Real Estate
- - Diversified REITs
- - Hotel REITs
- - Industrial REITs
- - Mortgage REITs
- - Multifamily REITs
- - Office REITs
- - Triple-Net REITs
Technology
- - Communication Semiconductors and Intellectual Property
- - Display and Semiconductor Technologies
- - Enterprise Platform and Application Software
- - Enterprise Services
- - Media Infrastructure*
- - Network Software
- - Specialty Contracting
- - Telecom Equipment and Services
- - Wireless Services
Energy
- - Coal Mining Companies
- - Gas Gathering and Processing Pipeline
- - Integrated Oil* & Refineries
- - Oil & Gas Exploration & Production (E&P) Canadian & U.S.
- - Oil Services
Diversified Industries/High Yield
- - Consumer Products
- - Special Situations
- - High Yield
Healthcare
- - Biotechnology
- - Genomics and Proteomics
- - Large-Cap Pharma*
- - Specialty Pharmaceuticals
*In process
Research is provided by Friedman, Billings, Ramsey & Co., Inc.'s (FBRC) Research
Department, which is independent from the Investment Banking Department of FBRC
and has the sole authority to determine what companies receive research coverage
and the recommendations contained in the coverage. In the normal course of its
business, FBRC seeks to perform investment banking and other fee generating
services for companies that are the subject of FBRC research reports. Research
analysts are eligible to receive bonus compensation that is, in part, based on
overall investment banking revenues. Specific information is contained in each
research report concerning FBRC's relationship with the company that is the
subject of the report.
INSTITUTIONAL SALES & TRADING
SALES & TRADING
* FBR focuses on institutional sales and trading services to equity and
high-yield investors in the United States, Europe and elsewhere
- - Market maker in over 460 Nasdaq and other securities
- - 79 management teams on the road (excluding syndicate roadshows) year to
date through June 30, 2002 plus 8 conference calls and 4 investor days
- - Over 80 professionals
- - Current information from research analysts at two daily sales meetings and
throughout the day
TRADING VOLUMES
OTC Listed Total
2000 452,332 190,563 642,895
2001 548,571 351,038 899,559
1st H 2002 Annualized 725,016 532,020 1,257,036
Source: Autex; in thousands of shares
Not all trading volume is reported to Autex.
INVESTMENT BANKING
INVESTMENT BANKING
FBR provides comprehensive capital raising and financial advisory services to
our corporate clients.
Mezzanine Debt
& Equity through FBR Asset
Business Creation and Seed Investments
Venture Capital & Private Equity
Equity Private Placements;
144A Institutional Equity
High Yield Debt and Preferred Equity
Initial Public Offerings
Secondary & Follow-On Offerings; PIPES
Restructuring and Re-capitalizations
Restricted Stock and Block Trades
Mergers and Acquisitions, Fairness Opinions and other Advisory Services
INVESTMENT BANKING
Aftermarket Performance Across All Industries 18 months 1/1/01-6/30/02
Lead Manager* #of Deals % Change Offer to Current
1 Friedman Billings Ramsey 33 20.03
2 Raymond James 16 5.25
3 Wachovia Securities 17 3.19
4 A.G. Edwards & Sons, Inc. 17 -0.06
5 Salomon Smith Barney Inc. 112 -2.26
6 CIBC World Markets 22 -5.41
7 Deutsche Bank Securities 40 -5.83
8 SG Cowen Securities Corp. 14 -6.56
9 Bear, Stearns & Co. 38 -6.73
10 Credit Suisse First Boston 149 -7.40
11 U.S. Bancorp Piper Jaffray Inc. 25 -10.49
12 Goldman, Sachs & Co. 98 -10.97
13 J.P. Morgan Securities Inc. 66 -11.42
14 Merrill Lynch & Co. 134 -15.71
15 UBS Warburg LLC 91 -16.71
16 Morgan Stanley 71 -20.78
17 Lehman Brothers 72 -20.89
18 Robertson Stephens 19 -35.58
19 Banc of America Securities 42 -37.91
20 Thomas Weisel Partners L.L.C. 12 -57.08
Source: CommScan LLC Total: 899 Average: -11.08
*Of 10 or more transactions
Aftermarket performance results for each of the offerings vary considerably, and
may be significantly different from the average figure quoted.
Past performance is no guarantee of future results.
