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| 8-K - FORM 8-K - WESTWOOD HOLDINGS GROUP INC | d499846d8k.htm |
 Westwood
Holdings Group, Inc. March 2013 Investor Presentation
Brian O. Casey
President & Chief Executive Officer
Mark A.
Wallace
Chief Financial Officer
Bill
Hardcastle
Vice President
Exhibit 99.1 |
 Forward
– Looking Statements
Statements
in
this
presentation
that
are
not
purely
historical
facts,
including
statements
about
our
expected
future
financial
position,
preliminary
estimates,
results
of
operations
or
cash
flows,
as
well
as
other
statements
including
words
such
as
“anticipate,”
“believe,”
“plan,”
“estimate,”
“expect,”
“intend,”
“should,”
“could,”
“goal,”
“target,”
“designed,”
“on
track,”
“comfortable
with,”
“optimistic”
and
other
similar
expressions,
constitute
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.
Actual
results
and
the
timing
of
some
events
could
differ
materially
from
those
projected
in
or
contemplated
by
the
forward-
looking
statements
due
to
a
number
of
factors,
including,
without
limitation,
those
set
forth
below:
•
our ability to identify and successfully market services that appeal to our customers;
•
the significant concentration of our revenues in four of our customers;
•
our relationships with investment consulting firms;
•
our relationships with current and potential customers;
•
our ability to retain qualified personnel;
•
our ability to successfully develop and market new asset classes;
•
our ability to maintain our fee structure in light of competitive fee pressures;
•
competition in the marketplace;
•
downturn in the financial markets;
•
the passage of legislation adversely affecting the financial services industries;
•
interest rates;
•
changes in our effective tax rate;
•
our ability to maintain an effective system of internal controls; and
•
the other risks detailed from time to time in our SEC reports.
Additional
factors
that
could
cause
our
actual
results
to
differ
materially
from
our
expectations
are
discussed
under
the
section
entitled
“Risk
Factors”
in
our
Form
10-K
for
the
year
ended
December
31,
2012,
which
together
with
our
other
filings
can
be
viewed
at
www.sec.gov.
You
should
not
unduly
rely
on
these
forward-looking
statements.
Except
as
required
by
law,
we
are
not
obligated
to
publicly
release
any
revisions
to
these
forward-looking
statements. |
 Agenda
I.
Firm Overview
II.
Growth Opportunities
III.
Financial Highlights
IV.
Equity Based Compensation
V.
Summary |
 Firm
Overview |
 Westwood at a
Glance •
Asset management firm focused on Value & Income, Global & Emerging Markets
strategies •
Serving institutional, private client and mutual fund investors since 1983
•
Publicly traded since 2002 (NYSE : WHG)
1
as of February 28, 2013
1
Firm Overview
Financial Profile
•
2012 Revenue: $77 million
•
Assets Under Management: $14.2 billion
•
Dividend yield @ $1.60 annual rate: 3.9%¹
•
Equity market cap: $336 million¹
•
Liquid balance sheet: $63.7 million of cash
and investments at year-end
•
No debt
•
Equity ownership
-
Employees & Directors: 30%
-
Institutional holdings: 59% |
 Organization
& Product Distribution •
Targeted consultant relationships
•
Subadvisory partners
•
Plan sponsor direct marketing
Institutional
Mutual Funds
Westwood Management
Westwood Holdings Group, Inc.
Private Wealth
Westwood International
Westwood Trust
Westwood Funds
•
Client referrals
•
Third party referral sources
•
Local community involvement
•
DC consultants
•
Private Wealth Advisors
•
Media
•
Separately managed
portfolios
•
Subadvisory
•
UCITS
•
Canadian pooled fund
•
Separately managed
portfolios
•
Subadvisory
•
Collective funds
•
Enhanced Balanced
TM
asset allocation model
•
Commingled funds
•
Separately managed
portfolios
•
Tax-managed accounts
•
Capped expense ratios
•
Institutional share class
-
Defined
contribution plans
-
Other institutions
•
A share class
-
Mutual fund
supermarkets
2
D i s t r I b u t I o n
C h a n n e l s |
 *The
institutional
track
record
started
January
1,
2002.
