AGF Management Limited

Robert J. Bogart - Chief Financial Officer, Executive Vice-President and Member of Executive Committee Blake Charles Goldring - Chairman and Chief Executive Officer

Scott Chan - Canaccord Genuity, Research Division Geoffrey Kwan - RBC Capital Markets, LLC, Research Division Stephen Boland - GMP Securities L.P., Research Division John Reucassel - BMO Capital Markets Canada Paul Holden - CIBC World Markets Inc., Research Division

Thank you, operator. Good morning, everyone.

I'm Bob Bogart, CFO of AGF Management Limited. Thank you, today -- thank you for joining us today on a discussion of our Q2 financial and operating results.

Please note that the slides supporting today's call and webcast can be found in the Investor Relations section of agf.com. Today, Blake Goldring, Chairman and CEO, and I, will discuss our second quarter 2012 results.

Also joining us on the call and available to answer questions is Mario Causarano, President and COO of AGF Trust. Turning to Slide 4, I'll now turn the call over to Blake.

Thank you, Bob, and good morning, everyone. It's been a very active quarter for AGF, and we've seen great changes both within AGF Management Limited and in the world markets as a whole.

Europe's continuing credit troubles, slowing growth in the BRIC countries, and uncertain economic rise in the U.S. all continued to weigh heavily on global markets.

The market volatility is not anything new. I think most of us would agree that we are experiencing right now something which is more significant than we've seen for sometime.

This volatility has continued to have a negative impact on investment managers around the world. At AGF, as a global equity-focused business, we remain committed in our beliefs of managing for the long term and to strengthen our position to grow our global investment management operations.

This has been our focus and has been communicated to our shareholders on our previous calls together. Within this context, AGF announced the sale of AGF Trust on June the 6.

The value recognized through the sale represents a major achievement. AGF has grown a small loan business that was acquired 25 years ago, and grew it into a valuable business that will generate $420 million of cash from its sale.

Finally, I'm pleased that we are seeing improvement in our investment management performance, with over 40% of our retail mutual funds ranked by MorningStar as first or second quartile on a 1-year basis, up from just over 29% a year ago. Turning to Slide 5, we'll discuss in more detail some of the key takeaways of our retail operations during the quarter.

While we have had some very significant positive developments in the quarter, this environment has presented significant challenges to global equity managers, including AGF. Across our entire industry, fund flows are down 31%, settling at $25.7 billion for the trailing 12 months through Q2 '12 versus $34 billion a year ago.

Returns on the Toronto Stock Exchange as well as the Standard & Poor's 500 and the MSCI have been negative per annum over the last 5 years. On a 1-year basis, the TSX is down over 10%.

This is following one of the worst RSPCs in this for equity products that I can remember. We remain convinced that there will be a return to equity products.

There has to be given that rates of retirement, demographics and the current returns on fixed income style products. When this all occurs, well, nobody really knows.

The market decreases affected AGF as well. The gross sales in our retail segment were down 28% relative to the second quarter of 2011.

Additionally, 66% in the drop in our AUM over the quarter was a direct result of market depreciation and volatility. I wanted to take the opportunity to update you on the Emerging Market Retail Funds post pro forma management team changes.

When these changes happened, we explained to investors that team changes are a normal part of our industry. They're not appreciated but they do happen, and this is something that happens across the industry.

When these do occur, we explained that this is a point that it would go and -- hire and rebuild the group. And the results that we have incurred as a result only incurred a slight increase in redemptions, no change in our gross sales and continued outperformance of the funds and very little change in overall AUM.

In fact, we have been meeting with many incredible candidates to add to the EM team and to make this product offering and successful team even stronger. We remain committed and focused on serving our advisers and clients with a breadth of product options and new products, and in the second quarter, we announced a new partnership with Eaton Vance Management, a highly-regarded asset manager based in Boston.

Together, we launched the new Floating Rate Income Fund, which seeks to earn high levels of current income by investing primarily in floating-rate senior loans and other floating rate debt securities companies domiciled in the U.S. This is exactly the kind of product we think is important to offer Canadian investors in this period of interest rate uncertainty.

