Invesco Ltd. (IVZ) Q1 2011 Earnings Report, Transcript and Summary

This presentation and comments made in the associated conference call today may include forward-looking statements. Forward-looking statements include information concerning future results of our operations, expenses, earnings, liquidity, cash flow and capital expenditures, industry or market conditions, AUM, acquisitions, debt and our ability to obtain additional financing or make payments, regulatory developments, demand for and pricing of our products and other aspects of our business or general economic conditions. In addition, words such as believe, expects, anticipates, intends, plans, estimates, projects, forecasts and future or conditional verbs, such as will, may, could, should, and would, as well as any other statement that necessarily depends on future events are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and may involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks described in our most recent form 10-K and subsequent Forms 10-Q filed with the SEC. You may obtain these reports from the SEC website at www.sec.gov. We expressly disclaim any obligation to update the information in any public disclosure, if any forward-looking statement later turns out to be inaccurate.

Welcome to Invesco's First Quarter Results Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the call over to speakers for today, Mr. Martin L. Flanagan, President and CEO of Invesco; and Mr. Loren Starr, Chief Financial Officer. Mr. Flanagan, you may now begin.

Thank you very much, and thank you, everybody, for joining us. In addition to myself, Loren Starr, Invesco's CFO and also Mark Armour is on the call with us today who leads our Institutional business. We'll be speaking to the presentation that's available on our website. And this morning, we'll do what we typically do and do a review of the business, but we thought it would be very, very helpful to have Mark provide some perspective on our Global Institutional business and highlight the capabilities where we're seeing the greatest interest from clients and consultants. Loren will go into the financial results in greater detail, and then the 3 of us are more than happy to answer anybody's question. So on Page 3, let me just hit a few points to highlight the quarter. Invesco's commitment to investment excellence continued to yield strong long-term investment performance for our clients. Investment performance across the enterprise remained very strong in the first quarter with areas of exceptional performance. Our strong investment performance continued a trend of positive long term net flows for the firm. And during the first quarter, we saw strong long-term net flows across all distribution channels. Also during the quarter, we continued the share repurchase program, purchasing 2.1 million shares for $53 million. The fund consolidation related to the acquisition of Morgan Stanley's Retail Asset Management business is nearly complete. We've experienced no merger-related outflows year-to-date and the combined business has demonstrated strong momentum. And consistent with our 6-year track record of progressively increasing the dividend and reflecting the firm's continued financial strength, we're raising our first quarter dividend to $0.1225 per share, an increase of 11.4%. Now let me hit the summary of the financial results for the quarter. Assets under management ended the quarter at $641 billion versus $616 billion at the end of the fourth quarter, reflecting the improved markets and also the strong momentum across our business globally. Adjusted operating income for the quarter was $272 million and the operating margin was 36.2%. Net flows for the quarter were $9.2 billion, including net long term flows of $6.6 billion. This continues the positive trend we've demonstrated over the past several quarters. And again, Loren will go into greater detail when he review the financials. If you take a look at the quarterly flows, what you'll see is the strength coming from strong gross sales in the first quarter led a continued positive momentum into long term flows. And as I mentioned earlier, the long term flows for the quarter was $6.6 billion, driven by continued strong interest in our traditional Invesco PowerShares ETFs and the UIT business also. If you look at the different distribution channels, again, strong growth sales across Retail and Institutional channels contributed to positive net flows for Invesco as a whole during the quarter and we saw positive flows into the Private Wealth Management business. And this is now 4 years in a row that we have had positive flows into that business. As you all know, key strategic priority for us is to generate strong long-term investment performance for our clients and our commitment to investment excellence has lead to a continuing significant improvement in our investment performance across the enterprise. The key reason we've seen improved stability in our flows, has been a strong investment performance of the firm. And if you look at the firm as a whole, 77% of the assets were ahead of peers on a three-year basis at the end of the first quarter, and over a 5-year period, 79% of the assets were ahead of peers. We also saw improvement in the one-year number with 55% of the assets ahead of peers during the first quarter versus 48% in the prior fourth quarter. And we have detailed charts in the appendix if you would like to look at that at your leisure. As I mentioned earlier, we saw strong investment performance across the enterprise, with pockets of exceptional performance. The U.S. value capability remained strong with 94% of assets in the top half of peers that were 3 and 5 years; 94% of U.K. Equity assets beating benchmarks of 1, 3 and 5 years; 86% of the global fixed income assets in the top half of the peer groups are 1, 3, 5 years; 95% of Asian Equity assets beating benchmarks over the 5-year period and Morningstar ratings for Invesco in the U.S. remain at near all-time highs with 61% of the assets rated 4 and 5 stars. And also, Invesco received 9 Lipper awards for 6 Retail Funds across a broad range of capabilities, including convertibles, non-US equities, sector, value and growth. And now on Slide 9. Just an update on the acquisition-related milestones. As we have discussed previously, late last year, we undertook the consolidation of the number of funds related to our acquisition of Morgan Stanley's Retail Asset Management business, and to highlight a few of the areas: In the area of cost synergies, the actual results were meaningfully greater than our initial estimate; we achieved $85 million over a 5-month period post-close and against an estimate of $70 million, which we thought we would achieve 12 months post-close; and in line with our expectations, we have not seen a spike in the redemption rates in the funds that were a part of the consolidation; we also experienced no meaningful merger-related outflows year-to-date; and with 92% of the assets having received the required votes, the fund rationalization is on track for completion in the second quarter. So I'm going to stop there and hand the meeting over to Mark, who will highlight Invesco's Global Institutional business. Mark?