Investment Banking
18 Months 01/01/01 - 06/30/02
37 lead and sole managed capital raising transactions;
total almost 90 transactions
2001
* 51 transactions
* $2.7 billion in transaction value
* 29 capital raising transactions
1 lead-managed IPO
15 lead-managed secondaries
9 co-managed secondaries
4 sole-managed private placements / PIPEs
* 22 M&A and advisory assignments
8 M&A
14 Advisory
1H 2002
* More than 36 transactions
* $3.4 billion in transaction value
* 27 capital raising transactions
14 lead-managed secondaries
5 co-managed secondaries
3 sole-managed private placements
1 co-managed IPO
2 co-managed trust preferred offerings
2 co-managed debt offerings
* 9 M&A transactions, plus advisory assignments
Investment Banking First Half 2002 Rankings
Number of Deals and Dollar Amount Raised
Issuer Market Cap under $1B - All Industries
1st Half 2002 - IPOs and Secondaries
Lead Manager # of Deals Amt. Raised
UBS Warburg LLC 24 $2,298.87
Credit Suisse First Boston 23 3,023.80
Merrill Lynch & Co. 20 2,567.10
Bear, Stearns & Co. 17 2,295.68
Friedman Billings Ramsey 15 1,107.64
Lehman Brothers 14 1,670.47
Salomon Smith Barney Inc. 12 1,436.78
Morgan Stanley 12 1,311.97
Goldman, Sachs & Co. 11 1,536.35
Deutsche Bank Securities 11 1,166.70
Raymond James 10 477.48
J.P. Morgan Securities Inc. 9 794.20
Robertson Stephens 9 561.55
Bank of America Securities 8 752.84
CIBC World Markets 8 405.58
U.S. Bancorp Piper Jaffray Inc. 7 744.27
Thomas Weisel Partners L.L.C. 5 520.50
Robert W. Baird & Co. Incorporated 4 384.60
SG Cowen Securities Corporation 4 277.11
Legg Mason Wood Walker Incorporated 3 275.43
226 $23,608.92
Issuer Market Cap under $500M - All Industries
1st Half 2002 - IPOs and Secondaries
Lead Manager # of Deals Amt. Raised
Friedman Billings Ramsey 12 $ 725.20
UBS Warburg LLC 12 764.76
Credit Suisse First Boston 9 985.92
Bear, Stearns & Co. 9 887.94
Raymond James 8 289.41
CIBC World Markets 7 350.38
Merrill Lynch & Co. 6 581.44
Salomon Smith Barney Inc 6 476.18
J.P. Morgan Securities Inc. 6 445.27
Robertson Stephens 6 226.02
Banc of America Securities 5 340.53
Lehman Brothers 5 276.48
Wachovia Securities 5 262.37
A.G. Edwards & Sons, Inc. 5 248.95
SG Cowen Securities Corporation 4 277.11
U.S. Bancorp Piper Jaffray Inc. 4 271.20
Legg Mason Wood Walker Incorporated 3 275.43
Morgan Stanley 3 265.57
Jefferies & Company, Inc. 3 257.21
Thomas Weisel Partners L.L.C. 3 252.14
121 $8,459.51
Source: CommScan LLC.
$ millions. Excluding closed end funds.
ASSET MANAGEMENT
Asset Management
Almost $6 Billion Under Management
Alternative Asset Investments
Hedge Funds
- - FBR Ashton
- - FBR Weston
- - FBR Arbitrage
- - FBR Biotech
- - FBR Pegasus (fund of funds)
Venture Capital
- - FBR Technology Venture Partners I & II
- - FBR Co-Motion
- - ETP/FBR Genomic I & II*
- - FBR Infinity II*
Private Equity
- - FBR Private Equity Fund
- - FBR Future Financial Fund
- - FBR Financial Services Partners
FBR Asset and other managed accounts
FBR Asset Investment Corporation
- - NYSE: FB
- - REIT tax status
- - Mortgage backed securities
- - Mezzanine and senior loans
- - Equity securities
Private Client Group
- - Asset allocation and other managed accounts
- - Investment management
- - Wealth planning
- - Access to FBR proprietary products
Mutual Funds
Equity funds, Morningstar Rated (TM), 5 & 4 Stars over the 5 years ended
06/30/02**:
- - FBR Small Cap Financial Fund X X X X X
- - FBR Financial Services Fund X X X X
- - FBR Small Cap Value Fund* X X X X X
- - FBR American Gas Index Fund X X X X X
Our newest fund (02/02):
- - FBR Technology Fund
Fixed income and money market funds:
- - FBR Fund for Government Investors ***
- - FBR Tax-Free Money Market Portfolio ***
- - FBR Maryland Tax-Free Portfolio ****
- - FBR Virginia Tax-Free Portfolio ****
- - FBR U.S. Government Bond Fund
Stated asset amount represents total gross assets under management.
