Good morning. My name is Nicole and I will be your conference facilitator today. Thank you for standing by and welcome to the Janus Henderson First Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. In the interest time, questions will be limited to one initial and one follow-up question. In today's conference call, certain matters discussed may constitute forward-looking statements. Actual results could differ materially from those projected in these forward-looking statements due to a number of factors, including, but not limited to, those described in the forward-looking statements and risk factors sections of the company's most recent Form 10-K and other more recent filings made with the SEC. Janus Henderson assumes no obligation to update any forward-looking statements made during the call. Thank you. Now, it is my pleasure to introduce Andrew Formica, Co-Chief Executive Officer of Janus Henderson. Mr. Formica, you may begin your conference.

Welcome everyone to our first quarter 2018 earnings call for Janus Henderson. I'm joined by Dick and Roger, and today Roger will be taking you through the results for the quarter, and then after his prepared remarks, we'll be happy to take your questions. Before we start, as you know, we take a long-term view of our business versus the short-term view that is inherent in quarterly reporting. To that extent, going forward, Roger will be providing you with updates on the quarterly flow performance and financial results on our first and third quarter calls, and we will use the second and fourth quarter calls to address these same items, along with a more detailed discussion on the business and our strategy from Dick and myself. We believe this change will help better align our calls with the way we manage our business. With that said, let me turn it over to Roger to walk you through the first quarter results.

Thanks, Andrew and thank you everyone for joining us. The first quarter results can be characterized by three points: First, investment performance continues to be strong. Second, we finished the quarter with slightly higher assets under management, despite market volatility and net outflows experienced during the quarter. And third, the financial results were strong, and reflect the growing economies of scale in our business and our ongoing delivery of synergies. Investment performance as of 31st of March, remains solid with 68% of firm-wide assets meeting their respective benchmarks over the three-year time period, improving slightly from the prior quarter. With the return of volatility and increased dispersion between stocks and sectors that we saw in the quarter, it was very encouraging to see our first quarter investment results be so strong. Total company net outflows whilst improved compared to the prior quarter, are still far away from where we want them to be. Despite the outflows, we remain optimistic about future prospects, given our global distribution footprint, our range of product offerings, and our good investment performance. Our financial performance remained strong with adjusted operating margins slightly above 40% reflecting AUM growth and the benefits of the merger. And finally, today we announced that the board has declared a quarterly dividend of $0.36 per share, which is an increase of 13% from the previous level. Moving to investment performance, which is on slide three. Overall, performance remains very good, and importantly, as you'll see on the right-hand side of the page, it's improved on a year-over-year basis across the one, three and five-year time periods. Performance in the quantitative equity capability, which is the INTECH business has seen the biggest gains as performance has been consistently strong since the end of 2016. INTECH's strong one-year performance with 91% of assets…

Thank you. Ladies and gentlemen, at this time, we will conduct a question-and-answer session. [Operator Instructions] And we'll take our first question from Ken Worthington with JPMorgan.

Hi, good morning and thank you for taking my question. Maybe, first can you give us an update on the cross-selling of products between Henderson and Janus? Where are you starting to see successes? And can you give us some numbers around maybe the gross dollars that have come from cross-selling, either during the quarter or since the merger was closed?

Hi, Ken, it's Andrew here. Look, there are evidence coming through in the results here. That include, we mentioned the TAL mandate in Australia that also linked through the relationship with Dai-ichi. And that was into our historical Henderson capability. If we look at some of the success we are seeing in the U.S. Mutual Fund space, intermediary space in the U.S. that's the old Henderson funds are doing extremely well and running at significantly higher run rates than they were prior to that. And actually, we are seeing at the top 10 fund, an increase in growth into both sales and in the top 10 funds that we were seeing redeemed prior to the merger of the redemption rate are falling on those. So, we're definitely seeing it. In terms of giving you hard numbers, Nicole, really we want to do is just focus on the quarterly numbers in here and at the half year we will think and spend a little bit more time on going into some of the details. But it's still very early days, we always sort of take up a year to get cross-sell benefits, but we're definitely seeing greater attraction and support from that. Clearly, improvement in numbers, I think I spoke to you once before saying INTECH was one of the improved areas we wanted see in the -- in Europe, and the numbers there are meaning we are starting to get some great attraction with clients over there on that front. So, when you look at the products such as Life Sciences, the Balanced Funds doing well over in Europe, as well. The Forty funds, for example, which is Doug Rao representing North American equities now for us in Europe, there is number of key examples. But we will pick up in a bit more detail in the second half -- in the first half, second quarter numbers if that's okay.