Look I'm going to start on Slides 10 and 11. And what I'd like to do is to leave you all with 3 basic thoughts, if I could. First thing you can see this on Slide 11, globally, we do have a sizable Institutional business. Secondly, we have achieved group [indiscernible] (13:13) momentum globally over the last couple of years. And for reasons that I'll touch on briefly, we do believe that we've got further significant growth opportunities in the Institutional space. So if we look at Slide 11, you can see that the relationships we have with the Institutional clients globally account for approximately 1/3 of Invesco's total AUM. And the breakdown by region is shown here on this slide. And you'll also note that we've got something like 60[ph] styles services and consultant relations professionally, professionals globally supporting our clients. That number to us seems about right, it's not so much the number of people that we've got, it's the quality that's important. As you can tell these teams are organized regionally all by country and the reason we do this is so that they can better understand clients' needs, being local and then work with our investment team globally to meet the needs of those clients. And I probably should put it to sidelight here that even though I'm talking about them all, not all of these people formally report to me, but rather to our business heads around the world. While broadly the focus that we've got in Institutional space is really in 3 basic areas: First and foremost, having top-quality people; secondly, looking to -- with those people to live with the investment excellence that we've got within the firm by better understanding and meeting the needs of our clients, and frankly, consultants who we think of as clients. So overall, our aim is to match up the investment capabilities of about more than 600 investment professionals and Martin talked to you already about the good position our investment performs across the globe, meet the client needs so that we can deliver, if you like, a compelling solution for their problems. Let's now move on, if we can, to Slide 12. And what I want to do is really talk to you a little bit about some of the investment capabilities that we're seeing gain a lot of traction globally. And these are the ones that are typically getting large investment made. So first and foremost, Real Estate, look, we have a very highly regarded capability here. We've been investing in the markets since the early 80s and we're in about the direct Real Estate business as well as Real Estate securities or REITS. And I think as most of you are aware, we just recently strengthened our platform with an acquisition in Asia late last year. The strong team is designed from the strong position we have in the models to maintain very low staff turnover, which in turn has enabled us to continue to fine tune the capability that we've got. And this in turn relates frankly to very good results for our clients in both the REIT space as well as the direct Real Estate space. Right at the moment, we're seeing terribly strong interest in Real Estate globally, and in contrast to what we saw a couple of years ago, it's not in REITS but rather now in the direct Real Estate space. And what's interesting, not just in the U.S. but also in other parts of the world, including Asia-Pacific and Europe. Moving on, something that's a little bit different is our Risk Parity capability, what we call a Premia Plus. This is managed by Global Asset Allocation space in Atlanta. We're doing this as you know since 2001, with [indiscernible] managing about $10 billion. You should be aware this capability's aim is to give sizable returns through a cycle and so it's more about not losing money rather than by gaining a large amount. Right at the time, it looked a bit silly, but we did actually launch this capability in the peak of financial crisis back in September 2008. But it turned out to be good because the returns we got early on were very strong, and that group performance is being continued. In terms of interest, what we see is that globally, our retail client is going to be most interested in the traditional Premia Plus capability, which is investing in cost asset classes. And that industry is very strong in North America, so U.S. and Canada, but also in Europe. By contrast, we've seen quite an interest in the Premia Plus Institutional space but more so on the commodities only capability and this is something that we seem to be differentiated from our clients. So strong interest there and frankly, really strong growth over the last 18 months. Stable value. Look, we've mentioned this before, like Real Estate, it's an area where we're seen as the market leader. We've been managing this asset classes since the mid-80s. I think people were aware, we did have some issues here a few years ago. Clearly, they're well behind us. Asset growth has been strong, $42 billion right at the moment. The strength of our structured credit team, I think, is a differentiator and hopefully outperformance in 2009, too, but also to us, two other things are important. First and foremost, we've had an equal focus on maintaining good value, not simply on getting returns, and I think that helped us through the crisis. And then we are unusual, even unique, [indiscernible] managers to the extent that we do, as part of our process, use other managers and that gives us some nice diversification. So overall, we've had very strong close in recent years, and in fact, we having to sort of control the way in which we take any money on right at the moment, and frankly believe that we're well positioned given the changes that are going on in the industry [indiscernible] position to continue to gain share. Finally, and if you can excuse the pun, we do want to talk about something that's a bit of an emerging capability. Mainly our Emerging Markets Equity. We've got 2 capabilities, one based in Austin, in Texas, it's already at capacity so we can't take on any new business there. So what I want to talk about briefly was our Global, the capability managed by our Global Equity team in Atlanta. We've got a track record here of just over 6 years, and that performance combined -- with which -- and the performance has been good, well ahead of benchmark, that combined with the fact that we've got capacity means that we are seeing quite a bit of emerging interest in this capability as we become better known. So these are some of the ones. There's obviously other areas where we've seen growth, but those are 4 of the key ones. So if I can move to my final slide, which is Slide 13, I think this sort of amply highlights that we have made good progress over the last couple of years in terms of engaging quality consultants, and that we are seeing meaningfully better outcome as a result. And these are coming up in terms of better flows and greater consultant advocacy. On the consultant side, we're seeing a broad range of activity across a wide range of a very stable value, bank loans, U.S. Value Equity, Asian Equity, including, importantly, Chinese Equity, Global and Global ex U.S. Equity, Global estimates return fixed income Real Estate Commodities and Risk Parity. And so that means to say, these are translating into quite an advocacy, better rating, in that in turn is the harbinger in my mind for proof of better flows in the future. At the same time, we are continuing to work hard to upgrade and better train our sales teams. The capabilities of the people here is critically, critically important. And so all this work together with a strong investment capability that we believe we have in the firm gives us reason to be optimistic for even better outcomes in the future. And I think, maybe just to finish, Marty, this potential in terms of future is reflected in the top line. I'm not in a position where I want to quote exact numbers, but I think I can say that on a revenue basis today, it's something like 30% up on where it was a year ago. And obviously, happy to take questions at the end of the session. So thank you, and I'll now hand it over to Loren.

