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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 11, 2008
WESTWOOD HOLDINGS GROUP, INC.
(Exact name of registrant as specified in charter)
| Delaware | 001-31234 | 75-2969997 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
200 Crescent Court, Suite 1200
Dallas, Texas 75201
(Address of principal executive offices)
(214) 756-6900
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 | Regulation FD Disclosure. |
On March 11, 2008, Westwood Holdings Group, Inc. (“the Company”) will hold meetings with investors to provide an update on the Company’s business.
The slides accompanying the investor meetings are attached as Exhibit 99.1 will be available on the Company’s website at www.westwoodgroup.com under “Investor Relations.”
The information in this report, including exhibits, is being furnished pursuant to Item 7.01 and shall not be deemed “filed” within the meaning of section 18 of the Securities Act of 1934, or otherwise subject to the liabilities under that Section.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit Number |
Description | |
| 99.1 |
Slides accompanying Company’s investor meetings to be held on March 11, 2008. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WESTWOOD HOLDINGS GROUP, INC. | ||
| Date: March 11, 2008 | ||
| By: | /s/ William R. Hardcastle, Jr. | |
| William R. Hardcastle, Jr., | ||
| Chief Financial Officer | ||
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 |
Slides accompanying Company’s investor meetings to be held on March 11, 2008. | |
 WHG Update March 11, 2008 Brian O. Casey President, Chief Executive Officer William R. Hardcastle, Jr., CFA Vice President, Chief Financial Officer Exhibit 99.1 |
 Forward – Looking Statements Statements in this presentation that are not purely historical facts, including statements
about our expected future financial position, 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, 2007, 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. Page 1 |
 Agenda Page 2 I. Firm Overview II. Investment Process & Products III. Financial Highlights IV. Summary |
 Firm Overview • Well-established asset management firm • Clear focus on investment management and client service since 1983 • Strong long-term performance • Strict adherence to our process has resulted in strong risk-adjusted returns for
our clients • Growing asset base • $7.9 billion in assets under management as of December 31, 2007 • Three-year compound annual growth rate over 25% • Independent with equity-based incentives • Publicly traded company (NYSE: WHG) since 2002 • 35% of company stock held by senior management, employees and directors • Effective tool to attract and retain talented professionals • Strong and committed team of professionals • Senior members of the firm have worked together for over a decade • Culture of integrity, ethics, solid governance and internal controls • Clean reports from external and internal auditors regarding effectiveness of internal
controls Page 3 |
 Westwood History Westwood Funds Westwood Management Corp. Acquired by Southwest Securities (SWS) Westwood Trust Westwood Holdings Group, Inc. • Registered Investment Advisor • Institutional focus 1983 1993 1994 1996 2002 SWS Provided: • Capital • Autonomy • Technology • Distribution • Distributed by Gabelli • Sub-advised by Westwood • Commingled funds • New product platform • Spin-off • Independent public company WHG Funds 2005 • Targeted to institutional, defined contribution market • Advised by Westwood; distributed by SEI Page 4 |
 Strategic Focus Page 5 • Value and Income investing • Multiple products spanning the capitalization range • Disciplined, time-tested investment process across all products • Proprietary, in-depth fundamental research • Team-based research and portfolio management process • Focus on downside risk protection • Seek to generate superior risk-adjusted returns across multiple products • Continuous product development • Responsive to client needs • Leverages and extends existing processes • Team contributes to development and management of new products • Institutional products delivered to multiple markets • Institutional quality products and pricing extended beyond traditional large
institutions • Client centered culture • Clients are at the center of everything we do |
 Our Mission Page 6 • Our mission: “Exceeding client expectations through exceptional performance and ethical conduct” • We strive to: • Deliver superior risk-adjusted returns • Serve our clients attentively • Provide a challenging and rewarding environment for our employees • Make a positive contribution to the communities around us • Distribute excess cash to our fellow stockholders in the form of dividends |