Okay, fair enough. And then can you talk about the impact that FX had on the results this quarter. Maybe what was the impact on revenue from FX in the weaker dollar? And what was the impact on OpEx from FX in the weaker dollar?

Ken, the impact of FX is about $3 billion on assets. We are about two-thirds U.S. dollar about 20% Sterling, and so the residual split largely between the euro and Aussie dollar. So, that -- as you say that will drive -- that will drive revenues, but we are relatively well naturally hedged on costs as well. So, we obviously do also have costs in Sterling and Aussie and a smaller amount in euro. So, that drives both revenues and expenses up, but I guess the easiest way to think about it is on an asset basis. And like you said, FX drove $3 billion on our $370 billion of assets.

And we'll move on to our next question from Kieren Chidgey with UBS.

Hi guys. Two questions, if I can. Roger, just keen to -- following from the framework you've outlined around how you're thinking about capital on slide 12. How would you advise we think about that in a more quantitative framework? I mean how should we be thinking about excess cash where the business is today? Can you give us any numbers?

So, as I said, where we are at the moment is -- the Board has looked at this and has asked that we look at putting a program in place, which means working through with a dual listing, working through that on both markets is a bit of process, as you know to set up to get that in place. And then the Board will actually -- and get the ASX to approve it. And then the Board will actually approve an amount. So, we will let you know that as and when the Board approve that. But broadly, as we said, we talked about a very disciplined process of returning a decent proportion of excess cash and when I say excess, I mean, in addition to anything the business uses or needs for future growth. This is a deal that we've done for growth. But we'll give you specifics, as and when the Board approve that, relatively shortly.

Okay. But in relation to the $1 billion of net cash you've got today. You're not outlining to what the actual sort of requirements that you would see against that? And what the excess position today is?

No, like I said, we will come out and very clearly with how much the -- how much any buyback would be when the Board have approved that.

And secondly, Andrew just on the institutional fund flow comments you made reference TAL in Australia being a fairly significant contributor? Was it largely concentrated around that? Or is it sort of a broader mandate we need to come through and sort of any comments on how the pipeline is building from an institutional point of view?

Yes, in terms of TAL, I am sorry, we can't go into the details to that. But in terms of the institutional success we are seeing out of Australia, it's not just TAL we are actually seeing, quite good success in the Australian marketplace. Both with our domestic capabilities for example, our fixed income capabilities down there continue to do well. And also, some of our international capabilities in particular, emerging market equities have seen some success in the quarter from there. So, it is quite broad-based. We are pleased to see it's both domestic and institutional -- international products sort of getting traction there in the Australian market is probably one of the areas where the business has done quite well through the merger, because of the mix of capabilities have really driven and increased our profile in the marketplace where both firms were probably outside of the top 20. And we are just outside of the top 10, now as a combined group.

And we'll take our next question from Andrei Stadnik with Morgan Stanley.

Good morning. Can you hear me okay?

Yes, we can Andrei.

Fantastic. I wanted to ask a couple of questions. One on base fee margins, the other one on compliance costs. In terms of base fee margins, it's quite an impressive outcome for basically margins to remain flat quarter-on-quarter. Despite and by the sound of which relatively more inflows into insta [ph] and some outflows from retail. And that's coming in addition to earlier comments of your said insta [Indiscernible] clients aggressively reviewing existing price. And so kind of what's helping stabilize the base fee margins given some of these insta headwinds?

Hey Andrew, it's Rogers. I think it's a quarter-on-quarter, but I don't think anything has really changed I've said before that we -- we've talked about fee margin compression of around a basis point a year. And I don't think anything has really changed in that. Like you say we're pleased to see margins remain relatively constant on that. It is a mix of business. We are winning in some areas. Some of the institutional money that Andrew has just talked about the emerging market is obviously at a higher rate than the sort of cash type products. It is very much, very much dependent on the mix of business coming through, but I don't think there is any change in the trajectory on fee margin. So, I think that's the most important thing for -- that you should be thinking about going forward.

Thank you. And my other question just around compliance costs, you flagged recently that was an area where you've seen a little bit of pressure. And for example, you pointed to maybe needing two senior risk leaders, as opposed to just one. So, could we get a feel for what kind of percent of the cost base is related to compliance? And are you starting to see -- are you thinking that now with different U.S. administration perhaps the compliance costs growth will normalize?