Thanks very much, Mark. So let me turn to the assets under management slide. During the quarter, you'll see that market gains added $12.9 billion, long term net flows added $6.6 billion, FX added $3.3 billion and net inflows into the Institutional Money Market product added $2.6 billion. The increase in AUM quarter-over-quarter was $25.4 billion or 4.1%, resulting in our ending AUM of $641.9 million. Average AUM for the quarter increased 2.3% to $630.2 billion, again largely due to the market gains and the long term inflows during the quarter. Our net revenue yields in Q1 came in at 47.7 basis points. That was down 1.8 basis points versus the prior quarter. And I will cover this in some more detail later in the presentation. Let's now turn to operating results. You'll see that net revenues decreased $9.9 million or 1.3% quarter-over-quarter, while favorable FX rates added $6.6 million to net revenues. Getting a little more specific into net revenues, you'll see that investment management fees grew $17 million or 2.1% to $816.1 million. The increase was primarily driven by higher average assets under management and also to the fourth quarter, with favorable FX contributing $9.1 million. Of course, day counts came into factor as it always does. Two fewer days in Q1 relative to Q4 reduced our Retail Management fees by $13 million, and our management fees from alternative asset class investments were also reduced by an additional $7.5 million as one of our larger funds became substantially invested in Q1. And as is frequently the norm for such products, when a fund enters the new stage of its lifecycle, the management fees will step down to reflect this transition. Importantly, in terms of guidance, I would say that we expect the impact of this step down to persist through the second quarter. Service and distribution revenues decreased by $3.3 million or 1.6%. This decrease was a result again of day count, but also included $2 million in the reduction in 12b-1 distribution fees. And this is a result of fewer B-shares sales and a continued conversion of existing B-share fee structures to A shares, that's a theme that will continue as well going forward, perhaps not at the same amount, though, per quarter. The performance fees were a big factor in terms of the revenue difference. During the quarter, we had $3.8 million compared to $18.7 million in the fourth quarter. You'll remember in the fourth quarter, we had a $12 million performance fee that came from our Private Wealth Management group. The $3.8 million in performance fees this quarter came from Real Estate, our Australia business, as well as our Bank Loan area. Other revenues decreased $1.9 million or 5.5% relative to Q4. That was due to lower Real Estate transactions fees in the quarter. UIT revenues were flat relative to Q4. Moving on down, you'll see the third-party distribution, service and advisory expense, which of course we net against our gross revenues, increased by $6.8 million or 2.3%. That increase was consistent with the increase in investment management fees, as well as average AUM. Foreign exchange added $3.6 million to these expenses in the quarter. Now looking at operating expenses that came in at $479.7 million, that was a decrease of $1.8 million or 0.4%. You'll note that foreign exchange increased total operating expenses in the quarter by $5.4 million. Employee comp expenses decreased by $5.4 million, that's 1.8% versus the fourth quarter. Base salary increases, seasonally higher payroll taxes and higher severance costs in the quarter were offset by reduced variable compensation, including bonuses associated with the performance fees. Foreign exchange also increased the compensation expense in the quarter by $3.5 million. I'd also like to point out that in terms of guidance that we do expect the second quarter compensation expense to be somewhat higher, approximately $5 million more than in the first quarter, assuming of course markets are flat and no foreign exchange changes. And this reflects a few things: one, we have a full 3 months worth of base salary increases in the second quarter, share based expense as well which is granted in February. You'll see 3 months instead of 2 months in the second quarter. And we'll also see compensation expense show up fully in line item from the Hyderabad operation, which came over in the first quarter. Previously, that was in the Tech area, and so it moved up in the P&L. It's really a geography point. So the salary increases and the new compensation awards as I mentioned went to February 28, and so that's just a natural thing. If you look back to prior quarters, you'll see a very similar trend in terms of how we manage compensation first quarter to second quarter. Marketing expense increased $1.9 million or 2.7%. This is largely due to the higher level of advertising activity in the U.S. and again, we've discussed this in prior calls. Property, office and technology decreased by 1.7% or 2.6%. Additional property cost again associated with the opening of our Hyderabad office during the first quarter were offset by reduced outsource administration costs, as we are no longer paying the third-party provider, and FX added $0.6 million. G&A expenses came in at $61.6 million in the quarter, that's up $3.4 million, and this increase was driven by greater irrevocable VAT expense in the U.K., with FX contributing another $1 million in the quarter. So continuing down the page, important note, non-operating income declined by almost $7 million quarter-over-quarter, this was due to lower mark-to-market valuation changes on our partnership investments, as well as lower realized gains on fee capital versus Q4. I'll say a hard thing to predict but it certainly stepped down a bit in the first quarter. Our effective tax rate actually came in right in terms of guidance that we'd originally suggested our tax rate was going to be between 27% to 28% and came in at 27.6%. Adjusted EPS ultimately at $0.41, and again we're pleased to see net operating margin holding relatively flat to the first quarter, coming in at 36.2%. Moving on to the next page. Let me just take a moment to walk you through a reconciliation of the net revenue yield quarter-over-quarter. Our Q4 2010 net revenue yield was 49.5 basis points. Late in the fourth quarter, as you know, we had an $18.6 billion low fee mandate redeemed, and the result of which you would expect to see an increase quarter-over-quarter in terms of net revenue yields. In fact, the calculation would be about 0.9 basis points as you see on this chart. However, there are many other things that offset this increase, none should have been terribly surprising. First is quarter-over-quarter decline in performance fees, which reduced the yield by 1 basis point. Again, that was the high net worth business or high net worth performance fee in the fourth quarter which did not repeat in the first quarter. We have a day count issue, too, fewer days during the quarter resulted in 0.7 basis points reduction. The one thing that was hard for anyone to actually forecast, but it's important to factor in was the step down in fee rate in terms of this large alternative investment fund that became substantially invested during the quarter. That had an impact of 0.5 basis points. The reduction in B-Share revenues and Real Estate transactions fees in combination resulted in a negative 0.3 basis points. And then finally, in terms of the net inflow impact, we saw obviously, as Mark mentioned, great strength in our Stable Value business. You saw Money Market come in and then some of the ETF products. So that, coupled with actually a 0.5% decline in our Equity AUM as a percentage of total Invesco AUM resulted in about a 0.2 basis point impact. Moving on to the next page, just to sort of adjust the point, which I think is prevalent and we really want to clarify, really the point is that low net revenue yield does not necessarily mean low quality or low margin. We've seen significant inflows into our Stable Value products in the PowerShares and over the last 12 months and more recently in our Money Market business. While inflows in these products may actually reduce our aggregate effective fee rate, this does not mean that the flows are detrimental to the overall firm operating margin. We have attained sufficient scale in all of these products to achieve incremental margins on inflows that are higher than the firm's total operating margins. And so we are very pleased, and we hope you would be pleased with the growth in these asset categories and you will also see our firm's margin being positively impacted by any future inflows that we see across these products. And with that, I'm going to turn it back to Marty.

Great, Loren and Mark, thank you very much. And let me just summarize the quarter before the questions. First of all, strong investment performance in the first quarter contributed to a continued trend of positive long-term net inflows for the firm. We're very pleased with the progress we've made in consolidating the funds related to the Morgan Stanley Retail Asset Management business combination with no merger-related outflows year-to-date. And given the firm's continued financial strength, we're raising the first quarter dividend to $0.1225 per share, 11.4% increase. And all in all, we think it was a very, very strong quarter. But why don't we stop now and the 3 of us will address any questions people have.

[Operator Instructions] Our first question does come from Michael Carrier of Deutsche Bank.

