AllianceBernstein Holding LP (AB) 2004 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the Alliance Capital Fourth Quarter 2004 Earnings Review. At this time, all participants are in a listen-only mode. Later, we will conduct the question and answer session, giving instructions at that time. If you should require assistance during the call please press star, then zero. And as a reminder, today’s conference is being recorded.

I would now like to turn the conference over to our host, Director of Investor Relations Valerie Haertel. Please go ahead.

Thank you, Gwen. Good morning, everyone. And welcome to our Fourth Quarter Earnings Review.

As a reminder, this conference call is being webcast and is supported by a slide presentation that can be found on our web site at alliancecapital.com. Presenting our quarterly results today is Alliance Capital’s President and Chief Operating Officer, Gerry Lieberman. Lou Sanders, our Chairman and Chief Executive Officer, and Bob Joseph, our CFO, will be available to answer questions at the end of our formal remarks.

I would like to take this opportunity to note that some of the information we present today may be forward-looking in nature, and as such is subject to certain SEC rules and regulations regarding disclosure. Our disclosure regarding forward-looking statements can be found on page 2 of our slide presentation and in the risk factor section of our 2004 Form 10-K. In light of the SEC’s Regulation FD Management will be limited in responding to inquiries from investors and analysts in a nonpublic forum. Therefore, we encourage you to ask all questions of a material nature on this call.

At this time, I would like to turn the call over to Gerry Lieberman.

Thank you, Valerie. And good morning to everyone on the call.

As is our custom we will begin with a brief overview of the capital markets which is so essential to how we do financially. A very brief overview of how we perform for our clients, which ultimately is the most important leading indicator for future net cash flows. And finally, an overview of our financial performance which, of course, is of interest to our unit holders. I will close my remarks with a review of our asset flows and the key trends in our distribution channels, and then we’ll open up the call for questions of either Lew or me.

So, let’s begin with the market performance. The year started slowly in the equity markets, but as you can see in Display 2, a fourth quarter equity market tailwind provided extraordinary returns to both the U.S. and MSCI industries. Virtually all of the equity gains occurred during the fourth quarter of this year.

Accordingly, we experienced an S&P Index increase of 9.2 percent in the quarter and 10.9 percent for the year, while the MSCI EFA Index gained 15.3 percent in the quarter and 20.2 percent for the year. This marks the third year in a row that non-U.S. AUM returns outpaced U.S. equities contributing to our growth in non-U.S. AUM.

Both growth and value indices performed well in the fourth quarter, but once again, value equities outperformed growth as measured by the respective Russell 1000 indices for an unprecedented five years in a row.

However, growth equities rebounded handsomely in the fourth quarter, delivering positive returns for only two or the second, actually, of the last five years. As you can see in the Display, fourth quarter market strength reversed a nine-month negative return for the Russell Growth Index, bringing the return for the year up to a positive 6.3 percent.

Bonds delivered positive returns all year with a fourth quarter return of about 1 percent as measured by the Lehman Aggregate Bond Index, ending the year at 4.3 percent expected for this asset class.

So, how did we perform for our clients? If you turn to Display three, and reference to performance tables, you will note that our overall performance this year for our clients was quite good, and performance on our U.S. world equity services and our non-U.S. value services were particularly strong. Our institutional growth services, large cap growth, dynamic growth, which was formerly referred to as multi-cap, mid-cap growth, small cap growth, international cap growth, and our emerging market equity service all outperformed their respective benchmarks for the year.

Also for the past year currency and international value, global value in emerging market services all beat their respective benchmarks by 500 basis points or more. And in the case of our emerging markets’ value we outperformed by over 1,400 basis points before fees. Importantly, since this outstanding performance just adds the three and five-year great numbers the net asset inflows into our non-U.S. value investment services have been particularly strong, totaling $17b in funding for the year.

Worthy of mention, too, before I turn our discussion to our financial performance, are the continued stellar returns posted by our Regent large cap services, where we outperformed the benchmark by nearly 900 basis points for the year. And Regent flows, like our non-U.S. value flows, have certainly married our performance, but here in our retail distribution channel, as we’ll discuss later.

As I close my remarks on retail returns I do want to note that our multi-cap and small cap growth returns for the year were also strong, indeed.