In addition, worth noting in our Retail business, we saw major net sales and performance improvements in key popular asset classes. Fixed income gross sales were up 30% year-over-year.

Peter Frost is doing an excellent job on monthly high income which is up almost 50% year-over-year with close to $100 million of year-to-date net sales. And we see strong sales in the AGF Fixed Income Plus Fund accrual.

If you move to Slide 6, we can discuss our performance in Retail Funds. We have been very focused on improving our investment management performance and capabilities.

We know that our clients, both advisers and investors need strong, consistent performance to support our products. I was recently at an advisor roadshows in Montebello, Moscowca [ph] out west [ph], where I was able to meet many of our clients.

These events were attended by our PMs and senior management team to understand what's happening and how to better serve our end clients. Advisor messages were consistent in every conversation I had.

In AGF, they have and need a true independent asset manager, and they want this to support them and their clients, to provide independent advice and strong performing investment products. We undertook several changes last fall involving manager changes, more focus on investment process and building out our research capabilities.

I am pleased to announce that we are seeing early signs that these changes are having a truly positive effect. Within this highly volatile and challenging market time, I'm encouraged that 40.3% of our retail mutual funds are ranked by MorningStar as being the first or second quartile versus only 15% at the start of the year.

We're confident that this is a sustainable trend. We are moving quickly as a team to achieve a stronger performance.

With respect to asset under management levels, we are correlated to the market and subject to it's fluctuations. It' s also having the right managers, products and ideas to help investors succeed.

If we now move to Slide 7, we'll review the results of our Institutional business segment. Our Institutional business suffered its first quarter of net redemptions in a while.

We've seen some redemptions from Emerging Markets Fund but most of the redemptions were as a result of other product platforms. Here, we have seen the biggest impact in Emerging Markets is in our pipeline.

Institutional clients who are committed in Q1 have put us on watch, which is customarily how the investment communities operate. This does not mean that clients will not invest with AGF in the EM Funds, it just means that there will be a revaluation after the team is back to full staff, there would be some time to show the continued strong performance.

Although our largest EM clients remain committed to the mandate and are comfortable with the team and the unique investment process, we might see further outflows over the next few quarters. Our distribution team continues to engage both current clients and prospects to show the merits of the product design, the investment process and the outperformance versus benchmark.

Most importantly, we continue to execute our growth strategy in our Institutional business focused on the long term. We increased our global sales presence by hiring sales talent in Europe, as well as beefing up our U.S.

presence in the Midwest. In addition, we hired Chris Adey as our Head of Global Consultant Relations.

Those of you that understand or report to the institutional space understand that having consultant relations traveling the world on our behalf opens new markets and it's end [ph] opportunities to accelerate our business growth. We will continue to grow this business as one of the keys to becoming a larger, stronger and more diversified asset manager, and we're focused on winning in this channel in the global arena.

With that, I'll now hand the call over to Bob to review the quarterly results.

Thank you, Blake. If you've had a chance to look at our published financials and MD&A, you'll notice that the financial statement presentation has been divided into consolidated, which represents continuing operations and discontinued operations, which reflect the sale of AGF Trust announced on June 6.

Continuing operations includes our investment management operations and Smith & Williamson and excludes AGF Trust. On Slide 8, we have provided a summary of our consolidated financial results for Q2 '12 versus Q2 '11.

Consolidated revenue was down 14.3%, driven by the reduction in AUM, largely due to the equity market volatility incurred over the quarter. EBITDA decreased to $60.4 million for Q2 2012, a reduction of 20.7% relative to Q2 2011.

Net income for the quarter was down 29.8% to $23.8 million. Diluted earnings per share were $0.25.

But the [ph] EPS was impacted by approximately $0.02 this quarter due to transaction costs associated with the Trust sale, as well as one-time investment management costs, primarily attributable to the fund mergers that occurred earlier in the quarter. Turning to Slide 9.

This slide lets you see our Investment Management segment performance on a longer trended basis and smoothing out some of the impacts of market volatility. It shows our Investment Management segment revenue, operating expenses and EBITDA as a percentage of average AUM in the current quarter, trailing 12-month basis in the prior year's quarter.