 Westwood Value Proposition Page 7 • At our spin-off in 2002 we said we would: • Build out our research team • Expand our product offerings • Deliver excellent performance for our clients • Operate the firm in a stockholder-friendly manner • Energize our employees • Since that time we have: • Developed a talented, team-based research process, adding 8 CFAs to the team
• Launched six additional products • LargeCap, SMidCap, SmallCap, AllCap and Balanced ranked in the top quartile in their peer group for 2007; most also rank in the top quartile over three and
five- year trailing periods • Declared over $37 million in dividends to stockholders • Experienced very low employee turnover • Built the platform for a much larger business |
 Product Distribution Westwood Management Corp. • Separately managed portfolios – large institutions • Subadvisory • Collective funds – large defined contribution marketplace • Managed accounts (“SMA”) – select platforms • Institutional consultants Account minimum – $25,000,000 Westwood Trust • Commingled Funds – small to mid-size institutions, high net worth • Enhanced Balanced™ asset allocation model • Separately managed portfolios – tax-sensitive accounts, IRA rollover market • Institutional consultants, client referrals, centers of influence Account minimum – $5,000,000 WHG Funds • Institutional share class – institutions, small to mid-size defined contribution plans, direct retail
• A share class – mutual fund supermarket platforms • Institutional consultants, financial intermediaries, media coverage Account minimum – $5,000 Page 8 |
 Overview of Investment Process Qualities that Westwood analysts look for in securities: • Strong free cash flow characteristics • Stable to improving return on equity • Improving balance sheet • Upside earnings surprise without corresponding change in consensus estimates Portfolio Teams Research Analysts • Idea generation • Proprietary fundamental research • Make buy & sell recommendations 4 Research Groups • Led by senior analysts • Weekly due diligence meetings to review analyst recommendations • Approved securities move to the “On Deck Circle” • At least one member from each Research Group • Weekly meetings to review portfolio and new names • Makes buy and sell decisions and manages portfolio risk Page 9 |
 Peer Group Product Comparisons Trailing 3-Years as of 12/31/07 Past performance is not a guarantee of future results. Performance results are calculated gross of fees . Please see full performance disclosures at end of presentation. LargeCap SMidCap SmallCap AllCap $49 Billion $3 Billion $1 Billion $24 Billion Median Portfolio Capitalization Page 10 |
 Peer Group Performance Comparison Source: eVestment Alliance Returns for 1 Year Trailing Returns for 3 Years Trailing Returns for 5 Years Trailing Returns for 10 Years Trailing LargeCap 1 1 11 12 SMidCap 9 3 2 8 SmallCap 18 9 N/A N/A AllCap 9 4 19 N/A Balanced 23 6 27 15 Percentile Ranking as of December 31, 2007 The eVestment Alliance Universes contain the following number of return sets: LargeCap Value Equity (339), Small-MidCap Value Equity (75), SmallCap Value Equity (220), AllCap Value Equity (93), and US Balanced/TAA (100). Past performance does not guarantee future results. Stock market conditions vary from year to year and can result in a decline in market value. This is not an offer or recommendation to buy or sell a security or an economic sector. Page 11 |
 Product Tenure 25 23 21 11 6 5 4 0 5 10 15 20 25 30 LargeCap Value Fixed Income Balanced SMidCap Value AllCap Value Income Opportunity / MLP SmallCap Value 1983 1985 1987 1997 2002 2003 2004 Inception Date Page 12 |
 Unseasoned (R&D) Products Page 13 • MidCap Value • Invests in securities in the $4 billion to $20 billion market capitalization
range • Product extension beyond the capacity constrained SMidCap product • Initially introduced to Westwood Trust Enhanced Balanced™ clients • LargeCap Enhanced (130/30) • Extension of long-only LargeCap Value strategy • Targeted to investors seeking sources of increased excess return • Initially introduced to Westwood Trust clients |
 Recent Performance Accolades • Smart Money Susan Byrne, our Founder and Chief Investment Officer, was named one of five of “The World’s Greatest Investors” by Smart Money in their August 2007 issue. • Morningstar The WHG LargeCap Value Fund (WHGLX) was named an Analyst Pick by Morningstar in the fourth quarter of
2007, due to its “experienced team and proven strategy” and highlighted it as having “one of the best track records in the large-cap value category.” • Pensions & Investments Pensions & Investments ranked our SMidCap Value product #1 for the five-year period and #2 for the