Now, that I’ve provided some highlights on performance, I’d like to turn to our Firm’s financial results. As reported in our press release earlier this morning, the fully diluted Alliance Holding earnings per unit were 82 cents for the quarter, 12 cents higher than the current analysts’ consensus, a result of significantly higher than expected performance fees. This is 69 cents higher than the 13 cents per unit we earned last year when our earnings were reduced by 54 cents per unit for our settlement of mutual fund matters and [legal fees] [ph].

As shown on Display four, YOY average fourth quarter AUM increased 11.3 percent or $51b to $509b, due to capital market appreciation and net asset inflows.

Revenues for the quarter increased by 7.4 percent to $826m primarily as a result of an 8.3 percent or $43m increase in advisory fees, including significant performance [fees] [ph].

As you can see in Display five, the base component of advisory fees was up 6.1 percent as a result of higher AUM, offsetting mutual fund fee reductions. Performance fees were $78m as compared to $57m in the fourth quarter of 2003. That’s an increase of more than 36 percent or $21m, the result of strong market performance and the investment returns we delivered to our clients. Primarily, those invested in global equity value hedge funds.

This quarter, transaction charges increased 10.7 percent, the results of lower institutional investor management and private client trading volume. As I mentioned in last quarter’s call, we are eliminating transaction charges for most of our high net worth private clients. A change we started phasing in effective January 1, 2005. The impact of this change will be largely offset by increased asset base fees. This change in our fee structure will increase transparency and predictability for both clients and the Firm.

Moving ahead to Display six, you can see the distribution revenues decreased 3.8 percent to $110m.

On Display seven, we show net distribution activity details. These are related to our mutual funds business, and you will see that distribution revenues were a significantly offset by distribution plan payments. Including the amortization of deferred sales commissions net distribution expense declined by nearly 28 percent to $22m.

As we have discussed in previous quarters, the decrease in amortization resulting from lower B share sales will continue and will favorably impact distribution expenses throughout 2005, as capitalized distribution of costs from higher B share sales in prior years are not being fully replaced with new sales.

Now, let’s turn to Display eight, where you’ll see that institutional research revenues increased nearly 15 percent as we go to higher market transaction volume and higher market share, which was primarily offset by a decline in the average cents per share transaction charge. The latter are a continuing trend in this increasingly competitive market.

You can see the other revenues increased 14.3 percent, an increase that we analyzed on Display nine. Primarily due to higher investment gains related to deferred compensation plans and investment income, partially offset by the impact of adoption of FIN 46 in April of ’04. As you know, FIN 46 has no impact on net income but its adoption has created YOY variances in several revenue and expense line-by-line comparisons.

As previously discussed, under FIN 46 Alliance was required to consolidate its Albion Alliance JV, and that JV sponsored [these] [ph] funds. We sold our Alliance, our interest in Albion Alliance effective 12/31/04, and although its results of operations are included for the last time in our consolidated P&L for the quarter, its assets and liabilities are not included in our balance sheet at yearend. Going forward in 2005 we will not have a FIN 46 consolidation issue, so we’ll just have to point out these meaningless variations for just one more year.

Now that I’ve covered revenues in detail, I’d like to talk about expenses which begin on Display 10. While total revenues were up 7.4 percent, operating expenses excluding the charge for mutual fund [adds] [ph] and legal proceedings rose only 2.4 percent. G&A expenses were up $14m or 15.5 percent but this increase includes a few significant items in the quarter that I’ll discuss later.

As you can see on Display 11, compensation expenses rose by 6.6 percent to $288m. The increase of 6.7 percent on base compensation reflects April ’04 merit increases, a very modest 1 percent increase in headcount, and some mix shift as we invested higher paid positions while we eliminated lower paid positions.

While on the top of the compensation we think it’s important to note that we continued to align our compensation practices with the Firm’s success, that is the success of our clients. The Firm has adopted the practice of awarding a significant portion of annual incentive compensation on a deferred basis, especially for the senior managers of the Firm. And we require that the recipients use our investment services for at least 50 percent of their deferred compensation awards, thereby aligning their returns on deferred compensation with the investment returns of our clients.

Moving down the Display, commission expense at this quarter of 17 percent as we continued to experience higher business volume in the institutional research service business and the private channel, private client channel, and to a lesser extent in the institutional investment management channel.