Both the quarters have been annualized and exclude the impact of one-time costs. Average revenue in basis points has decreased.

On a relative basis, we have an increasing percentage of institutional AUM versus retail. That, coupled with the increasing sales of lower fee fixed income mandates, has contributed to the decline in the overall revenue rate.

The most significant impact has been the market's effect on our average AUM. It's down significantly.

Although the change in business mix has an impact on the EBITDA yield, larger impacts is the result of more fixed nature of our SG&A cost. This highlights the substantial operating leverage of the business, which accelerates the effects of both growing and contracting market environments.

Moving on to Slide 10, let's review the continuing operations and results. Please note that as previously mentioned, continuing operations now includes the results of Smith & Williamson.

On an adjusted basis, excluding one-time cost from the Acuity acquisition, EBITDA margins decreased from a year ago due to the decline in revenue, driven primarily by the equity markets and increases in SG&A. SG&A expenses increased in the quarter both on a sequential and quarter-over-quarter basis, primarily driven by one-time fund merger costs associated with our fund rationalization efforts, an increase in fund absorption due to AUM declines in those funds that have MER caps in place, and a refresh in our technology infrastructure.

These increases were partially offset by lower stock compensation expense. Now on previous calls, we highlighted the investments we are making in both our Institutional distribution platform as well as the Investment Management function.

We have added capability on the distribution side and are comfortable with the level of resources we have deployed against that line of business. Although we will make targeted investments in our Investment Management area, specifically portfolio manager and research talent, we will reduce our overall SG&A over the next few quarters due to cost savings resulting from the sale of AGF Trust and other cost reduction initiatives.

Expectations of run rate for SG&A remain in the $175 million to $180 million range for 2012. That, of course, will be closely monitored based on revenue expectations going forward.

Turning to Slide 11 on the Trust segment. Trust continued its trend of increasing loan originations over the quarter.

Q2 '12 gross loan originations increased over 100% to $177 million compared to $87 million in Q2 of 2011. Increase in loan originations was largely by strength and momentum in mortgage loans while all other loan products remained reasonably flat.

AGF Trust experienced a continuation of improving credit metrics during the quarter with a 66% decrease in loan loss provisioning. Turning to Slide 12.

Cost revenue for the second quarter of 2012 was $19.8 million, a decline of 6.1% year-over-year. Revenue decline was due to the change in product mix in the portfolio, moving from higher-yielding loans to lower-margin mortgage business which has been growing.

EBITDA for the quarter was $9.5 million, an increase of 11.8% compared to Q2 2011. Trust will be accounted for as a discontinued operation in our financial statements until the closing of the sale.

As Blake mentioned, we expect that transaction to close in August of 2012, subject to regulatory approvals. Turning to Slide 13, we have shown our free cash flow on a consolidated basis through Q2 2012, and we've also included a view on the free cash flow from continuing operations, which excludes Trust for comparison purposes on the far right-hand side of the chart.

Free cash flow for the quarter was $39.2 million versus $52.4 million one year ago. Cash flow from continuing operations was $33.2 million in the current quarter.

Cash returned to our shareholders as a percentage of free cash flow was 65% on a consolidated operations basis, and on a pro forma basis is 76% for the quarter on continuing operations. Now turning to Slide 14, we can discuss our intentions with respect to future uses of capital.

As you know on June 6, we announced the sale of AGF Trust to B2B Trust for approximately $420 million in total cash proceeds. As we've noted as well, the closing is subject to regulatory approvals.

However, in terms of our thoughts on capital uses going forward, AGF will sustain the current level of dividend as well as reconfirm our commitment to actively pursue stock repurchases through the NCIB. And we expect an increase in the free cash flow payout after the sale of Trust, as we'll not have the related cash flow from the Trust operations.

And we focus on the payout ratio as a percentage of free cash flow as EPS is not as relevant in our industry due to the large noncash expenses. We are not concerned with increases to our payout ratio over the short to midterm as we have the Trust proceeds to support it, and we have simply converted that cash flow stream that Trust produced into a large sum of cash on hand to redeploy.