In
2001,
Westwood
transitioned
a
midcap
core
equity
strategy
to
the
institutional
SMidCap
strategy.
The
midcap
core
portfolio
was
exclusively
offered
to
private
clients
of
Westwood's
Trust
Company.
This
change
occurred
as
a
result
of
the
increased
demand
we
observed
by
institutional
investors.
January
1,
2002
reflects
the
inception
of
the
institutional
SMidCap
Equity
strategy.
The
true
inception
date
of
the
composite
is
7/1/97.
This
strategy
has
consistently
adhered
to
Westwood's
investment
process
and
philosophy.
Please
see
appendix
for
full
performance
disclosures.
The
disclosures
provided
are
considered
an
integral
part
of
this
presentation.
Domestic Equity Strategies
SmallCap
Value
1/1/04
SMidCap
Value *
1/1/02
(closed)
SMidCap Value
Plus+
7/1/10
LargeCap
Value
1/1/87
AllCap
Value
7/1/02
Dividend
Growth
11/1/93
Total Firm Assets Under Management as of 12/31/12: $14.2B
Specialized Strategies
Income Opportunity
1/1/03
LargeCap Value –
Socially
Responsible Investing
1/1/98
Master Limited Partnership
Infrastructure Renewal
1/1/03
Westwood Offerings
Product Mix Expanding with Non-U.S. & Specialized Offerings
Global/Emerging Markets Strategies
Global Equity
7/1/12
Global Dividend
7/1/12
Emerging Markets
7/1/12
Emerging Markets Plus
7/1/12
3 |
 *Due
to
capacity
constraints,
this
product
closed
to
new
investors
effective
October
1,
2009.
Performance
provided
reflects
the
institutional
track
record
which
started
January
1,
2002.
In
2001,
Westwood
transitioned
a
midcap
core
equity
strategy
to
the
institutional
SMidCap
strategy.
The
midcap
core
portfolio
was
exclusively
offered
to
private
clients
of
Westwood's
Trust
Company.
This
change
occurred
as
a
result
of
the
increased
demand
we
observed
by
institutional
investors.
January
1,
2002
reflects
the
inception
of
the
institutional
SMidCap
Equity
strategy.
The
true
inception
date
of
the
composite
is
7/1/97.
This
strategy
has
consistently
adhered
to
Westwood's
investment
process
and
philosophy.
Past
performance
is
not
a
guarantee
of
future
returns.
Please
see
appendix
for
full
performance
disclosures
(http://westwoodgroup.com/disclaimers.pdf).
The
disclosures
provided
are
considered
an
integral
part
of
this
presentation.
Benchmark
Data
Source:
©
2012
FactSet
Research
Systems,
Inc.
All
Rights
Reserved.
Investment Product Performance
Delivered Excess Returns with Lower than Benchmark Risk
Net of Fees
10.8%
12.8%
17.1%
8.9%
7.5%
9.2%
9.1%
4 |
 Portfolio
Attributes Westwood International’s AUM Surpassed $1B
Emerging
Markets
Emerging
Markets Plus
Global
Dividend
Global
Equity
Target number of holdings
70-90
50-70
65-90
65-85
Positions at initiation
1.2 -
1.5%
1.6 -
1.8%
1.0 -
1.2%
1.2 -
1.5%
Initial universe
27 countries
5,000+ securities
27 countries
5,000+ securities
45 countries
10,000+ securities
45 countries
10,000+ securities
Minimum Market capitalization (USD)
$500 million
$1.5 billion
$500 million
$1 billion
Liquidity (most recent 100 days -
USD)
$3.5 million daily
trading average
$7 million daily trading
average
$3.5 million daily
trading average
$7.5 million daily
trading average
Capacity (USD)
$4 billion
$4 billion
$7 billion
$10 billion
Prospective Client Reserved Capacity
$2.3 billion
$0.5 billion
$1 billion
$1 billion
Remaining Capacity
$1.2 billion
$3.4 billion
$5.9 billion
$8.8 billion
5 |
 Growth
Opportunities |
 Growth
Opportunities •
Significant capacity remains in seasoned products
-
Opportunity for substantial operating leverage