On Display 12, you can see the promotion and servicing cost of client at 9.2 percent. This was primarily the result of lower distribution expenses from the continuing decline on deferred sales commission amortization that I discussed earlier.

Now, we can turn to G&A expenses, shown on Display 13. G&A increased 15.5 percent to $105m in the fourth quarter. The quarter included $5m in charges for the elimination of various underutilized facility space, and $7m in charges for writing off obsolete software.

As previously noted, we expect significant facility savings this year due to our space consolidation. Although they’ll be partially offset by higher depreciation and amortization resulting from the buildout of our new space at our New York City Headquarters during 2004 and the first half of 2005, as well as our new private client offices that we opened during the course of 2004.

Professional fees declined 20.4 percent, primarily as a result of lower legal expenses, a function of its insurance reimbursements, offset by continued high legal and stocks related audit and consulting fees.

As we have noted previously, insurance recoveries are unpredictable. Therefore, we expect to continue to see some volatility in legal costs, costs which could, indeed, increase in 2005. However, we do expect stocks expenses to drop substantially in the coming year.

If we turn to Display 14, we can review Alliance Holdings results. Here you can see the Alliance Holding net income is $66m for the fourth quarter versus $10m in the same quarter last year. Our distributions per unit for Alliance Holding will be 82 percent, 82 cents compared to no distribution last year, resulting from the settlement of mutual fund matters and legal proceedings last year. Boy, what a difference a year makes.

Now, I’d like to review our assets under management, starting with the pie charts on Display 15. In the fourth quarter and throughout the year we continue to see significant growth in our non-U.S. investment services and non-U.S. funds, a trend we have been discussing for some time. By service our non-U.S. AUM is up 42 percent to $186b. And by client domicile our non-U.S. AUM is up 27 percent to $137b YOY. Clearly, our Firm is a truly global franchise. Few managers can match the depth and the breadth of our capabilities in research, money management, and client service around the globe, and our growth around the world proves this point.

This quarter we funded $6b in new institutional managed non-U.S. clients, and more impressively, we funded a total of $21b in 2004. In terms of services, $6b was in growth equities, $13b was in value equities, and $2b was in fixed income. This AUM includes fixed income assets from AXA Affiliates, which I’ll elaborate on a little later.

Turning to Display 16, you can see just how balanced our product mix is, both value in equities and fixed income, now comprise $193b of our AUM, and growth equities services comprises $123b. Which you will also see is in our blend services comprised $52b of our AUM, with $27m in value equities, and $25b in growth equities.

If you will recall, we broke out our blend assets for the first time last quarter. Blend services are still a relatively new offering for us. But the client interest in this area continues to grow. The blend services combines traditional Alliance capabilities in the growth arena with traditional [inaudible] skills in that investment. This combination is beneficial because both investment teams at alpha and their respective [inaudible], and the two teams’ alphas are negatively correlated.

Therefore, blend portfolios, which we systematically rebalance between the two styles offer clients a potential for more consistent returns. To date, institutional clients, particularly global clients, as well as the consultants who recommend our services, have been very enthusiastic. While blend services are fairly new we think they are well suited to meet the needs of any client, which in turn should allow us to maintain a leadership position in this space and further grow our assets under management.

There are some detailed changes in our AUM, on Display 17, you can see the activity and assets under management for the three months ended December 31st, 2004. Market appreciation was the primary driver of the increase in assets, accounting for more than $41b. As I will discuss later, we did have net asset flows from our clients across all three channels, totaling $9b. The largest increase in net flows was in our fixed income services. The result of nearly $7b in net fixed income flows from AXA affiliates. Additionally, net value closure, almost $5b as our global value services continued to have terrific performance numbers and garner significant assets.

Offsetting the inflows into fixed income and value equity services were continued outflows from U.S. growth equity services, a trend that we see abating ever so slightly along with some recent performance improvement. Although we’re not ready to call this an inflection point to positive flows just yet, we are encouraged with the recent absolute and relative performance numbers in our growth services mentioned earlier.

Our flows for the 12 months ended December 31st, 2004 by service are shown on Display 18. For the year, market appreciation increased our AUM by more than $55b. However, net asset flows accounted for $8b. And as you can see, value equity and fixed income services experienced significant net inflows, while growth equity services experienced nearly $15b in net outflows.