I think we've talked about over the last few years, both -- the two organizations have talked about this being an area of an increased needs, and that was part of the reason of the deal, of the benefits of scale. So, without a doubt, we are seeing that. There are some people out there, saying that the -- we, the industry are sort of over the hump. I'm not sure we would agree with that. There is a significant amount of work still to be done and the regulators all around the world, their expectations are higher than they were. So, we don't expect that to decrease. In terms of the overall percentage cost of the business, I guess it depends how you define it. It is a part of everyone's job. It's not just the good sales we have in the compliance function or the risk functions. It is a part of everyone's job. So, I guess if you added it up, it's a large amount. The narrow proportion of people are actually working in risk and compliance, it's obviously a smaller number.

Andrei, the only thing I'd add to Roger's comment about people saying across the hump. I think we're probably part a lot of the regulation -- new regulation coming in. So, from the regulator's eyes, they may be saying, they're passed the peak. But the implementation phase carries on. So, for example, this month we've got obviously JDPR over here Europe to implement. We still have no idea of the final stake for Brexit, and that could be a significant cost for us, we are preparing for that, which we just don't know the impact of it. Until we know the rules and what's it like. So it certainly doesn't feel like from a cost side that the compliance burden that we've faced is abating at this point.

This is Dick, it's worth mentioning also, it's still very early days and could settle out either higher or lower overtime.

And we'll take our next question from Alex Blostein with Goldman Sachs.

Hi, good morning. This is actually Ryan Bailey filling in for Alex. I was wondering if you can dive into INTECH a little more. Can you give us a sense like where the flows came from? How we should think about performance year-to-date instead of on a one-year basis? And how the product should operate in a, I guess a higher volatility environment?

Yes. Ryan, thanks very much for the question. The first part of it was where did the flows come from. And for the first time in a while, we're happy to report that U.S. large cap had some significant inflow. So, one quarter is too shorter a time to draw big lines from, but that's an encouraging sign. Remind me again, what was your follow-up?

I guess just around year-to-date performance and then, if we have a pickup in volatility what that would mean for the products?

For the first part year-to-date performance has been encouraging. As we've talked about too many times before they put on a really rough six months in the back half of 2016, and they've been digging out since that point. And they've been doing a really good job. And they continue to outperform through this year. So, that's all encouraging. But it's fair to say that -- we are still looking for to continue the improvement to get back to full health in sort of erase the pain of the second half of 2016. In terms of market volatility, INTECH makes money from relative volatility of stocks. So, it's not a traditional measure of overall market volatility, it's not the index volatility, it's the volatility -- the relative volatility of the pieces in the index that really drives success for INTECH. And so, it's a little hard to predict with mathematical certainty as they would want to do, but from a layman's point of view, I think, non-trending markets with volatility are good for them. And we continue to be very optimistic about their future. But it's fair to say they've got to keep putting on the good numbers to fully overcome the pain of the second half of 2016.

Got it. And then if I could also just ask the $12 million that showed up in G&A from legal expenses, what drove that?

This is the second of the legal case we had against an ex-employee that has been referred to as the peace case. Thank you very much.

And we'll take our next question from Patrick Davitt with Autonomous Research.

Thanks. Good morning guys. Could you give us an update on how you are finding your positioning amid the pension consolidation process in the U.K.? Any notable anecdotes around keeping accounts as that plays out, winning new accounts as that plays out?

No real update I will give the change certainly on a quarterly basis. We are very well-positioned in the U.K. institutional marketplace, very well-known and get very high grade for not just of the investment products we have, but also the service we're giving that -- in that channel. Obviously, as we went through the merger a number of fee consultants sort of put us on watch while they looked through the merger and where used the last quarter, this quarter, as update on how things are going, and they're going quite well. So, I certainly think the strengthening of the product line that we have has only improved our position as the industry here like other industry sort of consolidates and looks to more key detailed partnerships rather than sort of to have fewer names but a deeper relationships. We see ourselves are well positioned, particularly through the merger, and therefore the capabilities we've got from that. And that's definitely coming out from the conversations I mentioned earlier, like INTECH being with their improved numbers actually being quite strong in the demand in terms of some of the positions we are taking out. And that's definitely reflected in the U.K. marketplace.

Great. Thanks. And then maybe for Dick, last week, we got, I guess probably the most definitive comment from a U.S. Retail Manager that they needed to rationalize fees lowers, noting tax reform is an opportunity to do that. Could you speak to the U.S. business exposure to that kind of trend? And if you've been through a similar review recently in the U.S.?