•
Subadvisory mandates
-
Access to broad distribution infrastructure &
global markets
-
Support partner distribution network vs. building
proprietary distribution network
•
Westwood Funds
-
Family of 10 mutual funds
-
Assets under management currently exceed
$1.8 billion
-
Launched Emerging Markets, Global Equity, and
Global Dividend in 4Q12
-
Strong organic growth
-
Asset acquisition opportunities
6
•
Private Wealth
•
Westwood International
-
Cultivate new products
-
Expand private wealth
platform
in new markets
-
Acquisition opportunities
in strategic markets
-
International Distribution
-
New Product Opportunities
-
Specialized Country Fund Structures |
 Growth
Opportunities Significant Product Capacity For Future Growth
Seasoned Products
(>3 year track record & >$100 Million in assets)
Assets Under
Management
As of 12/31/12
Estimated
Maximum
Capacity AUM
Asset Growth
Potential
Product
Inception
LargeCap Value
$5.2 billion
$25 billion
$19.8 billion
1987
SMidCap Plus+
$492 million
$8 billion
$7.5 billion
2010
SMidCap Value
$2.8 billion
$3 billion
Closed
1997
SmallCap Value
$217 million
$1.5 billion
$1.3 billion
2004
AllCap Value
$402 million
$10 billion
$9.6 billion
2002
Dividend Growth
$182 million
$20 billion
$19.8 billion
2001
Income Opportunity
$1.7 billion
$5 billion
$3.3 billion
2003
MLP
$236 million
$1.5 billion
$1.3 billion
2003
Total Seasoned
$11.2 billion
$74 billion
$62.6 billion
New & Unseasoned (R&D) & Legacy Products
Emerging Markets
$538 million
$4 billion
$3.5 billion
2012
Emerging Markets Plus
$104 million
$4 billion
$3.9 billion
2012
Global Equity
$226 million
$10 billion
$9.8 billion
2012
Global Dividend
$20 million
$7 billion
$6.9 billion
2012
Short Duration High Yield
$54 million
N/A
N/A
2011
Balanced / Fixed Income / REIT / Global Strategic Diversification
$614 million
N/A
N/A
Various
Note:
Table
reflects
Westwood
Management
AUM
as
of
12/31/12
(including
Westwood
Trust
commingled
funds);
excludes
approximately
$912
million
in
Westwood
Trust
separately
managed accounts,
agency
assets and
subadvised
commingled
funds and
$581
million
of
additional
assets
managed
by
Omaha
office
7 |
 Growth
Opportunities Sub-Advisory Brands
8
•
Access to established distribution channels
•
Generally lower average fee, but high profitability due to low incremental costs
|
 Growth
Opportunities – Westwood Funds
Mutual Funds Now Represent 12% of AUM
•
Mutual Fund Assets have grown to
$1.8 billion from initial two fund launch
in December 2005
•
Six funds added last two years:
-
2011: Dividend Growth, SMidCap
Plus+, Short Duration High Yield
-
2012: Emerging Markets, Global
Equity, and Global Dividend
•
Targeted to institutional, defined
contribution and RIA markets
Growth in Westwood Funds Assets
1
Domestic Value & Income Strategies
LargeCap
Value
WHGLX
SMidCap
WHGMX
SMidCap
Plus+
WHGPX
SmallCap
Value
WHGSX
Dividend Growth
WHGDX
Income
Opportunity
WHGIX
Short Duration
High Yield
WHGHX
International Strategies
Emerging Markets
WWEMX
Global Dividend
WWGDX
Global Equity
WWGEX
Note: Short Duration High Yield is subadvised by SKY Harbor Capital Management,
LLC 9
1
thru February 28, 2013 |
 Growth
Opportunities – Westwood Funds
Substantial Proportion of 4 & 5 Star Rated Funds
Proportion of Assets Rated Four or Five Star by Morningstar (Asset Weighted)
Source:
JPMorgan
U.S.
Asset
Managers
–
North
America
Equity
Research
dated
February14
,2013;
Strategic
Insight.