one-year period ended December 31, 2007 among U.S. Blend Stock
Collective Investment Trusts, and ranked our LargeCap Value product #2 and the UBS Fiduciary Trust Large Company fund, for which we are
subadviser, #1 among U.S. Stock Collective Investment Trusts for the
one-year period ended December 31, 2007. • PSN Our LargeCap Value, Balanced, and SMidCap products were all listed among PSN’s Investment Manager Top Ten Performers for the fourth quarter of 2007. • Kiplinger’s Mutual Funds 2008 Special Issue The WHG LargeCap Value Fund and manager Susan Byrne were featured in “The Best of the New
Funds” in a special edition of Kiplinger’s Personal Finance Magazine, which recommends WHG LargeCap Value among new funds “run by skilled managers at reputable fund companies.” Page 14 |
 Significant Product Capacity Remains Page 15 Seasoned Products (>3 year track record & >$100 Million in assets) Assets Under Management As of 12/31/07 Estimated Maximum Capacity AUM Asset Growth Potential LargeCap Value $4.1 billion $20 billion $15.9 billion SMidCap Value $1.5 billion $3 billion $1.5 billion SmallCap Value $145 million $1.5 billion $1.4 billion AllCap Value $120 million $10 billion $9.9 billion Income Opportunity $300 million $2 billion $1.7 billion MLP $230 million $1.5 billion $1.3 billion Total Seasoned $6.4 billion $38 billion $31.7 billion Unseasoned (R&D) Products (<3 year track record & <$100 Million in assets) MidCap Value $15 million $8 billion $8 billion LargeCap Enhanced 130/30 $10 million $5 billion $5 billion Total Unseasoned $25 million $13 billion $13 billion Total Seasoned & Unseasoned $6.425 billion $51 billion $44.7 billion Legacy Products Balanced / Fixed Income / REIT $665 million N/A N/A Note: Table reflects Westwood Management assets under management as of 12/31/07 (including Westwood Trust commingled funds) |
 Increased Search / RFP Activity Page 16 • Search activity has increased with continued strong performance and new product marketing efforts • Finals win ratio remains strong 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2002 2003 2004 2005 2006 2007 |
 Westwood Trust • Consistent asset growth – Over 23% compound annual growth rate of assets over the last five years • Enhanced Balanced™ – Asset allocation model – 7 asset classes managed by Westwood Management 5 asset classes managed by subadvisors – Consultative approach – Low cost, efficient solution – Asset gathering platform – Private Client – “Best Ideas” • Subadvisors: Page 17 International Growth AllCap Growth & SmallCap Growth High Yield International Value Sanderson Asset Management |
 Mutual Funds • WHG Funds • 5 funds advised by Westwood Management • WHG LargeCap Value (WHGLX) • WHG SMidCap (WHGMX) • WHG SmallCap Value (WHGSX) • WHG Income Opportunity (WHGBX) • WHG Balanced (WHGBX) • Not yet rated by Morningstar; SMidCap & Income Opportunity will reach 3 year track
record in December 2008 • Subadvised mutual funds • Westwood Equity Fund (WESWX) – 5 stars; 21 year track record • Westwood Balanced Fund (WEBAX) – 4 stars; 16 year track record • Timothy Plan Large/Mid-Cap Value – 5 stars; subadvised since Q1 2005 Page 18 |
 WHG Funds Launch Has Exceeded Expectations The WHG Funds have been able to achieve reasonable asset growth prior to achieving a three-year track record and Morningstar rating Page 19 $0 $25 $50 $75 $100 $125 $150 $175 $200 $225 $250 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Income Opportunity SMidCap LargeCap Value Balanced SmallCap Value Dec 2005 Income Opportunity & SMidCap launched June 2006 LargeCap Value launched Sept 2006 Balanced launched April 2007 SmallCap Value launched |
 We strive to manage our company to reflect the qualities we look for in selecting securities for client portfolios How We Manage Our Company NYSE: WHG Peer Group High Dividend Yield Ongoing Quarterly Dividends 3.4% 1.5% Low/Declining Debt to Equity 0% 38% Insider Ownership >10% 35% Rare Solid corporate governance (measured by RiskMetrics Rating – out of 100) vs. Index –
98 vs. Industry –
82 vs. Index –
40 vs. Industry –
50 Peer group consists of: AB, AMG, AVZ, BEN, BLK, BPFH, CLMS, CNS, EV, FII, GBL, JNS, LM, TROW, WDR, WPL Page 20 |
 • People are our most important asset • Equity-based compensation is a significant component of our compensation
program • Effectively aligns incentives with all stakeholders • Restricted stock in lieu of increased cash compensation provides the opportunity to earn a multiple on that deferral • Restricted stock granted annually with a four-year vesting schedule; non-cash
expense recognized over vesting period • Performance-based restricted stock granted to CEO & CIO in May 2006; shares