Lastly, on the topic of assets under management, I’d like to remind you in our January 11th press release announcing our preliminary AUM, we reported that our AUM has been reclassified by investment orientation and distribution channel, including the fixed income components of balanced accounts previously reported in equity. As a result, the net affect was approximately $11b of AUM were reclassified from equity, $6b from growth, and $5b from value equity, to fixed income.

We also noted that certain fixed income assets managed for insurance clients are now reported at market rather than cost, consistent with the AUM of all of our other clients. This change increased previously reported AUM by approximately $2.5b at each periods of yearend.

Moving to our discussion of channel business unit highlights, let’s turn to Display 19. At December 31st, 2004 institutional assets accounted for 57.8 percent of our AUM, or $311m. Net long-term flows for both the three months and 12 months ended December were $8b, including approximately $9m in [inaudible] fixed income flows that we received in December, which were partially offset by approximately $2b in AXA outflows in October due to a change in portfolio strategy.

As we noted in our December AUM release, we expect fee adjustments in some existing managed from other asset affiliates to offset the increase in asset management fees attributed to the MONY assets. When you think about our relationship with AXA it’s important to keep in mind that although we are related we do compete for the business, just as we do with other clients. In addition to fixed income, continuous strong inflows into global and blend services offset the continued attrition in U.S. growth equity services.

Now, let’s turn to our Display 20 for discussion of our retail channel. 2004 was a year of rebuilding with a strong new leadership team, a deep bench in place, and an improved corporate governance structure and new, more competitive pricing, we feel confident we’ve built a solid foundation for future growth.

So, although we saw $6b of AUM outflows for the year, $4b in long-term assets, and $2b in cash management services, our fourth quarter had no net attrition. Leading the improvement was our Regent managed product offering, and we continue to see net asset inflows occurring at a substantially improved annual rate. In fact, the growth of this service has been nothing short of outstanding. If you will recall from a few years ago, we completely rebuilt and reestablished this business after leadership defections and substantial asset losses. We have been extremely pleased with the investment performance of Regent and with the growth in assets.

Also, worthy of mention is the fact that our wealth strategies portfolios launched over a year ago, that is in September of ’03, are continuing to grow, with gross sales over $1b. Following on the success we’ve experienced in the U.S. we’ve launched a non-U.S. wealth strategy series in the fourth quarter of 2004. Equally important, was the return to net positive sales of our Luxembourg marketed funds in the fourth quarter.

Finally, in regards to our retail channel, at the end of October we announced the sale of our $29m cash management services franchise to Federated Investors in order to allow us to focus on our core competencies, leadership and research innovation, and the management of value, growth, in fixed income assets. As previously announced, the completion of this transaction is expected to occur during the first half of the year. The sale should result in a capital gain of approximately 3 to 6 cents for our Alliance Holding unit by the final closing of the transaction, and the ongoing net affect on earnings is expected to be small.

Turning to our Display 21, for private client channel highlights. You can see that a high net worth business now has $64b in assets under management. In the fourth quarter we experienced just over $450m in net inflows and more than $4.6b for the full year, as we have detailed on Displays 41 and 42 in the appendix.

We continue to invest in this franchise, with our private client office expansion to new cities. By the end of 2004 we increased the number of financial advisors by 17 percent, to 193 versus 2003. We opened the Philadelphia Office in December, and offices in Boston and Tampa earlier in the year. We continue to see potential in expanding our presence to include other densely populated markets with the right demographics for our services.

Now, let’s turn to Display 22 to discuss our institutional research and trading services, where we experienced double-digit revenue growth. As I mentioned earlier, revenues were up approximately 15 percent, to $79m for the fourth quarter. This was due to our increased market share and higher market volumes, which more than offset the impact of pricing pressures we have experienced this year. An industry trend that continues. To offset pricing pressures we’ve taken steps to expand our trading capabilities and broaden our research offerings to clients to continue to differentiate our services and increase market share.

We’ve been particularly pleased with the growth out of our London Operations that we opened in 2002, as well as the expansion of our U.S. trading capabilities, which have enabled us to capture more share. Most importantly, we are pleased with the continued high quality of the research we’ve produced, and the recognition we’ve achieved from several leading research polls. We have added it all up, this channel achieved record revenues for the year.