I'd say we've been through a fairly constant set of reviews. If you look across our key partners in the industry, they have been in a fairly regular downsizing of the number of funds they have on their platforms, and the number of partners they have. And a fairly regular drumbeat of conversations around fees as well. So, I don't think this is a -- some sort of a major step change, but it's a continuation of the pressures and conversations that have been ongoing for a long time.

And we'll take our next question from Nigel Pittaway with Citi.

Hi guys. First question just back on that $12 million in the general admin expenses. Presumably given the nature of that, that's not -- wasn't in your original 12% to 14% non-comp cost growth guidance for the full year. Is that a fair statement?

Correct. Correct.

Yes, that wasn't in the guidance. Yes. Okay. Next if you take the [Indiscernible] projection sheet you referred to in the appendix, it does seem as if the first quarter was a relatively low number for [Indiscernible] relative to what you're expecting in the next three quarters? Firstly, is that the case? And secondly, I guess what's the reason for that? And is there any guidance you can give in how that's likely to pan-out quarter-on-quarter?

Yes, the first quarter is a light quarter because of the way that some of our schemes are maturing and rolling off. So, we're adding -- effectively we had a month of from couple of our schemes in the accounting them, Nigel. So the first quarter is a little bit light, like you say, is a little bit light and that's part of the reason why we've given this page. So, you should expect all other things being equal, as we've said that there will be some moves in here, because some of these grants are paid out in mutual funds. And therefore, they will be subject to movements, et cetera, but the 184 is the number that you should be expecting for this year.

Okay. Fine. And then just maybe finally on your progressive dividend statements on the quarter, are you basically saying about progressive it goes up every year, is that basically what you're saying by using the word progressive? Or are you expecting actually on a quarterly basis that it moves up?

Yes, certainly, and obviously, as Nigel it is different to how Henderson would have been under the U.K./Australia listing. The quarterly figures are generally kept throughout the whole year rather than move on a quarter-by-quarter basis. And what we mean by progressive is it should broadly match earnings, but obviously, we also expect it to be stable. So, earnings will fluctuate up and down. While we would like to keep the dividend to be more stable. So it won't quite mirror earnings on a short-term basis, but on earnings growth, but on a longer term basis dividend growth should broadly match earnings growth.

We'll take our next question Brendan Carrig with Macquarie.

No, its fine. Nigel, asked my question.

Okay. And we'll take our question from Chris Harris with Wells Fargo.

Thanks guys. A question on your fixed income platform. Data we track is showing a fair amount of outflow on the retail side in the U.S. I was just wondering if you could expand on that a little bit, maybe what's driving that. And I think the industry flows are actually pretty good. So, maybe what you guys are seeing versus the industry?

Hi, Chris, it's Andrew here. We had one large client who is a long-term investor in some of our fixed income range. They do sort of annual rebalance based on performance and where their reweighting is. That's done in January. That was pretty much the big impact there. When you actually strip that out, and you look at the underlying trends month-on-month, and over the quarter, we would actually believe that it appeared that we're doing better than the industry. We're probably gaining share in that. So, I think the intermediary flow you're referring to really was predominantly one client who has an annual rebalance program to where they would like to be through rest of the year. And that's just sometimes you are winner as that, sometimes you are looser, in this case it was taken money out. It's not performance-related or really even in the asset class, it's where they want to be in their asset allocation decision.

And there are no more questions in the queue at this time. I would like to turn the conference back over to our speakers for any closing remarks.

Thank you, operator. This is Dick Weil. Thank you, everyone, for joining us today. Let me just offer some concluding thoughts for you. First, obviously, a key message that Andrew highlighted at the top, investment performance continues to be strong. As an active Asset Manager, the dynamics that we've seen in the first quarter allow us to demonstrate our value to the clients as we help them achieve their long-term financial goals and help them understand the volatility that they're seeing. We are pleased with our outcome year-to-date. Second, we finished the quarter with slightly higher AUM. And while flows improved compared to the prior quarter, they are still not where we need them to be. Despite the net outflows in the quarter we are seeing good early signs in revenue synergies and we are optimistic about the future prospects for our business given the global distribution footprint that we have and the range of excellent product offerings. The third piece is obviously the financial results. They were strong, they reflect the growing economies of scale that we promised in our merger, and we believe we are delivering. And so, I think that's in good shape. As we approach the first anniversary of Janus Henderson, we're pleased with the pace of our integration, we remain disciplined in our financial investment and we are focused on building sustainable growth for you our owners. Thank you for joining us today. We look forward to speaking with you again in August.

And this concludes today's conference call. Thank you for attending.