First question just on the flow side. It looks like long term flows you're gaining some traction. And I just wondered if you can provide any other color, because I think the one pocket that people will tend to focus on is just the active equity and that tends to be a bit weaker. Given that the segments that you guys provide like we can see that the Canadian outflows that weighs on that number a bit. But if you can provide any other minute details, whether it's Quants products I think in the U.S. business just even though you're not seeing much from a dis-synergy standpoint, I mean, from what we can gather, you still see some outflows in the business and that's not too dissimilar from industry flows, it hasn't been like a strong equity flow market in the Retail channel. But I guess, just any other color on that. And I think in the past, you've given some stature details just on some of the sales momentum particularly in the U.S. Retail channel. So any updates on that would be helpful as well.

Mike, I'll start with the active equities question. You're right, obviously, in terms of the areas you mentioned, really the theme is mostly concentrated in the area of Quants, which has been a theme for I think the entire industry where Quants has really not played large in terms of consultants' playbooks right now, and we've seen industry-wide outflows. We do feel cautiously optimistic about the category. It's one where performance has certainly come back and it's one where we think, ultimately, we'll see a resurgence. But that has been, by far, the way the majority of what has affected our active Equity category. And again, I would just point out that, that tends to be at a lower fee, too. So it's certainly is not active equities in U.S. Retail Mutual Funds that we're talking about here.

That's helpful. And have you guys ever sized that up just in terms of the size of that business?

Yes, I don't think we've ever gotten to great specifics. Mark, I don't know if you want to comment on that.

Yes, thanks, Loren. Maybe a couple of comments. I think the first one is that, actually, we have seen pretty meaningful outflows over the last couple of quarters. I mean, if you look at the Slide 6, excuse me, you can actually see that in terms of inflows and outflows on the Institutional side of the business. You can see that by size, both in and out. It's a quite a big number. So I think what's pleasing from our side is that not withstanding the fact we've seen these big outflows, we're actually generating big inflows on the other side, so the net numbers become positive. Look, two other comments on the Quants side, not really sure when this will come to an end. I think we are seeing though a return on the performance side, which I think is a necessary pre-condition, our European strategies have been performing well ahead in terms of ahead of benchmark but for some quarters now and that's now translating into like a global capabilities and also some of the U.S. ones. I think the other thing though is that -- what's important to note is that the asset consultants themselves, not all of them follow the comp strategies, but those that do are still rating our capabilities quite highly. So I think a combination of improving performance, the markets returning to more normal in terms of their behavior gives us some sort of reason for cautious optimism as we go through 2011. But we're certainly not, to be fair, we're not seeing a return to massive inflows in the Quants for the time being.

And Mike, just in terms of the Retail question, absolutely we're tracking our plan in terms of the sales. I think we've been really pleased with sales, and we're seeing quarter-over-quarter growth in sales and we're seeing expectations of future growth begun, barring any market disasters. So the sales story has been very, very strong. Obviously, the things around that flows had somewhat to do with the redemption rates. And we still are seeing high redemption rates generally as with the industry in terms of the muni products and some other areas. So that's the theme that is a little harder to control. But in terms of kind of hitting the targets that we're looking to achieve, I'd say we're right on track.

That's helpful. And then maybe just a few things on the P&L. So on the revenue side, you gave the one detail on the $7.5 million in terms of the -- I'm assuming that's on the all side, the private Equity side, we've seen that, meaning just in terms of the structure of those products and how that works. Now if there's a future fund launch then obviously we'd expect that fee to come back in line, I just want to make sure, I'm thinking about that right versus do you think that's...

Mike, you absolutely are. I mean that's the way these types of products do work and so future fund launch would clearly offset any reduction. Because the future fund launch would start at the normal fee again, and so you basically recover that plus there's a clawback typically for these things were things have closed over multiple quarters. You'd actually claw back the prior quarters worth of revenues, too. So it's a little -- I don't want to call it a timing thing, but there is an element exactly to what you're saying.

Okay. And then on the comp, definitely came in a lot lower than expected. And then in the first quarter, you have, I think you guys mentioned in the last quarter, just the seasonal increase for like payroll taxes. So when you're saying $5 million up sequentially, is that a net number including all the different, I guess, factors that whether it's the Equity comp, the Indian operations, the payroll tax go down?

It is. I mean, there'll be some payroll declines. That will be offset by obviously the 3 months of salary and share-based comp and some other slips in terms of bonus pools being up given the fact that we're ending the quarter at a higher asset level than the average for the prior quarter in Hyderabad. So again, I think we managed -- and if you look back to prior quarters the way we've operated, it's been a somewhat similar kind of situation in terms of how we've managed through the first quarter.

Our next question does come from Robert Lee of KBW. Robert Lee - Keefe, Bruyette, & Woods, Inc.: Quick question. Could you maybe drill a little bit deeper into the ETF, UIT and Passive flows? I'm just trying to get a little better handle on the mix of flows and also AUM there, because obviously I think creating, at least for me, a little bit of confusion. You had about $2.7 billion of flows into PowerShares products excluding, not including QQQ, Passives and UITs, could you kind of size up the other flows and maybe asset levels there in the other product categories?

Sure. Well, I think in terms of the flows, I mean, UITs, I think, came in at roughly $1 billion in the quarter which is again somewhat consistent with prior quarters. Other Passive elements, we've got the Deutsche -- so yes, there's the Deutsche Bank, probably the rest of it is really around the DB PowerShares products. As you know, we have a relationship that was historic with the Deutsche Bank in terms of the commodity types of products. That's we act as a distributor of those products as opposed to the manager of the products. But we generate a revenue that really goes directly to the bottom line. And so the majority of the rest of that number is coming from that product. Robert Lee - Keefe, Bruyette, & Woods, Inc.: And maybe just -- I mean, since you include all of those assets I believe in your AUM calculation, I mean, you can take this as a suggestion, maybe just -- I think may be helpful to kind of break out those things that don't generate asset-based fees. Are you thinking about it down the road?

We'll certainly take that into consideration, Rob. I think obviously we're providing huge amount of disclosure already in terms of breaking out Passive and Actives, and it's getting complicated. So for us to cut it into yet more slices, is obviously another level of detail, and look, I take your point. We'll definitely consider if there's another way for us to show that. Robert Lee - Keefe, Bruyette, & Woods, Inc.: I appreciate it. And maybe going to the alternative flows, on the Active side, you certainly have positive flows there and listening to the comments around the Risk Parity products, where there any -- I'm assuming that's what drove most of those inflows, could you update us at all on any fundraising activity that may be going on, on Ross or whatnot? I know there's a limit to what you can say, but are they in the market raising the fund right now?