As we have said many times, innovative, high quality research is a core competence we continue to build and improve upon to ensure we deliver superior returns to our clients over the long-term.

Now, that concludes my formal remarks. As I mentioned earlier, Lou Sanders, our Chairman and CEO, is on the call. So, we’re both available to answer your questions. I also would like to mention that Lew is joining us from across the globe. He’s actually sitting in Singapore.

So, why don’t we just turn it over to, the chair over the analysts, and see what you have to say.

Gwen, would you please open it up?

[Caller instructions.]

And one moment, please, for our first question. And we have a question from Mark Thompson, Lehman Brothers. Please go ahead.

Hi, good morning, everyone.

Good morning, Mark.

Just a couple of questions, quick ones, actually. The MONY affiliate inflows, is that done or is there still a continuing review where you may get more assets from that?

No, that’s finished.

Okay. The transaction fee reduction that you talked about last quarter, I thought I heard you say in your remarks that it’s now first quarter, and I was a little surprised how high those fees were and that the offset in the management fees wasn’t very – did get that deferred?

Oh, no. Let’s start, again. We announced last quarter that we would change in the transaction fees for our private client, but we’re phasing – the plan all along was to make them effective January 1. And we’re actually going in in phases over six months, just so that…

Okay.

So we can handle it properly. So, we didn’t announce we were doing it. The letters started going out to the clients, but they continued. So, we couldn’t do 20,000 clients at one time.

Okay.

So, the volatility you see here literally is lower trading and, you know, for…

Yeah, I just expected it to take faster effect, you had some back in the fourth quarter, that’s all.

No, we didn’t. No, no. No, we really – it was supposed to be effective in January 1.

And, but my recollection is correct that there’s a partial offset on the advisory fees, is that right?

A significant offset.

Right, nearly the same, but not quite the same.

Exactly.

Yeah, okay.

Yeah, right.

And last question, I think you also mentioned on the institutional research side that you saw, I think you used the word ‘continuing’ pressure really on the commission side? Is it of lesser magnitude? I mean we’re kind of seeing anecdotally a little less of it, a lot of sensitivity, obviously, still to it. But, you know, quantitatively on the net commissions, less pressure elsewhere. Are you seeing something different than that? Or?

You know, it depends on the segment of the marketplace. We have some clients where there’s no sensitivity. We’re seeing it mostly from the larger firms, Mark.

Okay.

All right. And so that is almost episodic.

Okay. That was it. Thanks.

Terrific, Mark.

And we have a question from [Bill Katz] [ph], Buckingham Research. Please go ahead.

Thank you. Good morning, and I guess good evening to you guys. A couple of questions. Number one, I was sort of wondering if you could go back to the high net worth side, and just sort of walk through how quickly do your salespeople sort of rampup to sort of peak productivity gains? I guess with such a large jump in the headcount I would suspect that you have some ample productivity gains over the next couple of years, so I wonder if you could help me sort of figure out how to model that?

Yeah. What typically happens and it’s the aging of the financial advisors, as they get more experienced, and better networked, and you know, a lot of our growth in this channel is through referrals. So, the first couple of years we actually lose money on a financial advisor. But around the third year they’re breaking even. And then, they’re really adding value. That’s, you know, a typical life cycle of the financial adviser.

Does that help?

Somewhat. Second question I have, I was just sort of curious, maybe bigger picture. Now that it seems like you’re getting closer to return in the growth equity, and I was just sort of thumbing through your supplement pages and it certainly seems like they had very good performance in the fourth quarter. And it looks like on a one-year and a five-year base, you know, a little bit more mix on the three-year.

Right.

Where are you in terms of from sort of the institutional consultant community and maybe on the retail side, away from region, in terms of sort of acceptance? I remember Lew had said in the past that you sort of have good corporate relations at sort of the macro level with a lot of the companies, but when you sort of boil down to the FA’s you still haven’t determined when these guys back one at a time. Are you starting to now win that fight a little bit? Or where do you stand there?

No, it’s early. There’s a bit of a lag, there’s a bit of a lag. So, the conversation is going, it’s early for us to start landing significant mandates from clients in the space. But our conversation, as Lew has mentioned in the past, I mean we feel that, you know, there is going to be a turn, and we are going to see a shift, one, from value services, the typical style shift to growth. And so, our private clients, you know, we continue to work those portfolios on a balance situation, and we think that’s what the corporate should do. And we think that now we’ll start earning our way back into that space. There’s a lag, Bill, there’s no question.