We will replace the Trust EBITDA and the cash flow via the buildout of our core investment operations, which yields a higher return on our capital, and actively use our NCIB to repurchase our shares. Now this in turn will lower that overall cash required to fund the dividend over time.

We have not been active in our NCIB even though we wanted to because we were in a blackout due to the negotiations on the sale of the AGF Trust business. Over the next 12 months, we have the capacity to repurchase approximately 14% of the outstanding stock through the current NCIB program, and that also assumes a renewal of the NCIB in January 2013 at current levels.

As we've stated, the Trust sale will allow management to focus on the core Investment Management segment. Now this means investments in our existing PM teams, hiring new PM talent and completing our infrastructure buildout to ensure we have global capabilities for world-class execution of our investment operations.

Additionally, it means a continuing commitment to our distribution and our sales capability, both on a domestic and global basis. Finally, we'll seek opportunities to increase our Investment Management product capabilities.

This will involve both building the capability internally in organic fashion, as well as executing against smaller tuck-in style acquisitions to support our growth orientation. Now, I'd like to turn the presentation back over to Blake for a final comment and then Q&A.

Thank you, Bob. To reconfirm, we will paying a regular dividend of $0.27 per share this quarter.

This represents a CAGR of 18% over the last 16 years. That's compound annual growth rate and we're very, very proud of this record.

Before we open it up to questions, let me wrap up the formal presentation with a few final comments. After a strategic review of our business, we concluded that AGF will be best able to serve our investors and shareholders, enhancing our focus on our core strength of global investment management.

In that view, our investment management operations is poised for strong growth as the world's markets begin to settle. We don't know when exactly that will happen and further when investors will come back in the market, but we have a patient long-term view, backed by a well-capitalized company to weather the current volatility.

As Bob mentioned, we'll also be active in our NCIB in buying back shares. Some of our shareholders have been with us for years, and we see our largest institutional shareholders regularly.

We are able to reward our shareholders in these volatile times with a strong dividend. We've completed some major milestones this quarter, all in the backdrop of a very volatile global and geopolitical environment.

We've improved Investment Management performance, sold non-core asset, created new partnerships and I believe, done a very credible job retaining assets through unfortunate circumstances. Our management team is focused on creating a growth-oriented, stronger business that will reward shareholders as we continue to push through volatility into a better market cycle.

I want to thank everyone on the AGF team for their hard work over this quarter and shareholders for their standing behind us. With that, I'd like now to open the call to your questions.

Thank you.

First question relates to the AGF Institutional, particularly on the emerging market mandates. I guess first of all, I guess the quote that you said was that in Q2, the emerging market mandates in terms of redemptions met your expectations.

I guess, first of all, I wanted to see what those expectations were and what are you seeing over the next few quarters. And I guess the second part of the question is are you having conversations yet with institutional clients or is this something that will be reviewed after Q2 which is coming up or after you fill out your team?

And I guess just the progress on that because you lost 4 people there.

Well, Scott, I'll take the first part and maybe ask Bob, he can maybe comment on some of the sales trend. But we have met with all the major institutional clients, and I have to say the response has been frankly, very encouraging, in the fact that they see a process and they see a Steve Way, who heads the global group, 25-year vet, who is really the architect of both teams and has been involved in every single hire.

And I can fully just say too, that, I sort of alluded to it in my comments, but the talent pool that's out there today is nothing short of remarkable. And I say that it's been very busy here meeting some very, very interesting people, and I expect them, in a very short order, we should have some good news on that front as well.

But Bob, maybe you could make a comment?

Sure. And Scott, just to give some context in the second quarter, we've lost less than 2% of the total emerging market's AUM in terms of like net redemptions you saw [ph] across the platform.

To Blake's comments, we have met with, and had conversations with the largest of the EM clients, and we foresee a lot of stability with those larger clients. We don't -- to the extent that we've been notified, that would be in the pipeline of opportunities that were shown in the presentation.