Well, I certainly I'd say that broadly and, Mark, you can feel free to chime in. The themes, the products that Mark put up on that page are the ones that have really been driving a huge amount of the flows and it's something that Real Estate and Stable Value are major contributors, there's other elements in terms of the emerging markets, smaller but growing. We certainly, we'd love to be able to say something on the Wilbur Ross, but we cannot for the reasons that have been very clearly articulated in the past. So unfortunately I do -- the most that you're going to be able to take away is what I mentioned around to date on the topic. Robert Lee - Keefe, Bruyette, & Woods, Inc.: And maybe one last question on Capital Management, raised the dividend, bought back some more stock. I mean, obviously your rate of share repurchase, I guess has, I don't know if picked up is the right word, but it has remained at decent levels the last several quarters or so, I mean, at one point you had talked about there being a corporate goal to actually build liquidity, more liquidity within the firm in a more consistent basis whether it's to be opportunistic, maybe pay down some of the outstanding line, I mean, how shall we be thinking about your use of cash from this point forward? Are you at a point where maybe you want to start chipping away more of the outstanding credit facilities, building up that cash reserve or should we expect kind of more the same going forward as compared to the last couple of quarters?

I will answer, Rob, one point. First quarter is always the most cash intensive in terms of outflows because of the bonus payments and taxes. So in terms of being able to do a whole lot with free cash, where most of that cash was going to those things I just mentioned. Going forward, I think, again you'll see a balance between opportunistic stock repurchases, paying down the credit facility and also ultimately getting some more excess cash on the balance sheet. We feel very comfortable in terms of kind of where the firm is from a financial strength perspective. It's something that we're going to be generating significant amount of free cash flow coming off of the acquisition and also the growth in the asset base that we're seeing. So we feel we can achieve all those objectives in a very balanced way. And again, in terms of kind of how it all pans out quarter-to-quarter, I think that will have a lot to do with where markets are and where opportunities are.

Our next question does come from of Ken Worthington of JP Morgan. Kenneth Worthington - JP Morgan Chase & Co: Just to follow up on Mike's question earlier. For the fund that was substantially funded that did not collect any management fees in the first quarter. Is that correct?

No, that would be incorrect. It's really just a step down that takes place -- there's 2 elements to the step down. For funds that are launched that are based on committed assets, if you get the full commitments and then you get a higher fee. At the point where you become substantially invested, the fee is applied only to the invested assets. So that's a difference. And then it also steps down almost by 1/3 of what it was. Kenneth Worthington - JP Morgan Chase & Co: I understand that for Fund IV, but the substantially funded products for the quarter, that did not collect any management fees. So you step down on the old fund, but you haven't collected anything on the new fund.

Right. So I think in terms of the nomenclature, when we're talking about substantially invested, that's the Fund IV that we're talking about, right. So just to be clear, became substantially invested and that's when the fee stepped down. I can't really talk about anything else related to the future fund. Kenneth Worthington - JP Morgan Chase & Co: Understood. I try to be vague enough to...

No, I know. Listen, we're dancing around the topic. So... Kenneth Worthington - JP Morgan Chase & Co: Perfect. And then in terms of expanding distribution maybe for Mark and then a follow up with Loren, can you talk about the progress made during the quarter in terms of getting more funds rated by the consulting channel during the quarter? And any new entrées into other distribution channels? And then on the Retail side, was there any progress made in getting Retail Funds or more Retail Funds into model portfolios?

Mark, do you want to talk a little bit about the consultant side?

Yes. Happy to do so. Look, I think in simple terms, I sort of touched on this very briefly. But if we look around the world on the consultant side and with this trying to be more broad based, not simply Institutional, we have seen a lot of consultant interest and activities, stable value bank loans, U.S. value equity, Asian Equity, and that both Asia is [indiscernible] Japan, typically but also Japanese equities, Chinese equities, Global and Global ex U.S. equities, Global absolute return fixed income, Real Estate Commodities and Risk Parity, and so will give us sense as to the trend here, Ken. I mean what we saw is that in the 5 most influential consultants globally, just during the first quarter, we saw 4 of those 5 increased the ratings on a number of products, including Real Estate and with fixed income, non-US Equity product, Private Equity and Risk Parity, the rate of change that we saw in terms of a number of increases to buys and so on, frankly it was a pretty strong rate. So I think on that side, we are actually making some real progress. Kenneth Worthington - JP Morgan Chase & Co: So the implication there is future sales are going to get better. And then can you quantify the -- one, not funded or high probability pipeline for the Institutional business?

Look, Ken, we haven't historically put any numbers out on this. Look, it's something that we're talking about internally in terms of doing so. We've been keeping a track of our sales pipeline for a bit over a year now and we're just trying to get a sense as to how reasonable or frankly, accurate it is. I think the one thing I can say in terms of the prospects is that right at the moment, the pipeline, and we look at it both on a revenue as well as an AUM basis, it is on the revenue basis something like 30% bigger than this time a year ago. I think the other comment I'd make is that we look at it as the base or the basis of that pipeline is also broader, I mean just not as concentrated as it was a year ago. So I think all of that adds up to, if it was to be if it was to translate into reality [indiscernible] directly then we'd have reason for optimism that the sort of current trends we're seeing should be continued. Kenneth Worthington - JP Morgan Chase & Co: And then the Retail side, getting into model portfolios, progress there?

Ken, it's Marty. Yes, it's just -- what Mark talked about really continues through the Retail channels too. Getting more model portfolios, continuing to get deeper, broader access relationships to key distributors within the United States. And again, all the -- if you want to call it, preconditions for continued success, increased net flows are very, very much in place. And the other area that we think we're very focused on as a firm too, is right now, we're probably in a top 10 position in Continental Europe. We're not happy with that, and we think we can be just much more successful there. So that's another area of our immediate focus over the next 6, 12 months. We're expecting to see some incremental strength coming out of that part of the world, too.

Maybe just a final comment Ken. You said we had over the last couple quarter or 2 started to see some, I think, quite good broad-based momentum in the sort of more positive fund [indiscernible] channel. So I think that's been quite pleasing for us.

Our next question does come from Craig Siegenthaler of Crédit Suisse. Craig Siegenthaler - Crédit Suisse AG: Just first question, I was thinking about Mark's prepared comment on the international growth fund. And I'm wondering what percentage of active long term AUM is now at capacity, and maybe what percentage is near capacity. And maybe kind of rough ballpark numbers to make it easier.