Okay. thank you. Just a point of clarification. I’ll go over these very quickly. What kind of flows do you have in the fourth quarter from outside the States? Was that 6b this quarter?

Hold on, we’ll check that number, and why don’t we go to the next call?

Sure.

We’ll research it.

Thank you.

Terrific.

And we have a question from Ken Worthington, CIBC World Markets. Please go ahead.

Good morning. I think this is kind of a follow-up on Bill’s question. Are you seeing a change in RFPs for the growth product, given kind of the better absolute and relative performance there? And maybe you can give us kind of your outlook for institutional sales going into ’05?

Again, I’ll reemphasize what I mentioned to Bill. Not yet, there is a lag between the performance, and we’ll actually start winning the mandates. I think what we’re hoping for here is that, you know, the outsource are going to slowdown. We haven’t seen that quite yet, but just a couple of signs of that.

So, if we can just stop the outflows, Bill and Ken, this would be a significant thing for us on the growth side. And then, you know, we have to earn our way back as far as performance on growth. We’ve taken some terrific steps, we think, to help us in this space. But it’s going to take a little bit of time. So, that was the first part.

And I’m sorry, the second part of your question, Ken, was?

Just the outlook for the institutional channel for sales in ’05?

We’re – we feel very good about how we’ve positioned the Firm, and we’re positive for ’05.

Okay. The second question, can – just inform me how quickly pension assets decline when a pension plan is closed down? And, you know, how meaningful is your exposure to the airline industry?

The airline industry?

Yes.

It’s not meaningful.

Yeah.

Okay, not meaningful. And then, the first part of the question, when pension plans are closed how quickly do the assets kind of roll off?

Well, I mean sometimes it ends up where they just take some of the assets, and sometimes it’s, you know, it’s all the assets. It’s typically within the same quarter, you know, when they tell you. There’s not a huge lead-time here, but you know, a client can rebalance, they can cut down in growth and give you blend, or – I mean you don’t even have to lose the relationship. So, there is no – I don’t think you can say there’s one way this happens.

Okay. Thank you.

I’m sorry – Lew, you were going to say something?

I was just going to say, this issue is simply not material to our flows.

Yeah.

Okay, great. That’s very helpful. Thank you.

Okay.

And we have a question from [Cynthia Myer] [ph], Merrill Lynch. Please go ahead.

Hi, good morning. Just a couple of quick questions. It looked like the amortization of deferred sales commissions dropped at a faster rate than usual. And I’m just wondering, actually it’s been I guess two quarters accelerating. Is the most recent rate something we can project forward?

Yeah, it’s been a pretty consistent drop, and you can expect that to go forward, Cynthia.

Okay.

Okay. You know, throughout ’05.

Okay. And the press release mentioned increased attrition in private client?

Yeah, we had a few clients leave in the private client space. As it turns out, they were actually not individuals, they’re – most of them were clients that were serviced by our private client financial advisers. They’re small corporates, and it was mostly fixed income assets. But we did see that, and it gave us a spike for attrition for the quarter. We don’t see those being a trend.

Was there any special reason for that?

No, no.

Cynthia, a very big chunk of it actually was in the short duration, extremely short duration in the municipal area. Almost it was liquidity oriented investment. And it isn’t something you should extrapolate. Think of it more as a onetime deal.

Okay. And just wondering if you could let us know what your hedge fund AUM is at this point?

Bob, is that a public number? The hedge fund? We don’t disclose that, Cynthia. I’m not sure…

I think actually we provided an estimate in a presentation that we made.

Yeah, in the Fall. Is it about the same?

Well, you can assume that since investment returns will [inaudible] during the fourth quarter, that the figure is higher still at the moment.

Okay. Any thoughts on expanding that, or is that something you want to keep where it is?

Our objectives in that space are to, as we’ve strived to stress repeatedly, amplify our [generating] [ph] skills where appropriate. And the success of those services in terms of actually delivering on their mandates suggests that they will continue to grow. But the growth is a function of their success for clients, as opposed to definitive efforts on our part to expand our exposure to that kind of service.