And so at this point, we would expect some additional redemptions maybe beyond what we have visibility to, but we really don't have any way of monitoring that at this point. But I think that the overall expectations were larger than what has happened to date, going back to your comment of what were our expectations.

And I think we've exceeded that, but it's still early. So investment committees are still meeting.

There's reviews that are happening, and we'll see some fallout over the next 2 to 4 quarters.

And just a follow-up on that question, just based on the redemptions in the quarter, $736 million, I think, Blake, you mentioned that most of it came from other mandates. Can you specify what asset classes those other mandates were?

And just secondly on the pipeline, last quarter was $913 million, this quarter is minus $144 million. Was that mostly due to the emerging markets pipeline or is it more broad-based to the market conditions?

Yes, it's a little bit of both. It's EM, it's global core as well.

Both the -- when you have that type of an impact on the team, that may cause institutions to pause, and I think Blake's comments were that there -- these are deferral decisions, these are not no decisions, so that had a significant impact on the pipeline.

And so just a second question, just on the high-net-worth side, we don't talk about it too much, but it's a good 7% of your AUM. I just noticed on the year-over-year basis, the AUM was down 4.7%.

Total AUM for AGF was down north of 16%. Is that -- can you comment on some of the businesses?

Is that a function of a better asset mix with [ph] some of the fund merger's Acuity, when the Acuity Funds went over to Cypress, or -- and possibly comment on the flows, is there any big variances that we're missing here or...?

No, the -- I mean, I think that in general, those assets tend to be stickier, right? There's less volatility, and there's just a process that the high-net-worth managers employ.

So it's just stickier money, Scott, in general. And there has been organic growth in the high-net-worth business on the flows, but there's also a fairly steady amount of redemptions in the high-net-worth business just because individuals are spending their wealth.

The comment around the transfer of certain mandates to Cypress, that would not impact or be reflected in the high-net-worth category, so that's still in the Investment Management segment. So that wouldn't have any impact.

Okay. And just a last question.

I know you get asked every quarter, but I guess it's more important now that you have excess capital. Just the acquisition environment, where you're seeing opportunities?

Is it still U.S., Europe? And you mentioned, I guess, just briefly, that you're looking at a few tuck-ins instead of a larger one, which probably makes more sense.

Just wondering to get an update just on that scenario.

Well, suffice to say we've been very busy since June 6 answering phone calls. And what we're trying to do is to get our sales focused on the acquisition through an acquisition framework about what it is that we'll be looking for.

But before we get there, Scott, there is work to be done internally in terms of where is it that we want to focus from a product capability set, and we're very close to finalizing that. And then there's an assessment as to whether or not we should organically build that or whether or not we would think that a better answer, because it's a speed to market issue or some opportunity, we would go out and buy that capability.

So there's work to be done before we get to any kind of a buy decision. But we'd be focused on, to the extent, the target rich environment more in the U.S.

and more on capabilities that are in the alternative asset space and global fixed income space.

I just had a couple of questions. One was just, are you able to kind of talk about what you're seeing in the flows so far in June?

I guess in particular on the retail side, I know you've talked on the institutional, it maybe a little bit lumpy over the next several quarters, but on the retail side, overall. And then also are you seeing, with respect to emerging markets, are you starting to see the impact on the redemptions starting to dissipate?

I'll take the second part and maybe Blake can speak to the first. On the EM, it's got a -- it's had a fairly short tail, Scott, so I think we saw a fairly significant spike in redemptions in April.

Those are essentially halved in May and then halved again in June. So I think, coupled with the fact that the investment performance has been maintained and it continues to be an industry leader, has obviously been helpful.

Okay. And then in the second -- oh, sorry, yes.

Yes, there's really no overall change. It means continuing on.

There's still a lot of fear out in the marketplace. And the only thing I would say about EM is just frankly, the market as an investment area has been under a lot of stress more recently.

Okay. And the second question as I know that we probably don't have too much time before the closing on Trust if it goes kind of -- to the timeline that you're pointing to, and you're trying to figure out what types of assets that you want to potentially acquire.