vest over four and six years, respectively, only if annual earnings performance targets are met Compensation Page 21 |
 Financial Highlights Page 22 • Record assets under management and financial results in 2007: Year-over-year Metric 2007 Result Increase • Assets under management $7.9 billion 33% • Revenue $36.3 million 33% • GAAP net income $7.9 million 76% • Cash earnings $13.3 million 46% • GAAP earnings per share $1.28 62% • Cash earnings per share $2.14 34% • Thirteen quarters in a row of sequential growth in assets under management and revenue • Liquid balance sheet – net cash & investments of $25 million ($3.67 per share) at December 31, 2007 • Proforma annual quarterly dividend rate of $1.20 per share – 3.4% yield as of February 29, 2008 |
 AUM Growth • Growth in assets under management driven by new account wins as well as strong performance in client portfolios Page 23 $4.0 $4.9 $5.9 $7.9 $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 $9.0 2004 2005 2006 2007 25% Compound Annual Growth Rate from 2004 - 2007 (Cumulative increase of 97%) |
 Revenue Growth • Revenue growth has followed strong asset growth • New performance-based fee earned in 2007 Page 24 2007 includes $3 million performance-based fee $20.0 $21.9 $27.4 $36.3 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 2004 2005 2006 2007 22% Compound Annual Growth Rate from 2004 - 2007 (Cumulative increase of 82%) |
 Cash & GAAP EPS Growth • EPS growth reflects positive impacts of operational leverage in our business Page 25 $0.68 $0.66 $0.79 $1.28 $1.08 $1.60 $2.14 $0.95 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 2004 2005 2006 2007 GAAP EPS Cash EPS Growth Rate from 2004 - 2007:
Cumulative
CAGR Increase GAAP EPS
24% 88% Cash EPS
31% 125% Please refer to GAAP reconciliations at the end of this presentation
|
 Dividend Growth • Transition from smaller quarterly dividends supplemented by annual special dividends in
our building phase to larger quarterly dividends • Annual quarterly dividend rate of $1.20 per share – 3.4% yield as of February 29, 2008 Page 26 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 2002 2003 2004 2005 2006 2007 2008 Q1 Q2 Q3 Q4 Represents annual dividend rate based on $0.30 quarterly dividend declared in Q1 2008 |
 WHG Stock Price Performance • WHG stock provided a 69.9% total return including reinvested dividends in 2007
• Outperformed SNL Asset Manager Index by over 56% • Ranked in the 5th percentile for total return performance among NYSE-listed securities Page 27 Total Return Performance 50 100 150 200 250 300 350 400 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 Westwood Holdings Group, Inc. Russell 2000 SNL Asset Manager Index |
 Near-term Objectives • Repeat our successes: • Generate solid investment performance • Continue to develop research teams • Serve clients attentively • Cultivate consultant relationships • Leverage referral sources at Westwood Trust – approximately 75% of new assets from referrals • Leverage manufacturing capability with distribution partners through subadvisory
opportunities • Develop collective fund offerings across multiple products to serve the large defined
contribution plan market • Continue to grow the WHG Funds • Cultivate new “R&D” products • Increase visibility of WHG stock Page 28 |
 Summary • Established firm with recognized institutional presence • Seasoned competitive products • Attractive product pipeline with strong performance; gaining traction in institutional marketplace • Private client growth opportunities • Employees are stakeholders • Opportunity to realize operational leverage and growth • Potential for significant cash generation combined with history of returning
excess cash to stockholders Page 29 |
 Cash to GAAP Reconciliations Page 30 Cash EPS Reconciliation (in thousands, except share and per share amounts) 2004 2005 2006 2007 GAAP net income 3,686 $ 3,636 $ 4,508 $ 7,944 $ Add: Restricted stock expense 1,250 2,114 4,500 5,316 Add: Stock option expense 249 250 126 - Less: Cumulative effect of change in accounting principle - - (39) - Non-GAAP cash earnings 5,185 $ 6,000 $ 9,095 $ 13,260 $ Diluted weighted average shares 5,438,491 5,540,342 5,690,455 6,199,669 GAAP earnings per share 0.68 $ 0.66 $ 0.79 $ 1.28 $ Non-GAAP cash earnings per share 0.95 $ 1.08 $ 1.60 $ 2.14 $ |
 Disclosure Information Westwood Management Corp. (Westwood) has prepared and presented this report in compliance
with the Global Investment Performance Standards (GIPS ® ). GIPS ® has not been involved with the preparation or review of this report. Past performance is no guarantee of future
results. Westwood is a registered investment advisory firm that provides
investment supervisory services, managing equity and fixed income portfolios.