Yes. There are very few products that are at capacity within the firm. As Mark talked about, one emerging market's capability is at capacity, couple of the small caps are at capacity, but there really is just an awful lot of capacity left within the firm. So we don't see that as a headwind for us, as an organization. Craig Siegenthaler - Crédit Suisse AG: I got it. And then just on kind of your commentary on the incremental margins from the Passive ETF and UIT business, you said they're higher than you're kind of existing business. Can you also kind of ballpark on average where those 3 areas are? Because a lot of these products, it's not really kind of a incremental comp expense. It's more of maybe an incremental kind of non-comp expense. How do you think about the incremental operating margin on another dollar that you gained in these buckets?

Yes. It's a great question. I mean, they range -- as I said very similar to our existing products and we've talked about incremental margin of 60% to 65% for the firm as a whole. I would say they fit in that range. Again striking the fact that you're not having to pay compensation, but you do have other variable expenses whether you're licensing an index or PowerShares products, or you have to pay for VAT and other things. But when you put it down on paper, they are coming in at those types of incremental margins. So we feel really good about continuing to grow those flows and feeling good that, that is only helping on margin expand as we bring that stuff in. And that will be true for Money Market as well.

Our next question does come from Bill Katz of Citigroup.

Just with the flows a little bit, if you could mention a little bit some of the trends that's going on in Canada, the U.K. and Europe, where you've seen some attrition, is it sort of macro-driven just in terms of the things going on in the marketplace or is it performance issues, any sort of qualitative there would be helpful?

Maybe start with the U.K. there, one of the macro environment in the U.K. has been a topic. But within it, again, we're just in very, very strong position as a firm, I think probably recognized as probably the top money manager there, somebody had mentioned the relative performance of the Equity Income products. I feel very, very good about them. If you look over beating peers over any relevant period, absolute returns during any relevant period, and again, just really, really tough, what hurts arguably the absolute top money manager in the United Kingdom, by one of the top money managers in the world, and just feel very, very good about where we're positioned there. So I feel very good about that. If you look at Canada by 2 topics: one, there is a -- it is different than anywhere else in the world right now. Actually Australia probably the same but the banks are very, very strong and they've done very, very well in money management with regard to vis-a-vis independent money managers. So that's a current trend within that, our Relic [ph] performance in Canada is improving in the core product, but I think very, very importantly, where we are seeing traction beyond that sort of traditional core retail businesses in ETF market in Canada is a competitive advantage for us there. And also looking, we have very little positions in the Institutional market in Canada, and we have just started in the past 6 months going into that market. And early days, we feel very, very good about the prospects for us in Canada. So in total, we think Canada is a very important market for us and will continue to do very well in time.

The one thing I would also just mention on U.K., is if you look at the U.K., there was an Institutional outflow in the U.K. and if you strip that out in the sort of large, I think on the order of magnitude of $1.5 billion, the Retail business is actually not doing badly at all. And so it's a little bit of noise in the U.K. domicile flow number that should not alarm you.

Okay, that's helpful. And the second question is maybe for Mark. just going back to that slide on Page 13, which is very helpful so thank you. You mentioned earlier that sort of Quants, some sort of out of phase is it sort of reasonable to conclude then, maybe ask it like, could you just talk a little bit about the step up of redemptions in the fourth, the first quarter and the outlook over the next couple quarters as an offset to the gross sell opportunity?

Yes. I think I mean, you can see it in the chart the first problem that the nature of the Institutional businesses is that the flows can be very lumpy. They can be -- individual mandates can be very deep both coming in and going out. I think having gone through the period where our redemption rate and outflows were lower than we would normally expect the last couple of quarters have been a little bit higher. We've had capital mandates has been some on the comp space but there's also been some strategic asset allocation changes by some clients that have resulted in some big outflows. I think in simple terms, we would not expect this to continue whether it turns around the next quarter or it's a quarter later, I think it's unclear. But on the other side, I think the first one is we would expect that redemption rate to come back to more normal levels. So if you're looking at the chart there, where we've been running 4 to 5, I think that's probably a little bit below leverage. The 10 is above average. So we'd hope to get back to more normal, maybe 5 to 7 top numbers for the third quarter going forward. I think what we do need to do though is to continue to make sure that the inflows continue to be strong and broad based. And as I said, that's the top line indicates there should be reasons for optimism on that.

Okay, that's helpful. One last one for Loren and maybe just geography as I said before but with the headcount additions, I guess, for the end of the year you sort of highlighted the Hyderabad. Any incremental cost savings as a result of the step up in this area?

Yes. Over time, I think you'd expect to see roughly $5 million over the course of the year kind of savings as a result of going from the third party provider to having that on our books managed by ourselves. Again, that may be something that will be hard to see in the sense that we're growing Hyderabad generally and so it's an expense base, it's growing but it's also reducing, that's probably the biggest impact to the extent that we continue to smartly allocate sort of our operations and resources in locations like Hyderabad. It will have a bigger net cost savings for us than what I just mentioned in terms of the transfer.

Our next question does come from Michael Kim of Sandler O'Neill. Michael Kim - Sandler O'Neill + Partners, L.P.: First, just to kind of follow up on the flows. I understand it's still early days as it relates to kind of fully leveraging the combined Invesco and Van Campen franchise. But at the same time, some of your competitors continue to put up strong flows on kind of the actively managed side despite less than ideal macro conditions. So I guess, the question is, where do you see the greatest organic growth opportunities in the near term? And do you really need to see retail investors coming back to equities more forcefully in order for your flows to really pick up here?

Yes, a couple of points here. We're as focused on this as you are. And my point of view is this: You start with broad deep range of products that are performing well, and we absolutely have that. I mean, it is really very, very strong. And we now find ourselves in a position that we can be very, very helpful to the main distribution partners in multiple ways, whether it is the UITs, the ETFs or the open-ended mutual funds. And again, the strength of the performance is really important for us. The other reality though that I think is just clear is the truth of the matter is, Invesco, as a name brand, has not been in the Retail channel. It has not been known to the same degree as another firm that has been in it for 15 years. So we, as I've said in the past, from a standing start with same relative performance, somebody's been in the channel with the name brand for 15 years is going to outpace us at this time. We're working very, very hard to close that gap. And again, I feel we have all the talent on the ground. I feel we have great relations and the client base and people are also very, very strong. So I think, again, I think we're in a very strong position to do very well in time.