But if something had come up relatively quickly, and I know M&A processes can take some time, but if you were looking at something and it was a more sizable acquisition, would you be comfortable doing the acquisition before the AGF Trust deal closes?

I don't think so. I mean, I think right now, we're just focused on just closing the transaction.

And anyway, we're only talking really 4 full [ph] weeks. Now, as Bob said, I mean, we've had a number of interesting conversations already but I think we want to just see it share weighted [ph] to August 1.

I thought you were going to ask a question of Mario since he's still in the room here, had a question.

Just one question. Thanks for giving -- I guess, your uses of capital, when I look at the NCIB, could be $100 million, $150 million spending on your core investment operations.

I guess I'm curious about what this $420 million. How quick do you think you would be deploying it, like how long would we expect to see a surplus amount of cash on your balance sheet?

Could it be 18 months, 24 months, 36 months?

Steve, sorry, was it with respect to how long it would to exercise the NCIB?

Sorry, yes. Let me turn my phone up.

Just in terms of how long we would expect to see a surplus of cash at AGF, would it be 2 years, 3 years before you get down to a normalized level?

Yes. Well, let me not fully answer your question.

If I tell you that if we exercise the NCIB, full expectations, it would take anywhere from 9 to 12 months to buy back about $150 million worth of stock, which is what you calculated. So we'd see that off the balance sheet over that period of time.

With respect to the remaining cash, it -- I just wouldn't hazard a guess at this point in terms of how long we'd have that on the balance sheet. Cash on the balance sheet is from a CFO position, I know it's not always the most productive assets but in these volatile times, it's also not a bad position to be in.

Okay. And just in terms of adding investment management, you did talk about acquisitions, but primarily, your focus is in the U.S, is that fair to say?

Yes. I just -- I think it's a normal extension from our operations in Canada.

It's not to say that it's always going to be just a U.S. target, but that would be -- that's where we think our initial priority would be.

Okay. I'm not sure where I'm from these days, but Blake and Bob, just want to clarify your statements on the dividends.

You're comfortable with $0.27, largely because of the cash and your free cash flow bridges you until the Institutional business replaces the Trust cash flow. Is that correct?

Yes, coupled with the reduction of shares outstanding.

Okay. So $0.27, you're very comfortable with that?

Yes, very comfortable.

Okay, okay. Perfect.

And then Blake, remind me, when you sold Unisen a number of years ago, was there -- I thought there was a minimum commitment to Unisen for AUM, and I'm just wondering are we -- is that commitment still valid and what is the number and what are the implications to cost -- what happens to costs, fund costs, if the markets remain volatile here?

I'm going to -- just to remind anybody on the call who didn't know about this, this is a -- we had an administrative service business that we had created at AGF. We had invested roughly $87 million through a series of acquisitions which we sold to Citi for $114 million, so a very nice pickup for our shareholders.

As part of that, we moved our transfer agency business to Citi on a long-term contract, and there were a stipulated amount of assets. But where we sit today, and we're getting close to the end of that contract for another 3 years, I guess.

Is that right, Bob?

Yes, 3 years. It wasn't an AUM metric, John, it was more of a, just a total dollars.

There's a kind of a minimum guarantee in terms of the dollars that we were going to pay to Citi for services and we're well above that.

Okay, okay. And then Bob, I just -- if you look at the world today and you mentioned the SG&A, and the $175 million to $180 million for 2012, any -- can you give us any help on what you think for 2013?

And is $0.17, given what you see today, is that a good number for AGF even in a volatile world and where you might be in 2013?

Yes, I mean, I have a hard enough time providing guidance for 2012 considering the world that we're living in, John. But on -- we've made an awful lot of investments in 2012 in terms of technology refresh and some of the infrastructure that we're building on and the investment operations, which some of that will continue in 2013, largely, that will not.

And based on revenue levels today, if they were to continue, I would not be comfortable with that level of G&A in 2013.

Okay. So there is flexibility there?

Yes.

I just want to ask you a couple of questions on the improved fund performance, I guess the first one being what has resulted in the improved performance over the last 6 months?