Westwood is a wholly owned subsidiary of Westwood Holdings Group, Inc. (NYSE:
WHG). The inception dates for the Westwood composites are: LargeCap Equity (1/1/87); SMidCap Equity (7/1/97); SmallCap Value (1/1/04); AllCap Equity (7/1/02); REIT (7/1/95); Income Opportunity (1/1/03); Fixed Income - Core (4/1/85); Fixed Income - Intermediate Bond (10/1/90); Balanced (1/1/87); MLP Infrastructure Renewal Fund (1/1/03). A complete list and description of the firm's
composites and historical performance records are available upon
request. The calculation of returns is computed on a monthly basis (starting
1/1/02) for the composites; including accrued dividends and interest income. Securities are valued as of trade-date. Monthly returns are asset-weighted based on
the portfolio market values at the beginning of each month. Accounts in the composite, must be under management for the entire reporting period. The minimum
portfolio size for inclusion in the Westwood Composites, except the MLP
Infrastructure Renewal Fund Composite, is $5 million dollars beginning
January 1st, 2006. The minimum portfolio size for the MLP Infrastructure Renewal Fund Composite is $1 million dollars beginning January 1st, 2004. Carve-outs returns are allocated using the beginning of period allocation method. The currency used to express
performance in all composites is US dollars. Additional information regarding
policies for calculating and reporting returns is available upon request.
The comparative index returns include interest and dividend income but do not
include potential transaction costs or management fees. Performance results are calculated gross of investment management fees but after all
trading expenses. The net of fees composite returns may not be reflective of
performance in your account. Actual results may vary depending on level
of assets and fee schedule. Performance results net of management fees
reflect the actual rate of fees paid and after all trading expenses. Westwood’s fee schedules are: LargeCap Equity 0.75% on the first $25 million, negotiable thereafter; SMidCap Equity 0.85% on the first $25 million, negotiable thereafter; SmallCap Value 1.00% on the first $10 million, negotiable thereafter; AllCap Equity 0.80% on the first $10 million, negotiable thereafter; REIT 0.75% on the first $10 million, negotiable thereafter; Income Opportunity 0.80% on the first $10 million, negotiable thereafter; Fixed Income - Core Bond 0.40% on the first $10 million, negotiable thereafter; Fixed Income
- Intermediate Bond 0.40% on the first $10 million, negotiable thereafter; Balanced 0.625%
on the first $25 million, negotiable thereafter; MLP Infrastructure Renewal Fund 1.00% on the first $10 million, negotiable thereafter. All fees are stated in annual rates and are typically billed
quarterly. More information on Westwood's management fees is available upon
request in its Form ADV, Part II. Internal dispersion is calculated using the
asset-weighted standard deviation of all portfolios that were included in
the composite for the entire year. Westwood Management is in compliance with GIPS ® standards since January 1, 1993. Westwood Management has been verified for the periods January 1, 1995 through December 31, 2006 by
PricewaterhouseCoopers LLP. A copy of the verification report is available upon request. |
 Disclosure Information |
 Disclosure Information |
 www.westwoodgroup.com 200 Crescent Court Suite 1200 Dallas, Texas 75201 (214)756-6900 |