Westwood Funds AUM as of 1/31/13
10 |
 Westwood
Trust – Private Wealth
Focused on Organic Growth and Selective Acquisitions
•
Low cost, efficient solution
•
Asset gathering platform
•
“Best Ideas”
•
Consultative approach
1
For
the
period
from
1/1/93
to
12/31/12,
the
Enhanced
Balanced
performance
shown
is
that
of
a
representative
client
who
has
been
diversified
among
the
available
Westwood
commingled
funds
throughout
their
term
with
Westwood.
Since
12/31/12,
the
Enhanced
Balanced
performance
shown
is
a
composite
of
several
clients
who
have
been
diversified
among
the
available
Westwood
commingled
funds
throughout
their
term
with
Westwood..
2
The
Enhanced
Balanced
strategy
is
benchmarked
60%
against
the
MSCI
ACWI
IMI
Index
and
40%
against
the
Barclays
US
Universal
Index.
The
MSCI
ACWI
IMI
Index
is
an
unmanaged
market
index
consisting
of
Large,
Mid
and
Small
Cap
equities
in
24
Developed
Markets
and
21
Emerging
Markets
Countries.
The
Barclays
US
Universal
Index
is
an
unmanaged
market
index
consisting
of
US
Dollar
denominated
taxable
bonds
that
are
rated
either
investment
grade
or
highyield.
Since
the
inception
of
the
MSCI
ACWI
IMI
index
is
June
1,
1994,the
MSCI
ACWI
index
was
used
from
January
1,
1993
–
May
31,
1994.
Westwood
discontinued
the
use
of
the
60%
S&P
500
and
40%
Barclays
Government
Credit
benchmark
on
7/31/12
and
the
change
was
made
retroactively.
The
new
benchmark
is
more
representative
of
the
characteristics
of
the
strategy
because
it
represents
both
a
global
equity
focus
and
a
US
investment
grade
and
US
high
yield
bond
allocation.
The
60%
S&P
500
and
40%
Barclays
Government
Credit
benchmark
does
not
accurately
represents
the
characteristics
of
the
strategy.
Past
performance
is
not
indicative
of
future
results.
Stock
market
conditions
vary
from
year
toyear
and
can
result
in
a
decline
in
market
value.
This
information
is
provided
for
clients
and
prospective
clients
of
Westwood
Management
Corp.
and
Westwood
Trust
only.
This
is
not
an
offer
or
recommendation
to
buy
or
sell
a
security
or
an
economic
sector.
11
•
Establishes long-term trust relationship
•
Capable of serving multiple generations
Enhanced Balanced
Trust Services
Continuity of Leadership
Comprehensive Allocation Strategy
•
Randy Root, President Westwood Trust
Dallas (20 yrs)
•
Art Burtscher, President Westwood
Trust Western Region (13 yrs)
•
Kallie Myers, Board Certified Attorney |
 1
Team members are listed from left to right as shown in picture above.
Westwood International Advisors Investment Team
Global Team with Impressive Track Record
Team Members¹
Sector Coverage
Industry Experience
Patricia Perez-Coutts, CFA –
Senior Vice President, Portfolio Manager
Lead Portfolio Manager
27 Years
Thomas Pinto Basto, CFA –
Vice President, Portfolio Manager
Technology,
Telecommunications
19 Years
Alice Popescu, CFA, CMT, DMS –
Associate Portfolio Manager
Consumer Discretionary, Energy
10 Years
Richard Dolhun, MBA –
Global Equity Analyst
Consumer Staples, Health Care
17 Years
Martin Pradier, CFA –
Global Equity Analyst
Materials, Industrials
23 Years
Max El-Sokkary, CFA –
Global Equity Analyst
Financials
18 Years
Gerald Loo, CIM –
Vice President
Portfolio Specialist
15 Years
12 |
 Growth
Opportunities Westwood International Advisors
13
•
Internationally diverse team –
10 languages spoken fluently
•
Collectively lived or worked in 10 countries
•
Global research coverage of all GICS sectors –
developed and emerging
economies
•
Average 18 years of industry experience
•
Focus on Economic Value Added (EVA)
•
Risk management incorporated at every step of the process
•
Long-term focus with very low turnover (< 20% annualized on average)
Diversity
Experience
Investment Approach |
 Financial
Highlights |
 Total Return
Since 2002 WHG Spin-off Data as of 12/31/12
Track Record of Shareholder Value Creation
14 |
 2012
Highlights •
AUM increased 8% to $14.2 billion
•
Average asset based fee increased from 53 bps to 55 bps
•
Income Opportunity strategy, with its focus on current income and lower volatility,