*Funds offered through FBR, managed by third-party managers
**Past performance is no guarantee of future results. For each fund with at
least a three-year history, Morningstar calculates a Morningstar Rating(TM)
based on a Morningstar Risk-Adjusted Return measure that accounts for
variation in a fund's monthly performance (including the effects of sales
charges, loads and redemption fees), placing more emphasis on downward
variations and rewarding consistent performance. The top 10% of funds in
each category receive 5 stars, the next 22.5% receive 4 stars, the next 35%
receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive
1 star. (Each share class is counted as a fraction of one fund within this
scale and rated seperately, which may cause slight variations in the
distribution percentages.) The Overall Morningstar Rating for a fund is
derived from a weighted average of the performance figures associated with
its 3-,5-and 10-year (if applicable) Morningstar Rating metrics. The FBR
Small Cap Financial Fund received 5 stars for the 3-and 5-years and was
rated among 71 and 33 U.S. domiciled specialty financial funds. The FBR
Financial Services received 4 stars for the 3- and 5-year period and was
rated among 71 and 33 U.S. domiciled specialty financial funds. The FBR
Small Cap Value Fund received 4 and 5 stars for the 3- and 5-year periods
and was rated among 392 and 258 U.S. domiciled small growth funds. The FBR
American Gas Index Fund received 5 stars for the 3-, 5-, and 10-year
periods and was rated among 81, 69 and 21 U.S. domiciled specialty utility
funds respectively. 2002 Morningstar, Inc. All Rights Reserved. The
information contained herein: (1) is proprietary to Morningstar and/or its
content providers; (2) may not be copied or distributed; and (3) is not
warranted to be accurate, complete or timely. Neither Morningstar nor its
content providers are responsible for any damages or losses arising from
any use of this information. ***An investment in the money market fund is
not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the money market fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the fund." ****Some income earned in the
tax-free portfolios may be subject to the Federal Alternative Minimum Tax.
Income earned by non-Maryland or non-Virginian residents will be subject to
applicable state and local taxes.
For more complete information about FBR mutual funds, including fees and
expenses, call 888.888.0025 for a free prospectus. Investing in the Funds
involves certain risks which are fully discussed in the Fund's prospectus.
Please read the prospectus carefully before you invest or send money.
FBR mutual funds are distributed by FBR Investment Services, Inc., member
NASD/SIPC.
Assets Under Management
Net Total
12/31/1999 $694M $990M
12/31/2000 $721M $1,004M
12/31/2001* $1,518M $2,757M
03/31/2002 $1,868M $4,344M
06/30/2002 $2,333M $5,784M
*Includes technology sector assets of $71.0M ($64.9M net).
Net assets under management#
# Net assets under management represents total gross assets under
management, net of any repo debt, margin loans, securities sold but not yet
purchased, lines of credit, and any other liabilities.
AUM Growth
12/31/2001 - 06/30/2002 = 110%
Private Client Group
Private Client Group
Brokerage
- - FBR proprietary research
- - Portfolio management
- - Access to FBR IPOs and other new issues
- - Block trades
- - Private placements
- - Direct trading with FBR's institutional trading desk
Investment Management
- - Financial Planning
- - Asset allocation
- - Manager selection & monitoring
- - Tax-efficient investment policy design
- - Portfolio risk management
- - Trust & estate services
- - FBR proprietary products
Corporate Executive Services
- - Restricted stock sales / 144 sales
- - Hedging & monetization
- - Stock option execution & management
- - Secured lending
- - Fixed income strategies
Banking Services*
- - Private banking
- - Lines of credit
- - Mortgage loans
- - Trust and custody services
- - Cash management
- - Mutual fund accounting and shareholder services
- - Transfer agent services
*Provided by FBR National Bank & Trust. Member FDIC and an equal housing lender.
Products offered by other FBR subsidiaries are not FDIC insured, not offered,
guaranteed or endorsed by FBR National Bank & Trust, and may lose value
Friedman Billings Ramsey Group, Inc.
Metropolitan Washington, D.C.
Headquarters
1001 Nineteenth Street North
Arlington, Virginia 22209
Tel: 703.312.9500
Fax: 703.312.9501
www.fbr.com
Atlanta
3475 Lennox Road, Suite 400
Atlanta, Georgia 30326
866.249.4640
Bethesda
4922 Fairmont Avenue
Bethesda, Maryland 20814
301.657.1500
Boston
101 Federal Street, Suite 2100
Boston, Massachusetts 02110
617.757.2900
Charlotte
100 N. Tryon Street, 51st Floor
Charlotte, North Carolina 28202
704.348.2631
Chicago
311 South Wacker Drive, Suite 4550
Chicago, IL 60606
312.697.4750
Cleveland
3201 Enterprise Parkway, Suite 320
Cleveland, Ohio 44122
216.593.7000
Dallas
200 Crescent Court, Suite 520
Dallas, Texas 75201
214.661.7450
Denver
1200 17th Street , Suite 950
Denver, Colorado 80202
720.946.6108
Irvine (Los Angeles)
18101 Von Karman Avenue, Suite 1000
Irvine, California 92612
949.477.3100
New York
330 Madison Avenue, Suite 900
New York, New York 10017
646.495.5239
Portland
208 SW First Avenue, Suite 300
Portland, Oregon 97204
503. 221.0200
San Francisco
505 Montgomery Street, Suite 1010
San Francisco, Ca. 94111
866.249.4642
Seattle
1111 Third Avenue, Suite 2400
Seattle, Washington 98104
206. 382.9191
Vienna, Austria
Millenium Tower - 23rd floor
Handelskai 94-96
A-1201 Vienna
43.1.240.27250
London, UK
9-11 Grosvenor Gardens
London SW1W OBD
44.207.663.9100
Note: Not all services are available from all offices.