The other thing I just want to point out, I think we'll be even better positioned once we complete the fund mergers. Because right now, obviously, there's still a lot of noise and a lot of product out there that no one's going to sell or buy into because it's clearly is an orphan thing that's going to get moved in. And so I think there's going to be some benefits when that happens that you'll be able to see.

Absolutely. Michael Kim - Sandler O'Neill & Partners: And then maybe if you could just give us an update on kind of the ETF business in terms of growth prospects, both here and outside of the U.S? And then also any updates on where you stand as it relates to actively-managed ETFs?

Yes. Right now, the global franchise ETF business is about $60 billion. It's the fourth largest ETF provider, and I think it's all obvious to everyone on the phone that we're the big asset base that has historically been in more of the Passive area. We feel that we have absolutely been the first mover and the leader in the value-added ETF products. And if you look at the relative asset classes, that's where our flows are going in recognition of fundamental indexing and the like, has been a very, very powerful trend. We're rolling into 5-year track records, good 5-year track records with those and I think that's some of the things that you're doing in this flows up here in the United States. I mentioned Canada, they've exceeded $1 billion in ETF flows in a matter of 6 or 9 months. So very, very strong. We've been in Europe probably 4 years now. But again, from a standing start, we're not where we want to be. We think the prospects are good for us on the continent, and we'll continue to push that very well. So I think we're positioned very, very well, we like the ETFs that we have, we like the, let me call, the construct of them very much. And I'm sorry, I forget, what was your other point? Michael Kim - Sandler O'Neill + Partners, L.P.: Just on the actively managed side.

Yes, we did -- it's quite a topic, isn't it? We did launch an active ETF, actually 3 of them now, I want to say it's 2007. And I should know the date off the top of my head. And with great fanfare and not a whole lot happened. And there's an industry discussion about the role of active ETFs and the like, and we'll see. My personal opinion right now is that not all asset classes are appropriate in the ETF wrapper. And if you think of most equity investors that are building positions, they're just not in a position to have their portfolios published everyday. And so I just don't think that you're going to see that be a very successful category within active ETFs. Now on the other side, fixed income and very, very liquid type portfolios and an active portfolio does make sense. But again, I come back to what we have, and these value-added ETFs it's further up the food chain away from beta products, if you would like to call it that. And we think that's a real sweet spot. It is for us now and we think it probably is for the industry for a period of time.

Our next question does come from Roger Freeman of Barclays Capital.

I guess, just come back to a couple of topics that have been discussed here. On the Retail side, I mean, it sounds like at this point given you've had no meaningful outflows related to the fund consolidations that the $2 billion number from last quarter's you don't think that's going to happen at this point. Correct me if I'm wrong in that, but then secondly, how do you think about -- and Loren, you sort of mentioned noise, how do you think about the lack of sort of growth sales on these funds and what that might have been? I mean, is it just do you think that at least anecdotally where you pick up to the channels that net flows might be closer to a push on those funds rather than the negative numbers we're seeing?

When you talk about these funds, you're talking about the ones that are to be merged?

Yes, I'm just looking like the top -- your top 10 equity funds, some of which are now Invesco Van Kampen funds. And really 7 of your top 10 equity funds are negative flows, and if you look at gross income, of the Equity income, I guess, there's the performance has fallen off a little bit. Maybe that's part of the issue there, but I mean I'm just trying to get a sense of how much do you think of lack of selling is actually contributing to the negative flows right now?

We think it's not a lack of selling at all. We think the #1 driver of any redemption rate is going to be the demand for the products. And so to the extent that people are not wanting Muni products, we're going to suffer that as well as anybody else in the Muni space. In terms of domestic equities, sort of coming back, but I think it's still not as much as what we've seen in some the other equity categories or the hybrid categories, where we don't have as strong a footprint as others do. So I think it's just where we're positioned. It's probably the biggest element in terms of our outflow picture right now, combined with what Marty mentioned in terms of we're still building the name of the brand. But I mean, again, I think we have every reason to be very hopeful going forward because we don't think any of these elements are going to persist. I mean it's just going to get better and better. So it's hard to point to it other than say -- but in terms of our plan in sort of hitting the sales targets that we thought were realistic, we are tracking that very well now. So we're not at all uncomfortable with the results we're seeing on the sales side in terms of the redemption. That's where we look at us versus the industry rate and we say are we somehow an outlier. Are we doing something that's clearly different then, and I think we don't see that.

But within just to tie a couple of points together, it sounds like you're not getting redemptions as a result of the fund mergers. You're not suffering from a lack of selling. So I'm trying to figure out what the noise is that when you get past June that things will necessary look any different?

I think it's an issue of underperformance of the funds that are currently going to get merged into some of the better performing funds. Clearly, if you're an underperforming funds, sub-scale and that's going to get merged away, you're probably not going to get a whole lot of flows and it's going to be in highly redemption rate. I think the good news is that one's those assets are merged into the better performing, more redemption rate funds that we'll see those assets actually take on a lower redemption rate. That would be our hope. And also, because the performance will be better, and it will be a better experience for those clients.

That's helpful. And then just lastly, I mean as you think about your sales targets and some of the anecdotal comments you've made over the past year and change about expanded distribution agreements, et cetera, how good do you feel about that pipeline and when that starts to come on? And do you think post-June you are able to paint that picture for us a little bit better?

The best that we can do, I can tell you, the feedback that we're getting across the distribution from head offices through the people in the field, we are positioned very, very well. The relationships are very, very strong and I believe we are doing all the right things. I think Loren's made a very important point. The more investors start to move into U.S. Equity funds, the better we will do. We're positioned very, very well against that as a firm. And again, Ken asked earlier we're getting into more models. And during this process, you get on hold when you go to your post merger process of the on-hold statuses. I think they've probably all have been eliminated right now, which is also very important thing. So we would think post all the mergers in the second quarter, we just have to be in a very good position to see increasing flows and participate in the industry in a real way.

Next question does come from Jeff Hopson with Stifel, Nicolaus. J. Jeffrey Hopson - Stifel, Nicolaus & Co., Inc.: So you talked about Continental Europe a little bit. Which products there would you expect to kind of spur...

[Technical Difficulty] J. Jeffrey Hopson - Stifel, Nicolaus & Co., Inc.: Sorry about that. In terms of Continental Europe, you spoke a little bit about the potential first in recovery there, which products could lead that? And then in Asia better quarter this month in terms of flows, which are the products there that are getting well?