experienced high demand, nearly doubling its assets to over $1.7 billion
•
SmallCap and MLP products experiencing high levels of interest
•
Global and Emerging Market Strategies surpassed $1B AUM
•
Record 2012 revenue of $77.5 million, a 12.5% increase over the prior year
•
Net income decreased to $12.1 million, reflecting WIA start-up costs
•
Economic earnings increased 15% to $29.2 million¹
•
Increased quarterly dividend to $0.40 per share; dividend yield of 3.9% at February 28,
2013 •
Repurchased $3.8 million (97,724 shares) of our common stock
•
Liquid cash and investments of $63.7 million at December 31, 2012 vs. $57 million in
2011 Assets Under
Management
Investment Strategies
Operating Results
Capital Management
15
1
Excludes $5.9 million of Westwood International Advisors related
losses |
 16
Growth in Assets Under Management |
 Average
Asset-Based Fees 17
Note:
excludes impact of performance-based fees
Westwood Average Asset-Based Fee |
 Quarterly
Revenue Growth – Trailing Five Years
1
Excluding performance-based fees
18 |
 Attractive
Dividend Returns $91 Million of Dividends Declared Since Becoming Public
*Data as of 12/31/12, excludes special dividends
19 |
 Shareholder
Value Creation WHG vs. S&P 500 Market Capitalization
20
WHG Market Capitalization |
 Equity Based
Compensation |
 21
Equity Based Compensation |
 •
Annual Cash Performance Awards funded into an Employee Benefit Trust
•
RBC as Trustee invests funds in WHG common stock
•
WHG common stock acquired in open market transactions by the Trust
•
Stock held in trust until employee vests in the Award
•
Awards cliff vest 3 years after performance period
•
2013 Cash Awards approximate $880,000 –
all of which will be used to purchase WHG stock
•
Share Award Plan is Anti-Dilutive
Canadian Share Award Plan
Share Award Plan
22 |
 •
Granted 188,124 restricted shares in February 2013
•
291,079 shares currently available for future grants
•
Proposal to increase shares available for future grants by 500,000
•
Total represents 4 years based on 2013 grant levels
Equity Based Compensation
23 |
 Summary
|
 Strategic
Priorities 24
•
Focus on Improving
LargeCap
and SMidCap performance
•
Broaden Institutional Sales
•
Fill remaining capacity of existing products
•
Cultivate new relationships
with
strong global partners
•
Hired first mutual fund and managed account
sales professional
•
Continue to expand sales
and
marketing platforms
•
Create commingled and UCITS
Funds
for global prospects
•
Add Sales and Relationship Managers
•
Corporate Development Opportunities
•
Focus on Performance
•
Capitalize on existing pipelines
•
Leverage National Bank of Canada relationship
Improve Performance & Fill Capacity
Sub-Advisory Mandates
Westwood Funds
Expand Private Wealth Platforms
Westwood International Advisors |
 www.westwoodgroup.com
200 Crescent Court
Suite 1200
Dallas, Texas
75201
T. 214.756.6900
*
*
* * * * * * * * * * * * * * * |
 Disclosures |
 Economic
Earnings Reconciliation Economic Earnings Reconciliation
($ thousands)
2007
2008
2009
2010
2011
2012
GAAP net income
$ 7,944
$ 10,543
$ 7,895
$ 11,280
$ 14,686
$ 12,090
Add: Restricted stock expense
5,316
6,735
7,666
9,269
9,969
10,515
Add: Intangible amortization
-
-
13
155
498
472
Add: Tax benefit from goodwill amortization
-
-
5
59
189
154
Economic Earnings
$ 13,260
$ 17,278 $ 15,579
$ 20,763
$ 25,342
$ 23,231 |
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 IMPORTANT
INFORMATION ABOUT YOUR PRIVACY
BECAUSE YOUR TRUST IS SO IMPORTANT
Your trust is the cornerstone of our relationship. That is why we work so diligently to
safeguard your privacy. The information that you provide us is kept in the
strictest of confidence. We have no intentions of selling personal information
about our clients to third-party businesses. We are proud to make that
commitment to you, because your trust is the foundation of our business. The following
privacy policy explains how we use and protect the information about our clients.