Great. Thanks a lot.

Before we take the next question, I want to get back to Bill’s question on the institutional mandates. Bill, the number was 6b in new institution mandates from non-U.S. clients for the quarter, and 21b for the year.

Okay. Next question.

I have a question from Jeff Hopson, AG Edwards. Please go ahead.

Hi, good morning. Two questions. Could you give us the numbers specifically on Regent in terms of both flows, and then assets? And then, in terms of the new wealth management products that you’ll introduce in non-U.S. markets, how extensive will be the rollout of that? How many markets, et cetera?

Again, we’ll do with Regent – we’ll look those numbers up. We have them right here, Jeff, as far as the Regent flows. And I’ll give them in just a second.

Okay.

And, I’m sorry, what was the second part of the question?

On the wealth management products, on the retail side, you’ll introduce in non-U.S. markets, how many markets, how extensive a rollout will this be?

It’s being introduced in our Luxembourg funds, and so it’ll go to all the markets that we distribute those funds, both in Europe and in Asia, and it’ll be a gradual rollout. And there’ll be a lot of explanation here. You know, we take – I mean we think this is the right way for investors to, you know, to invest. But these markets aren’t as sophisticated as they are in the States, so it’s going to be a longer sales in these markets. As you may know, in Europe it’s not, you know, except for perhaps the U.K., they’re not quite as into equities as much as we are in the States. And then, you go to Asia it’s even less so. So this is going to take time, but we know it’s the right way to go, both for the clients and for the Firm.

Okay.

So, I wouldn’t expect huge flows in these services, you know, in the coming year.

Okay.

And we have a question from Robert Lee, KBW. Please go ahead.

Thank you. Good morning.

Good morning, Rob.

A couple of quick questions for you. I noticed in the press release you mentioned about having a favorable ruling in the lawsuit from the State of Florida.

Right.

And I understand it is unappealed, but if I recall correctly when you took all your charges a year or so ago you actually reserved I think for in excess of what at least the mutual fund fines had been, assuming there was something to for the State of Florida or other things. If you get to the point where you win the appeal, that goes away, should we assume that you can reserve some release and that would actually become part of a future distribution? That may be down the road, obviously.

Right. We did not reserve anything, any reserve for the SBA case. The reserves that we had were related to the market timing and mutual funds, and litigation issues. So, there’s no reserve for this. We can’t. It’s under GAAP. It’s inappropriate for us to setup a reserve for this.

Okay.

And as far as…

By the way, it is not yet on appeal.

Yeah, I was just going to say that. All right, so they can appeal, but they have yet to file an appeal on the summary judgment, on the partial summary judgment.

All right. Great. And a second question is on the balance sheet, you know, you have cash, 1.2b, other than the segregated cash.

Right.

If I x out the dividend what should I be thinking of as sort of the real holding company cash? Cash at the operating company that’s sort of available to pay-down debt, or what have you?

About half a billion dollars.

Okay.

And we’ll be looking into that this coming quarter.

Great. Thank you very much.

[Caller instructions.]

And we have a question from John Hall with Prudential. Please go ahead.

Thank you. I just have two quick numbers questions. You’ve got, if the performance fees, are they falling down to the bottom line at a greater rate than the standard investment advisory fees?

No, but they’re falling down at the same rate to the bottom line, all right, which wasn’t the case in the past, John.

Okay. And I was just wondering if you could just offer a little bit of clarification on the G&A expense going forward? It’s significantly lower, I wonder if you had an order of magnitude there?

We don’t give guidance. You know, we generally don’t give guidance on the G&A. One of the reasons that we don’t do that, John, is the legal expenses bounce around so much. I mean we’re, you know, incurring them, and we get insurance reimbursement. It’s just a bouncy number, so we don’t give guidance. I’m sorry.

Fair enough. Thank you.

And there are no further questions at this time. Please continue.

Do you have anything to add?

The only thing, we owe Jeff an answer on Regent, and we could say that the flows are for the quarter were about $700m, about $700m. And the AUM is over $10b.

Okay. Great.

And that’s in Regent, all of our reps product services.

I think that concludes the q-and-a session for this call. Please feel free to call the Investor Relations Department if you have any further questions. Thanks very much, and have a terrific day.

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