I think I got the question, so let me just talk about Europe. We're very, very focused in Europe. We got through C Cap products like everybody has purchased across the border market. And where we think we're very, very strongly Invesco European corporate bond fund has been a very strong product, our European Equity products are very strong. Actually, the PowerShares EQQQ actually is getting some real traction there, also the Invesco Asian Equity funds. So it's really quite broad based. And historically over the years where we have played more is not necessarily in the core. What would be core in Europe would be things like a Euro corporate bond fund or really a European Equity fund and now our Equity products are -- our European Equity products are good, strong performing, and again, that will put us in a good position on the continent. And I think you asked the same question on Asia?

Asia. I mean just, I know one of our biggest successes has been around our U.S. REIT products. It's actually been selling very, very strongly in Asia, particularly in Japan. We've got a balance fund that's one of our top performers and then within our joint venture small and mid-cap funds are selling as well. So again, it's hard to point to one particular product, but I think the REIT piece again on the strength of the Real Estate and our capabilities there is playing very heavily in Asia.

Our next question does come from Marc Irizarry of Goldman Sachs.

Just on the performance fees, it looks like, this quarter is seasonally lower you can say. Can you give us some help, Loren, in terms of what the sort of seasonal patterns should look like for flows -- for performance fees? Are you seeing more AUM coming in with the performance fee features? And then also, how should we think about realization from Wilbur Ross now that the fund looks like it's sort of more on harvesting mode rather than investing mode?

Yes. I think in terms of the seasonality that people may have historically seen with our performance fees, that came from the U.K. and from the Quant group. Both of those areas, I would say, for the near term, we wouldn't expect to see performance fees coming from either of those areas. So the performance fees that we've seen has been a little bit more episodic for the high net worth business, which has been actually paying out at year end over the last couple of years. It's been mostly coming from an MLP type of fund, which has just been one of the top funds in that space. It could potentially do it again this year. And so I don't want to forecast it. It's off to a very strong start but again, it would be something that would be a year end type of calculation and not -- we would not recognize anything in any of the prior quarters. You could see performance fees showing up from bank loans and Real Estate and other places and in smaller levels but generally, I don't think there's going to be anything that I could point to that would say you should expect something. The Wilbur Ross on forward type of products, obviously just finished substantially investing this product, as I've mentioned. And so in terms of kind of the realizing of carry and performance fees for us, there's a watermark that it has to get over. And so it's going to take some time, I think before we would begin to see things show up on the performance fees. So that probably my guess is more of a 2012 type of event and beyond than it is a 2011 event.

And then just on the servicing and distribution fees relative to the distribution expenses, it looks like you have this somewhat of a drag given lower transaction fees. Is that going to continue? Should we expect sort of the margin between the servicing and distribution fees to continue sort of outstrip the expenses there the same rate?

I think the theme that about B-share role-off is something that throughout, say, U.S. B-shares have a higher rate in terms of the distribution revenue. I'd say many outfits are no longer doing B-shares, and it's really changed the mix of what they're selling. And we're not different in that respect. So that roll-off is something that will continue over probably several years in the sense that there's a big book out there that, that goes. It's not going to be dramatic though. It's not something that's going to move around quarter-to-quarter. I think the $2 million step down may be a little bit more dramatic than what you should expect going forward. It's probably under $500,000 really quarter-over-quarter going forward.

And then Marty, I think you touched on this earlier. But can you talk about the growth in sales that you're seeing in U.S. Retail ex the Passive product? Just are you seeing an acceleration or pickup sequentially in sales in U.S. Retail Active product?

Yes, we absolutely are. And as Loren has said, consistent with our -- our plan has been very consistent with that. But what we -- and I think some of the questions that people have had, part of the question is do we think we're operating at peak growth sales, the answer is absolutely not. We expect it to accelerate and increase gross sales in the quarters ahead as, one, investors come back to the market and our positioning -- U.S. equities in particular for us, come back into the market and our position against that, we think we're positioned very, very well.

Our last question does come from Jonathan Casteleyn of Susquehanna.

I appreciate the disaggregation of investment management fees quarter-over-quarter, but just wondering year-over-year, how does that look? And are you seeing any core fee pressure from Passive or lower fee products?

Yes, I mean, I think the management fee element is going to be affected by mix. And so in terms of our mix, I think we've certainly seen equities expand. We have the acquisition, which was probably the biggest element, at I think roughly 49 basis points, 47, 49 basis points. So those are going to be the elements that will reconcile year-over-year, more than anything else. I don't think there's -- there's not been any sort of pressure to reduce management fees because of competitive reasons. Again, I think when you talk about ETFs and there's been a lot of discussion in the market about ETFs reducing fees, we've not seen that same pressure because we're not sort of in a commoditized type of ETF products. So I would say overall, to the extent and certainly to the extent that we've grown and we hope to grow outside the U.S. so that we would hope to see that fee rate increase. I don't have any more detail. If you wanted any, it may be something we could capture off line, if you'd like.

No, that's fine, that's helpful. Thanks. And just on the buyback in the quarter, can you help me characterize or understand if it was really -- is it related to reducing RSU expenses or did you -- did the stock screen well against your internal growth expectations?

Definitely the answer is both. We have a desire to reduce any RSUs associated with and it's really stock units, or stock associated with our share grants. And so we made some headway into that. But we also saw the price was quite attractive. And so again, you should expect us to continue to still, more to do. And again, it doesn't necessarily stop at the point where we finished that element. We still will be active in terms of buying stock if the stock price warrants it.

Right. And then any sort of forward expectation, obviously of $0.5 billion in cash and then forward free cash flow any idea what sort of capital could be earmarked for forward buybacks?

Well, again, our priorities are structured in a way that if we don't have any acquisitions, and clearly, if we don't have any internal needs, which we generally don't have anything of any substantial amount, our dividends are going to grow single digits. We would expect to see, over the long term, a fair amount of cash being able to be returned in the form of buybacks. So I would say that, that would be the default in terms of where the cash will go. We do have a desire to continue to build up some cash on the balance sheet in excess of the European subgroup cash. And we also have a desire to pay down our credit facility. So those are elements that we're going to balance against straight buyback.

Well, thank you very much, everybody, for your questions and interest, and again on behalf of Loren, Mark and myself, thank you very much, and we will talk to you next quarter. Have a good rest of the day.

Today's conference has ended. All participants may disconnect at this time.