We ask that you read it carefully.
A nonaffiliated third party is a person we do not employ or a company that is not an
affiliate of ours. This is also known as nonaffiliated third party, or simply,
an “other party.” THE INFORMATION WE COLLECT
We collect information about you from the following sources:
•
Information you give us on applications or other forms
•
Information about your transactions with us
•
Information about your transactions with our affiliates
INFORMATION WE DISCLOSE ABOUT YOU
We do NOT disclose any information about you to anyone, except as permitted by
law. This might include disclosures necessary to service your account, perform
joint marketing or prevent unauthorized transactions.
Destruction of Sensitive Data. All records and data are properly shredded prior to
disposal. Destruction of documents is handled by authorized employees and/or
bonded companies when the shredding of large quantities of documents is required.
THE CONFIDENTIALITY, SECURITY, AND INTEGRITY OF YOUR INFORMATION
We restrict access to information about you to those employees who need to know that
information to provide products or services to you. We maintain
physical, electronic, and
procedural safeguards to protect this information.
INFORMATION ABOUT FORMER CLIENTS
We have the same policy about disclosing information about former clients as we do about
current clients. We do not retrieve account or personal information from
visitors who browse the public areas of our website. Westwoodgroup.com does use
“HTTP cookies” –
tiny pieces of information
that we ask your browser to store. However, we make very limited use of these cookies
for website statistical information only. We do NOT use them to learn your
e-mail address, or to view data in cookies created by other websites. We
will not share the information in our cookies or give others access to it.
WESTWOOD TRUST DEPARTMENT OF BANKING DISCLAIMER
Westwood Trust is chartered under the laws of the State of Texas
and by state law is subject to
regulatory oversight by the Texas Department of Banking. Any consumer wishing to file a
complaint against Westwood Trust should contact the Texas Department of Banking
through one of the means indicated below:
In Person or U.S. Mail: 2601 North Lamar Boulevard, Suite 300, Austin, Texas
78705-4294 Fax No.: (512) 475-1313
E-mail: consumer.complaints@banking.state.tx.us
Website: www.banking.state.tx.us
NOTICE OF YOUR FINANCIAL PRIVACY RIGHTS
We, our, and us, when used in this notice, mean Westwood Management Corp., Westwood Trust, and
Westwood Holdings Group, Inc.
This is our privacy notice for our clients. When we use the words “you”
and “your”
we mean the
following types of clients:
•Our consumer clients who have a continuing relationship by purchasing or holding
financial products or services such as a(n):
•Self-directed Individual Retirement Account
•Financial, investment, or economic advisory services
•Mutual fund shares
•All persons who use our trust department
•All IRA accounts for which we act as custodian
•Former clients
We
will
tell
you
the
sources
of
the
information
we
collect
about
you.
We
willtell
you
what measures
we take to secure that information. We first define some terms.
Nonpublic personal information means information about you that we collect in connection with
providing a financial product or service to you. To help the government fight the
funding of terrorism and money laundering activities, Federal law requires all
financial institutions to obtain, verify, and record information that identifies each
person who opens an account. Therefore, when you open an account, we will ask for your
name, address, date of birth, and other information that will allow us to identify you.
We may also ask to see your driver’s license or other identifying documents. Federal law
requires us to screen new clients through the Office of Foreign Assets Control “Specially
Designated National & Blocked Persons”
list and/or the Financial Crimes Enforcement Network (FinCEN).
Nonpublic personal information does not include information that
is available from public sources,
such as telephone directories or government records. Hereafter,
we will use the term “information”
to
mean nonpublic personal information as defined in this section.
An affiliate is a company we own or control, a company that owns
or controls us, or a company that is
owned or controlled by the same company that owns or controls us. Ownership does not
mean complete ownership, but means owning enough to have control.
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