I think that in part, we made some changes in portfolios. And let me just highlight one area, and that would be on the Canadian large -- Canadian portfolios.

And we basically moved someone, who was Martin in this case, who was managing that as well as global CIO, moved him to be focused purely on these CIO responsibilities, and that allowed an opportunity for Peter Frost to be focused entirely on the equity management. That would be sort of one example of what we took.

Second would be the role of our analysts, that we have an individual who is working very hard on the research area, was hired, her name is Terri Ellis. And I think getting our analyst teams fully staffed and organized, that's also been a net benefit to the group.

There have been a number and the nice thing, Paul, is that it's just not in sort of one particular area, I'd point to sort of monthly high income, traditional income funds, those are really coming alive as well. So we feel very good, the -- through, and Acuity Funds, which is now renamed the AGF Fixed Income Plus, that's doing very well.

We introduced, of course, and Eaton Vance Pooling [ph] Fund which, while that's not a performance related one, it comes with a great following, so it's with an attractive flow as well.

And what's the -- I know it's early days, what's the AUM for that Eaton Vance Fund?

It would be about $40 million now, I guess?

Okay. And that's been around for maybe a month?

Yes. That includes some CD notes as well.

So it's been around about, for about a month and generating north of $12 million to $15 million in new sales.

Okay. So the story I'm hearing on the investment performance, it's more of a matter of change in personnel versus than say, specific sector exposures and how the portfolios have been positioned.

Is that fair?

I would say that -- I mean, as you know, it is all a bit because investment management is art and science so there's a little bit of -- a blend of both there, sure.

Okay. And Blake, you made a comment earlier that you're confident that, that trend will continue.

I guess, I want to ask what gives you that confidence that this trend will continue?

Well, what I think has hurt us is that we had -- we're a multi-style organization, and we have many different styles, and it just happened that a number of them were not working at the same time. And eventually -- and this is what we've been putting a lot of focus on, is making sure each individual style has been sort of looked at, reviewed.

And that at any one moment, you would not expect all of them to be knocking the lights out nor would you expect them to be not working. What we're seeing here is a real improvement right across the field and expectations that, that would continue.

I would just add, Paul, I think there's been a real focus on investment process, documentation of the seat [ph] thesis of each of the portfolios. Blake mentioned the buildout on the research capability, getting better ideas up to the portfolio managers.

I think that those 2 are quite key in building a sustainable investment management process.

And then maybe you can touch on how the changes you made over in Dublin maybe have impacted that number, given you reduced your -- significantly reduced your exposure to European financials, which I'm sure has helped a lot over the last 6 months.

Yes. It certainly has helped out and it's -- all I can say, Europe is a tough environment right now, there's no question about it.

And so we did make some changes, as you're aware, and acted at the start of this year, some portfolio rebalancing. But it's -- even though we believe that mid, long-term, or probably in fact, today, there are some very good values in Europe, it's certainly not being reflected in performance.

Okay. So there's no -- I guess your global equity mandates traditionally have been maybe overweight Europe, I would argue that, that will continue?

Yes. However, I can tell you is that this flow has definitely stabilized in Dublin.

Like I mean, we're not seeing the same sort of outflows that we would have seen before, for sure.

Although they are making, I mean, to your point there, they have been overweighted Europe. They are moving more so into the U.S., Paul.

Okay, good to know. And then final question.

Bob, I think I heard you right in terms of domestic distribution on the retail side, you said you're sort of comfortable where you sit today. Is that right?

I said I think we're comfortable with the level of -- what we are -- I thought my comment was more with respect to the Institutional distribution. I think we're comfortable with the resources we have deployed against that business.

Okay. And then with respect to retail, you continue to expect to invest in additional wholesalers and inside sales?

No, I don't think so. I think we're just -- we're comfortable with where we're at.

Thank you very much, everyone, for joining us today. Our next earnings call will take place September 26 when we review our third quarter results for fiscal 2012.

Details of that call will be posted on our website. Finally, an archive of the audio webcast of today's call with supporting materials will be available in the Investor Relations section of our website.

Thank you and good day, everyone.